Builders face challenge of new home buyers’ code | 19 March 10

HOME builders are facing a shake-up in the way they do business, a leading law firm has warned.

The introduction of the new Consumer Code for Home Builders from April 1 this year will bring about major changes in the way that new homes are sold, according to experts at law firm Ward Hadaway.

The Consumer Code sets out requirements that home builders who are registered with home warranty providers NHBC, Premier Guarantee and LABC New Home Warranty must meet in their marketing and selling of properties and in their after-sales customer services.

Serious failures to comply with the Code could see a home builder taken off the register of Home Warranty Bodies who participate in the scheme.

This would seriously affect the ability of buyers to obtain mortgage finance as lenders currently require new homes warranty schemes to be in place for almost all new build properties.

Lesley Fairclough, partner and head of development at Ward Hadaway, said: “The introduction of this Code has not been widely reported, but it will bring about major changes in the way that house builders do business.

“It is a comprehensive set of requirements that covers every stage of the process, from reservation to after-sales service.

“And, since it applies to all new houses built by a company under the insurance protection of the supporting Home Warranty bodies, it will cover a large percentage of all homes built across the UK.”

Some of the key areas affected by the introduction of the Code include the way in which house builders carry out the sales process.

Lesley explained: “Home builders will have to either develop or update a Customer Charter to include detailed information so that buyers know what service levels to expect and are given reliable information on all aspects surrounding their purchase.

“Standard forms of reservation and sale contracts may also have to be altered to fit in with the Code’s rule to maintain transparency with customers.

“For example, home buyers must be given realistic information about when their home is likely to be completed and this date will need to be inserted into the contract at the outset.

“They will also need to be advised of their rights to terminate the contract under certain circumstances.

“Whilst all of these requirements will hopefully encourage more new home buyers by providing greater security and peace of mind, they do require builders to make some quite important changes.

“As a result, home builders who are not fully aware of the Code and its implications need to get up to speed fast – or they could find themselves left behind.”

Lesley added that the potential penalties for not complying with the Consumer Code for Home Builders make it vital for home builders to ensure they take account of it when planning for the future.

She said: “The fact that home builders could see their warranty cover taken away from the houses which they build is a sobering thought for the sector.

“However, with proper planning and advice, builders should be able to adapt to the Code and offer their customers greater peace of mind when it comes to their new home.

“We at Ward Hadaway have an expert team ready to help house builders with implementing the new Code and ensure they are fully prepared to deal with its effects.”

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