What is the New Homes Quality Code?
The New Homes Quality Code is a newly established code of conduct for new build property builders and is governed by the New Homes Ombudsman Service. Developers were required to register for the New Homes Quality Code by 31st December 2022. Although the Code is not legally binding, it will be a requirement for many warranty schemes to adhere to the terms within the Code. Developers and builders will need to be trained on the Code’s requirements to make sure that all internal customer service standards and procedures comply with them.
Relevant staff members should be trained on the specific sales and marketing techniques that are accepted by the Code, such as no high-pressure selling methods, information requirements, part-exchange schemes, reservation procedures, New Home Warranties, and after-sales service provisions. Continued training should be provided and continuously monitored.
It may take some time for builders to put systems in place that are in line with the Code. During this transition period, builders and developers must clearly notify their customers if they are covered by the New Homes Quality Code and the New Homes Ombudsman Service, or if they are subject to legacy arrangements that were there when they entered into the plot reservation agreement with the developer.
What are the obligations for home builders and developers?
The New Homes Quality Code was established to fill gaps in the existing practice codes to provide extra protection for new-build buyers. The Consumer Code for Home Builders and the Consumer Code for New Homes (which are other new build codes) worked together to develop the new requirements within the New Homes Quality Code. As a supplement to the Code, the New Homes Quality Board has also published “Developer Guidance” to provide further details on how to comply.
The Code sets out ten fundamental principles: safety, compliance, fairness, quality, service, transparency, independence, responsiveness, inclusivity, and security. The Code is made up of four key parts:
1. Selling a new home
The New Homes Quality Code states that “Developers should be fair and complete in the information they provide to a customer about their home purchase. They must avoid mis-selling, misleading information, and high-pressure sales tactics.”
This means that builders and developers must publish precise information about the new build so that consumers are not being mis-lead. This includes describing the home using the following information:
- Size of property (room and plot dimensions),
- Tenure (including formula for any ground rent and residual length of the lease),
- Specification of property,
- Indicative energy performance ratings,
- Pricing of property,
- Mobility adaptations,
- Completion dates,
- New Home Warranty provisions,
- Management services,
- Service charges,
- Future phases of the development committed to by the developer,
- Any resale restrictions/covenants,
- Costs, coverage or benefits of any additional products such as insurances or warranties and guarantees, and
- Expected Council Tax Band at point of sale.
2. Legal documents, information, inspection, and completion
Builders and developers must give new-build buyers:
- An opportunity to secure a specific plot early (an Early Bird or plot option arrangement),
- An option to reserve a home for purchase (Reservation Agreement),
- Pre-completion information,
- A Contract of Sale to legally bind each party to complete the purchase,
- Notice of completion, and
- An opportunity for the consumer to view the new home before legal completion.
3. After sales, complaints management, and new home ombudsman
This section of the Code states that the obligations of the developers do not end on completion of the sale. Developers must have after-sales services and complaints resolution processes including escalation to the New Homes Ombudsman.
If, for instance, the customer complains of defects or reports snags, and these are not resolved in a timely manner (according to the builder’s complaints procedures), then the complaints can be referred to the Ombudsman.
A customer can refer a complaint that arose within the first 2 years following legal completion to the New Homes Ombudsman Service, after first lodging the complaint with their builder and allowing 56 calendar days from the initial complaint being made to the builder. The referral can be made to the New Homes Ombudsman Service regardless of whether or not the complaint referral is made within the first 2 years after completion.
The developer must make sure that the consumer is adequately protected against insolvency by making repayment of financial deposits in a timely manner, including awards made by the Ombudsman.
Recommending a solicitor
The Code outlines that a customer must have a choice about their own legal adviser (or other advisers) guiding them through the legal process. The developer must make the customer aware of the need to appoint independent legal advice when carrying out the legal formalities of buying a new home, and in doing so may offer to recommend the services of a solicitor to the customer.
The New Homes Quality Board’s guidance to the Code says that developers should recommend more than one adviser to provide the customer with choice, however the Code does not explicitly require this. Developers cannot link any inducements or incentives to the customer using a recommended adviser, or suggest that a sale may not proceed unless a specific adviser is used.
The developer should explain the basis on which any recommendation is being made. This must include transparency about any fees or benefits the developer gets in making a particular recommendation, but should also extend to the benefits to the customer of using a recommended adviser, providing the information presented is factual.
This could include a comparison between those advisers being recommended, as well as reference to service levels and procedures of a particular adviser, and transaction timescales and experiences of previous customers. The developer can also explain that their recommended solicitors may offer preferential legal fees due to being able to streamline their processes, having acted on other plots on the site. They are also more likely to proactively work towards a developer’s exchange of contract timescales, by promptly issuing contracts on the customer’s behalf to ensure buyers don’t lose their plot reservation.
Waheeda Alli, Head of New Build at BHW, says: “The customer should have the information and freedom to make an informed decision regarding their preferred professional adviser. Developers having a preferred panel of solicitors, often unfairly, has a negative reputation. However, there are actually many benefits to a buyer in using one of them.
At BHW we have dedicated conveyancing teams that specialise in new build purchases and understand the nuances of this type of transaction, such as the workings of government purchase incentive schemes, and specific title registration requirements. Because of this, we are recommended by house builders on sites across the region. We’re also regularly instructed by customers buying from other developers who are looking to appoint their own choice of legal adviser.”
BHW Conveyancing is the leading residential property law firm in Leicestershire and is ranked in the top ten real estate firms in the East Midlands by the Legal 500 guide. We pride ourselves on giving our clients a seamless and efficient end-to-end conveyancing service and adhere to high-quality industry standards. We work with many estate agents and financial advisors as their preferred conveyancing partner. Due to our proactive approach to progressing our clients’ property transactions, we are constantly being referred time and time again.
Whether you are a property professional, seller, or buyer, we can help with your residential conveyancing queries. To request a personal conveyancing quotation, or to discuss setting up a professional referral relationship with your business, please call us on +44 (0)116 289 7000 or send us an email at email@example.com.