The NHQB is an independent body established in February 2021 for the purposes of developing a framework to oversee reforms in the build quality of new homes and the customer service provided by housebuilders in England, Northern Ireland, Scotland and Wales. As part of the proposals a new industry code of practice – the New Homes Quality Code (Code) – was published on 17 December 2021 with the aim of driving up the quality of new build homes and strengthening protections for customers.
The existing protections, such as the NHBC scheme will still apply. The Code applies to every aspect of a new home purchase, from when a customer walks into a sales office, through to two years after the purchase of the home.
Over the next twelve months all housebuilders will be expected to register with the NHQB. Once registered, they are to comply with the requirements of the Code and the remit of the (once established) New Homes Ombudsman Service (NHOS). The NHOS will have powers to require housebuilders to undertake work or rectification measures and to award compensation to enforce the Code.
To become registered, a housebuilder must follow the required registration process, including completion of training and introduction of necessary complaints procedures to meet the requirements of the Code.
Who the Code applies to
For the present time, the Code applies to an individual buying or intending to buy a new home for their own occupation. Other groups of buyers will be considered in future codes or amendments. These would include shared owners and those purchasing a new house as a Buy to Let.
All registrations should be made no later than 31 December 2022. Prior to 31 December 2022, customers must be advised whether the provisions of the Code or a legacy arrangement apply to their new home.
The Code establishes mandatory requirements which must be adopted and complied with. This is achieved by:
- a statement of 10 fundamental principles; and
- details of practical steps expected to be complied with at each stage of the new home sale process.
The Fundamental Principles
The fundamental principles aim to fill the perceived gaps in the current protections and include Fairness, Quality, Service and Security and these principles are reflected in the new requirements. So, for example:
- completion of the purchase must only occur once the new home is complete. This is to reduce works after the customer has bought the home (other than genuine snagging items) and ensures the home is ready for occupation on moving day;
- customers should be informed that they have a right to have their new home inspected by a qualified independent inspector prior to completion;
- to address mis-selling, high-pressure selling techniques are prohibited and vulnerable customers should be identified and supported. The developer guidance notes elaborate further on nature of the support and it includes the housebuilder recommending that the customer is accompanied by a suitable representative;
- to avoid misleading information, all information about the purchase of the home should be available as part of the sale process including tenure details and service charge costs;
- insurance or other products should be placed by the housebuilder to ensure that their financial obligations can be met even following insolvency. This includes the obligations under the Code but also to ensure the repayment of deposits and/or reservation fee when due and any financial awards made by a NHOS.
As a housebuilder needs to be compliant with the Code to become registered, housebuilders will need to take various practical steps ahead of registration, such as a review of:
1) all documentation to check for Code compliance and possible amendments to reflect:
a. the complete property details and cost disclosures in the marketing information together with a statement that they are registered with the NHQB;
b. the maximum fee (from time to time) and refund requirements in any option agreement or early bird arrangement;
c. the cooling off period in any reservation agreement;
d. a complete legal pack which includes the detailed planning consent reference number for the construction of the home and details of any future build phases, details of any services, facilities and/or liabilities which may not immediately transfer to the customer and are retained by the housebuilder. If these are to transfer to a customer at a later date then this must be fully explained;
e. the preparation of an indicative costs schedule to identify the likely costs associated with the home for a period of 10 years (but does not include everyday maintenance costs) such as management fees, costs associated with the wider development (including roads or sewers which will not be adopted, new recreational facilities where the Customer may have a liability), event fees, stepped service charges, ground rents;
f. the completion trigger and pre-completion inspection in any sale agreement. The checklist for the inspection is not available as at the date of this article;
g. the termination rights and major change notice provisions in any sale agreement and the corresponding return of any deposit;
h. procedures for dealing with snagging requirements in the sale agreement;
i. disclosures of all fees or benefits that the housebuilder receives from making a particular recommendation of any legal representative, pre-completion inspector, financial adviser or mortgage intermediary; and
j. the preparation of a statement from the customer via their legal representative stating in writing what spoken statements the customer is relying on when entering into the sale agreement;
Further documentation is to be produced in support of the Code and we will keep a watching brief. The full code can be found here together with a guidance note for housebuilders but the Code has priority over any guidance that is issued. If we can assist further with any reviews of any documentation, please let us know.