The New Homes Ombudsman Service

The New Homes Quality Code ("NHQC") sets out the requirements which must be adopted and complied with by the developers who are registered with the New Homes Quality Board ("NHQB").

There are 10 fundamental principles which must be followed:

1. Fairness: treat customers fairly throughout the process
2. Safety: complete works in accordance with all Building Regulations
3. Quality: complete all works to a good quality standard
4. Service: ensure processes are in place to meet all customer service level requirements
5. Responsiveness: be clear, responsive, and timely in responding to customers’ issues
6. Transparency: provide clear and accurate information about the purchase of a new home
7. Independence: ensure customers are aware of the need to appoint independent legal advisors when purchasing a new home
8. Inclusivity: identify vulnerable customers and ensure appropriate support is given
9. Security: ensure processes are in place to meet all obligations under the NHQC, including any financial arrangements
10. Compliance: comply with all requirements of the NHQB

Where it is determined that the developer has fallen short of the requirements of the NHQC, the Ombudsman can ask it to:

• Apologise for the shortcomings, or provide a further explanation to customers
• Complete outstanding work or make good any defects; or
• Make financial payments for losses or for stress and inconvenience caused, up to a maximum of £75,000

The NHOS Annual Report

The report includes details of the number of enquiries, nature of complaints and outcome of disputes together with useful case studies.

Enquiries

• 54% related to requests for information on how to progress a claim
• 36% related to defects and snagging issues
• The remaining 10% included complaints related to reservation, sales, customer service, estate management, and matters that fall outside the scope of the NHQC

Nature of complaints

• The majority of complaints related to after-sales service and how developers dealt with complaints

Outcome of disputes

• Most complaints resolved during the early stages of negotiation/mediation
• Outcome of disputes included the developer apologising for poor customer service, undertaking remediation works, compensation payments (between £200.00 - £3,661.00), providing upgrades and slight price adjustments

Hot topic - Affordable Housing

• A reoccurring topic relates to complaints from homebuyers to the NHOS regarding a lack of accurate information about the number of affordable houses on the development
• At the pre-sale stage customers were only informed about the number of affordable houses required for planning approval and not aware that further plots could be sold individually/block sales to councils and housing associations
• Customers concerned that an increased proportion of affordable houses could adversely affect re-sale value of their properties
• The Ombudsman concluded that the information provided to customers about private and open market sales was not sufficiently transparent, and developers were making unrealistic assumptions about the extent to which customers understood the term 'affordable housing'
• The NHQB has provided some helpful guidance to developers to ensure that all information provided to customers is transparent. Developers must:
• highlight to purchasers in all pre-purchase information and sales material that the designated affordable housing units are indicative and subject to change;
• include provisions within pre-completion material (including reservation agreements) to advise that the tenure mix of development is subject to change; and
• ensure that sales advisers are appropriately trained and are able to explain the different types of tenure and ensure they make prospective customers aware of both the potential changes that can occur regarding affordable housing

Case Studies

The annual report provided details of 6 case studies which are summarised below:

1. Build Quality – Complaint upheld

Following completion, the customer complained that the mortar bed joints to the brick work were too large and was concerned about the appearance and the structural stability of the property. Despite the developer carrying out remediation works the customer remained dissatisfied.

A jointly appointed independent surveyor concluded that the stonework was untidy but there was no risk to the structural integrity of the building. The customer remained dissatisfied and appointed a second surveyor.

The second surveyor's report concluded that there was a variation in the depth of the mortar beds, the mortar varied in colour and the recessed pointing was untidy. It was considered that the value of the property at resale could be affected by the quality of the work, and that the total impact, including any costs, if the customer had to move out for the work to be completed, could be in the region of £25,000. 

