Buyers of new build properties will be particularly interested to know that following the 2004 Barker Review and the 2008 OFT Homebuilding Study in the UK the Consumer Code for Home Builders was put together.  The purpose of the code is to ensure that home buyers are treated fairly, can rely on the information they are given and have access to quick low cost dispute resolution when things go wrong.

Whilst this does not have a statutory basis for purchasers, and is therefore not enforceable through the courts, the industry’s top structural guarantee providers, most notably NHBC, Premier Guarantee and LABC,  have subscribed to the Code and require that any Home Builder offering their guarantee comply with the provisions of the Code.

Some notable points for Buyers and Home Builders :- 

●  The builder must display a Copy of the Code and provide copies, without charge, to any purchaser who asks for a copy, and all buyers who actually reserve one of their new build properties.

● When a buyer wishes to purchase a property from a Home Builder, they must now be given a reservation agreement setting out the terms on which they have agreed to buy the property.  This reservation agreement allows the hopeful buyer a period in which the Home Builder agrees not to sell the property to any other interested party.  This is not new to the larger home builders, who have adopted this procedure for a number of years, but will have an effect on smaller or start up Home Builders.    At this point a reservation deposit is normally paid over to the Home Builder, by the buyer (typically between £500 and £2500 depending on the value of the property).

●  Previously if the hopeful buyer did not proceed to exchange contracts, being the point at which the purchaser is contractually committed to purchasing the property from the Home Builder, then the Home Builder would often retain the reservation deposit paid.  Under the Consumer Code for Home Builders the builder is obliged to return the reservation deposit to the buyer (although they may first deduct such money as is necessary to cover their reasonable costs).  This will mean that buyers  will not proceed to buy a property they are not entirely happy with for fear of losing their reservation deposit.

●  All sales and marketing material must be clear and truthful, to include a brochure or plan showing the layout, appearance and position of the property within the development as a whole.  Home Builders are currently bound by the provisions of the Property Misdescriptions Act 1991 which could lead to a Trading Standards complaint, investigation and possibly a prosecution for those concerned.  However, this provision within the Consumer Code is likely to mean more to an aggrieved purchaser, as it is an easier course for redress.

●  The Contract for Sale must, under the Consumer Code, detail realistic and reliable information about timing of construction, completion and handover. This is perhaps the most exciting change for a buyer.  Previously most Home Builders contracts provided that completion would take place once construction had been completed, which could take several months or in some cases even years.  One national home builder had a clause within their contract providing that handover could be up to 5 years from the date on which contracts were exchanged.  Home Builders would usually provide buyers with an estimate of a handover date but there would be no penalties if they missed this date.  Home builders must now include a date in the contract setting out the date on which they realistically anticipate  the property will be completed and also termination date, which will allow a buyer to withdraw from the purchase and recover their deposit, if the property is not completed by the termination date.  The termination date must be no more than 12 months for an apartment and 6 months for a house from the anticipated date, where the property is not watertight or 4 months and two months from the anticipated date respectively where the property is watertight at the point of exchange of contracts 

●  A buyer must also now be given an accessible after-sales service  and explain what this includes, who to contact and what guarantees apply to the Home, including what health and safety precautions should be taken when living on a development where work continues. In addition the Home Builder must have a system for receiving handling and resolving the home buyers calls and complaints and must also co-operate with suitably qualified professional advisers appointed by the home buyer to resolve disputes.  This will be of comfort for buyers to know as if the Home Builder fails to deal with any issues, such as areas which need rectifying or perfecting following completion, they can refer the matter for an adjudication under the Code. 

●  This after-sales part is important also because the Code does not just benefit the first purchaser of the property, but any subsequent purchaser for up to two years from the date of completion of the build. 

●  An adjudicator can make an award of up to £15,000.00 and accordingly it is vital that Home Builders also obtain good professional advice from a New Homes specialist before marketing their properties for sale.

Solicitors acting on behalf of Home Buyers of newly constructed properties also need to be aware of the code so that they can competently advise their clients what to expect and what protections are in place. 

