Neil Fraser
- Partner
Insights | Commercial Property
What does the New Homes Quality Code mean for developers?
31 May 2023
A friend recently bought a new-build house. It was only after the first heavy rain that she realised that something was not right. An architect acquaintance confirmed to her that, no, the back door should not be flush with the back garden which sloped downhill towards it, and while there was indeed a damp proof course installed, it was below ground level.
Of course, every housebuilder makes mistakes, and everybody knows that what really counts is how the housebuilder reacts when a mistake occurs. Suffice to say that not all housebuilders have historically been particularly responsive to complaints. Combined with allegations of pressure selling and failure to complete homes prior to occupation or to deal with snagging after occupation, increasing numbers of home buyers have taken to the media and lobbying of politicians to seek redress. In 2017, the UK Government requested that the housebuilding industry develop a new scheme to promote good customer care.
The Housebuilding Federation, in conjunction with Homes for Scotland and other stakeholders, established the New Homes Quality Board in 2021 to develop and promote the New Homes Quality Code and to create a referral system to the New Homes Quality Ombudsman. The Scottish Government has agreed that the scheme will apply in Scotland.
From 2022, the Board started inviting housebuilders to register to adopt the Code and to submit disputes to the Ombudsman.
Is registration compulsory?
Not at present. It remains possible that the UK Government, with the agreement of the Scottish Government, would use the Buildings Safety Act 2022 to make registration under the scheme compulsory. For the moment, the Board and Homes for Scotland are encouraging voluntary registration to fend off the threat of a more draconian scheme being imposed by legislation.
There has been a suggestion that NHBC and other warranty providers, as well as mortgage lenders, might make housebuilder registration a prerequisite for cover/lending. No decision has been made as yet.
So far, 470 UK housebuilders have applied to register and 146 are actively operating under the Code. In time, the absence of registration may put a housebuilder at a competitive disadvantage in the market.
How is this different from the old code?
The new scheme introduces general principles by which home sales should be conducted, along with practical steps to take in implementing those principles. The full Code and Developer Guidance can be downloaded here.
Some of the key changes include:
- further requirements relating to the sales process, for example, taking measures to protect vulnerable customers, allowing a two-week cooling off period after reservation, providing information not only regarding the service charges for common management/maintenance but also the likely ongoing costs of maintaining the home itself, and restrictions on early bird offers and pressure selling;
- an opportunity is to be allowed for the customer to have 14 days before legal completion in which to inspect the home. This inspection would only be carried out by an accredited/qualified individual and in relation to a standardised checklist;
- more effective after-sales management to identify snagging, and to address snagging within 30 days;
- a stricter complaints handling system with deadlines for responding, broadly involving five days to acknowledge the complaint, ten days to find a pathway to resolution, 30 days to assess the complaint and respond to the customer and 56 days to have finally resolved the issue. The Board will provide pro forma letters that the developer can use in this process; and
- referral to the Ombudsman where disputes cannot be resolved directly with the customer.
What does it cost?
The Ombudsman is paid by the developers’ annual registration fee. The annual registration fee varies by turnover of the developer, such that larger developers pay more. Until 1 July 2023, the fees range from £500 for a dormant company, through £1,000 for a developer with turnover between £0 and £2,500,000, to a maximum of £200,000 for developer with a turnover greater than £1,500,000,000. These figures take into account a prompt-payment discount, and the full table of fees can be viewed here.
What next?
If you haven’t already, we suggest that you approach the Board to discuss registration. Further information is available from their website here.
Once registered, you will have access to a number of useful documents provided by the Board and which are Code compliant, including a templates of the reservation form, pre-completion inspection checklists, complaints responses and terms for sales agents. You’ll also be able to access online training from the Board.
In preparation for operating under the Code, you may wish to review your standard plot sale offer to ensure that it is Code compliant. We can assist with this if required.
If you have any queries regarding your particular circumstances, please contact Neil Fraser, Director in our Housebuilding and Strategic Land team.