Aidan Walker
- Solicitor
Insights | Commercial Property
There is a new, higher standard for homebuilding in the UK
11 April 2022
The New Homes Quality Code (“New Code”) was published on 17 December 2021 and replaces the current Consumer Code for Home Builders. The New Code is designed to “fill in the gaps” of the Consumer Code by introducing additional requirements for property developers.
It intends to “deliver a step change” in how the housebuilding industry operates and deals with customers.
This article provides an overview of the New Homes framework, sets out the additional requirements of the New Code, and outlines practical steps that developers must take to adapt to the new standard.
Framework
The New Code was published by the New Homes Quality Board (NHQB). There are ten members on the board, including property developer Taylor Wimpey, the Conveyancers Association and the Citizens Advice Bureau. The New Code is five years in the making and has been the subject of many reports and government scrutiny, given the rapid acceleration in demand for new homes since 2012.
It will be complemented by the New Homes Ombudsman Service (the Ombudsman). The Ombudsman will operate independently of the NHQB and has the power to offer dispute resolution, order compensation to be paid and even expel a developer from the scheme. Handling of this role has been awarded to The Dispute Service – the same organisation that deals with disputes relating to deposit returns from the UK nations’ safe deposit schemes.
New Requirements
Applicable across the UK, it represents a new standard for developers to adhere to with the following new requirements:
- High pressure sales tactics are prohibited and any deposits paid by customers must now be protected
- Developers must provide all relevant information about the home, such as future service charges for the common parts and even a projection of the cost of maintaining the home
- There is a new standard for fair reservation – most notably, developers’ reservation agreements must include a cooling-off period
- Customers have the right to a professional pre-completion inspection of the newly built home
- Developers are prohibited from paying customers to move into unfinished homes early
- Developers must now have an effective after-sales service in place to deal with ‘snagging’ issues and complaints. Many do already, but this is now a requirement.
Practical Considerations for Property Developers
Developers should be aware that they have until 31st December 2022 to become a member of the
NHQB and a signatory to the New Code. It is also worth pointing out that the New Code also applies to trading arrangements for project-specific work, such as Special Purpose Vehicles.
Pre-Completion
New home buyers are be afforded the opportunity to view the home prior to completion or to have a qualified inspector complete a pre-inspection checklist. The checklist must take the form of the NHQB’s Template Pre-Completion Inspection Checklist, though this is yet to be made public.
Developers must allow 14 days between issuing their Notice to Complete and the date notified for legal completion of the sale. They must also allow the purchaser or their surveyor to carry out a pre-completion inspection from five days after the Notice to Complete is served. Both these periods can be shortened by mutual agreement.
Post-Completion
Of the new additional requirements, the most onerous will be the development of a “comprehensive and accessible” after-sales service for a minimum of two years after legal completion. In particular, small and medium sized developers may need to develop their after-sales departments to deal with the requirements.
Currently, most after-sale departments in small and medium-sized developers deal merely with routine snagging issues, such as leakages. Now, all customer-facing personnel are required to be knowledgeable on the New Code, with a robust complaints process in place and regular communication with customers.
Training on the New Code should be offered to staff – it is of note that the New Code allows customer complaints on both build quality and the developer’s conduct, with customers able to raise a complaint with the Ombudsman free of charge if they are still not satisfied. Therefore, communication and the customer experience will be pivotal.
The complaints process itself is extensive and may require the adjustment of complaints procedures. For example, there are a number of ‘deadlines’ set out at 3.4 of the New Code, which includes that a written acknowledgement must be issued within 5 days of receipt of the complaint, a written Path to Resolution Letter must be issued within 10 days, and if the complaint is ongoing, an “Eight Week Letter” summarising progress and setting out future actions.
However, developers need not worry about retrospective action being taken as a result of the New Code. The New Code is only enforceable from the date of registration of the developer with the NHQB, at which point the developer becomes known as a ‘Registered Developer’, and the Code only applies in relation to reservations taken after the date of registration.
Furthermore, developers are not required to sign up the entirety of their business in the one go. This means that, in practice, it may be a good idea to recommend to developers that they register a subsidiary and trial adherence to the New Code on a specific project. This will likely help smooth the transition to the new standard for the full business from 2023.
The New Code can be accessed here: New Homes Quality Code.
Please feel free to get in touch with Aidan Walker if you have any queries about the New Homes Quality Code and how it might affect the new homebuilding or buying process.
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