The New Homes Ombudsman Service was created to determine whether developers are complying with their obligations under the New Homes Quality Code (NHQC). In previous articles we have discussed a number of parts of the NHQC, including selling to vulnerable customers and early bird arrangements. In this article, we consider the first complaint determined by the Ombudsman.
The complaint was that the developer had treated the customer unfairly by not taking the circumstances of the customer's mortgage offer into consideration during the reservation process.
In early 2022 the customer secured a mortgage offer on favourable terms. They entered into a reservation agreement with the developer, which included an estimated completion date 7 months after exchange of contracts.
The developer and customer were ultimately unable to exchange contracts because of the customer's concern that the purchase might not complete within the period of their mortgage offer. The customer was worried about the volatility in the mortgage market and the risk for them if their mortgage offer expired prior to completion.
The reservation agreement was extended several times, and the developer remained optimistic that completion would occur by the original estimated completion date, but the draft contract included a later date by which the developer would require to complete the build. The developer's documentation had made it clear that it could not guarantee a completion date within a mortgage offer. The Customer decided not to exchange contracts because of the later date for completion and the reservation agreement lapsed.
The Ombudsman's decision
The Ombudsman decided that the developer had complied with the requirements of the New Homes Quality Code, including the need to be transparent with the information provided and fair in their treatment of the customer.
The Ombudsman took the view that, although the customer's concerns about timing were understandable, the nature of buying a new build property is that there is less certainty about completion dates.
The decision will be reassuring for developers given the inherent difficulty in estimating completion dates at the reservation stage.
Many customers will, of course, be anxious to ensure that their house purchase completes within the period of an existing mortgage offer – but the Ombusman was clear that the complaint here could not be upheld where the developer's documentation stated that it could not guarantee completion before expiry of a mortgage offer.