New Consumer Code for Homebuilders 4th Edition Operative from 1 April 2017

The Consumer Code for Homebuilders 4th Edition (“the Code”) became operative from 1 April 2017. The 4th Edition applies to all Reservations signed on or after 1 April 2017. It sets mandatory requirements that all house builders must meet in their marketing and selling of new homes and their after-sales customer service. Whilst not a statutory requirement, it is a requirement of the National House Building Council (NHBC) that all builders registered with NHBC adhere to the Code and non-compliance can result in a house builder being “black listed” by other warranty providers also. The importance of housebuilders adhering to the Code is therefore self-evident.

Although not an exhaustive list and not a substitute for reading the Code as a whole, we have set out below what we consider to be the keys points that housebuilders should bear in mind:-

1. The purpose of the Code is to ensure that home buyers are:

• Treated fairly
• Know what service levels to expect
• Receive reliable information on which to make their decisions and
• Know how to access speedy low-cost dispute resolution arrangements if they are dissatisfied.

2. The Code protects those that have signed a reservation form and not just those that have exchanged contracts. Special emphasis is given to the protection of “vulnerable customers.”

3. A copy of the Code should be made freely available to all customers either as a hard copy or by directing customers to the Code website.

4. A hard copy of the Code should be given to all customers who make a reservation at the time of reservation. We would suggest that you add an additional paragraph to the reservation form whereby the customer acknowledges to have received a hard copy of the Code.

5. The Code needs to be clearly displayed in the sales offices, including those of appointed Estate Agents. The Code should be incorporated into the website and sales literature of the housebuilder.

6. Customer Service: The Code states that “You should have formal processes in place to provide a reliable and consistent service to Home Buyers. You should treat them and their personal effects with respect and resolve relevant issues that may arise with them and their Home both before and during occupation“.

7. Training: Your staff need to understand the details of the Code and the responsibilities of you (the Housebuilder) and your sales staff as individuals to the customers. Adequate training needs to be given to all sales staff including those employed by Estate Agents instructed to market the properties. You may wish to include this within your contract with the Estate Agent.

8. Sales and Advertising: The Code states that “Your sales and advertising material should be clear, truthful and comply with all relevant legislation. Customers should not be subjected to high pressure selling technique. The evident needs of Vulnerable Customers should be considered at all times”

9. You/your sales staff should not restrict the Home Buyer’s choice of legal representative, financial advisor or mortgage intermediary.

10. You have to give the Homebuyers enough pre-purchase information to allow them to make an informed decision about the purchase. Detailed guidance as to the nature of the pre-purchase information that should be disclosed is set out in the Code. In particular, reasonably reliable service charge figures and the costs associated with a re-sale (such as fees for any certificate of compliance) need to be disclosed.

11. Reservation Terms: there are very specific guidelines in this regard and the Code should be reviewed in detail. In particular, the reservation fee must be reimbursed if the reservation is cancelled. If you propose to make any deductions then these must be disclosed at the point of reservation and you need to give a figure for the amount that will be deducted and in what circumstances.

12. Whilst the reservation agreement is in force you cannot enter into a new reservation agreement or sale agreement with another customer in relation to the same home.

Contact our legal experts today

Our Partner-led New Homes Team focuses on understanding the needs of and listening to its national and regional/local housebuilder and residential developer clients at both a generic and individual level so as to deliver an exceptional bespoke tailored service. The team deals with all aspects of new-build home disposals from site set up to plot sales to freehold and managed land disposals.

To find out more, please contact us on 03456 381381 or email us at newhomes@ibblaw.co.uk.