The New Homes Quality Code (the ‘Code’) is a set of requirements for registered developers to follow when building and selling new homes in the UK. It is produced by the New Homes Quality Board (NHQB) as part of its scheme to improve protection for buyers of new-build homes. A recent NHQB consultation has proposed changes to the Code that would enhance customer protections and provide more specific requirements for developers. The proposed changes include alterations to the responsibility of developers regarding pre-completion inspections, expanded terms of reservation agreements and proposed changes to the requirements of the developer at completion. In addition, the Code includes specific provisions relating to high-pressure selling techniques, financial incentives, and drip pricing.
Pre-completion Inspection and Reservation Agreements
Firstly, an adjustment has been made to the responsibility of the developer in relation to pre-completion inspection checks. In addition to giving the customer the opportunity to undertake a pre-completion inspection or appoint a qualified inspector to do so, the developer will now need to inform customers that the NHQB pre-completion checklist is available for use on these inspections. This checklist provides guidance for the customer on how to conduct the inspection, whilst also making the results of such inspections more uniform and easier for the developer to process and compare.
The terms of reservation agreements have now been expanded to include details of the materials used to construct the property in line with the National Trading Standards’ description of ‘Material Information’. Plus, full details on how shared spaces, roads and amenities on the development are to be managed, for example, local authorities, management companies, etc. In addition, the affordability schedule for any expected costs issued by the developer would only need to cover five years following the sale, rather than the previous ten-year schedule.
Completion and Right to Cancel
Other proposed changes relate to the requirements of the developer at completion. In Scotland, the need to provide a habitation certificate has been removed and replaced with a requirement for confirmation from the relevant local authority showing that the new home has been passed as habitable and fit for occupation.
The removal of habitation certificates may come as a welcome change, as lack of Local Authority resource often meant that written certificates were not available for weeks, or in some cases, months after the inspection. Altering this requirement will help bring the process into line with practice. It will bring the consumer comfort knowing that the proper habitation inspection has been carried out without potential delays waiting for a written certificate, with confirmation available in a verbal or informal writing format.
The requirement for developers to notify consumers of major changes to their new homes has also been altered. Whilst it remains that should any material change to the size or appearance of the new home occur the customer will have the right to cancel the reservation agreement or contract of sale, the proposed changes would increase the threshold at which a change would be considered material. A change in the value of the new home would only be considered as a major change when it has an adverse effect on the customer’s use and enjoyment of the new home. In practice, this should reduce the frequency of situations where a customer is granted the ability to cancel despite the change in value having no real impact on their use or enjoyment of the home.
Customer protections
Protections against high-pressure selling techniques have also been enhanced to give customers additional time to consider their purchase before proceeding. In terms of financial incentives, the definition has now been extended to cover time-bound events, such as launch weekends where certain incentives are available ‘this weekend only’. It would also allow the customers who take advantage of such offers a grace period of seven days to consider any purchase they have agreed to that is tied to a financial incentive. The changes being suggested would ensure that customers can trust that any incentives they agree to will still be available during a grace period. This would prevent situations where a deal is only offered if the customer reserves it immediately.
Additionally, drip pricing has now been included in the prohibited list of selling techniques. This will prevent the practice of incremental disclosures of additional costs and charges being made that are presented as “optional” but are in fact reasonably foreseeable that most customers would have to pay, even if some may avoid them. The aim of this inclusion is to get rid of the hidden costs that customers feel they are hit with whilst buying a new home, whilst also encouraging greater transparency from developers.
It is important to note that these changes are currently in the consultation stage and are subject to further amendment. Developers and customers alike should stay informed about any updates to the Code as the consultation period progresses. If you are looking for advice on the proposed changes outlined in this article, contact our team to find out how we can support you.
