New build conveyancing is not immune to the forces within the wider property market, however it does have a unique set of regulations and regimes that property professionals need to keep a constant eye on to ensure they are kept abreast of changes.
We have certainly had our fair share of changes in 2024 already. Even though we are only half way through the year, this update provides a snapshot of the recent updates and takes stock of where we are now in the sector.
Consumer Code for Home Builders
The Consumer Code for Home Builders (the Code) covers most new build homes constructed by the main warranty providers – NHBC, LABC Warranty, Premier Guarantee and Checkmate. The Code, which covers every stage of the home buying process, was designed to make the process of buying a new home fairer and transparent for home buyers.
Effective from 1 January 2024, a Fifth Edition of the Code was enforced to strengthen protections for homeowners, and clarify expectations for house builders and agents. A brief summary of the main changes are:
- A new 14 day cooling-off period from date of reservation
- The information to be provided in pre-contract stage has been expanded to include information such as the detailed planning consent reference number
- A new requirement for a pre-inspection prior to completion to allow home buyers to have professional help to identify snagging
- Detailed requirements for handling customer complaints
- An increase in the amount that can be claimed through the Code’s Independent Dispute Resolution Scheme
These changes are not an exhaustive list. The full details are available from the Consumer Code for Home Builders website, and property professionals who deal with new homes should familiarise themselves with the new requirements to ensure compliance.
Land Registry Practice Guide 7 – Discounts and Incentives
Last year alone (1 April 2023 to 31 March 2024) the Land Registry issued over 2,000 requisitions regarding discounts and incentives on new build properties. Any confusion over a discount or incentive in a Land Registry application will affect the entry the Land Registry makes in the register and house price data. If the application is unclear, the Land Registry will need to request more information from conveyancers.
Land Registry Practice Guide 7 explains the distinction between what is considered a ‘discount’ being a cash sum deducted from the purchase price, and an ‘incentive’ being something a house builder may offer which does not relate to the purchase price. Some examples of incentives include moving costs, contribution towards legal costs, or providing flooring or white goods.
Both discounts and incentives are very common in new build transactions, but the way they are dealt with by lenders and new build conveyancers is important. Where there is a discount or incentive, the Council of Mortgage Lenders require this information to be passed to lenders as part of their lending process. Conveyancers will also need to ensure the correct price paid, net of any discount, is inserted into the transfer of part or lease to comply with the practice guide. Helpfully, there are examples within the practice guide as to what wording the Land Registry expects to see in the consideration panel, as well as within the body of the respective transfer or lease.
It is therefore imperative that all parties understand the distinction between a discount and an incentive, and how that will be treated within the legal documents and mortgage paperwork.
The Building Safety Levy
It would be surprising if anyone in the new build property sector hadn’t yet been affected by the provisions of the Building Safety Act 2022. Upcoming on the horizon is the new Building Safety Levy (the Levy), which will be payable as part of the building control process to enable the Government to recover costs towards remediation of building safety defects. The Levy will be charged on new build properties that require building control approval in England, and payable by the house builder. Ultimately it is proposed that the final building control certificate for the new build property will not be issued by the relevant building control professional, until the Levy is paid.
Following Royal Asset of the Building Safety Act 2022, The Department for Levelling Up, Housing and Communities has been consulting on the design and implementation of the Levy, which closed on 20 February 2024. The key proposals as to how the Levy will operate suggest that there will be some exemptions of payment of the Levy for developments of community facilities such as affordable housing, small developments under 10 units, or conversions. The consultation also proposed how different rates of the Levy might apply, and considered whether Local Authorities should be responsible for the collection and administration of the Levy.
The final details of the Levy and when it will be launched is not yet known, but this certainly needs to be on your radar.
Affordability Update in Capital Funding Guide
For those who deal with shared ownership properties, a series of changes have been implemented in the Capital Funding Guide (the CFG). The CFG contains the rules for all providers who deliver affordable housing through programmes from Homes England.
The latest changes relate to revised shared ownership affordability guidance in a new Section 6B in Chapter 1 of the CFG. A transitional period will apply until the full implementation of the revised guidance until the end of July 2024 at which point providers, advisors and other parties will need to adhere to the changes.
The main updates include the removal of the Homes England affordability calculator, clarifying expectations in determining applicant eligibility, and the introduction of a new affordability methodology. For any Homes England grant funded shared ownership schemes, the approach of affordability should be followed as outlined in the revised guidance. However it is acknowledged that there is unlikely to be total consistency between providers as they will adopt their own policies depending on several factors such as size or geographically. Crucially Homes England advises that any differences should be made clear to applicants.
CMA Housing Market Study
In February 2024, the Competition and Markets Authority (CMA) released the final report of their housebuilding market study in Great Britain. The findings as to why there is a persistent under delivery of new homes is, in part, unsurprising. Less than 250,000 of new homes were built last year across England, Scotland and Wales, which is below the target for England alone being 300,000.
The findings in the study cite several recommendations to improve the position. A planning system which is under resourced, produces unpredictable results, and takes a protracted amount of time to navigate, needs streamlining in order to speed up delivery of new homes. Within the year 2021-2022, around 60% of new homes built were delivered by speculative private development. This method allows house builders to obtain land, secure planning permission and construct properties without knowing who will buy them or for how much. There are limitations to this approach. Where private developers produce new properties at a rate at which they can be sold without needing to reduce sales prices, this gives them flexibility within the market, however the study argues that homes are not being built to meet the needs of what communities need. As a result, speculative private development is a widening the gap between what communities need, such as more affordable housing, and what the market will end up delivering.
The CMA also found that the increasing trend of new build estates having privately managed public amenities secured by way of estate management charge is raising concerns with homeowners. The recommendations for upfront and clear information to be provided to homeowners on what charges they should be expected to pay for estate costs and repairs, are necessary. The study acknowledges further findings which may not be the ‘main drivers’ of persistent under delivery of new homes, but important nonetheless to ensure good quality homes are built for those that need it.
The CMA have outlined recommendations to governments where there is an opportunity to enhance the market and outcomes for homeowners, but it is clear that it is up to the policymakers to deliver fundamental change.
Closing Notes
It is imperative that property professionals within new build conveyancing take note of the updates in their practice area outlined in this article. For any help or information to ensure you are compliant with any of the changes mentioned, please contact Jade Hawksworth for further information.
Associate Solicitor (Plot Sales) Foot Anstey LLP & Sector Lead Women in Residential Property for New Homes Plot Sales
