Changes to the Consumer Code
The Consumer Code for Home Builders (“the Code”) has been under extensive revision since 2016 and as a result, it has been announced that there is now a Fourth Edition of the Consumer Code Scheme and the Home Builder ‘Requirements and Good Practice Guidance’.
The new edition of the Code will come into effect for all reservations signed on or after 1st April 2017. To be fully compliant with the new Code you need to familiarise yourselves with the changes and ensure that any sales teams acting on your behalf in taking reservations does so as well.
It has been confirmed that there is a three month implementation period in place so you and your sales teams have until 1st July 2017 to ensure you are up to speed.
We have set out below a summary of the key changes that you and your sales teams need to be aware of. The full list of changes to the Code can be found here.
The Code was subject to a major review process to ensure that it is evolving with the development industry, its consumers and their needs.
The change to the Code has taken into account results from many audits, compliance surveys and adjudication cases including mystery shopping inspections. Recent scenarios have indicated that in some instances developers (defined as Home Builders within the Code) and their staff have shown a lack of knowledge of the Code Scheme. Therefore certain elements of the revised Code tackle this issue with a view to improving awareness and understanding of the Code Scheme by all Home Builders and their employees.
Summary of the key changes
Some words or phrases used in the Code have now been clarified and we have set out those that will be of particular interest to you:
This is now defined as a person who has shown an interest and made enquiries into purchasing a Home, but has not yet Reserved a Home.
This is now defined as a Customer who reserves a Home with the intention of purchasing it. A Customer only becomes a Home Buyer once they have entered into a formal Reservation agreement.
This is now defined as someone who could be at a disadvantage due to personal circumstances. It is now advised in numerous sections of the Guidance that the evident needs of Vulnerable Customers should be considered at all times.
For example, if a Customer is elderly and has memory problems, they may benefit from a younger family member or friend helping them throughout the buying process.
Independent Dispute Resolution Scheme (IDRS)
This is now defined as the official scheme for any dispute resolution.
Changes that will affect how you take reservations (Section 2.6 of the Code)
- The information provided on Reservation must now advise a date on which the agreement to sell at the current purchase price will expire and it must also clearly confirm that a copy of the Code Scheme has been provided to the Home Buyer by either hard or soft copy. It is worth noting that the Home Builder Guidance does not have to be provided as it is accessible on the Code website.
- Whilst you can recommend panel solicitors and offer incentives to Home Buyers, their choice of legal representation, financial advisor and/or mortgage broker is not to be restricted.
- ‘Event fees’ must now be declared on Reservation. These fees include charges which may occur during the resale or transfer of leases and also deferred management charges.
- If any appendices or schedules are to be attached to the Reservation agreement they must now be signed by both you and the Home Buyer so that it is clear the information has been agreed by both parties.
- You must now give an estimate of the amount of the Reservation fee that will be retained if the Reservation is later cancelled by the Home Buyer. It can be any amount you deem reasonable when taking into account any costs that you have incurred in dealing with the Reservation. The Home Buyer is within their right to challenge the amount through the IDRS.
The new homes team here at Cripps Pemberton Greenish can provide assistance to you, if required, in terms of what should be included on your reservation forms in order to be Code compliant.
Changes in relation to how you advise on the timing of construction, completion and handover (Section 3.2 of the Code)
- It is now suggested that, in addition to the existing requirements, you should also explain to the Home Buyer that there may be minor items outstanding on completion and to also advise of the arrangements that will be put in place to complete any such works. This would include details of any works required to complete items such as roads or landscaped areas. The main point to take from this is that it is important to ensure the Home Buyer receives suitable information regarding the “completeness of the Home”.
- You must also make the Home Buyer aware that you are responsible for rectifying any relevant defects that fall within the two-year period following completion, as per your obligations under the relevant home warranty. Further information about how to deal with after-sales service (post completion) can be found in section 4.1 of the Code.
Changes in relation to Health and Safety (Section 4.2 of the Code)
- On completion you now need to supply the Home Buyer with the health and safety file for the Home.
- During construction, you are now entitled to restrict access to certain areas to the Home Buyer if it would be unsafe to allow them access.
Other changes to the Code that you should be aware of:
- The Code now excludes the use of high pressure selling techniques.
- The Requirement to provide a plan showing ‘the layout’ has now been changed to ‘a general layout’ only.
- The definition of individual investors has now been clarified. The Code does not apply to individuals buying more than one property on the same development for investment purposes, so if you have an investor purchaser that is only buying one property on your development, they will be deemed to be a Home Buyer and the Code will apply to them in the same way as owner-occupier buyers.
Further guidance on the IDRS
The Fourth Edition introduces amendments to the IDRS and the main ones to be aware of are set out below:
- The timescale in which a Home Buyer has to bring a complaint has changed. A complaint can now no longer be brought unless:
- 56 calendar days have passed since they first contacted you raising the complaint
- It is no later than 12 months since you made your final response.
- ‘Inconvenience claims’ can no longer be made by the Home Buyer; they must be made by the adjudicator at their own discretion.
- Claims in relation to emotional upset will no longer be a valid ‘inconvenience’ claim and all claims are to be judged on financial loss only.
- The maximum award for an ‘inconvenience’ claim has been increased from £250 to £500.
- When making a claim in relation to an alleged breach of the Code, the Home Buyer will now have to be able to identify the Code Requirement which has been breached, which should result in fewer generalised complaints being received.
Ensuring the Code is available to all
Due to the digital age we now all live in, there is no longer a requirement to hand a copy of the code to Customers who ask for it as they can obtain this by visiting the Code’s website. It is, however, now a requirement that the Code logo is clearly displayed in the following places:
- Your sales offices
- Any of your agents’ sales offices
- Within all sales brochures.
Finally, the logo must exactly match the design as set out in the guidelines which can be found here. There are also guidelines for use of the logo in your brochures.
Need further guidance?
If you would like further guidance on how the changes will effect you or if you would like to arrange some training for your team then please do not hesitate to contact Fiona McIntosh and Kate Anderson.