What powers will the New Homes Ombudsman have against developers?

Further details about the New Homes Ombudsman have been published by the Government in the Building Safety Bill. While much of the focus will be on the fire safety elements of the Government’s proposals (including the extension of the limitation period under the Defective Premises Act 1972 from six years to 15 years, as previously reported), the Bill also contains more information about the New Homes Ombudsman.

The New Homes Ombudsman is a key component of the Government’s plan to overhaul the housebuilding sector to ensure that – as well as meeting the ambitious targets for building more new homes – housebuilders also deliver high standards of quality, service and customer satisfaction. Earlier this year saw the launch of the New Homes Quality Board (NHQB), an independent body designed to drive new build quality and strengthen the protection available for buyers. The NHQB is currently consulting on the text of the draft New Homes Quality Code, which is set to replace the Consumer Code for Homebuilders. The new Code sets out 10 fundamental guiding principles that will regulate how housebuilders deal with customers. In addition, a key element of the new Code is that compliance will be judged by a new body, the New Homes Ombudsman.

Further details of the New Homes Ombudsman Scheme (the Ombudsman Scheme) were included in the draft Building Safety Bill, first released in July 2020, and have now been updated in the latest draft, issued on 5 July 2021. Under the revised Bill, purchasers of new homes will have the right to have complaints against builders investigated and determined by an independent individual – the New Homes Ombudsman – which will be free to use for customers. The Ombudsman will have the right (where a claim is well-founded) to require housebuilders to:

• pay compensation;
• make an apology;
• provide an explanation; and/or
• take some other action as the Ombudsman may specify.

Failure to comply with a determination may lead to the builder being expelled from the Ombudsman Scheme – effectively barring them from the industry (since membership of the Ombudsman Scheme is mandatory). The updated Bill also provides that the Ombudsman will have the power to suggest “improvement recommendations” to Ombudsman Scheme members where the Ombudsman identifies widespread or regular unacceptable standards of conduct or quality of work. It is unclear at this stage what form these recommendations might take and how extensive they might be.

The industry awaits further detail on how the Ombudsman Scheme will work in practice, or whether there will be a limit placed on the financial award that the Ombudsman can make.  The Government’s response to its initial consultation (in February 2020) suggested that the limit might be £50,000 (which is a significant increase from the current limit of £15,000 under the Consumer Code). Further details are expected later in the year; the NHQB is currently going through a tender process to identify and appoint a third party to run the Ombudsman Scheme and a decision is expected in the autumn.

We will keep you updated.

If you have any queries, please contact Rob Bridgman.