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BLP Code for the Sale of New Homes
NEWS: BLP Insurance joins forces with the Consumer Code for New Homes
A number of Consumer Codes have been made available to new home buyers over the last two years. It was always BLP’s view that an industry wide Code to support best practice and improved consumer protection was the optimum approach within the construction industry. Home buyers require clarity and transparency in the sales and post sales process, and should things go wrong they also need access to an effective low cost dispute resolution process. We are pleased therefore to announce that BLP is joining the Consumer Code for New Homes (CCNH) that provides a unified approach for the developer and consumer from five warranty providers.
The objective of the BLP Code for the Sale of New Homes, which BLP launched in 2015, and that of the CCNH Code are closely aligned. Both Codes are approved by the Chartered Trading Standards Institute and establish mandatory standards for the marketing, selling and purchasing of new homes by registered developers. Those warranty providers signed up with CCNH have a genuine commitment to consumers, improving standards of construction and raising customer service standards in the new homes market together with offering customers a clear complaints process to resolve any issues.
If your development falls under the current BLP Code, and should be moved across to the CCNH Code, we will write to you with further details.
The Code’s main requirements are listed on this page but for more details please view our Code booklet which is available on our Downloads page.
Information packs include a copy of the BLP Code booklet, a poster for displaying in customer-facing areas and flyers for Home Buyers. These packs can be ordered by emailing BLPCode@blpinsurance.com.
We have developed an e-learning course which will assist you in understanding your obligations as well as those of any third parties involved in the sale of your properties. Completion of the e-learning course is compulsory in order to meet the TSI monitoring requirements.
Once you have registered for the course we will send you a link with access details.
1. What you need to know
The BLP Code for the Sale of New Homes (“Code”) applies to new build homes where a BLP insurance policy has been quoted after 1st June 2015.
The Code has been established to ensure that best practice is followed in respect of the marketing, selling and purchase of Homes and the after sales customer care service which would include the rectification of Snagging. The application of the Code requirements will ensure transparency during this process.
The Code establishes mandatory requirements that apply to all Home Builders who purchase and provide a BLP insurance policy for a new build home intended for sale.
A Home Builder is defined as: A commercial builder or commercial developer (being persons whose principal business activity is building new or newly converted homes for sale to the public) who is contractually bound by BLP to subscribe to and comply with the Code. BLP is responsible for managing the Code.
All Home Builders who have taken out an insurance policy with BLP must agree to subscribe to and comply with the Code. Under the terms and conditions of the BLP Client Services Agreement signed by BLP and the Home Builder, BLP requires that any Home Builder who has taken out an insurance policy with BLP will honour any award made against them under the Code Dispute Resolution Scheme.
The BLP Client Services Agreement also provides for a range of sanctions for non- compliance in the event that a Home Builder is found to be in contravention of the Code as a result of the Dispute Resolution Scheme. Sanctions include BLP’s right to refuse to quote for new business from a Home Builder who does not comply with the Code. This is a serious sanction as it may result in the home not being eligible for a mortgage. BLP will also advise other home warranty providers of the breach by the Home Builder to enable them to consider removing that Home Builder from their register which also amounts to a refusal to quote for new business.
For those Disputes not covered by the BLP Insurance policy, Clause 21 provides a Dispute Resolution Scheme for complaints that arise and are made in writing to the Home Builder within two years of the date of the start of the BLP insurance.
The Dispute Resolution Scheme will also apply to complaints made by second and subsequent Buyers in respect of after sales matters provided those complaints are reported within two years of the date of the start of the BLP insurance.
To ensure the Code remains relevant and effective, BLP will undertake customer surveys from time to time with Home Builders and consumers to assess the levels of customer satisfaction and may also conduct random audits, mystery shopping surveys, reviews and assessments of customer satisfaction feedback and complaints. BLP may also provide training for Home Builders. In all cases, the relevant sections of the Data Protection Act will be complied with.
Nothing contained within the Code affects the Buyers existing legal rights and does not replace any existing legislation regarding the sale and marketing of new homes to consumers.
2. BLP Code for the Sale of New Homes
The Code’s main requirements are listed in this Guide but for more details please view the 'BLP Code for the Sale of New Homes' booklet on our Downloads page.
Terms which start with a capital letter (e.g. Buyer, Home) are defined in the Code.
a) Before Completion
BLP insurance insures the property, not the Home Builder. If you become insolvent before the Home has been completed, and the property is taken on for completion by another Home Builder, the insurance will still cover to the Home.
Where you take deposits from Buyers you are obliged to put those deposits in an escrow account to ensure they are kept separate from all your other funds. This is to ensure those deposits are protected if you become insolvent to ensure they can be returned to the Buyer.
