Hopefully all you house builders will already be aware that on 1 April 2010, a new mandatory Consumer Code will be introduced which will affect all house builders who are members of a Home Warranty Scheme. This is one of the most significant changes of practice ever imposed upon house builders and will catch all new plot sale reservations taken on or after 1 April 2010.

The key component of the new Code is that builder’s contracts for sale must now be “fair”.

The particular importance is the fact that the Code now requires the builder to provide in the contract for an anticipated date by which notice of legal completion should be served. Note the reference to “anticipated date”. This means it is still not a firm contractual commitment.

The Code confirms that it is still fair and reasonable to include “force majeure” provisions so that house builders are still not responsible for delays caused by matters outside of their control. However, the Office of Fair Trading indicates that it would be seem to be unfair to exclude or limit liability for any matter that might reasonably be within its control.

Most importantly, the Code provides for purchasers to have rights of termination if practical completion of the development is not reached within a reasonable time of the anticipated date. The Code actually suggests drafting that should be incorporated within sale contracts providing for the purchaser to be able to terminate if the house builder fails to serve notice on the purchaser to complete the sale within [x] months of the anticipated date stated in that contract. The guidance goes on to suggest that this “reasonable period of time” may be no more that 6 months for houses or 12 months for apartments if the sale contract is exchanged before the building is wind and weather proof. However, if the sale contract is exchanged at a more advanced stage of construction, then this period should be no more than 2 months for houses or 4 months for apartments.

The Code also deals with clauses seeking to exclude liability for oral representations and provisions dealing with the situation where there are alterations to the specification of the property.

Accordingly, all lawyers acting for house builders should be ensuring that their sale contracts comply with the Code and you as house developers must make sure that your teams are fully appraised of these far reaching changes.

These changes even impact upon you after-sales service. Once the purchasers have moved in you must now provide accessible after-sales service and explain what services include, whom to contact and what guarantees and warranties apply. You will also need to have in place procedures dealing with complaints if you do not have a procedure in place already.

Failure to comply with the Code means that a purchaser may contact the Home Warranty Body for them to deal with the complaint. Alternatively, the purchasers can take their complaint to the independent Disputes Resolution Scheme.

Anybody requiring further information about this Code should contact Ross Wellman at rossw@berg.co.uk for assistance.

The information and opinions contained in this document are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Berg Legal, or any of its partners or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of the contents of this document.