Unfortunately adjudications under the code have not been reported in the industry or legal press, but the annual report is due to be published shortly, which should evaluate the effectiveness of the code.   Keep an eye on our website for further information once the report has been published.

Similarities are notable between the Conservative and Liberal Democrat manifestos, which can be used to interpret what impact this Government is likely to have on Property.

The first similarity was clearly the plan to abolish Home Information Packs before a property could be sold. The Liberal Democrats did however wish to retain the Energy Performance Certificate element of the packs. As of today (21 May), this plan has been implemented following the announcement by the Government for their immediate suspension. This would seem to be a sensible move by the Government; many had predicted this move and could therefore have had the effect of sellers withholding their properties from the market, hoping to save the cost of the Home Information Pack. This move will certainly be welcomed by residential developers and sellers alike, and hopefully bring back some spontaneity to the market.

A second point on which both parties are agreed is for a more localised planning policy. The Conservatives want to see a new “open source” policy, with local people being able to specify what type of development they want. The Liberal Democrats want local authorities to determine how and what type of developments are carried out. These proposals are in line with a clear intention to scrap the previous Government’s housebuilding targets, which many commentators state to be unrealistic based on current levels of construction. Whether a more local planning policy will help developers in obtaining planning for developments remains to be seen. One move which developers may not be so keen on is a Conservative proposal to force developers to pay a tariff to local authorities as compensation for the loss of amenities and costs of additional infrastructure.

The Conservatives proposal to permanently scrap Stamp Duty Land Tax for first-time buyers on properties priced under £250,000 may help the lower end of the market. Whilst this is likely to be welcome news, its effectiveness could be watered down by the scaling down of schemes such as Homebuy Direct, which has been suggested by the Liberal Democrats. This scheme has been of assistance to a number of developers and purchasers alike during challenging times.

There has also been much news on plans to increase the rate of Capital Gains Tax, currently at 18 per cent, and thought to be likely to increase to at least 40 per cent. This is not just likely to hit property investors and people investing in property to fund their retirement, but potentially also people who had lost confidence in pensions and may not have made separate provisions. However, if this has the effect of putting off potential buy-to-let investors from entering the market, then this could see an upturn in rental incomes as demand outstrips supply for rental properties.

Clearly, some uncertainty remains as we wait to see whether any such plans are watered down following consultation and the parliamentary process.  

In addition to the developers own schemes, developers have joined forces with local housing associations by participating in schemes backed by the Government. Indeed, properties on residential developments participating in such schemes have been quick to sell.

Homebuy Direct is one such scheme that developers have been participating in and is open to households earning less than £60,000 who would otherwise be unable to purchase their own home. First time buyers, key workers and housing association or council tenants are examples of those eligible to take part in the scheme.

Under this Scheme, an equity loan is given to the buyer by a Homebuy agent (through public funding) and the developer. These loans represent a percentage of the value of the property and are secured as second and third legal charges against the property. The Buyer then obtains the balance of the purchase price from a conventional mortgage lender.

No fees or charges are payable during the first five years of the equity loan, so what is the catch?

When the property is sold, the owner will be liable to repay both equity loans and also the conventional mortgage. The amount to be repaid will depend on the percentage borrowed. Therefore, if the property has increased in value then the owner has to share that profit with the Homebuy agent and the developer. However, there is also a risk to the developer and Homebuy agent if the property has fallen in value, as they may make a loss on the amount loaned.

We have seen a number of developers keen to participate in this scheme. This would suggest to me that they have confidence in a recovery of house prices in the near future!

Marine Conservation Zones are intended to protect nationally important marine wildlife, habitats, geology and geomorphology by placing restrictions on the type of activities which may take place within the Zones.

Adam Symons, Prospective Parliamentary Candidate for Torridge and West Devon, is delighted that the seas around Lundy have been given further protection, believing it to be a unique place and a significant attraction to the local economy. If this is the case, then it is possible that the designation of more waters within a Marine Conservation Zone may result in improved house prices in neighbouring areas as more people flock to visit.