The fourth edition of the Consumer Code for Home Builders (the Code) came into effect for reservations signed on or after 1 April 2017.
Following industry consultation during 2016 a number of changes have been made to the Code. Highlighted below are some of the key changes from a legal perspective. The Consumer Code website has a full overview of the changes in their download area – click here.
Change of scope
Section 4 of the Code has been amended to clarify that whilst the Code does not apply to investors, individuals will only be treated as investors if they are “buying more than one property on the same development for investment purposes”. This means that investors who own several properties in other locations, but who are only buying one property from your development, will not be treated as investors and will be protected by the Code.
New definitions have been introduced to distinguish between a Customer who has made enquiries about a home but who has not reserved one and a Home Buyer who has completed a formal reservation agreement or bought a home. In addition a new concept of a Vulnerable Customer has been introduced for customers whose personal circumstances make them especially susceptible and the Guidance requires their needs to be considered at all times.
To further publicise the existence of the Code, the Home Builders’ Scheme logo must be prominently displayed in the Home Builder’s sales offices, those of appointed selling agents, and in sales brochures.
Making the Code available
It is now a requirement of the Code that a copy of the Code Scheme must be provided to the Home Buyer with the reservation agreement.
In addition it should be provided to the Home Buyer’s legal representative with the draft sale contract. When we send out contracts for plot sales, we are now submitting an electronic copy of the Code Scheme by email and are also providing website details where a copy can be downloaded.
Recommended lawyers and financial advisers
It has been clarified that Home Builders may offer incentives and/or refer Home Buyers to a panel of solicitors. However, the new Code also makes it clear that the prohibition on restricting the Home Buyers choice of legal representative also now extends to its choice of financial adviser or mortgage intermediary.
Contents of the reservation agreement
A few changes have also been made in respect of the contents and treatment of any reservation agreement. Most notably:
- Event fees - Following complaints about events fees such as deferred management charges and fees on resale or transfer of leases (particularly for retirement homes), there is now a requirement that any such event fees are declared at the reservation stage and the nature and method of assessment of such fees set out in the reservation agreement.
- Reservation fees - The information that must be given regarding the retention of monies from reservation fees on the cancellation of a reservation has been simplified. Rather than specifying a sum that represents the likely cost of any retention, the reservation agreement may set out the range (in monetary terms) of the possible cost of the retention. Although be aware the Home Buyer may use the Code’s Independent Dispute Resolution scheme to challenge any deductions they consider excessive.
- Date until which purchase price remains valid - Rather than specifying the period during which the price will remain valid, a specific date must now be given.
- Evidence of acceptance - To ensure that Home Builders can prove that the home and its specification has been agreed with the House Buyer, the new guidance recommends that the reservation agreement and any appendices or schedules attached to it should be evidenced by the Home Builder and the House Buyer.
Due to a high number of complaints arising under the existing Code from snagging issues, new guidance has been included to suggest that the Home Builder should explain to the Home Buyer that there may be minor items outstanding within the home and it curtilage, and explain what arrangements they will make for completing them.
Timescale for claims
The timescales have been changed to bring them inline in with standards applied across other schemes. A claim cannot be brought before 56 calendar days have passed since first raising it with the Home Builder and no later that 12 months after the Home Builders’ first response. In addition the maximum award for inconvenience has increase from £250 to £500.
If you want to discuss the changes further, please contact Sarah Easton, Partner in our Commercial Property & Development team on 01892 701157 or by emailing email@example.com.