Consumer Code For Home Builders: Provisions For New Home Developers And Buyers

Year Published: 2018

It’s been a while since the Consumer Code for Home Builders (the “Code”) was released and with the abundance of new home developments in and around Cheshire, it is time to take stock and remember the requirements.

Steven Percy, Commercial Property Associate Solicitor at SAS Daniels Macclesfield

Steven Percy, Associate Commercial Property Solicitor

When released, the Code introduced a series of safeguards for buyers of new homes or newly converted homes. It also put in place rules for developers and builders to follow. For developers offering National House Building Council (NHBC), Premier Guarantee or Local Authority Building Control (LABC) warranties, the provisions of the Code are mandatory. For developers offering other forms of warranty, the Code is a voluntary code of practice.

The latest version of the Code, which has applied since 1st April 2017 covers all new home buyers from the date of signing a reservation agreement for a new or newly converted home. The Code intends to regulate the period of marketing and after-sales customer service to ensure buyers enter the process with eyes wide open.

Some of the key principles of the Consumer Code for Home Builders are as follows:

  • A copy of the Code should be readily available at reservation stage;
  • The buyer should not be subject to ‘high pressure’ selling techniques;
  • Additional fees such as deferred management charges and fees on resale must be declared at the reservation stage;
  • Developers may offer cash or cash equivalent incentives and refer buyers to panel solicitors but there must be no restriction on the buyer’s ability to seek independent legal or financial advice;
  • The amount of the reservation deposit to be kept by the developer if a buyer pulls out must be set out clearly in the reservation agreement. This should include the minimum and maximum retention period for the fee if the buyer pulls out and the reasonable costs typically incurred when processing and holding the reservation fee.

Consequences of non-compliance for developers:

If a developer does not comply with the Code, the warranty provider can apply a range of sanctions including the removal of the developer from the affiliated warranty scheme. This also includes exclusion from any other home warranty schemes that take part in the Code. For a developer, this could be catastrophic to the profitability of the scheme and the speed in which the new homes can be sold.

The Code is an important set of principles which if ignored can be costly for developers. It’s vital that developers and builders review the provisions and ensure their processes are up to date.

For more information and advice on the Consumer Code for Home Builders, please contact Steven Percy in our Commercial Property team on 01625 442158.

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