On 22 October 2024 the Government published their response to the Competition and Market Authority Housebuilding Market Study report. This is announced to result in secondary legislation to ensure that all housebuilders are using a single mandatory consumer code to provide parity for all new homebuyers.
Previously, housebuilders had a choice of the New Homes Quality Code (“the NHQC”) or the Consumer Code for Home Builders, with compliance being voluntary and around 200 housebuilders embracing the requirements. The NHQC was established by the New Homes Quality Board (“NHQB”) in November 2022, designed to increase protections for customers from pre-reservation through to two years post-completion of the sale.
NHQB held a consultation on proposed changes to the NHQC in late 2024. The results are expected to be published in early 2025.
Registered providers of social housing (“RP’s”) are expected to remain exempt from the NHQC but many already adopt it voluntarily. The consultation process indicates that RP’s will be expected to comply with the principles of the NHQC. This uncertainty is flagged as unwelcome by the Chartered Institute of Housing due to potential misalignment between the NHQC and the separate shared ownership Code of Good Practice under consultation through the Shared Ownership Council.
Some of the key changes proposed to the NHQC are outlined below.
Implications for housebuilders
Main focuses
The NHQC focuses on a few main areas designed to enhance the customer security including marketing, reservations, pricing, and post completion works.
The Government is establishing the New Homes Ombudsman Service (“NHOS”) to ensure consistency and transparency for consumers.
Reservations and sales impact
The availability of the consumer ‘right to cancel’ for material changes may reduce as a result of a review of the threshold of ‘adverse effect’.
Due to the amendments in the NHQC, housebuilders will face higher costs, particularly to undertake vast training of sales and marketing staff and a review of their documentation to
ensure that they are being fully transparent with the customers and compliant with the NHQC.
High pressure selling techniques are not acceptable under the NHQC. For instance, time bound financial incentives, such as at launch weekends, will have a seven-day grace period so that the customer can make an informed decision within a reasonable period. Drip pricing will also be prohibited to ensure transparency on costs that are reasonably foreseeable, so removing hidden ‘optional’ costs.
Housebuilders will need to protect vulnerable customers, so it is essential that staff are trained to identify, react appropriately and assist these vulnerable customers with their specific needs.
Reservation agreements, and sales documentation must include prescribed ‘material information’, which may also impact plot sales contracts to ensure compliance.
Housebuilders will face longer reservation periods as a deadline to exchange, as the NHQC sets out a six-week minimum, unless a customer asks for an earlier date. This may cause uncertainty over the initial 14 days, as the customers could rescind the agreement. Housebuilders may prefer to wait for the 14 days cooling off period to elapse before instructing their solicitors to issue documentation to minimise any abortive costs. Exchange within the 14-day cooling off period must be with the buyer’s express consent.
Housebuilders must provide a five-year affordability schedule prior to reservation, requiring confirmation on how the shared spaces, roads and amenities of the development will be managed and associated costs.
Snagging, remediation and complaints
Housebuilders may face regulatory pressure from the NHOS, as customers can refer any complaints, including snags and defects, if the problem is not satisfactorily resolved within the timescales set out in the NHQC. Complaints not resolved within 56 days can be referred to the NHOS. Housebuilders should resolve complaints in a more efficient manner to prevent escalation to the NHOS.
In order to minimise snagging items and remediation, customers can undertake a pre-completion inspection themselves or appoint a professional, with the housebuilder providing a standardised checklist to follow. As the Chartered Institute of Housing suggest, this “is a positive step to avoid continued issues with ‘snagging’ and…ensure that any issues with quality are addressed earlier in the process”. Housebuilders would be obliged to provide a Schedule of Incomplete Works and commit to enforceable timescales for carrying out remediation.
Final thoughts
This is a highlight of the most impactful changes facing housebuilders. A full version of the NHQC can be found here along with the public consultation here. To help you navigate these requirements and advise in relation to compliance, Birketts offer expert guidance based on hands-on experience with the NHQC’s implementation. Contact Kelvin Cooper for more information.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2025.