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Updates to the Consumer Code for Home Builders

Established in 2010 the Consumer Code for Home Builders ensures that new home buyers are fairly treated and know what levels of service to expect and that they are provided with reliable information on their purchase. During a recent review of the Code, ensuring it continues to meet the needs of new home buyers, a number of amendments have been made which will take effect from 1st April 2017.  As one of the founding members of the Code these changes and how they could affect you have been summarised below:

  1. Definition of ‘the Code’, and ‘The Code Scheme’ have been clarified:

‘The Code’ is now clearly only the set of the 19 numbered ‘Requirements’ while ‘The Code Scheme’ includes further explanation and an introduction to the dispute service. ‘The Code Scheme’ documents must be provided to the Home Buyer with the Reservation Agreement, and also to the Home Buyers’ legal representative, with the draft contract of sale documents.

  1. Definition of ‘Home Buyer’ and ‘Customer’:

These have been separately defined. A ‘Customer’ only becomes a ‘Home Buyer’ when they enter into a formal Reservation Agreement.

  1. Vulnerable customers:

In order to meet the requirements of vulnerable customers, it is now stated that “the evident” needs of Vulnerable Customers should be considered at all times. An example might be an elderly customer who has difficulty understanding documents or exhibits memory problems and needs support, for example, from a younger family member to help them through the buying process.

  1. Making the Code available:

The requirement is that the Code Scheme Logo is prominently displayed in both Home Builders’ and Agents’ sales offices and in sales brochures. The Logo will be to a designed specification and include the Code web address. Home Buyers must be provided with the Code Scheme documents with the Reservation Agreement, but this can be done by electronic means.

  1. Staff Training:

Working in partnership with the Home Builders Federation, Homes for Scotland and other Industry organisations, The Code is enhancing the on-line training for front-line staff employed by Home Builders and Estate Agents contracted to sell new homes on their behalf.

  1. Sales and marketing:

The Code’s good practice Guidance now includes exclusion of high pressure selling techniques.

  1. Information pre-contract:

Following complaints about 'event fees' such as deferred management charges and fees on resale or transfer of leases (particularly in the retirement homes sector), there is now a Requirement that any such ‘event fees’ are declared at Reservation stage. The Requirement to provide a brochure or plan showing ‘the layout’ has been qualified to now show ‘a general layout’.

  1. Pre- contract:

The good practice Guidance has been amended to make it clear that Builders may offer incentives and/or refer Home Buyers, for example, to a panel of solicitors, but should not restrict their choice of Legal representative. In addition, this preclusion now includes not restricting the financial advisor or mortgage intermediary that they may wish to use.

  1. Reservation:

The Requirements to be included in the Reservation agreement have been amended to include:

  • The specific date until when the price remains valid;
  • The nature and method of any event fees; and
  • A statement that a copy of the code scheme has been supplied to the home buyer.
  1. Reservation fees:

The guidance regarding the retention of monies from Reservation fees on the cancellation of a Reservation has been simplified in response to representations. In the Reservation agreement a Home Builder is now required to state the likely ‘range’ of monetary deduction which may be made on cancellation. The Home Builder may retain an amount that represents the reasonable costs that they have genuinely incurred in processing and holding the reservation.  The Home Builder determines the amounts entirely in their own judgement within the ‘range’ indicated in the Reservation agreement.  However the Home Builder must have regard to the fact that a Home Buyer may challenge any deduction made through the Code’s Independent Dispute Resolution Scheme if they consider it excessive.

  1. Completion and handover:

There are frequent issues arising regarding the ‘completeness’ of the Home at handover. The good practice Guidance has been extended to suggest that the Home Builder should explain to the Home Buyer that there may be minor items outstanding within the Home and its curtilage, and explain what arrangements they will make for completing them. Similarly, in respect of works serving the property, but not being a part of the Home, such as roads etc. many complaints may be alleviated by appropriate communication with the Home Buyer.

  1. Independent Dispute Resolution Scheme:

Taking the learnings from the decisions made by the Adjudicators and good practice from across other schemes, the following changes have been made to the Independent Dispute Resolution Scheme:

  1. Timescales for a Home Buyer to bring a complaint –A claim cannot be brought before 56 days have elapsed since first raising it with the Home Builder, and no later than 12 months after the Builders’ final response.
  2. Maximum Award Limit remains unchanged at £15,000 including VAT.
  3. Award for ‘Inconvenience’ – this has increased to £500 from £250. However, Home Buyers can now no longer make ‘inconvenience’ claims and such awards can only be made by the Adjudicator at their own discretion and consideration, where there has been ‘more than minor inconvenience’ and where a breach of the Code has been identified. Further, the Home Buyer may not receive an award for ‘emotional upset and stress’ as awards will be judged as a matter of fact and on the resulting financial loss caused.
  4. Allegation of Code breach - Home Buyers making a claim must now identify the Code Requirement alleged to have been breached when making an application for dispute resolution. This is to avoid generalised complaints which may have little or no specific relevance to the Code.

The new version of the Consumer Code for Home Builders rules will be provided to all developers registering with Premier Guarantee and will be available to download via our website from 1st April 2017. There will also be a new on-line training module which takes you through the Code requirements. All of the documents will also be available from the Consumer Code website http://consumercodeforhomebuilders.com/

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