Should the Buyer wish to have the benefit of component failure cover, BLP will be willing in principle to provide it, subject to the Buyer requesting the additional cover from the Home Builder prior to the build being weather tight (the building stage known as ‘first fix’) and subject to the payment of the additional premium due for the BLP Secure Plus policy. The Home Builder will request a quote from BLP. It will then be a matter for the Home Builder and Buyer to agree between themselves who will pay for the higher amount of premium for the BLP Secure Plus policy.
b) Home Builder’s obligations after Completion
Water Ingress in the first year
The BLP insurance covers the property form the date of Completion. For the first year of purchase you will be responsible for any claims that arise as a result of Water Ingress, such as leaking external windows or external doors. You will be responsible for any repairs that are necessary arising from Water Ingress. The Buyer should report such faults to you as soon as possible, in writing and keep a copy. If you fail to respond or rectify the problem BLP offer a Dispute Resolution process assist the Buyer in respect of any dispute with you. We will also help arrange any remedial work required if you fail to respond. Our Underwriting Agent, Allianz Global and Specialty do have the right to pursue you for any costs they may incur in rectifying such claims.
BLP insurance policies do not cover Snagging. These are minor issues of a cosmetic nature relating to the Home which remain outstanding at the point at which Home ownership passes from you to the Buyer. If you fail to rectify Snagging and the Buyer makes a complaint this will be addressed under the terms of the Code.
3. The Code
a) Matters covered by the Code
The Code requires you to adopt best practice for the marketing, selling of Homes and the after sales customer care service, including Snagging. The objective of the Code is to ensure that the Buyer is:
- Fairly treated by you;
- Reassured that you are a legal entity and acting professionally;
- Informed on how to manage the Home and address problems that may arise;
- Provided with a clear procedure for dealing with any matters of dissatisfaction or complaint;
- Advised that you comply with the Code guidance on Vulnerable Customers;
If the Buyer makes a complaint because you fail to rectify Snagging this complaint would be addressed under the terms of the Code. (BLP insurance policies do not cover Snagging). And that the Buyer:
- Knows what quality of construction to expect for the Home;
- Know what service levels to expect from you; and
- Receives clear and honest information from you at the right time upon which to base their decisions.
If the Buyer believes they have a Dispute with you because you have failed to comply with the Code, they may refer their Dispute to BLP who will then address the complaint. BLP will first approach you to see whether an amicable solution can be agreed. If this is not possible the complaint will be referred to the BLP Dispute Resolution Scheme.
b) Matters not covered by the Code
The Code and Dispute Resolution Scheme do not apply to:
- Those properties where a BLP Policy has been purchased by an individual customer or sole trader;
- Those properties taken by Home Builders in part exchange and re-sold;
- Properties acquired by social landlords for rent;
- Properties acquired by companies, partnerships and individuals buying several properties for investment purposes;
- Properties built by self-builders for their own occupation;
- Homes assigned or sub-sold by an investor to a third party before they complete the purchase of the Home; and
- Properties built under architect’s certificates.
The Code does not cover disputes that concern:
- Claims that are covered by the BLP insurance policy;
- Personal injury claims;
- Loss of property value or blight;
- Claims about land conveyed or its registered title; and
- Claims that exceed the Dispute Resolution Scheme’s limits of 25% of the purchase price of the Home subject to a maximum award of £50,000 plus VAT in the aggregate for all claims arising in respect of the Home.
c) Adopting the Code
You must adopt the principles and good practice guidance of the Code.
ii. Making the Code available
You must display the Code and give, without charge, a copy to the Buyer when they ask for it. The Buyer must also receive a copy when they reserve a home. You should also inform the Buyer that further guidance is available on the BLP website and, from the Home Owners Alliance at http://hoa.org.uk/
You must comply with the guidance on Vulnerable Customers contained within the Code, acknowledge and cater for their needs and help them to make informed decisions.
iii. Customer Service
You must have suitable systems and procedures to ensure it can reliably and accurately meet the commitments on service, procedures and information in the Code.
iv. Appropriately trained customer service staff
You must provide suitable training to all staff to inform and assist the Buyer with their responsibilities. Suitable training should also be provided to staff in respect of what the Code means for your company and its directors.
v. Sales and advertising
Sales and advertising material and activity must use plain English, be clear, fair and truthful and comply with the FCA requirements of Treating Customers Fairly. It must also comply with the relevant code of advertising and the law, e.g.:
- UK Code of No Broadcast Advertising, Sales Promotion and Direct Marketing;
- The Television Advertising Standards Code;
- The Radio Advertising Standards Code; and
- Any other relevant code.
d) Information Provided by the Code
Pre Contract Information
i. General information
You must provide the Buyer with sufficient pre-purchase information to enable the Buyer to make a suitably informed purchase decision. In every case this information must include:
- A written Reservation Agreement (see below at point vi);
- An explanation of the BLP insurance cover including contact details for BLP and where to locate a copy of the policy (website www.blpinsurance.com Tel 020 7204 2424);
- Description of an annual estimate of the cost to support any Management Services and organisations to which the Buyer will be committed; and
- Where the Home may be subject to Leasehold arrangements, the details of those Leasehold arrangements.
