Draft Building Safety Bill

31st July 2020

Presented to Parliament by the Secretary of State for Housing, Communities and Local Government by Command of Her Majesty July 2020. The appointment of the New Homes Ombudsman was dealt with in the Draft Building Safety Bill and, has been extracted below.

Part 5: Supplementary and general

Chapter 1: New homes ombudsman scheme
Clause 106: The new homes ombudsman scheme

Effect
771 Clause 106 requires the Secretary of State to arrange for there to be a redress scheme available for people who are ‘relevant owners’ of new build homes. The scheme selected must meet the conditions at subsection (2), including the requirements set out in Schedule 7.
772 The purpose of such a scheme is to enable relevant owners to make complaints against scheme members (developers) and to have such complaints investigated and determined by an independent ombudsman.
773 The Secretary of State can arrange with a person to establish the scheme and implement it or the Secretary of State could establish the scheme itself and implement the scheme directly (or appoint a person to undertake the implementation of it). This will provide flexibility for how the scheme is established and maintained, and who will be the new homes ombudsman.
774 The clause allows the Secretary of State to provide financial assistance to the new homes ombudsman scheme, including through non-repayable forms (grants) as well as repayable forms of assistance (such as loans and guarantees). In the alternative, if the scheme is procured and is not self-financing there is also provision to allow the Secretary of State to pay for the service. However, the intention is for the new homes ombudsman scheme to cover its own costs and to finance itself through fees charged to developers.
775 As stated above, the scheme must manage complaints made by relevant owners of new build homes. The definition of ‘relevant owner’ covers individuals rather than businesses. Such individuals must own the relevant interest in land. The individual bringing the complaint must occupy the home as a private residence but may let the property to another person for that person to occupy the home.
776 The clause doesn’t restrict the new homes ombudsman scheme to receiving complaints from ‘relevant owners’ only. It may include provision for other people or organisations, however, it will be up to the new homes ombudsman scheme to set out who can complain to it in these circumstances.

Background
777 This is a new provision. There is no previous provision for owners of new build homes to complain to an ombudsman or redress scheme. Residents living in the private rented sector and social housing already have provision to seek redress set out in legislation.

Example 1
An individual who owns a new build home will be able to bring a complaint against developers who are members of the new homes ombudsman scheme about the developer’s conduct and standards of work. The complaint can be raised about matters occurring within two years from the date the home was purchased from the developer. There is flexibility for the new homes ombudsman to include provision in its rules so that it can receive complaints where the purchaser wasn’t an individual (for example, small organisations who purchase a new build home from a developer and do not have the capacity to pursue cases through the courts). Complaints can be made for new build homes developed or converted after the clause comes into effect.

Clause 107: Meaning of developer

Effect
778 Clause 107 defines who is a developer, establishing who must become a member of the new homes ombudsman scheme.
779 The clause also allows the Secretary of State to set out, in regulations, an additional description of persons (for example by reference to their connection with a “developer” as defined in the first part of the clause), so that anyone of such a description is also a ‘developer’ for the purpose of the legislation.

Proposed use of this power
780 If, based upon experience in administering the scheme, it transpires that alternative company structures are utilised so that the definition of a developer is inadequate and is not able to capture all those required to be a developer for the purposes of membership of the new homes ombudsman, regulations can provide additional provisions to supplement the definition under this clause, for example by adding related companies as a developer.

Background
781 This is a new provision.

Example 1
Review the definition of a developer The Secretary of State may review the definition of a developer after a certain period of time and decide that another category of persons should be included in it (for example where a new development or sales structure existed). This provides flexibility to ensure those who are intended to be members of the new homes ombudsman should be. If the Minister chooses to make regulations, a draft of the regulations will be subject to approval from by each House of Parliament.

Clause 108: Power to require persons to join scheme

Effect
782 Clause 108 creates a power for the Secretary of State to make regulations which will require developers of new build homes within scope, to join the scheme and remain members of the scheme for a specified period. The Secretary of State may also in regulations set out the framework for enforcement including: enforcement body, types of sanctions for failing to comply, and the right to appeal the sanctions, and may include the imposition of a criminal offence where one of the forms of sanction (prohibition order) is breached. The clause also covers publicity by enabling the Secretary of State to make regulations which will require developers of new build homes to obtain a certificate to prove or advertise their membership.

