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Practitioners with a conveyancing workload, including those working for developers, are reminded that all registered developers are now required to follow best practice standards as prescribed by The Consumer Code for New Homes (CCNH).
The requirements, relate mainly to:
- Marketing
- Selling
- Customer care after a sale
The aim of the Code is to make sure buyers are treated fairly; provided with clear, truthful, reliable marketing material to enable informed decisions to be reached; and to ensure they know what standards to expect of the builders, developers and of their agent.
The Code does not apply to developers or builders who are not registered with the Code. For those who are registered, the Code is mandatory and provides additional protection to home buyers additional to their existing legal rights.
The developer (including any agent) who fails to comply with the Code could find themselves subject to sanctions which could – in serious cases – include a referral to the Disciplinary and Sanctions Process, financial penalties and/or removal from the register.
Marketing
Developers/agents are expected to make sure all advertising and marketing material is clear, truthful, in plain English and does not mislead. It must also be legally compliant with all relevant codes of advertising and statutory requirements. Pressurised selling techniques, such as offering financial incentives for a quick decision, are banned.
Developers must include the Code within the reservation agreement, complying with specific requirements where vulnerable consumers are involved. This may not be as straightforward as you’d might expect: developers and agents are, it appears, expected to recognise when a buyer comes with the meaning ‘vulnerable’. “Developers should not make assumptions about the degree of knowledge that a potential Buyer has” para 3.6.
These requirements also apply to the terms of, and offers under, newbuild part-exchange schemes.
Selling
Minimum information must be included by developers within pre-purchase material provided to potential buyers. The requirement is that ‘enough’ suitable information is provided to enable a buyer to make an informed decision.
Buyers should also be provided with the names and contact details of someone who will deal with any complaints under the Code. They must also be told about their right to terminate the reservation agreement, for example if there’s an unreasonable delay in construction of the property.
Buyers are entitled to choose their own conveyancer and developers are not to restrict this freedom. They must, if specifically asked, recommend at least two solicitors/conveyancers to the buyer.
Discussions between the developer, agents and the purchasers frequently lead to alterations and, sometimes, misunderstanding as to the final contractual terms. The Code recognises the potential problem that disputes may arise over spoken statements. It makes clear that developers should, immediately before exchange of contracts, ensure the buyer’s conveyancer states in writing what spoken statements they are relying on when entering into the contract.
On completion, developers must then provide minimum information around structural warranties, the complaints procedure and dispute resolution procedures.
Customer care and after sales
Following legal completion, the buyer may still have a wait until structural completion has taken place. When the newbuild is ready for occupation and handed to the buyer, the buyer is entitled to ‘comprehensive’ information about the property, for instance snagging problems and the use of appliances.
The developer must give full details of all guarantees and warranties coming with the property – but they are banned from using high-pressure techniques to sell additional insurance products and warranties.
Once the purchase and handover are complete, the developer’s obligations continue. They must then provide comprehensive after sales service information, making clear how long it will last and how to make a claim. Their complaints procedure must also be made clear.
Practitioners should note that the Code’s requirements in relation to after sales care extend to subsequent buyers, so long as the matter is reported within two years of legal completion
Resolving matters
If a developer receives a written complaint, a new independent dispute resolution scheme will apply. Do note that there is a cut off for any complaints received after two years from the date of completion of the purchase. The scheme is cost-effective and speedy (but a referral can’t be made until 56 days have passed since the complaint was made).
The DR scheme does not apply in every case. It does not, for example, deal with claims which are covered by the structural warranty or claims around registered title or the land conveyed.
The developer must comply with the adjudicator’s decision. Successful complaints are subject to a maximum award of 25% of the purchase price – up to a maximum aggregate award of £50,000 inclusive of VAT). An award for emotional distress and/or claims for inconvenience may also be made (up to a maximum of £1,000.)
Developers must comply with an award made by the adjudicator – even if they’re no longer registered with the code. And if they refuse, CCNH can take enforcement action.
The introduction of the Code ought to be good news for the majority of developers, builders and new home buyers, providing certainty, facilitating relationships based on trust – and redress if things were to go wrong.
