After five years of consultation, the New Homes Quality Code (NHQC) and accompanying Developer Guidance was published last year, with the intention on replacing the existing Consumer Code for Home Builders.

The deadline for implementation of NHQC is now fast approaching, and developers intending to adopt the new code must be registered with the New Homes Quality Board by 31 December 2022. But why is there a new code being brought in, and what will it mean for developers and homebuyers?

A fall in standards

The NHQC was created in recognition of the decreasing build quality of new homes and the poor standards of service offered to homebuyers.

The More Homes, Fewer Complaints report published by the All-Party Parliamentary Group (APPG) for Excellence in the Built Environment concluded that the existing code “does not appear to give homebuyers the safeguards we think they should expect”. It was clear that the existing Consumer Code was no longer fit for purpose.

Amongst recommendations included within the report were the following:

• Improving the systems in place to check quality and workmanship
• Developing a new quality culture within the construction industry
• Improving customers’ means of redress through the establishment of a New Homes Ombudsman and a review of the warranty system
• Improving the information customers receive about their new home, including standardised contracts and a right to inspect before completion

The NHQC is part of a broader framework designed to protect homebuyers, which includes a New Homes Ombudsman Service to deal with complaints made under the NHQC.

The intention is to ensure customers benefit from enhanced levels of quality and transparency, both in terms of the service provided and the quality of the finished product.

What is changing?

The requirements set out in the NHQC are mandatory and must be complied with by those developers who are registered with the New Homes Quality Board (NHQB).

The NHQC sets rules for registered developers to meet and includes a statement of fundamental principles which registered developers are agreeing to apply when dealing with customers. These principles include Fairness, Quality, Service, Transparency and Inclusivity, with a view of prohibiting high pressure selling, protecting vulnerable customers and protecting customer deposits.

The NHQC includes a requirement to provide the customer with all relevant information during the sales process, including service charges, so customer decisions are fully informed.

Other measures include the requirement for a fair reservation agreement that includes a ‘cooling-off’ period and allowing customers to have a pre-completion inspection of the home undertaken by a qualified inspector.

Post-sale, registered developers need to have an effective after-sales network in place to deal with any issues in the snagging process and a quick, transparent complaints procedure. In the event that a customer is not satisfied with the handling of a complaint, they can refer it to the New Homes Ombudsman Service.

The changes developers need to make to reflect the new code include:

• All standard documentation to be reviewed, including sales and marketing information, any early-bird arrangements and the wording of reservation agreements to ensure that they reference the necessary cooling-off period.
• All pre-contract information must be reviewed to ensure it details any costs of the wider development for which the buyer will be responsible, including details of management or factoring fees and brochures or plans relating to properties yet to be completed.
• Revising the process of selling a new build property to introduce a pre-completion inspection check during the period five days after the completion notice has been served, although it can be carried out earlier by agreement.

Training will be an essential activity for developers

Developers must also ensure those members of staff dealing directly with customers receive training, particularly around providing the necessary information and the need to avoid high-pressure selling. This training must be refreshed annually and records of its delivery maintained.

The NHQC also requires developers to provide a detailed and easily accessed after-sales service for at least two years after legal completion. Although developers do not have an obligation to provide an after-sales service to subsequent owners, if an issue is reported within two years from the date of completion, the developer should take responsibility for dealing with it.

High-pressure selling techniques such as use of a specified third-party advisor, and offering financial incentives for immediate reservation, will be prohibited. There are also restrictions on ‘early-bird’ reservations, when customers are offered an exclusive chance to reserve a plot before it gets released for general sale, typically for a fee.

Future developments

Although registration with the NHQB is currently voluntary, it is anticipated that the Ombudsman Scheme under the NHQC, and perhaps the NHQC entirely, will become mandatory for developers in the future.

It would be wise for any developer to review their operations and assess how they sell and market houses, liaise with customers and deal with complaints, and ensure they are both familiar and compliant with the NHQC and the Ombudsman Scheme.

If you are a developer and have concerns over the NHQC, Ansons are here to help. Please contact Jonathan Rowley, Director within the Commercial Property team, on 01543 466660 or email jrowley@ansons.law

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