Proposed use of power
783 We intend that when a new homes ombudsman scheme is available, affirmative regulations will be laid which, once approved by both houses of Parliament, will require developers to belong to the new homes ombudsman, and publicise their membership of the same. We also intend that the regulations will set out the enforcement of the provisions.

Background
784 This is a new provision.
785 There is presently no statutory obligation upon developers of new build homes to belong to a redress scheme or way to enforce the requirements. This represents a significant gap for purchasers of new build homes.

Example 1
Once the regulations have been approved, developers of new build homes will be required to belong to the new homes ombudsman scheme. Developers may have to remain members of the scheme until such a time that they are no longer bound by schemes terms. The Government may want developers to be able to confirm or prove their membership (for example, by displaying a copy of their membership in their sales offices).

The clause provides for regulations to be laid regarding the enforcement of any duties introduced by this clause. Where a developer receives a sanction, this could be a fine or prohibition order (for example, a prohibition against marketing or developing new homes), but the regulations must allow for a right of appeal against such sanctions, for example to a court or First-tier Tribunal. If a person breaches a prohibition order, the regulations may include a new criminal offence with a maximum level of penalty to be defined.

In addition, the clause allows the Secretary of State to designate the body or organisation to impose the sanctions or investigate suspected breaches of requirements. This could be a new or existing body to undertake the enforcement role, and the clause allows the Secretary of State to make payments for that body to undertake the role. The power is flexible to take into account both the existing or new regulatory environment, and territorial extent.

When the Secretary of State chooses to make regulations, a draft of the regulations would be subject to approval by each House of Parliament.

Clause 109: Developers’ code of practice

Effect
786 Clause 109 allows the Secretary of State to give approval to a code of practice that covers the conduct and workmanship of members of the new homes ombudsman scheme. Alternatively, if the industry or others do not come forwards with its own code, or it is not one which can be approved (for example, as it does not cover the whole of the UK), the clause allows the Secretary of State to issue a code.
787 If a code is issued or approved it must be published by the Secretary of State. If the code of practice needs adjustment or replacement in the future, there is provision to allow this to happen. The Secretary of State can revise or replace it, or approve its revision/replacement, and again such revised or replaced code must be published. In accordance with the Schedule, where there is a code of practice which has been issued or approved then the scheme may accept complaints about non-compliance with such a code. In considering a complaint under the scheme, however, whatever the issue, the scheme must have regard to any code of practice that has been issued or approved.

Proposed use of power
788 The Secretary of State is not required by this clause to issue or approve any code of practice. The ability of the Secretary of State to issue or replace a code of practice is included as a potential option only.
789 It is anticipated that an independent board incorporating the housebuilding industry, consumer groups and others will produce a code of practice governing the standards which owners can expect from a developer, in terms of service and quality/workmanship. A draft code of practice has been seen in draft form.

Background
790 This is a new provision.

Example 1
A code of practice may be used by developers (members of the new homes ombudsman scheme) and the public who buy the homes so that they are all aware of the standards that are expected. These standards could be in relation to the sales, marketing, and after-sales services expected of the developer of the new build home, and on the standards of workmanship/quality. It is expected that if a code of practice is issued or approved by the Secretary of State the new homes ombudsman will
require its members to follow it and will consider compliance with the code when investigating complaints.

The intent behind this provision is to create a level playing field for owners and developers alike and to allow the new homes ombudsman to investigate and determine complaints between purchasers of new build homes and developers in a consistent manner.

In the future once the new homes ombudsman scheme is set up, it may be necessary to adjust the scheme and amend a code of practice. The Secretary of State may then approve, revise or replace a code of practice to reflect circumstances at the time.

To enable purchasers and developers to be aware of the code of practice and expected standards. The Secretary of State will ensure it is publicised and could publish it on the Government’s website or signpost to where the code of practice is published.

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