There have long been calls for the implementation of a new scheme to provide increased levels of protection and rights to purchasers of new homes, to combat a minority of housebuilders where build quality and customer service falls on deaf ears.
Against this backdrop, the creation of the New Homes Quality Board (NHQB) by the Government is a welcome initiative.
New Homes Quality Board
The NHQB is an independent body whose purpose is to develop a new framework to oversee reforms in the build quality of new homes and the customer service provided by house builders.
The NHQB has now published the New Homes Quality Code (the Code) and put in place a New Homes Ombudsman (the Ombudsman Scheme).
In so doing, the NHQB’s aim is to improve standards in the context of the new build homes market across the UK and provide purchasers with a means of redress if they discover faults with their new build property which are not dealt with by the house builder responsible satisfactorily.
The code was published on 17 December 2021 by the NHQB after a period of consultation lasting almost five years.
The code is split into two parts. The first part is a statement of the fundamental principles that registered developers agree to apply in their business and their dealings with purchasers. The second part is the practical steps i.e. what is expected at each stage of the sales process.
The fundamental principles are described as ’10 guiding principles’ which include fairness, transparency, quality and responsiveness (amongst others).
Applying the 10 guiding principles, the code:
protects vulnerable customers, prohibits high pressure selling and requires any deposit the purchaser pays to the house builder to be protected;
requires the house builder to provide all relevant information about the home during the sales process (including, for example, about the tenure and any future management or service charges), to allow the purchaser to make an informed decision;
sets out requirements for a fair reservation agreement, including a 'cooling off' period, and sales contract requirements;
allows the purchaser to have a "suitably qualified inspector" carry out a pre-completion inspection of their home on their behalf if they wish (against a standard form Pre-Completion Template);
specifies that a home must be 'complete' and ready to occupy, preventing housebuilders from paying purchasers to move into a new home early;
requires housebuilders to have an effective after-care service process in place to deal with any issues or 'snagging' problems purchasers raise; and
requires house builders to have a robust complaints process that responds to purchasers' concerns in a timely manner. Should a purchaser not be satisfied with how their complaint is dealt with, they will be able to refer their case to the new independent Ombudsman service (detailed below).
As a result, there are a number of changes that house builders will need to make in order to ensure compliance with the code. This will involve updating existing policies and procedures (such as sales information and reservation agreements), and ensuring that all staff members receive appropriate training on the changes. Housebuilders are expected to ensure that all customer facing staff have a good understanding of the requirements of the code.
Housebuilders will need to familiarise themselves with all aspects of the code. However, there are a number of provisions of particular note, including:
House builders aren’t obliged to register their entire business at once. Instead, a house builder can choose to register each regional office (or even development-specific subsidiaries) separately although it should be noted that the code does expect the entire business to be registered on or before the end of the transition period (i.e. 31 December 2022).
The code allows the purchaser (and/or a suitably qualified inspector) to visit the property before completion and from five calendar days after the Notice to Complete has been served.
A fundamental principle of the code is that house builders should take steps to identify and support vulnerable customers. The onus is on the house builder to take the lead on this, so consideration needs to be given on how best to approach this.
There are specific timeframes in which housebuilders must provide updates to purchasers following a complaint, including updates no later than day 10, 30 and 56 from receipt of the complaint.
During the transition period, once registered, housebuilders must inform customers as to whether they are covered by the new code or are covered by previous arrangements.
New Homes Ombudsman Scheme
The Ombudsman Scheme will provide purchasers with free access to timely, independent and efficient redress where issues occur with their new home. It is intended to be used where quality issues that the purchaser is not happy with arise, which are not dealt with to their satisfaction by the house builder. The Ombudsman Scheme will deal with claims with a value of up to £50,000. This will obviously cover lots of cases, except in respect of the most serious of issues.
The ombudsman is an independent body who will consider the evidence provided by the purchaser and the house builder and reach a decision.
The newly selected provider of the Ombudsman Scheme is working in conjunction with the NHQB to put in place the appropriate processes so that the service can be rolled out and made available to purchasers. It’s understood that, as matters stand, the intention is that the service will go live by June 2022.
What is the next step?
Although the code is voluntary, Homes England has made it compulsory for house builders and contractors to register if they are under the Help to Buy Scheme. It is also clear that the industry expects lenders/ warranty providers to follow suit in requiring their services to be dependent on registration. Given that the period for registration is now open, house builders should move now to not only register but ensure that they are able to effectively comply with the requirements of the code.
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Kate’s focus is on preventing disputes where possible and seeking commercial resolutions which align with her client’s goals when disputes do arise.