The number of connected homes or smart homes in the UK is expected to increase over the next decade with more households interested in connecting smart devices and appliances throughout their home. Housebuilders and property developers are also responding to consumer demand and incorporating more and more technology into the apartments and houses that they sell. However, incorporating technology into new homes can place certain liabilities and obligations on housebuilders. This blog explores what a connected home is and what housebuilders need to know about the laws that apply to the supply of connected technology.

What is a connected home?

A connected home or a smart home is a home which allows the homeowners to control different devices and appliances remotely using a smartphone or tablet. This includes thermostats, lights, security systems, and doorbells.

This network of devices can gather and share electronic information. Many of these devices and appliances can also be connected to smart speakers allowing homeowners to control all of these smart devices centrally in one app or by voice activated instructions to the smart speakers. This can even extend to just outside the home with smart electrical vehicle chargers which connect via Wi-Fi or Bluetooth, allowing them to be turned on and off remotely.

The Product Security and Telecommunications Infrastructure Act 2022 and Regulations

The Product Security and Telecommunications Infrastructure Act 2022 (the "PSTI"), which we wrote about when it was first introduced here, will introduce new product safety requirements for connected products. It creates broad obligations to apply to devices throughout the product life cycle in relation to security of such products, imposing security requirements depending on the stage of the products journey. These rules come into effect on 29 April 2024.

The Product Security and Telecommunications Infrastructure (Security Requirements for Relevant Connectable Products) Regulations 2023 (“Regulations”) supplement the PSTI. The Regulations also detail the products which are exempted where there are existing security requirements which are deemed as being sufficient, such as for smart meters and electrical vehicle chargers.

The PSTI is to apply across all of the stages of a smart devices product and applies to manufacturers, importers and distributors. A distributor is an entity which makes the products available in the UK and this will include housebuilders who provide and install these devices.

The duties of distributors include:

  • Providing statements of compliance: The distributor must not make the product available unless it is accompanied by a statement of compliance. The Regulations state this must include the product type or batch, the name and address of the manufacturer and a declaration that the statement of compliance is prepared by or on behalf of the manufacturer and that they have complied with the applicable security requirements and deemed compliance conditions (both found in the Regulations).
  • Compliance failures: Where there has been a compliance failure by the manufacturer, or the distributor, the distributor has the duty to not supply such products and to take action in both cases, notifying the relevant people in the case of a failure and acting to remedy the failure.
  • Complying with security requirements: Schedule 1 of the Regulations sets out many security requirements for manufacturers. This includes requirements for unique passwords and to publish information on a specific point of contact for reporting security issues. The distributor also has a duty to comply with security requirements, although these are not detailed in the Regulations. As mentioned above, if there is a failure of the manufacturer to comply with the security requirements, then the distributor has a duty to not supply such products and to take action. This means that distributors need to carry out appropriate diligence on the products they supply to consumers.

Breaches of the PSTI or Regulations can result in various sanctions including issuing compliance notices requiring the distributor to comply, stop notices, product recalls and fines of up to £10 million or 4% of worldwide revenue.

In preparation for the new laws coming into effect, housebuilders should review what connected technology they incorporate in their homes and ensure that they comply with their duties. This will include assessing whether manufacturers have complied with their obligations under the PSTI in respect of the technology that the housebuilder wishes to install in the home.

Housebuilders should also ensure that they have appropriate controls in place internally to assess and approve the addition of new connected devices to their new home specifications in the future.

Data Protection and Privacy

Whether the housebuilder is responsible for the processing of personal data gathered by smart devices in the home, will depend on the devices and system itself.

If smart systems are installed, such as a smart thermostat like Google Nest or a Hive, it is likely the provider of this system will be the controller for the purposes of data protection legislation as the user will need to create an account with the provider to use the system.

Housebuilders could, however, be responsible as the controller where it is a branded system of the housebuilder and the housebuilder enters into a contract with the home owner for the service. In these cases, the housebuilder will need to ensure that it complies with data protection requirements. This includes ensuring that the collection of personal data is fair and lawful, and that the home owner is provided with a privacy notice explaining how their personal data will be used.