Following a meeting with both surveyors (it was agreed that although structural integrity was not an issue there were problems with the aesthetics caused in part by poor workmanship which affected about 50% of the rear elevation), the Ombudsman concluded that there were defects in the property which the developer had acknowledged as falling beneath their quality standards and as such considered the appropriate remedy was for the developer to take the steps necessary to put these defects right, taking account of the conclusions of the two independent experts.

The developer also acknowledged that there had been delays and poor communication with the customer and had offered a compensatory payment of £1000. The Ombudsman considered this to be an appropriate level of redress for poor service levels experienced by the customer. Additionally, the developer was also asked to reimburse the customer for the cost of the second expert report, bringing the total level of compensation to £1540.

2. Build delays and customer service – Complaint upheld

The customer complained that the developer lied to them throughout the process and concealed information about the progress of the build, requiring the customers to move into temporary accommodation.

The customer reserved the property in late 2022 with an estimated completion date of June/July 2023. There were a number of delays in the build process which resulted in completion not taking place until early November 2023.

The customer was living in rented accommodation with a lease ending in late August 2023. Although the customer was able to secure a brief extension to the lease, it was not possible for them to remain in the rental as the deadline for completion was extended further.

The developer arranged for the customer to move into a property which they had taken in part-exchange and the developer covered the costs of this until completion.

The customer complained to the developer about the information they had been given throughout the process, including information posted on their portal page indicating that a key build stage had been completed when it had not. The customer felt they had needed to chase the developer repeatedly for updates, and that the estimated completion date had been moved a number of times.

The developer acknowledged that there had been delays with the build and that incorrect information had been posted on the customer’s portal page about the progress of the build. The developer felt they had acted reasonably in securing and covering the costs of temporary accommodation and had relied on their agent’s assurance that the property was ready for occupation. The concerns raised by the customer about cleanliness, the boiler and the oven were addressed promptly.

During their handling of the customer’s complaint the developer had provided a partial refund for an extra paid by the customer and a goodwill payment of £500.

The complaint was upheld on the basis of the standard of communications around the delays, the number of changes to the anticipated completion date and the error in the information posted on the developer’s portal about the stage completion. However, there was no evidence to suggest that the developer deliberately concealed information from the customer. The Ombudsman acknowledged the efforts made by the developer but considered that the developer should make a further payment of £735 to the customer, taking overall compensation to £1500.

3. Covenants and complaint handling – Complaint upheld in part

The customer complained about the information provided by the developer in relation to covenants and that support promised by the developer failed to materialise. The customer also complained about the time taken to communicate with them once they had raised their concerns and the way in which their complaint was handled.

Shortly after the customer moved into the property, they contacted the developer with concerns about how a neighbour was using an area of shared access. The developer offered to send a letter to the neighbour to remind them about the restrictive covenants. It was suggested to the customer that they obtained independent legal advice, as covenant issues ultimately need to be resolved directly between homeowners.

The customer took their own legal advice, which was initially to await the outcome of the developer’s contact with the neighbour, and the customer let the developer know about this. Several weeks passed, and the customer contacted the developer on a number of occasions to ask about progress. Eventually the customer was told that the developer would not write directly to the neighbour as had originally been offered, but would send a general circular to all residents, reminding them of their responsibilities.

The customer complained to the developer about the time that had been taken, the uncertainty it had created and the delays this had caused to their own potential action.

The customer raised a number of additional concerns about the neighbour’s actions and questioned whether the developer had been aware of these in advance of their purchase.

It was concluded that there was no evidence that the developer had been aware of the covenant breaches before the customer told them. This aspect of the complaint was not upheld, although the Ombudsman commented that it may be helpful to provide customers with written information about covenants during the initial reservation phase so they can understand more about their purpose and means of enforcement.

The Ombudsman concluded that the way in which the developer had handled the offer to help the customer fell below the standards of transparency in the code, took too long and required the customer to chase repeatedly for progress.

The Ombudsman concluded that the developer should pay the customer £200 in recognition of delays and inconvenience caused by the way in which the customer’s concerns had been handled. The customer and developer accepted the outcome.

