The Consumer Code For Home Builders Is Failing New Homebuyers

PrintClose examination of the 2015 published case studies for Consumer Code for Home Builders Adjudication Scheme (CCHBAS) shows exactly what is wrong with the house building industry. It is now time for a New Homes Ombudsman to independently deal with homebuyers complaints and award justifiable and fair levels of compensation. At present, the maximum new homebuyers can claim using the CCHBAS is £15,000. The maximum compensation for “inconvenience” is just £250 – this being all that was awarded to a quarter (27%) of the successful claimants in 2015.

A total of 47 complaints made by new homebuyers were adjudicated in 2015. Of these, 41 were successful or successful ‘in part’ due to a total of 110 violations over 17 different Code requirements. Only one Code requirement (3.4) was not mentioned in any of the case studies.

During the process many aspects of buyers’ claims were dismissed including: any warranty matters or disputes, snagging, defects, poor quality and workmanship issues, unfair fees for extra works, loss of property value, safety, electrical safety and water ingress; all of which being deemed “outside the scope of the Code”

Despite the increased number of cases that succeeded (87% in 2015, up from 45% in 2013), the total awarded to homebuyers represents only a fraction (22.7%) of the combined amount claimed. A spokesperson for the Code told me It is not unusual for homeowners to claim the maximum award, however the adjudicator will require evidence of any losses in coming to their decision.” It should be noted that even though their claims succeeded, eleven of the 2015 claimants didn’t have the CCHBAS registration fee (£120) reimbursed. The Decision in case 45 noted: “As the claim succeeded in part, the adjudicator directed the Home Builders to reimburse the registration fee to the Home Buyer.”  This alone demonstrates a level of inconsistency in the CCHBAS.

It is surprising that so few claims were made by new homebuyers in 2015, considering the 143,560 new homes built and given this industry’s abhorrent reputation for poor quality and customer service. The spokesperson for the Code told me that for Q.19 in the HBF Customer Satisfaction Survey (sent out to some new homebuyers after 8-weeks) only “57% of respondents confirmed they were given a copy of the Code at reservation.” This means at least 16,802 confirmed occasions that house builders breached Code requirement 1.2. If this same percentage were applied to the total number of new homes built in 2015, it would equate to 61,730 violations of the most basic Code requirement (1.2) The Home Builder must display the Code and give, without charge, a copy to customers who ask for it and to all Home Buyers who reserve a Home”

Consumer Code Annual Report 2014It is no wonder, that even with its limitations, the Consumer Code for Home Builders Adjudication Scheme (CCHBAS) is rarely used by consumers – they do not know it exists! The Codes’ Annual Report 2014 even stated that just 32% of homebuyers leave a housebuilder’s site aware of the Code. Indeed only 78.5% of the builder’s own sales staff is aware of the Code (see 1.4), just 28% of site sales offices display the Code and only 15% gave a copy of the Code to mystery shoppers (see 1.2). In response their spokesperson told me: “we do believe the Code’s visibility should be improved at the earliest possible interactions [sic] with potential home buyers so we will be proposing changes to the Code’s requirements in this respect.” “Builders who are registered with the participating warranty bodies have to comply with the Code as a condition of registration.” Clearly they are not. Those responsible for monitoring adherence to Code requirements and imposing sanctions on miscreant house builders are failing to do so! A spokesperson for the Code told me “in addition to any financial award, warnings; requirements for further training and suspension from the registers of the participating warranty bodies have been used where appropriate, including in the successful cases you referred to.”

Scales of justiceWhilst the industry is keen to promote the illusion that the existence of their own Consumer Code for Home Builders does give buyers “independent adjudication when issues arise”, it clearly isn’t being adequately promoted by house builders for the same reason that a turkey wouldn’t advertise Christmas. Given the number of times builders breach their own Code, all but hiding its very existence from their customers (a total of 133 claims in six years!). It is time the Code was recognised as a failure it is, duly dismantled and sent to Room 101. It should be replaced with a totally independent, robust New Homes Ombudsman Service: FREE – FAIR – FOR EVERYTHING. This would be able to adjudicate on all matters relating to new home buyers, including warranty, poor quality and workmanship issues. It should be a legally-enforced requirement that house builders make buyers aware of their right to use the New Homes Ombudsman, via Government leaflets in sales offices, direction in all housebuilder’s marketing material, and in all correspondence with consumers before and during any complaint or dispute.