Defective software and technology

Housebuilders should be aware of the various rights consumers hold in relation to goods and services and the remedies available to consumers in the case of defective goods, including software and devices.

The Consumer Rights Act 2015 ("CRA 2015") provides protection for goods and services, including digital services, provided to consumers.

Consumers have a right to goods to be of satisfactory quality, fit for purpose and to be provided as laid out in the contract. Otherwise, the consumer has the right to reject such goods, to repair or replacement, to a price reduction or to reject the goods. Goods must also be installed correctly otherwise the consumer has a right to repair or replacement or to a price reduction.

The CRA 2015 also provides protection for digital services, which is defined as data which are produced and supplied in digital form and includes software and apps. Similarly to the above, where the digital content is not of satisfactory quality, is not fit for purpose and is not as described, the consumer has the right to repair or replacement or, if this is not possible, a price reduction.

If digital content has damaged the consumer's other digital content or the device itself, and the consumer can provide damage was caused by lack of reasonable care and skill, then the seller must either repair the damage or pay for the damage. If, for example, any software provided as part of a smart device is corrupted and damages the device or other connected devices, then the seller will be liable.

Where housebuilders allow for the capability for smart devices to be installed, but do not install such devices, and these devices are bought by the house buyer themselves, then these obligations and liabilities under consumer protection law are likely to apply to the third parties providing the devices.

The Digital Markets, Competition and Consumers Bill (the "DMCC Bill") was introduced to the UK parliament on 25 April 2023 and is expected to receive Royal Assent in the spring and come into force in autumn of 2024. It will expand the Competition and Markets Authority's powers when enforcing consumer protection laws. The CMA and the courts will be able to impose fines on business which break consumer protection laws of up to 10% of their global turnover and award compensation to consumers. You can read more about the DMCC Bill in our four part series here.

Marketing Claims

Housebuilders should always be careful when marketing the addition of any smart devices to the homes.

The UK Advertising Standards Authority ("ASA") was clear in its 2020 advice on "New build and off plan homes" that all additional upgrades available at an additional cost are made clear, otherwise ads could be ruled as misleading.

Indeed, the ASA has previously upheld a complaint relating to an advertisement for a new housing development on the basis that the advert included multiple additional upgrades, such as tiled bath panels and chrome finishes that were subject to additional charges. The ASA held that consumers would expect the advertised layout and finish to be available at the price advertised and if that detail is not made clear in the advert (or marketing materials) then the advert may be deemed to be misleading and therefore in breach of the CAP Code.[1]

In summary, developers must ensure that advertisements or promotional materials are reviewed to cover the following core CAP Code compliance elements:

  • Ensure qualifications are included: prices must relate to the product featured in the marketing communication. Marketers are likely to fall foul of the Cap Code if they feature an unqualified ‘from’ price relating to a standard property alongside a photograph of a more expensive home.
  • Make additional costs clear: Quoted prices must include non-optional taxes, duties, fees and charges that apply to all or most buyers. Marketers should make clear in ads of any additional or ongoing costs such as service charges. They should also include where possible, how these are calculated and if these may change.
  • Avoid misleading terminology: Further, if access to some technology or functionality is subject to a subscription, then this should be explained. Housebuilders should also ensure that the terminology used to describe the features of the home are clear. For example, they should not refer to "fibre broadband" if the house will not be connected with fibre to the premises. They should also be wary of including information on broadband speeds in marketing materials.

Broadband services

Any housebuilders which provide broadband services to home owners via a captive provider must also note their obligations as a communications provider. The Office of Communications ("OFCOM") guidance to communications providers to improve consumer understanding of the technology used to provide broadband services, was published 13 December 2023 (the "OFCOM Guidance").

The OFCOM Guidance is to apply from 16 September 2024 and stresses the importance of using clear and unambiguous terms to describe its broadband services. Clear terminology should be used in both services descriptions, pre-contract information and marketing and promotional materials. You can read more about this guidance here.

If you would like to discuss anything raised in this blog in more detail, please get in touch with a member of the corporate and commercial team or your usual Brodies contact.

[1] Taylor Wimpey UK Ltd - ASA | CAP