The New Homes Quality Code revamps rules for housebuilders and developers

After a nearly five-year consultation process, the New Homes Quality Code launched in October 2022 and sets out rules for residential developers who are registered with the New Homes Quality Board. The final version of the code was published in December 2022.

Who does the code apply to?

Although the first iterations of the code were published in December 2021, many housebuilders have only just completed their registration in the last couple of months, with numerous developers still pending registration. The code will only apply to housebuilders once their registration completes.

The code replaces the Consumer Code for Home Builders 2010 and introduces new regulations for registered developers, which will apply to a customer relationship from the point of reservation onwards.

The code only applies where customers intend to live in their home or gift it to someone else. Presently, it does not apply to investors or "buy to let" purchases. However, there is an ongoing consultation that is looking at broadening the scope of the code to these transactions.

Overview of the code

The code sets out mandatory requirements that registered developers must meet. The code has two parts:

• A statement of the core principles. Registered developers agree to apply these principles to their dealings with customers. These include treating customers fairly, carrying out works safely to a high standard, providing a good standard of customer service, following effective complaints procedures, providing clear and accurate information, and supporting vulnerable customers.
• Practical steps. The code provides practical guidance on what is expected from developers at each stage of the sales process.

What does the code do?

The new code looks to build on and improve the protections set out in the old code. In particular, the new code has a number of new regulations:

• It tightens "early bird arrangements" which governs when and how customers are allowed to be told first when a plot on a development becomes available for reservation before it goes on general sale.
• It sets out and provides more detail on the required pre-contract information to be provided by developers to customers.
• It places increased focus on ensuring that contracts are clear and fair.
• It sets out the developer's obligations for after-sales services, which must be communicated clearly to customers and accessible.
• It introduces the right for a customer to ask for a "pre-completion inspection", which can be carried out by a qualified independent professional.
• It drives a focus on best practice for dealing with vulnerable customers and in particular, prohibits developers from employing high pressure selling techniques.

New disputes resolution procedure

Perhaps most significantly, the code introduces a new customer disputes resolution process that developers must follow. In particular, the New Homes Ombudsman Service has been created, with powers to issue decisions in respect of unresolved customer disputes.

The new code introduces a new detailed "56 day" complaints procedure, which developers must follow. If a complaint cannot be resolved to the customer's satisfaction within this period, then the dispute can be referred to the ombudsman.

The ombudsman then has the power to issue a decision requiring the developer to make an apology, put the matter right, pay compensation for loss of up to £75,000 or take any other action that the ombudsman may specify.

The decision of the ombudsman is binding on the housebuilder, but does not have to be accepted by the customer, who can still consider taking other action (such as court proceedings).

Osborne Clarke comment

While most national housebuilders have already registered with the New Homes Quality Board (or are pending registration), there is some way to go to ensure that small and medium-sized housebuilders sign up to be covered by the new code.

Although it is not yet a legal requirement to register, it is anticipated that it will become compulsory in due course. In the meantime, lenders and warranty providers may also seek to make registration of the code a prerequisite to offering their services. This may present future complications and delays for developers who do not register.

Housebuilders that have registered are still very much finding their feet with the new code and its implications for the industry remain to be seen. However, the increased protections for customers and the introduction of the New Homes Ombudsman are likely to result in a slow but substantial change in industry behaviours.