The New Home Quality Code – Too Much or Not Enough?

In 2021 an independent body was set up and named New Homes Quality Board (“NHQB”) this board issued the New Homes Quality Code (“Code”) which replaced the existing consumer code. The Code has been introduced to address the gaps in existing protections for new build buyers for which the house building industry has been much heavily criticised.

The Code establishes mandatory requirements which must be adopted with the intention to strengthen redress for buyers of newly built apartments. Fairness and openness are leading themes, with a view of establishing a comprehensive code of practice across the industry.

A noticeable and a much needed change is the introduction of New Homes Ombudsman Service, if the buyer is not happy with how their complaint has been dealt with then they will be entitled to refer their case to the New Homes Ombudsman Service. 

Eddie Hughes MP, Minister for Rough Sleeping and Housing has commented on the Code as follows “We will continue to work with the NHQB to complement the government’s plan for legislation on the new homes ombudsman, to resolve disputes and to hold shoddy developers to account”.

Becoming a Registered Developer

From January 2022, homebuilders and developers can apply to register with NHQB. The registration includes a training requirement and the introduction of various processes, such as a complaints procedure. Time and money will need to be spent reviewing and rectifying their standard form of documents, procedures and training their employees in order to ensure full compliance with the Code. 

Developers will have until 31 December 2022 to register, during the transitional period developers will need to advise buyers if the Code applies to their new home and all sales and marketing material should clearly state that they are a registered developer with the NHQB.

Protection for Buyers

One major change is the complaints procedure, if a buyer is unhappy with how its complaint has been handled by the developer then the buyer can refer its matter to the New Homes Ombudsman Service for resolution. There is a strict procedure and process which the developer will need to comply with which includes updating the buyer in writing no later than day 10, day 30 and day 56 from receipt of complaint. The burden clearly lies with the developer to strictly comply with the robust complaints process.

The Code also allows the buyer to have a ‘suitably qualified inspector to’ carry out pre-completion inspection and snagging checks against a standard form pre-completion template. The form of the template is yet to be issued. 

There is added pressure on the developer to identify vulnerable buyers this means engaging in conversation with the sales office and being aware of the circumstances surrounding a potential buyer. One suggestion has been to amend the reservation form to include a question about whether a buyer considers themselves to be vulnerable. Developers will need to consider the various scenarios and the additional steps they may need to take to adhere with the fairness and openness requirements of the code. For example, they may need to prepare sales materials in a number of different languages and this, in turn, will incur additional costs. 

Selling agents should be mindful that the code restricts certain practices; they cannot tell the buyer that there are other parties interested in the property as this could be construed as pressure selling. Recommending a firm of solicitors will be prohibited, as will offering financial incentives for a quick decision. There will be a ‘cooling off period’ allowing purchasers 14 calendar days from signing the reservation agreement to walk away with a full refund of the reservation fee.

Natalie Elphicke OBE, NHQB Chairman has stated “A new home is the biggest purchase most of us will ever make and so it is right that we put the strongest protections in place to protect consumers buying a new home”.

Impact on the Industry

It is yet to be seen how the Code will impact developers and whether a workable practice of building high quality, finished apartments which are sold for a profit to a satisfied buyer will be achievable. We expect to see further announcements issued by NHQB regarding the transition from the existing consumer code and implementation of the Code throughout 2022.

Much will also depend on buyers’ reaction and acknowledgement of the protection offered by the code. If the developer being registered is a deciding factor for a buyer, it will be a fundamental for the developers. If certain developers choose to opt out of registering with NHQB then it may cause them reputational damage and possibly bad media coverage.

However, in the current market, with a shortage of properties for sale, a buyer may not be so discerning. In which case, the developers will need to decide whether improving standards across the industry is a sufficient incentive to balance the burden of registration and compliance. 

Angela Paul, Senior Associate Solicitor in the Residential Property Team at Irwin Mitchell