The New Homes Quality Code introduces various new rules and requirements for housebuilders registered with the New Homes Quality Board. We've already considered a number of areas, including part-exchange schemes and high-pressure selling techniques. Another key change is the new set of rules on "early bird" arrangements.
Early bird arrangements - also known as a plot-option arrangements or pre-reservation waiting lists - allow customers to be told first when a plot (or plots) on a development becomes available. The customer therefore gets an opportunity to reserve the plot before it goes on general sale.
Unlike the Consumer Code for Home Builders, the New Homes Code has introduced specific rules that developers must follow when offer. We've broken down the key requirements for housebuilders here.
Maximum fee of £150
Although developers can charge customers a fee for the arrangement, it must not exceed the limit set by the New Homes Quality Board. The maximum fee is currently set at £150, though this may be revised by the Board from time to time.
Clear deadline for acceptance
Customers should be told how long they will have to reserve the plot once they are told it is available. The deadline should be clear and specific (e.g. 24 hours from the moment the customer is informed of the plot being released) to minimise uncertainty and the risk of a dispute. Importantly, this should be explained to customers before they pay any fee for the arrangement.
Refund policy
Before any fee is paid, developers should also explain to customers the circumstances in which they will receive a full refund if they change their mind and decide not to reserve the plot.
Customers are entitled to a full refund if they inform developers - within 24 hours of being notified the plot is being released for sale – that they no longer want to proceed with the purchase. Developers can choose to extend this "full refund" period (to 48 hours, for example). Whatever period the developer chooses, this should be made clear to the customer from the outset.
If a customer only decides not to proceed with the purchase after the end of the "full refund period", developers may deduct administration costs from the refund they pay. Once again, this must be explained to the customer before they enter into the arrangement.
The key takeaway
The overriding message from this section of the Code is that developers should be as transparent as possible with customers, from the very outset, about the terms and conditions of any early bird arrangements.
Developers should review their standard forms for early bird arrangements to ensure that these contain the necessary information about deadlines and refunds, and ensure that customer-facing staff are aware of the requirements that the Code imposes.
For more information and advice on early bird arrangements, or any other aspect of the new Code, please get in touch with our Real Estate Litigation team or your usual Housebuilding contact at Brodies.
