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The New Homes Quality Code

The New Homes Quality Code has been published and this article sets out some initial aspects for housebuilders to consider.

After a consultation process lasting almost five years, the New Homes Quality Code (the Code) and Developer Guidance were published by the New Homes Quality Board (NHQB) on 17 December 2021.

The Code will replace the current Consumer Code for Home Builders and will apply across the UK for the benefit of purchasers buying new build homes for their own occupation.

The NHQB intend that the Code, together with the broader framework including the New Homes Ombudsman Service, which will deal with complaints arising under the Code and will provide robust remedies for buyers, will deliver a “step change” in terms of service and product for the customer.

As regards timing, developers will be expected to register with the NHQB from January 2022 and will have to do so by the final registration date of 31 December 2022.

This article will outline what we see as the headline practical points in the Code at this stage and we will follow this up with more detail in the New Year.

The Code in brief

The Code establishes mandatory requirements which must be adopted and complied with by developers and new home builders who are registered with the NHQB (Registered Developers).

The Code provides:

  • a statement of fundamental principles which Registered Developers agree to apply in their business and dealings with customers; and
  • details of practical steps expected to be complied with at each stage of the new home sale process.

Fundamental principles

Many of the fundamental principles, including Fairness, Quality, Service, Transparency and Inclusivity, which are demonstrated in some of the new/additional requirements for developers, aim to fill the gaps in the current protections and ensure that every aspect of a new home purchase is covered from reservation to two years after occupation. These include:

  • Protecting vulnerable customers, prohibiting high pressure selling and requiring that any deposit paid by the purchaser is protected
  • Requiring Registered Developers to provide all relevant information about the home during the sales process – including any factor or service charges – to allow the buyer to make an informed decision about their purchase
  • Setting out requirements for a fair reservation agreement, including a cooling off period
  • Allowing customers to have a suitably qualified inspector carry out a pre-completion inspection of their home on their behalf
  • Ensuring that a new home is complete so that buyers are not moving until the property is ready for them to occupy
  • Registered Developers must have an effective after-sales service in place to deal with snagging issues and a comprehensive complaints process that responds to buyers‘ concerns in a timely manner and to their satisfaction, keeping them informed throughout. If a buyer is not satisfied with how a complaint is dealt with, they can refer themselves to the New Homes Ombudsman Service.

Practical points for developers to consider at this stage

Documentation

Standard form documentation will need to be reviewed to ensure that it reflects the Code. Documents to be reviewed include:

  • Sales and marketing information
  • Early Bird Arrangements
  • Reservation Agreements including wording to cover new cooling off period for the buyer’s benefit
  • Contract of Sale/Missives for sites in Scotland (including the wording for the expected date of completion and new pre-completion inspection)
  • The package of pre-contract information to be provided to the buyer (including management or factoring fees and information on costs for the wider development for which the buyer will be responsible and brochures/plans for properties not yet completed)

Reviewing current processes to incorporate new steps

The Code introduces an opportunity for a pre-completion inspection check by an appropriately accredited professional acting for the buyer from five days (or earlier by agreement) after the completion notice has been served. The Code provides for a Pre-completion Inspection Checklist which is the only checklist that may be used for this inspection. We have not seen the checklist yet.

The inspection and snagging need to be factored into the process and Contract of Sale/Missives.

Staff training and training records

Registered Developers are expected to ensure that all customer facing staff (including agents) have a good understanding of the Code requirements relating to sales and marketing, no high-pressure selling techniques, standards expected, information requirements, part-exchange schemes, reservation procedures, New Homes warranties and after sales service. The training should be refreshed annually and training records kept.

After-sales service

Registered Developers must provide customers with a comprehensive and accessible after-sales service for a minimum of two years following the date of legal completion.

The Code details specific information to be given to the customer (including an explanation of how issues will be managed) and Registered Developers will need to review their after-sales service policies to ensure Code compliance.

The Developer guidance clarifies that the obligation to provide information about the after-sales service does not apply to second and subsequent owners. However it is clear that Registered Developers should still take responsibility for after-sales matters which are reported by a subsequent purchaser within two years from the date of completion of the original sale by Registered Developers.

After - sales issues and complaints management

Registered Developers must have a process in place for dealing with the situation where the customer is not satisfied with the after-sales service and the customer needs to be made aware of that process.

The Code sets out detailed steps to be included in the developer’s complaints procedures and we expect developers will need to review their Complaints policies to ensure Code compliance.

Transition to the Code

During the transition period, once registered, Registered Developers must clearly inform customers if they are covered by the new Code and the New Homes Ombudsman Service or subject to legacy arrangements due to the date of their Reservation Agreement.

Next steps

The purpose of this article has been to identify the key elements of the Code and the key issues for developers to consider at this stage. Given the window for registration opens in January 2022, the Code is something that developers will require to become familiar with rapidly.

We will follow this up with more detailed analysis of how we see the Code affecting day to day processes, but in the meantime, please feel free to get in touch to discuss any queries.

Disclaimer

This information is for educational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. © Shoosmiths LLP 2022.

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