The Consumer Code for Home Builders
Written by Clair Grant
There have been concerns raised for a number of years over the standards of customer service and satisfaction within the house building sector. This culminated in an Office of Fair Trading Market Study into the industry in October 2008.
The Consumer Code for Home Builders is a voluntary code of conduct devised in conjunction with the NHBC, Premier and LABC New Home Warranty brands. It provides for self-regulation of the industry and seeks to avoid Government imposed regulation. The scheme is run by a Management Board who are in turn supported by an Advisory Forum consisting of representatives from a wide range of industry groups such as the Council for Mortgage Lenders, Home Builder’s Federation and the Retirement Housing Group. This article looks at how the code will operate.
Who does it affect?
The Code applies to individual Home Buyers who reserve a newbuild or newly converted home on or after 1st April 2010 where that home is being built by a Home Builder who is registered with NHBC, Premier or LABC.
The scheme is not retrospective and so will not apply to any reservations taken before the 1st April. Nor does it relate to properties acquired for investment purposes.
The Home Builder must comply with a set of mandatory requirements in respect of the marketing and selling of the Home and their after-sales customer service. The Code Disputes Resolution Scheme applies to complaints arising and made in writing to the Home Builder within two years from the start date of the Home Warranty Cover. Subsequent Home Buyers will benefit from the Code scheme in respect of after-sales matters where any complaint is reported within the two year period.
The Code is in addition to, and does not replace, any existing legislation affecting the sales and marketing process such as the Property Misdescriptions Act 1991 and the Unfair Terms in Consumer Contracts Regulations 1999.
What are the requirements?
The overriding principles of the Code are that Home Buyers:
• Are treated fairly
• Know what service levels to expect
• Are given reliable information upon which to make their decisions
• Know how to access quick, low-cost dispute resolution arrangements if they are dissatisfied.
Home Builders can decide for themselves the approach they wish to take to satisfy the Code requirements however they must ensure that a similar level of information is given and a comparable outcome achieved.
Specific requirements include:
• Making the Code available to the Home Buyer.
• Having suitable systems in place to ensure the Home Builder can reliably and accurately meet its commitments on service, procedures and information.
• Providing staff training.
• Ensuring sales and marketing material is clear and truthful.
• Providing additional pre-purchase information at reservation including details of any management company that the Home Buyer will be committed to and details of associated costs.
• Providing contact details for dealing with queries.
• Providing details of the warranty cover provided by the warranty provider including information on how deposits are protected.
• Providing information on health and safety precautions for site visits.
• Advising Home Buyers to appoint a professional legal adviser.
• Ensuring the contract terms are clear and fair and comply with the Unfair Terms in Consumer Contracts Regulations 1999. The Contract must clearly state the termination rights including termination without penalty if substantial changes are made to the property or if there has been an unreasonable delay in completing the property beyond the anticipated date which must be provided in the contract.
• Ensuring that on hand over of the property the Home Buyer signs a statement to confirm that the property has been demonstrated to them. The Home Buyer must also be provided with an explanation of how any outstanding works will be dealt with.
• Providing an after-sales service including details of who the Home Buyer should contact and providing all guarantees and warranties relating to the property.
• Providing the Home Buyer with details of the complaints handling procedure which the Home Builder has in place together with details of the dispute resolution arrangements under the Code. There is an obligation on the Home Builder to co-operate with any professional advisers appointed by the Home Buyer to resolve disputes.
Resolving Disputes
If the Home Buyer has a complaint they must first raise it with the Home Builder who must be given the opportunity to investigate and put matters right. If the Home Buyer remains dissatisfied he should then contact the relevant Warranty Body who will deal with the complaint under the terms of the Home Warranty Policy. However, where the complaint falls outside of the scope of that policy, the Warranty Body will offer the Home Buyer the opportunity to refer the complaint to the independent Disputes Resolution Scheme provider.
Any claim must be brought within three months of the Home Builder’s final response to the original complaint. The Home Buyer must send an application form, statement of evidence and pay a fee of £100 plus VAT. The Home Builder can then choose to resolve the complaint without formal adjudication, this is called ‘early settlement’ and will cost a reduced fee of £100 plus VAT.
If the Home Builder does not take the ‘early settlement’ option the Home Builder must submit their response and pay a fee of £300 plus VAT. The adjudicator will consider both submissions and notify both parties of his decision. He can order a performance award, where the Home Builder must carry out works or a financial award, or a combination of the two. The maximum value of the award (including an award of compensation for inconvenience of a maximum of £250) is £15,000 plus VAT. The Home Builder may also be ordered to reimburse the Home Buyer’s case fee.
A Home Buyer may refuse to accept an award and take legal action but any subsequent judgement is likely to take into account the adjudication.
The Home Warranty Bodies can impose other sanctions including removal from the Home Warranty Body’s register and exclusion from all registers run by other Home Warranty Bodies that take part in the Code scheme.
How to find out more
Information on, and copies of the Code itself, can be obtained from the Consumer Code for Home Builders website. The website includes guidance on the Code and replies to ‘Frequently asked questions’. It is intended that the website will also include an e-training package which can be used for staff training purposes.
Clair Grant
Cripps Harries Hall LLP
March 2010