New Homes Quality Board (NHQB) case study: the provision of affordable housing information

In the wake of the UK Government’s growing housing targets, developers entering into Section 106 agreements with local planning authorities are facing an increasing obligation to deliver on affordable housing, whilst also ensuring that they operate in compliance with the NHQB Code (the Code).

The recent case study produced by the New Homes Ombudsman Service demonstrates four separate claims made against developers who were in breach of the Code by failing to be transparent with customers in relation to multi-unit/ bulk sales of properties to affordable housing providers on their developments.

How can developers deal with affordable housing?

In this case study, the customers had separately requested details of the location of the affordable housing on the developments during the sales process and were subsequently shown the Section 106 agreement and plans which identified the affordable housing locations. However, these plans had fundamentally changed due to the bulk sales that had occurred to housing providers and had not been updated by the developers.

The customers accused the developers of being misleading and were concerned about the impact that these bulk sales would have on the value of their properties, as well as the tenure mix on the developments. If the customers had known about the other locations of the affordable housing, they may have reconsidered their purchases. Whilst the developers argued that the bulk sales were private and, therefore, did not need to be disclosed to customers, the Ombudsman found that the developers’ lack of transparency constituted a breach of the Code.

Despite finding that there was no deliberate misrepresentation, it was held that the developers in these four separate claims had caused confusion due to the inadequacy of their sales and marketing material. The customers were not awarded with any compensation as there was no evidence of any financial loss suffered.

Of course, developers cannot advise all customers of every single potential change that may occur in the future regarding their developments, and this would be impractical and entirely burdensome. However, there are ways that developers can operate to ensure that customers are not surprised when changes do occur.

Key takeaways

To be compliant with the Code, developers do not have to waive privacy over their bulk sale arrangements, but they should consider taking the following steps:

• updating pre-purchase information and sales material concerning affordable housing locations to state that they are indicative and subject to change;
• including provisions within reservation agreements and pre-completion material to advise that the tenure mix of development is subject to change; and
• ensuring that sales advisers are appropriately trained and confident in explaining the different types of tenure and making prospective customers aware of both the potential changes that can occur to affordable housing and the tenure mix on the developments.

Whilst no compensation was awarded to the customers in these cases, this decision does not restrict those customers from attempting to pursue civil claims against the relevant developers in respect of the alleged diminution of value of their properties.

Developers should also bear in mind that if developers fail to implement changes in light of the above decisions, and/ or where developers repeatedly fall below the transparency requirements within the Code, the Ombudsman may impose harsher penalties on developers to prevent re-offending.

It is worth remembering that the maximum amount the Ombudsman can award to a customer for failure to comply with the Code is £75,000.

Developers should, therefore, take action to update their materials as soon as possible, in light of the new advice and guidance published.

This article was co-authored by Taylor Sawyer.