The house building industry should embrace the introduction of the New Homes Ombudsman. It could improve the industry’s tarnished image and reputation. It would give potential new homebuyers reassurance that any and all complaints they may have about their home, the warranty, or the house builder, can and will be ultimately dealt with independently, fairly and free of charge. 

Consumer Code coverThese are the requirements that were breached in 2015 by house builders of their own Code of Conduct (number of  violations reported in 2015 in brackets)

1.1          (2) “Home Builders must comply with the requirements of the Code and have regard to the good-practice guidance.”

1.2          (6) “The Home Builder must display the Code and give, without charge, a copy to customers who ask for it and to all Home Buyers who reserve a Home. The Home Builder should also inform their customers that further guidance is available and how they can get this.”

1.3          (8) “The Home Builder must have suitable systems and procedures to ensure it can reliably and accurately meet the commitments on service, procedures and information in the Code.”

1.4          (5) “The Home Builder must provide suitable training to all staff who deal with Home Buyers about their responsibilities to them and what the Code means for the company and its directors.”

1.5          (9) “Sales and advertising material and activity must be clear and truthful”

2.1          (13) “Home Buyers must be given enough pre-purchase information to help them make suitably informed purchasing decisions. In all cases this information must include:

  • a written Reservation agreement;
  • an explanation of the Home Warranty cover;
  • a description of any management services and organisations to which the Home Buyer will be committed and an estimate of their cost.

Also, if a Home is not yet completed, the information must include:

  • a brochure or plan reliably showing the layout, appearance and plot position of the Home;
  • a list of the Home’s contents;
  • the standards to which the Home is being built.”

2.2          (1) “Home Buyers must be told how their questions will be dealt with and who to contact during the sale, purchase and completion of the Home.”

2.3          (4) “Home Buyers must be given accurate and reliable information about the insurance-backed warranty provided on the Home.”

2.4          (2) “Home Buyers must be informed about the health-and-safety precautions they should take when visiting a development under construction.”

2.5          (1) “Home Builders must advise Home Buyers to appoint a professional legal adviser to carry out the legal formalities of buying the Home and to represent their interests.”

2.6          (7) “Home Buyers must be given a Reservation agreement that sets out clearly the terms of the Reservation, including, but not limited to: – the amount of the Reservation fee; what is being sold; the purchase price; how and when the Reservation agreement will end; how long the price remains valid; the nature and an estimated cost of any management services the Home Buyer must pay for.  The Reservation fee must be reimbursed if the Reservation agreement is cancelled. The Home Buyer must be told of any deductions that may be made. While the Reservation agreement is in force, the Home Builder must not enter into a new Reservation agreement or sale agreement with another customer on the same Home.”

3.1          (10) “Contract of sale terms and conditions must be clear and fair, comply with the Unfair Terms in Consumer Contracts Regulations 1999 and clearly state the contract termination rights.”

3.2          (15) “The Home Buyer must be given reliable and realistic information about when construction of the Home may be finished, the date of Legal Completion, and the date for handover of the Home.”

3.3          (1) “The Home Buyer must be told about their right to terminate the contract.”

4.1          (8) “The Home Builder must provide the Home Buyer with an accessible after-sales service, and explain what the service includes, who to contact, and what guarantees and warranties apply to the Home.”

4.2          (3) “Home Buyers must be told about the health and safety precautions they should take when living on a development where building work continues.”

5.1          (25) “The Home Builder must have a system and procedures for receiving, handling and resolving Home Buyers’ service calls and complaints. The Home Builder must let the Home Buyer know of this, and of the dispute resolution arrangements operated as part of this Code, in writing.”

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