The Consumer Code for Home Builders was established in 2010 to ensure new home buyers are treated fairly, know what service levels to expect and are provided with reliable information on their purchase. To ensure the Code continues to meet the needs of new home buyers there has been a recent review, which takes effect from 1st April 2017, which has resulted in a number of amendments. As one of the founding member of the Code we have summarised these changes and how they could affect you:
1. Definition of ‘the Code’, and ‘The Code Scheme’ have been clarified:
‘The Code’ is now clearly only the set of the 19 numbered ‘Requirements’ while ‘The Code Scheme’ includes further explanation and an introduction to the dispute service. ‘The Code Scheme’ documents must be provided to the Home Buyer with the Reservation Agreement, and also to the Home Buyers’ legal representative, with the draft contract of sale documents.
2. Definition of ‘Home Buyer’ and ‘Customer’:
These have been separately defined. A ‘Customer’ only becomes a ‘Home Buyer’ when they enter into a formal Reservation Agreement.
3. 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.
4. Making the Code available:
The Code now requires that the Code Scheme Logo is prominently displayed in both Home Builders’ and Agents’ sales offices and in sales brochures. The Logo will be to a designed specification and include the Code web address. Home Buyers must be provided with the Code Scheme documents with the Reservation Agreement, but this can be done by electronic means.
5. Staff Training:
Working in partnership with the Home Builders Federation, Homes for Scotland and other Industry organisations The Code are enhancing the on-line training for front line staff employed by Home Builders and Estate Agents contracted to sell new homes on their behalf.
6. Sales and marketing:
The Code’s good practice Guidance now includes exclusion of high pressure selling techniques.
7. Information pre-contract:
Following complaints about 'event fees' such as deferred management charges and fees on resale or transfer of leases, (particularly in the retirement homes sector, there is now a Requirement that any such ‘event fees’ are declared at Reservation stage. The Requirement to provide a brochure or plan showing ‘the layout’ has been qualified to now show ‘a general layout’.
8. Pre- contract:
The good practice Guidance has been amended to make it clear that Builders may offer incentives and/or refer Home Buyers, for example, to a panel of solicitors, but should not restrict their choice of Legal representative. In addition, this preclusion now includes not restricting the financial advisor or mortgage intermediary that they may wish to use.
The Requirements to be included in the Reservation agreement have been amended to include:
- The specific date until when the price remains valid;
- The nature and method of any event fees; and
- A statement that a copy of the code scheme has been supplied to the home buyer.
10. Reservation fees:
The guidance regarding the retention of monies from Reservation fees on the cancellation of a Reservation has been simplified. 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.
11. Completion and handover:
There are frequent issues arising regarding the ‘completeness’ of the Home at 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.
12. Independent Dispute Resolution Scheme:
Taking the learnings from the decisions made by the Adjudicators and good practice from across other schemes, the following changes have been made to the Independent Dispute Resolution Scheme:
a) Timescales for a Home Buyer to bring a complaint –A claim cannot be brought before 56 days have elapsed since first raising it with the Home Builder, and no later than 12 months after the Builders’ final response.
(b) Award for ‘Inconvenience’ – this has increased to £500 from £250. However, Home Buyers can now no longer make ‘inconvenience’ claims and such awards can only be made by the Adjudicator at their own discretion and consideration, where there has been ‘more than minor inconvenience’ and where a breach of the Code has been identified. Further, the Home Buyer may not receive an award for ‘emotional upset and stress’ as awards will be judged as a matter of fact and on the resulting financial loss caused.
(c) Allegation of Code breach - Home Buyers making a claim must now identify the Code Requirement alleged to have been breached when making an application for dispute resolution. This is to avoid generalised complaints which may have little or no specific relevance to the Code.
The new version of the Consumer Code for Home Builders rules will be provided to all developers registering with LABC Warranty and will be available to download via our website from 1st April 2017. There will also be a new online training module which takes you through the Code requirements. All of the documents will also be available from the Consumer Code website http://consumercodeforhomebuilders.com/
By Craig Ross
Please Note: Every care was taken to ensure the information in this article was correct at the time of publication. Any written guidance provided does not replace the reader’s professional judgement and any construction project should comply with the relevant Building Regulations or applicable technical standards. However, for the most up to date LABC Warranty technical guidance please refer to your Risk Management Surveyor and the latest version of the LABC Warranty technical manual.