Noel Hunter, chairman of the Consumer Code for Home Builders, talks to PBC Today about protecting home buyers from nasty surprises when making one of the biggest purchases of their life
Buying a home is probably the most important – and expensive – purchase most of us will ever make. But it is also something the majority go into with little or no previous experience to fall back on in what can be a complicated and sometimes confusing market. The consequences of a nasty surprise in terms of unexpected costs or changes to the design or specification after the contract is signed can be stressful and difficult to fix.
The Consumer Code for Home Builders was set up in 2010 to ensure fairness and transparency for buyers before and after they sign on the dotted line. In short, to make sure those nasty surprises don’t happen.
Noel Hunter became the code management board’s first independent chairman in the autumn of that year.
A trading standards officer by profession, his background covers both consumer issues and regulation, having previously worked in a local authority, as director of the National Consumer Council and as a member of the consumer panel of the Financial Services Authority and the Banking Code Standards Board.
He saw home building as a major industry where consumers are uniquely vulnerable because most of them rarely buy the product.
“Homes are probably the most important consumer purchase anybody ever makes in their lives. One is also aware that consumers are pretty inexperienced at buying homes because they don’t buy many of them – you buy in your lifetime maybe three or four homes, and perhaps not even as many as that,” he tells PBC Today.
The consumer code’s origins lay in a report by the old Office of Fair Trading, which identified what Hunter describes as “a number of serious consumer detriments” in home building, not least in customer service – how people were treated at the point of sale.
“They gave the industry a couple of options,” he says.
“One was to put their house in order by producing self-regulatory code of practice that had a statutory background in the Fair Trading Act. If they didn’t go down that route, there would be regulation imposed.
“The industry, not unnaturally, chose self-regulation.”
The resulting code covers every stage of the home buying process, from pre-contract through to exchange and post-occupation, requiring builders to ensure consumers can make informed decisions and know exactly what to expect.
“If you put down a reservation fee, for example, that fee has to be managed appropriately and cared for and controlled – and should be returned if the consumer decides not to proceed,” Hunter says.
“It’s quite proper if a reservation goes on for some time that the builder incurs some costs in making legal preparations and that can be deducted from the reservation fee – but that should not be a surprise. The consumer should know what is going to happen with their reservation fee and the fact that they can pull out of the reservation if they wish to without detriment.”
Consumers should also know how a house will look if they are buying off-plan, the materials being used, the standards it will be built to and list of fixtures and fittings.
“If there are other considerations, like if a home is sold and there is a management fee to control common ground – none of this should be a surprise to the consumer. It should all be clear at the point they were deciding to make a purchase,” Hunter says.
“If fees are likely to go up in time, the formula on which that is going to happen and the control over that should be made clear to the consumer as well. “Is it a leasehold property? Is it a freehold property? Is there ground rent involved? These sort of things should be absolutely clear. You quickly see that some of the issues that have been vexatious recently are actually covered by the code.”
If issues do arise, home builders must have a system in place for receiving, handling and resolving buyers’ calls and complaints – and must make the consumer aware of their dispute resolution arrangements in writing.
“We are sponsored by two warranty companies – NHBC, which is by far the largest and probably covers around 80% of the market, as well as Premier Guarantee and LABC Warranty which probably cover 10-15% of the market, so we cover under the code in excess of 90% of the market for new homes in the UK,” Hunter says.
In December, the code also secured approval from the Chartered Trading Standards Institute after completing its Consumer Codes Approval Scheme process, which involved an independent assessment of evidence that the code could influence and raise standards across the sector.
Sue Steward, CTSI head of client and commissioning said: “The Consumer Code for Home Builders provides essential reassurance for new homebuyers that their rights are protected and that they can seek redress should a home builder fail to meet the pre-sales, purchase and after-sales requirements set out in the code.”
Warranty bodies require registered builders to adopt and comply with the code, and can apply a range of sanctions if a builder is found to be in serious breach by the Independent Dispute Resolution Scheme.
This can include removal from the warranty body’s register and exclusion from other bodies that are part of the code which can ultimately affect their ability to trade.
Work is currently underway with other assurance schemes to ensure a consistent approach – and that those found to have breached the code cannot just find accreditation elsewhere.
“There’s a couple of other codes we’re working with, which have been set up separately, that cover exactly the same ground as our code,” Hunter says.
“We are concerned about two things: firstly, consumer confusion. We’re linking our websites together so that consumers won’t have any confusion about where they should go for help.
“Secondly, it’s really to ensure that if we have a problem with a company under our code and we remove them, they shouldn’t be able to hop to another code. There’s a protocol to make sure that doesn’t happen.”
The code itself also continues to evolve. It is reviewed every three years in consultation with stakeholders including consumer bodies, government departments, devolved administrations and bodies such as the Law Society, as well as the industry itself.
“One of the issues that came up last time was to try and ensure that the code was much more visible at the point of supply,” Hunter says.
“Bearing in mind I said before that consumers typically know very little about house purchases because of a lack of experience, it’s therefore really important that when they go to buy a new home and have to deal with an agent, they are aware there is a consumer code that protects them.
“That information should be provided at point-of-sale, it should be in the documentation that’s provided and, just to leave nothing to chance, when the lawyer or conveyancer gets involved, a copy of the code goes to them as well.
“The code should be visible at every stage in the process, so if anybody has a problem, they can get back to us.”