4. Mis-selling and legal - Complaint upheld in part

The customer considered that the plot they reserved was mis-sold as having full planning permission in place when there were outstanding conditions to be discharged. The customer also complained about the way they had been treated by members of the developer’s team.

Following reservation, the customer was informed that not all planning conditions on the plot had been discharged, discussions took place regarding putting in place indemnity insurance to allow the sale to proceed while the developer investigated the issue with the council.

Subsequently, the customer’s lender withdrew their mortgage offer, citing issues with planning. The customer decided to withdraw from the purchase. The developer was able to resolve the issues with the council and it was confirmed that the planning conditions for the plot had been discharged retrospectively.

The developer agreed to return the customer’s reservation fee and extras payments in full. The customer also wished the developer to meet the costs of their legal fees. The complaint included concerns about the customer’s interaction with a member of the developer’s team. The developer offered a contribution towards the customer’s legal fees during the course of the Ombudsman’s investigation, but the customer declined the offer.

It was concluded that the developer should pay the customer’s legal costs in full. The complaint about inappropriate treatment was not upheld.

5. Return of deposit – Complaint not upheld

The customer complained that the developer provided misleading or incomplete information about various aspects of the property and its surroundings and that matters did not become clear until after the cooling-off period. As a result, when the customer decided to withdraw from the purchase, they were unable to secure a full refund of their reservation deposit and the deposit paid for extras.

The customer paid a reservation fee and an additional 50% deposit for extras after the expiry of the 14 day cooling off period.

At reservation the customer was given a presentation about the development including plans showing access and green/recreational areas. The customer said that they had asked specifically about parking and access arrangements at reservation and the developer provided reassurances. When further information was released to their conveyancer as part of the contract process, details of covenants and their method of enforceability were included, at which point the customer became aware that the developer was unlikely to play an active part in the enforcement of covenants relating to access and parking. The customer was also concerned about upkeep of certain areas of the development.

The customer withdrew from the purchase and the developer refunded the customer’s reservation fee less a deduction of £500 as specified in the agreement, on the basis that the customer had withdrawn after the cooling-off period and the issue of legal documentation. The developer was not prepared to refund the 50% deposit for the optional extras.

The Ombudsman recognised the customer’s disappointment that they felt unable to continue with the purchase but concluded that the developer had not misled them. As a result, although the developer could have exercised their discretion to return the fee and extras deposit in full, they were not obliged to do so.

6. Price reduction – Complaint not upheld

The customer complained that the developer did not tell them that neighbouring plots had been reduced in price prior to them completing their purchase. The customer considered the developer’s behaviour to have been unfair and unethical.

Prior to completion the developer reduced the prices on 4 nearby plots by £7,500. The customer did not become aware of the price reductions until after completion. The customer argued that they should have been offered the opportunity to withdraw from the purchase and buy one of the reduced properties.

The developer argued that they are not required to tell customers who have reserved a property of changes in prices upwards or downwards prior to exchange of contracts and that there were a number of factors which affected sales prices, including general economic factors.

The NHQC requires developers to notify customer of major changes, a major change includes value, but it was concluded that this is not the same as selling price, which can be affected by a number of factors.

The Ombudsman concluded that the principle of fairness in the code did not extend to a general requirement for the developer to inform customers proactively of changes in prices.

In relation to transparency, developers should ensure that customers have ready access to information throughout the sale process. In this case, the customer opted out of direct marketing shortly before the price reduction became effective, meaning that they did not receive the information which could have resulted in them withdrawing from the transaction.

A copy of the NHOS's annual report can be found here.

The NHQC is at the forefront of everyone's mind, if you require any assistance or advice please do not hesitate to get in touch.

Rakhshinda Nazir and Chelsea Charlesworth, members of our DACB Professional and Commercial Risk team, would be happy to discuss any areas of support.