The Consumer Code for Homebuilders

January 10, 2018

The Consumer Code for Home Builders was established in 2010 with the intention of making the process of buying a new home fairer and more transparent for buyers. Following extensive consultation, a revised and updated Consumer Code for Home Builders 4th Edition came into effect for 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.

The Code’s purpose is to ensure that Home Buyer’s:

  • 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.

The new edition of the Code has resulted in a number of amendments. Some of the key changes are set out below.

Vulnerable Customers

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.” In order to meet the requirements of vulnerable customers, it is now stated that “the evident” needs of Vulnerable Customers should be considered at all times. An example might be an elderly customer who has difficulty understanding documents or exhibits memory problems and needs support, for example, from a younger family member to help them through the buying process.

Making the Code available

A copy of the Code should be made freely available to all customers either as hard copy or by electronic means.

Home Buyers must be provided with the Code Scheme documents with the Reservation Agreement. It would be advisable to add an additional paragraph to the reservation form whereby the Home Buyer acknowledges to have received a hard copy of the Code.

The Code now requires that the Code Scheme Logo needs to be clearly displayed in the sales offices, including those of appointed Estate Agents. The Logo will be to a designed specification and include the Code web address.

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.”

Staff Training

Your staff must 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. Working in partnership with the Home Builders Federation, Homes for Scotland and other Industry organisations, the Code is enhancing the on-line training for front line staff employed by Home Builders and Estate Agents contracted to sell new homes on their behalf.

Sales and Marketing

The Code’s good practice Guidance now includes exclusion of high pressure selling techniques. 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.”

Pre-contract

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

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 need to be disclosed.

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. In the Reservation agreement a Home Builder is now required to state the likely ‘range’ of monetary deduction which may be made on cancellation. The Home Builder may retain an amount that represents the reasonable costs that they have genuinely incurred in processing and holding the reservation.

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.

Completion and Handover

The good practice 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. Similarly, in respect of works serving the property, but not being a part of the Home, such as roads etc. many complaints may be alleviated by appropriate communication with the Home Buyer.

Claims

With regard to any claims brought under the scheme, a claim cannot be brought before 56 calendar days have passed since first raising it with the Home Builder and no later than 12 months after the Home Builders final response. The maximum award for inconvenience has increased to £500, up from £250.

All Home Builders standard practices should be reviewed to ensure they remain Code compliant.

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Property Team at Cleaver Fulton Rankin for further advice or information.

Patricia Cronin, Associate Director, Property Team, Cleaver Fulton Rankin, Solicitors.