What is the new Code?

The New Homes Quality Code of Practice (the “Code”) was launched by the New Homes Quality Board in January 2022. The stated aim of the Code is to “drive up the quality of new build homes and strengthen protections for customers”. The Code aims to fill gaps in current protections and to cover every aspect of new home purchases through to two years post purchase.

A Developer Guidance document has also been published which references the consultation and outcomes which have led to the publication of the Code.

What does the Code say?

The Code is split into four sections and some of the key points include:

1. Considering and making appropriate arrangements for vulnerable customers and avoiding high pressure selling techniques (Section 1).
2. Developers to recommend that buyers take independent legal/mortgage advice. Where recommendations are sought the developer should not restrict customers choice to one adviser and cannot link inducements when recommending services (Section 1).
3. Should exchange of contracts not occur reservation fees should be refunded less reasonable costs incurred (as set out in a reservation agreement). Prospective buyers should have a cooling off period (Section 2).
4. Buyers should be kept informed of progress and once the property is decorated and main service connected the developer should provide the buyer details of the week in which the property will be ready. Legal completion should be no less than 14 days from serving notice to complete (Section 2).
5. All buyers (or their representative) should be given the opportunity to snag the property ideally allowing sufficient time for the developer to remedy any snags before legal completion. Where not practical agreement should be reached with the buyer on the timescale for remediation. (Section 2).
6. It is expected that contract deposits, reservation fees and pre-payments will be protected by some form of insolvency insurance (Section 2).
7. After-sales issues are expected to be dealt with within 30 days. There should be a proper, prompt and professional co-operation between the developer and the buyer (or their representatives). If buyers are not satisfied with the resolution offered by the developer they will have the opportunity to refer the issue to the New Homes Ombudsman Service (Section 3).

Is the Code mandatory?

We anticipate that peer pressure at the lower end of the market may drive developers to voluntarily adopt the Code. It remains to be seen whether developers in the prime and super-prime space will follow. All developers would by necessity have to adopt the Code if new home warranty providers, local planning authorities and/or insurers mandated developers to adopt it. Customer expectation, and the related reputational impact, is likely to be an additional driver. Making the Code effectively mandatory for developers would drive the Code forward and would accelerate the levelling-up process for the consumer.

The Code is perhaps onerous on developers but is no more than a new home buyer should expect. The Code offers additional support to buyers and might be seen as part of an overarching move towards greater accountability of building practices (e.g. the Building Safety Bill) and property sales (e.g. the CMA investigation into sales of leasehold houses). The government’s desire to increase home ownership and to give statutory support to home owners (e.g. through leasehold reform legislation) further supports this directional shift.

What should developers be doing?

The registration window is now open (as of January 2022) and developers will need to consider if and when they will sign up. It is anticipated that there may be phased registration where developers have subsidiary group companies. A process of alignment with broad values embodied within the Code (transparency and fairness) is likely to have already started to occur particularly within larger developer companies. However, the process of alignment and compliance is likely to take time, during which developers might revise complaints policies, handover and sales procedures and precedent documents.