Developers will be aware that the New Homes Quality Code, which was introduced in 2022, imposes various new rules on housebuilders with the intention of improving protection for buyers of new-build homes. We have already considered a number of areas of the Code including the rules on part-exchange schemes and early bird arrangements.
This article considers the additional protections which the Code introduced for vulnerable customers.
How does the Code define a vulnerable customer?
The Code defines a vulnerable customer as someone who is "significantly less able than a typical customer to protect or represent their interests or is significantly more likely than a typical customer to suffer disadvantage during the process of buying a new home".
Like many similar definitions adopted by regulators in other sectors, this test leaves plenty of room for uncertainty. However, some indication of what it might mean in practice can be gleaned from the guidance for developers which accompanies the Code. The guidance gives the examples of difficulty in comprehension and physical or mental impairment as being vulnerabilities which would fall within the above definition. Experience from other sectors indicates that very elderly customers and customers with mental health disorders may also be considered vulnerable.
The guidance also directs developers to a guide to identifying vulnerable customers which has been produced by the UK Regulators' Network.
Importantly, the Code states that all customers should be viewed as being potentially vulnerable, as buying a home is not something that people do very often. This means that customer-facing staff should be alive in all cases to the possibility that a customer is vulnerable, even if the customer has not disclosed that they have a specific vulnerability or condition. Developers should satisfy themselves that every customer is able to properly understand what is involved in buying a new home the different parts of the process.
What do developers have to do?
In addition to the other obligations under the Code, which apply to developers when dealing with all customers, the Code requires developers to do the following things to ensure specific protection for vulnerable customers:
- consider whether a customer is vulnerable and, if so, take any appropriate steps to help them make informed decisions;
- take all reasonable steps to provide vulnerable customers with appropriate advice and help that is suitable to their needs; and
- ensure that their employees do not make assumptions about the degree of knowledge that a customer has.
What does this mean?
Compared to some other parts of the Code, the requirements in relation to vulnerable customers are pretty vague and generic.
The guidance for developers provides a little more context. It states that developers should take all reasonable steps so that a vulnerable customer understands the Code, the purchase and their responsibilities. Where a customer has difficulty in comprehension – which could be because, for instance, they have problems with literacy or are not fluent in English – the developer should recommend that the customer is accompanied to meetings by a suitable representative. That might be a family member who is able to translate or otherwise explain the meaning of documents to the customer.
Sometimes a customer may declare a vulnerability at the outset. If that happens, or if it is obvious they have a vulnerability - as may be the case with certain physical impairments in particular - the developer must consider the possible effect of that vulnerability on the proposed transaction. The developer may even consider seeking information or guidance from an organisation specialising in that vulnerability (e.g. Age UK if the customer is elderly) in order to make sure that the customer gets advice and assistance that is suitable for their needs.
Alternatively, if no vulnerability is declared by the customer but it becomes apparent there may be a vulnerability, the developer must seek clarification from the customer and/or their representative. Employees should do so sensitively – the guidance provides that enquiries must be of a nature that are considerate, inoffensive and can in no way be interpreted as discriminatory.
In short, when dealing with a vulnerable or potentially vulnerable customer the requirements of the Code mean that developers should take extra care to ensure that the customer is fully aware of the terms of any agreements they are entering into.
What steps should developers take?
Developers should familiarise themselves with the terms of the Code and guidance on this topic and ensure that all employees in customer-facing roles are aware of their obligations in relation to identifying and supporting vulnerable customers.
Developers should also think about whether they can take any proactive steps to prepare for dealing with vulnerable customers. This might include, for instance, producing a guide in simple language which explains the developer's process for buying a new home. Doing this in advance may reduce the burden on individual sales advisors when faced with a customer who is vulnerable and could also reduce the risk of the developer falling foul of the Code's requirements.
For more advice and assistance in dealing with vulnerable customers, or any other aspect of the Code, please get in touch with our Real Estate Litigation team or your usual Housebuilding contact at Brodies.
