The Consumer Code for Home Builders (Fourth Edition) – Are You Ready?

Builders and developers selling new or newly converted homes and who are registered with NBHC, Premier Guarantee or LABC New Home Warranty must ensure that they are complying with the updated code.

Non-compliance can result in removal from not only the relevant home warranty provider’s register but also from all registers run by the other participating home warranty providers. Given that the Council of Mortgage Lenders’ Handbook states that new builds or conversions have to be under a scheme acceptable to the lender, exclusion from such schemes could have a significant impact upon the ability to sell the properties.

The new addition of the Code introduces a number of amendments. Some of the key ones are set out below:

• Claims under the Code Scheme can only be made by Home Buyers the definition of which has been amended to add clarification that a Home Buyer is a customer who goes on to reserve or buy a home and not simply someone who is making enquiries about buying a home but has not reserved one.
• The definition of Individual Investors has been clarified and the Code Scheme does not apply to individuals buying more than one property on the same development for investment purposes.
• The Code Scheme logo must be prominently displayed in both the Home Builders’ and their Agents’ sales offices and in sales brochures.
• The Code Scheme logo must precisely follow the design shown in the logo requirements on the Code website.
• Home Buyers must be provided with the Code Scheme documents with the reservation agreement although this can be done by electronic means.
• The Code Scheme must also be provided to the Homer Buyer’s legal representative with the draft contract of sale documents.
• A high number of adjudications have been found against Home Builders because they were unable to prove that the home and its specification was as agreed and explained to the Home Buyer at the point of reservation and subsequent contract. It is therefore important that any appendices or schedules should be clearly annexed to the Reservation Agreement and Contract and evidenced by both the Home Buyer and the Home Builder in recognition of them having been seen, received and agreed.
• Guidance has been given regarding the retention of monies from the reservation fees and the cancellation of a reservation. The Reservation Agreement must state the likely range of monetary deduction which will be made on a cancellation and that range is to represent the reasonable costs that the Home Builder will genuinely incur in processing and holding the reservation.
• There are frequent issues arising regarding the completeness of the home at handover and the guidance has been extended to suggest that the Home Builder should explain to the Home Buyer that there may be minor items outstanding within the home and its curtilage and explain what arrangements they will make for completing them.
• The timescales for the Home Buyer to bring a complaint has been changed so that a claim cannot be bought before 56 calendar days has passed since first raising it with the Home Builder and no later than 12 months after the Home Builder’s final response.
• The maximum award for inconvenience has increased to £500. Such awards can now only be made by an adjudicator at their own discretion where there has been ‘more than a minor inconvenience’.

All Home Builders should ensure their standard practices and literature now comply with the updated code.

For further information relating to the points raised in this article, please contact Kirsty Barsby or a member of the Housebuilding team.