Autumn update from the New Homes Quality Board

• Parliamentarians joined developers and other stakeholders at our three separate launch events to launch the new Code and Ombudsman.  Events were held in Cardiff, Edinburgh and Westminster where the new, enhanced consumer protections were warmly welcomed.  More details of each of the events can be found on our website here.

 

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• The New Homes Ombudsman Service (NHOS) has been operational since October in line with the first activated Developers.  Customers can contact them via their website www.nhos.org.uk or by telephone: 0330 808 4286.   Eligible complaints that are reviewed by the NHOS will be used to create anonymised case studies and published on the NHQB website to encourage continuous improvement across the sector.

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• At time of writing, we are delighted to confirm that over 150 developers have applied for NHQB registration including 85% of all large and medium developers in England, Scotland and Wales.  A total of 60 organisations are now live (including parent companies and subsidiaries, JVs, etc).  You can see the full list on the Register of Developers.
  
  Developer activation onto the Register takes place on the first Tuesday of every month.  Developers decide their month of activation and remain as ‘Pending’ on the register until they activate.  Only once activated are developers required to comply with the requirements of the new Code.  Those organisations that are currently in the transition period are due to go live in the months ahead.
  
  If you haven’t yet signed up and would like more information, please contact our team at [email protected]  We will be delighted to have a call or meet with you and your team to go through the process and answer any questions – over 200 presentations to developers have been undertaken so far! 
  
  Application is a simple process on our website and once you have applied, you can take as long as required to complete your readiness preparations before activating your registration.  Further information is available on our website here.

“Gleeson welcomes the opportunity to be part of the New Homes Quality Code as it provides a further protection and reassurance for customers buying a new home. It is a positive initiative and being accredited demonstrates our commitment to delivering a thorough and professional service throughout the full customer journey.”
Mark Knight, Chief Executive, Gleeson Homes

“The launch of the New Homes Quality Board is a positive step forward for the housebuilding industry. Anything which protects our customers more is good, and the Board, the New Homes Quality Code and the New Homes Ombudsman Service will help do that. It will mean customers get more and better information at every stage of their journey and it will also enable them to check the quality of their home prior to legal completion. We are proud to have been part of the HBF working group for the Board and look forward to seeing how it helps customers going forward.”
Douglas McLeod, Regional MD, Barratt Homes Scotland

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• CTSI accreditation for the new Code is underway.  As part of this, minor amends to the Code have been made to clarify some of the wording and remove out of date information.  There are no material changes to the requirements for developers.  The updated version of the Code is published within the downloads section of our website.

We have received a few questions regarding section 2.13 and part 4 of the new Code and the requirement for developers to have adequate arrangements in place to repay customer deposits, reservation and upgrade fees – especially in the event of insolvency.

Some warranty providers include protection of customer deposits within their policy, but this doesn’t ordinarily extend to monies taken as reservation fees or for upgrades and this can often run to thousands.

A key principle of the Code is that customer monies are to be protected and there are a number of mechanisms available to provide this:

 

• Escrow/segregated client facility.  This is a separate account where client monies are paid, which can be ringfenced until legal completion.  This has the benefit of being relatively cheap to set up but can be resource heavy to transfer funds in and out.  It also removes funds from a developer’s working capital for the duration.
   
• Surety policy.  This is a type of financial guarantee, issued in favour of a trust, that can call on the surety in an insolvency event whereby the proceeds will be paid directly into a segregated bank account.  This can be sourced through some insurance brokers and usually entails an annual payment.
   
• These examples aren’t exhaustive so the Code also allows for developers to utilise any other legal arrangement within the course of their business which they can reasonably use to repay the above amounts if necessary.  This mechanism is for each organisation to determine to ensure that their customers are protected.

In the past, developers have been dismayed at the inconsistent approach taken by surveyors when carrying out snagging inspections. This often led to unnecessary disputes between developer, surveyor and customer.  An important feature of the New Homes Quality Code has been the creation of a standardised inspection carried out by accredited professionals, to level the playing field.

The Residential Property Surveyors Association (RPSA), working with the NHQB and stakeholders including warranty providers, developers, surveyors, lenders, lawyers, and consumer organisations, created an agreed protocol to ensure that snagging could be carried out in a consistent, relevant and reliable way.

Section 2.8 of the new Code highlights that developers must give customers an opportunity to appoint “a suitably qualified inspector” to carry out a Pre-Completion Inspection. Although the Code also refers to a customer having the opportunity to visit the property, it is not intended that this is to enable them to carry out their own snagging inspection. By having the inspection conducted by a professional, developers can have confidence that matters highlighted will be impartial, reasonable and proportionate. And the presence of professional inspectors, who are aware of the risks associated with a live site, removes the need for site managers to manage health and safety risks by requiring CSCS cards.

Suitably qualified inspectors must be a member of a recognised surveying professional association such as RPSA or RICS; must hold Professional Indemnity insurance; and most only work within their competency and to the standards identified by the Pre-Completion Inspection checklist.

So how will this work in practice? Section 1.7 of the Code highlights that developers may recommend professional advisers to customers (and declare any fees or commissions received) and so it seems likely, in practice, that developers may wish to offer the contact details of trusted sources, such as the RPSA, whilst making it clear that the customer is free to make their own choice of service provider.

The RPSA, a not-for-profit professional association representing independent residential surveyors, operates a scheme whereby snagging practitioners can gain professional accreditation through Technical membership status. This is supported by a national business panel delivery service where customers are guided through the process of commissioning a Pre-Completion Inspection quickly and professionally, and in the full knowledge that their surveyor will be accredited, insured and quality assessed. Reports are delivered to the customer in standardised format (digital and/or hard copy) that can be easily referenced by the developer to carry out remediations.

Although these requirements signal a significant change in emphasis on snagging, the intention, by building impartiality into the process, is to reduce the risk of disputes and to ensure, as far as possible, that day one in their new home is a happy day for every customer.

In the last newsletter we introduced Leon Livermore, the Chief Exec of NHQB and Alison MacDougall, the New Homes Ombudsman.  This time we’re introducing two more members of the team: 

 

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