House Builders' Contracts

Significant changes of practice are occurring in the house building industry. These will be covered in full in next week’s CPI Update. From April 1, 2010, a mandatory Code of Practice – the Consumer Code for Home Builders (see http://www.consumercodeforhomebuilders.com) - will apply to house builders who are members of home warranty schemes, such as the NHBC, who have undertaken to enforce the Code. Such home warranty bodies have agreed to require their registered builders to adopt and comply with the Code. Of greatest interest to property lawyers is the requirement in the Code for the house builder’s contract of sale to be clear and fair, to comply with the Unfair Terms in Consumer Contracts Regulations 1999, and to clearly state termination rights.

The implication is that house builders’ contracts, which may not be individually negotiated, are currently unfair; i.e. they create a significant imbalance between the rights and obligations of the builder and the consumer, to the detriment of the consumer. This might not be too far from the truth. Parts of the contract where changes may be required as a result of the Code include removing the “unfair” exclusion of liability for oral representations made by the house builder in the reservation process, introducing fair rights of terminations where the builder makes significant changes in design and construction, providing for anticipated practical completion dates, and providing for rights of termination if practical completion is not reached within a reasonable time of the anticipated date. Significant changes, indeed.