If the Home is not yet completed the information must include:
- A brochure or plan showing the size of the Home, Specification (including a statement as to the cosmetic finish the Buyer can expect to be achieved), layout, plot position, appearance, price, utilities provided and their location, energy performance ratings, and mobility adaptations of the Home;
- The future build phases of and the facilities on the anticipated completed development;
- A list of the Home’s contents including general specifications of fixtures and whether wood, laminate etc.;
- The standards to which the Home is being built, including confirmation that the build is in compliance with the Building Regulations; and
- Your estimate as to when the Home will be ready for occupation.
ii. Contact Information
The Buyer must be told how their questions will be dealt with and who to contact during the sale, purchase and completion of the Home.
iii. Insurance Cover
The Buyer must be given accurate and reliable information about the BLP insurance provided on the Home.
iv. Health and safety for visitors to developments under and after construction
The Buyer must be informed about the health and safety precautions that they should take if they visit a development under construction.
The Buyer must be told about the health and safety precautions they should take when living on a development where building work continues and the measures that you implement in order to protect the Buyer.
You must give the Buyer a health and safety file for the home in compliance with the relevant Construction (Design and Management) Regulations 2015. This information should form part of the after-sales service pack.
You must advise the Buyer to appoint a professional legal advisor to carry out the legal formalities of buying the home and to represent their interests.
vi. Reservation Agreement
The Buyer must be provided with a Reservation Agreement in plain English that clearly sets out the following:
- The amount of the Reservation Fee;
- The terms under which the Reservation Fee is refundable or non-refundable and any administration fees or similar which you may deduct. Terms and conditions for refunds and deductions should be reasonable This should include the circumstances where that deduction may apply and the likely cost / penalties;
- Confirmation that the Reservation Agreement is not a Contract of Sale for the purchase of a Home and that the Buyer understands the difference between the two;
- What is being sold including the type of Home, plot number, map, development name, and parking arrangements, where appropriate;
- The purchase price;
- How and when the Reservation Agreement will end;
- How long the price remains valid;
- Date by which Contract Exchange must take place;
- Copies of the pre-purchase information noted above;
- Part Exchange details if applicable;
- Details of how the Buyer can include in the Contract of Sale any spoken statement that is to be relied upon;
- The nature and annual estimated cost of the Management Services (if any) the Buyer must pay for;
- What happens if you become insolvent; and
- Scope and process to request changes (i.e. paint colour, design changes, specification changes).
4. Information on Exchange of Contracts
a) The Contract
Contract of Sale Terms and Conditions must:
- Be clear, fair and written in plain English;
- Comply with the Unfair Terms in Consumer Contracts Regulations 1999;
- Clearly set out the process and timing for advising the Buyer of the date at which ownership of the Home will transfer from you to the Buyer on Completion;
- Clearly state the circumstances in which the Buyer can terminate the Contract of Sale, e.g. if the Home is significantly different in size, quality, location or tenure from that which you agreed to buy;
- Clearly state what will happen should the Home be delayed during the course of construction and not be ready for ownership by the date advised by you.
b) Timing of construction, completion and hand over
The Buyer must be given reliable and realistic information about when construction of the Home may be finished, the date at which ownership of the Home will transfer from you to the Buyer on Completion and the date for handover of the Home.
c) Contract termination rights
The Buyer must be told about their right to terminate the Reservation Agreement or the Contract of Sale. Examples of circumstances when a right to terminate exists would include:
- An alteration to the Home that directly or materially affects the value;
- Excessive or unreasonable misrepresentation of features or amenities; and
- Excessive or unreasonable delay in finishing the construction of the Home and serving the notice to complete.
d) Contract Deposits and Pre Payments
You must clearly explain to the Buyer how their Contract Deposits are protected and how any other pre-payments (such as reservation and administration fees) are dealt with.
5. Information during occupation
After Sales Service
You must provide the Buyer with a comprehensive and accessible after-sales service pack. The pack must contain:
- Who to contact in respect of Water Ingress in the first year of the BLP insurance;
- Contact details for you in relation to after-sales service (see ‘Contact Information’ below);
- Process for handling emergencies;
- Guidance on Snagging, what it is and how to report any Snagging problems the Buyer encounters at the Home. It should also be made clear that Snagging is not covered by a BLP insurance policy;
- Guarantees and warranties that apply to the Home; and
- Duration of the after-sales service.
