If you’re a solicitor or conveyancer acting for a home builder, or a buyer, of a new-build home, it’s likely the Consumer Code for Home Builders (the Code) is relevant to you.
The Code exists to make the buying and selling of homes fairer and more transparent for consumers, and it’s important to be aware of your role in complying with the Code. Following an independent review in 2023, the Code has been strengthened with new requirements effective from 1 Jan 2024, so it’s important to keep up to date with the latest information.
The Code covers homes built in the UK by Home Builders who register with the UK’s main new Home Warranty Bodies:* NHBC; Premier Guarantee; LABC Warranty and Checkmate unless the builder has switched to an alternative scheme.
If you are acting for a buyer, you should know what protection the Code affords your client, and avenues for redress if matters go wrong. Similarly, if acting for the builder, you need to be aware of the requirements they must meet – particularly in relation to the information they must provide – to comply with the Code.
We’ve put together some quick tips to highlight the main aspects to be aware of:
Using the Code to support buyers:
- Download the Code requirements and guidance for builders so you’re aware of the expectations on developers from the start. New home reservations up to 31st December 2023 are covered by the Fourth Edition of the Codewhich will continue to apply for two years after legal completion. Reservations from 1st January 2024 are covered by the Fifth Edition.
- Expect to receive a copy of the Code Scheme along with the proposed contract, the legal title, and any other relevant documents and approvals, including information about any future build phases, town planning and other statutory approvals and consents as soon as your client signs a reservation agreement.
- Ensure your client receives, from the builder or agent, the information required by the Code to enable them to make an informed purchasing decision. This includes a reservation agreement, information about the Code and the Independent Dispute Resolution Scheme (IDRS), timescales and completion dates, termination rights and after sales information.
- Complete the Code’s free, online training course – it takes around one hour – and refresh your training annually.
- Be clear on termination rights at every stage of the purchase:
- The Reservation Agreement should include cancellation terms, including what proportion of the reservation fee will be retained to cover costs genuinely incurred by the developer in processing and holding the Reservation, should the agreement be cancelled. Compliant examples can be viewed here: https://consumercode.co.uk/resources/sample-reservation-agreement/
- Home buyers can withdraw from a purchase without penalty, even after exchange of contracts, if the builder has made a substantial change to the property which the buyer is not happy with (such as changing the external design) or if there has been an unreasonable delay in finishing the construction of the home and serving the notice to complete.
Helping builders comply with the Code:
- Use the Code requirements and guidance for builders to validate that the appropriate materials are prepared and shared with buyers at the right time, such as a written reservation agreement, a clear and legally compliant contract including termination rights, and information about any warranties that apply. Home builders are also required to have in place procedures for handling and resolving service calls and complaints from buyers, and make buyers aware of this in writing, alongside details of the Code’s dispute resolution scheme. The revised Code includes timeframes for handling complaints and all builders are encouraged to meet these to provide good customer service – read our guidance on handling complaints for details.
- Review reservation agreements and contracts to ensure they are compliant with the Code and written in plain English.
- Work with your client to ensure any changes made to a property are clearly communicated in writing and that consent is appropriately recorded.
Include a description of any management services and organisations to which the homebuyer will be committed, together with an estimate of their cost, and the nature and method of assessment of any event fees, such as transfer fees or similar liabilities. This is not just important for compliance with the Code – failure to clarify the financial implications associated with a purchase could leave you open to a complaint via the Legal Ombudsman.
- Keep in mind customers who may be vulnerable. Under the Revised Code Fifth Edition, this requirement has been strengthened to clarify that home builders should take reasonable steps to identify where a vulnerability may exist and act accordingly.
Whether you are acting for a builder or a buyer, remind them not to rely on spoken statements when entering into a contract – putting assumptions in writing and seeking confirmation prior to exchange will reduce the risk of later disputes.
Read more about our Independent Dispute Resolution Scheme
This blog was originally published in October 2022 and has been updated to reflect recent changes
* Excluding homes that at the time of reservation by the first buyer are covered by the New Homes Quality Code. Builders operating under the NHQC must still comply with Code requirements for new homes reserved prior to activation with the New Homes Quality Board.