From time to time, customers purchasing new build homes may ask the developer about the volume and location of affordable housing at the development. What information do developers need to provide to comply with the New Homes Quality Code? A case study recently published by the New Homes Ombudsman provides useful guidance on this question.
The Facts
The Ombudsman received four separate complaints from homeowners who alleged that developers had completed more multi-unit sales to affordable housing providers than they had expected based on the information they had been provided during the sales process.
The complaint
The customers complained that the developers had not been transparent about multi-unit sales for affordable housing. In particular, the customers claimed that they had asked specifically about the volume and location of affordable housing and had only been told about the units which were being built to comply with the Section 106/75 planning consent. Each customer had later discovered that the developer had completed additional, private multi-unit sales to affordable housing providers.
The customers were concerned that the tenure mix would affect the value of their home. They said that had they known about these extra sales prior to completion, they may have reconsidered their purchase.
In response, the developers said that as the sales were private, they could not be disclosed to customers for confidentiality reasons.
The Ombudsman's decisions
The Ombudsman acknowledged that there was no deliberate misrepresentation or misselling by the Developers. However, they found that the developers had still breached the transparency requirements of the Code.
In particular, the Ombudsman found that the developers' sales and marketing materials did not make it clear that the tenure mix of properties within the developments could change and the developer may agree multi-unit sales to various types of buyers including housing associations, local authorities and investors. The Ombudsman said that the developers should update their sales and marketing materials to prevent confusion in future.
This does not mean, though, that developers must provide customers with specific information about multi-unit sales at the development. Information such as the identity of a purchaser or the location of the plots included in a multi-unit sale may well be confidential and does not need to be disclosed under the Code. Instead, the Ombudsman's decision is directed at the generic information provided to customers about tenure mix, and in particular, making it clear to customers that this is subject to change.
Finally, the Ombudsman refused to award the customers any compensation. There was no evidence that they had suffered any financial loss or that the location of affordable housing had any impact on their house prices.
Key takeaway
These cases clarify what developers need to say about tenure mix in their sales and marketing materials to comply with the New Homes Quality Code.
Developers should ensure that their materials make clear that tenure mix at a development is subject to change and that multi-unit sales may be agreed for plots other than those identified as part of the Section 106/75 planning consent. This may involve including a specific statement to this effect in Reservation Agreements and annotating site plans to say that the location of affordable housing is indicative and may change.
Developers should also ensure that staff are well-equipped to discuss tenure mixes and the potential for these to change, so that customers with concerns about these issues can make an informed decision about their purchase.
For more advice on complying with the requirements of the New Homes Quality Code, developers can get in touch with our Real Estate Litigation team or their usual contact in the Brodies Living team.
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