6. Complaints and Disputes
a) Complaints handling
You must have a system and procedures for receiving, handling and resolving the Buyers service calls and complaints.
You must let the Buyer know of this and of the escalation / dispute resolution arrangements operated as part of this Code, in writing.
b) Co-operation with professional advisers
You must co-operate with appropriately qualified professional advisers appointed by the Buyer to resolve disputes. Professional advisors would include solicitors and qualified surveyors.
c) BLP Mediation and adjudication process
The Buyer may bring the Dispute to BLP for mediation within three months of the date of the your final response in respect of a complaint or final offer to resolve the original complaint or within three months of the date of making their original complaint in writing to you should there not have been a response. This mediation service is free to the Buyer.
In the event that the BLP mediation is unsuccessful the complaint will be referred to independent adjudication provided by CEDRs. (Centre for Independent Dispute Resolution). This will cost you £250 in fees if the matter is settled prior to the adjudicator being appointed. In the event that adjudication is required this will cost you £500 in fees.
You must comply with the Adjudicators decisions which may comprise any of the following:
- The maximum value of any award will be 25% of the contract price of the Home subject to a maximum award of £50,000 inclusive of VAT in the aggregate for all claims arising in respect of the Home;
- Awards for emotional distress and / or inconvenience subject to a maximum award of £1,000;
- Reimbursement of the Buyer’s case registration fee of £100;
- Comply with any performance award that may be advised by the Adjudicator i.e. carry out work on the Home;
- Comply with any combination award i.e. a combination of reimbursement of financial loss, compensation for emotional distress and inconvenience not to exceed £1,000, and carrying out work on the Home;
- Referral of the Home Builder to the Disciplinary and Sanctions Panel;
- Pay the Buyer the amount of any such award if accepted by the Buyer within the period for payment required by the Adjudicator
Under the terms and conditions of the BLP Client Services Agreement signed with the Home Builder, BLP requires that any Home Builder who has taken out an insurance policy with BLP will honour any award made against them under the independent Dispute Resolution Scheme. If the Buyer accepts the award, the courts will usually recognise this as evidence that the Buyer’s claim was valid.
d) Disciplinary and Sanctions Panel
Any contravention of the Code by a Home Builder will be treated as a very serious matter by BLP.
Where required BLP will convene a Disciplinary and Sanctions Panel.
Should you fail to comply with the Code there are a range of sanctions which the Disciplinary and Sanctions Panel can enforce depending on the level of seriousness of the breach:
i) BLP Training programme
Where the breach is deemed to be of a minor nature by the Disciplinary and Sanctions Panel, they will require you to participate in a training programme to ensure that they understand what they have to do to comply with the Code, that they take it seriously and learn lessons from their mistakes. If you refuse to participate in the training programme, BLP may treat this as a serious contravention of the Code and refuse to quote for new business from you.
ii) Imposing Fines for Breaches of the Code
If you fail to inform the Buyer that they have the option under the Code to upgrade to BLP Secure Plus (subject always to the payment of an additional premium by the Buyer or you in such contributions as they may agree between themselves), then BLP shall have the power to fine you in a sum equal to that additional premium together with a fixed fee of £1,000 + VAT for BLP’s reasonable expenses for dealing with this breach of the Code.
Other fines may be imposed on you for breaches of the Code determined by the Disciplinary and Sanctions Committee to be of a minor nature.
d) Refusing to quote for new business
Where the breach of the Code is deemed to be serious and the breach has been identified by the Disciplinary and Sanctions Panel, then BLP will refuse to quote on new business. This is a serious sanction. Residential defects insurance is a requirement of the Council of Mortgage Lenders. The Home Builder who is refused such insurance will find it very difficult if not impossible to sell the homes they build.
This refusal to quote shall be extended to any company of which the Home Builder is a statutory director listed in the register of directors maintained by Companies House, including any special purpose vehicles which the Home Builder sets up from time to time.
For the most serious contraventions of the Code (e.g. a refusal by you to honour the payment of an award made by an adjudicator), the refusal to quote will be for a period of not less than 10 years.
In all other cases, the refusal to quote will continue for a minimum period of not less than 3 years or until such time as you have taken all necessary steps to comply with the Code.
BLP will also recommend to other home warranty bodies that they remove the Home Builder in question from the registers they maintain in the event that BLP has refused to quote new business for a Home Builder.
For more information please contact Charlotte Weathersbee, our Code Executive, on 020 7204 2897 or BLPCode@blpinsurance.com.