Property: New homes codes: setting the record straight

When the Government embarked on plans to strengthen consumer redress in the new build homes market, many of us expected a mandated single code and New Homes Ombudsman to be phased in, replacing the numerous codes currently operating. In some respects, this would have made life easier for consumers and their advisers, since there would be one set of requirements for developers to follow, and a single scheme for redress. But only if that one scheme was as good as or better than the existing codes.

As things currently stand, though, there is no statutory code or statutory ombudsman, although provision has been made for both. So where does that leave new build home buyers, and what do you, as solicitors and conveyancers, need to know to best support your clients?

Seeking stronger redress

In 2019, the Government consulted on plans to strengthen redress for consumers buying new build homes. This decision followed a report from the All Party Parliamentary Group in June 2018, which identified a number of shortcomings or gaps in the protection afforded to consumers at the time.

The Consumer Code for Home Builders is the largest and most established voluntary new homes code, having been in existence for more than 12 years and currently covering 95% of the new homes market across the UK. In that time, we have helped to drive up standards by setting clear requirements, providing tools designed to make the process of buying a home fairer and more transparent, and helped the industry learn from past mistakes through a mixture of training, information and sanctions.

But we have always recognised there were gaps, not least due to the complexity of the home buying process. Even for solicitors who deal with the process on behalf of buyers daily, it can be challenging to gain an in-depth understanding of the different cover offered by codes and warranty policies and the consumer protection afforded to their clients.

We therefore welcome the Government’s move to strengthen redress and simplify protection for consumers. However, we are still a long way away from a single, statutory approach. In the meantime, the setting up of a new code and new homes ombudsman has led to confusion, with some developers mistakenly under the impression that these are new mandatory arrangements they must switch to. In the short term, this could compromise the protection available to consumers now, which is why it’s important to be clear on the facts.

Ahead of legislation

The Government has made provision in the Building Safety Act 2022 for a statutory new homes ombudsman and single code to help strengthen redress for consumers buying new build homes. However, these both need secondary legislation. In the current political environment, it seems unlikely that this will be brought forward in the short term, so how and when these changes will be implemented remains unclear.

In anticipation of the proposed legislative changes, a new not for profit company called the New Homes Quality Board set itself up to develop a new code, the New Homes Quality Code (“NHQC”), designed to plug gaps in consumer protection. The draft NHQC was developed in partnership with the Consumer Code for Home Builders and the Consumer Code for New Homes. Described further at Journal, March 2022, 34, the NHQC was consulted on in late 2021 and is due for launch in autumn 2022.

Therefore, as things currently stand, all existing codes, including the Consumer Code for Home Builders, New Homes Quality Code (when operational), and Consumer Code for New Homes remain voluntary. Developers are free to choose which code they comply with, subject to any restrictions imposed by their warranty provider.

New Homes Ombudsman

A voluntary new homes ombudsman was commissioned earlier this year by the New Homes Quality Board as part of its redress mechanism and will provide independent dispute resolution for consumers protected by the New Homes Quality Code, once launched. It is not a statutory body and its remit, like any other ombudsman, will be limited to consumer redress rather than sanctions on builders. Consumers protected by other codes will continue to have access to existing alternative dispute resolution schemes, such as the CTSI-approved scheme operated on behalf of the Consumer Code for Home Builders by the Centre for Effective Dispute Resolution (CEDR).

Which code?

In the absence of a statutory code or ombudsman, it is incumbent on those of us providing consumer protection to make this transitional phase as clear as possible and ensure that consumers are given the best support.

With that in mind, we are currently reviewing the Consumer Code for Home Builders and inviting input from a wide range of interested parties. The intention is to bring our code in line with the New Homes Quality Code where it makes sense to do so, reducing complexity for consumers, developers and advisers alike. However, whether you are acting for a developer or home buyer, it will be important to understand which code applies in each case so that the right advice and route to redress are provided from day one. This is something we are keen to make as clear and simple as possible – both for professional advisers and home buyers. As things currently stand, home builders currently registered with NHBC, LABC Warranty, Premier Guarantee or Checkmate must comply with the Consumer Code for Home Builders unless they voluntarily seek to change to the New Homes Quality Code.

Quality drive

But just as important as clarity is the need to maintain focus on driving up the quality of new build homes. Codes of practice are an essential tool in this process, but true effectiveness comes when this is supported with training, continuous learning, and sanctions. This has been a cornerstone of our work over the past 12 years and was instrumental in achieving accreditation by the CTSI Consumer Codes Approval Scheme, operated by the Chartered Trading Standards Institute.

As the new build homes market develops and new codes come on stream, maintaining that focus on improving quality and customer service at the outset is what will make the biggest difference to consumer outcomes. Solicitors and conveyancers have a role here too. By familiarising yourselves with the codes of practice, and using the resources provided (consumercode.co.uk), for example reservation agreements and contracts, you can help both your developer clients to comply and your home buyers to receive the right information at the right time.

Towards 2023

2023 will see the launch of the updated Consumer Code for Home Builders, following the current review, and will likely see the New Homes Quality Code and the voluntary ombudsman become fully operational.

As these changes come into force, one of the priorities for our board and, we hope, other new homes codes, will be to provide clear signposting for all those involved in the buying and selling of new build homes. We want advisers, developers and consumers to know where to go to get the information that applies to their plot, and new build home buyers to feel well informed and supported from the moment they reserve a property until two years after moving in.

Furthermore, all codes should continue to work collaboratively with the industry to improve the service homebuyers receive, and strengthen the protection available to consumers should things go wrong.

Further updates on changes to consumer protection and code compliance will be published on www.consumercode.co.uk when available.