Contracts

Completion and "Long Stop" Dates

 

1 

Under clause 3.2 what is meant by increased certainty of the completion date?

The Home Builder should assist the Home Buyer in understanding when their new purchase will be ready.  What the Home Builder tells the home buyer will depend on when this information is given to them; this will determine the degree of accuracy of this information. The guidance gives some ideas of what this might mean. 

Whilst some builders might elect to keep their customers up to date on a more regular basis as to when the home might be completed, this is not a requirement of the code.

When a Contract of Sale is exchanged, it must incorporate an anticipated date of Legal Completion, which should reflect that which is truly considered as the date by which it will be delivered.  This date should reflect the advice given to the Home Buyer during the pre contract period.

 2

Under clause 3.3, does the long stop date start from the anticipated date of Legal Completion?

Yes.  The so-called ‘long stop date’ is the date beyond the anticipated date of Legal Completion stated in the contract following the guidance to Code Requirement to 3.3.

If the Home Builder fails to complete and handover the home by this date in the contract, they could become liable for costs incurred by the purchaser due to the delay, and may cause a referral to the independent dispute resolution service available under the code. 

If the Home Builder also fails to complete and handover the home after the expiry of the further extended period (the long stop date) beyond the anticipated legal completion date, thereby incurring ‘unreasonable delay’ as defined, the Home Buyer could also exercise their right to terminate the contract.

3

If, due to a Home Buyer’s requirement for extra works, the ‘long stop date’ had been exceeded, could he cancel the contract?

Where extra works are agreed prior to the exchange of contracts, the timing of those works should be taken account of in the anticipated date of legal completion and the works shall be incorporated as part of the Contract of Sale.

If additional/ extra works are agreed with the Home Buyer after the Contract of Sale has been exchanged, these works are outside the Contract of Sale and should be the subject of a separate contract with the customer which is not a part of the original Contract of Sale of the dwelling.

If these works will cause the contract completion date to be exceeded, then the Home Builder and the Home Buyer should agree via their respective legal advisors to an amendment to the anticipated date of legal completion.  If this new date is missed, the comments under 2 above will apply in respect of missed dates of legal completion and missed long stop dates

4

 

The Code refers to keeping the home owner informed with regard to completion dates.  If the completion date becomes extended but the Home Builder has kept the home owner involved throughout this process, can the home owner still make a valid claim through the independent dispute resolution scheme?If the Home Builder and Home Buyer formally agree a variation to the date in the contract and confirm the same by an amendment to the contract through their solicitors, then it would be difficult to see a basis for a claim.

5

If delays arise which are outside the Home Builder’s control, are these relevant in relation to extending the completion date and negating any liability under the dispute resolution service?

No; Home Builders are considered to be the experts, and have committed to deliver a Home to the customer in a time frame having assessed the risks.

6

Can contracts include a clause around providing flexibility around completion dates?

If a Home Builder feels that that they can word their contract in this manner and still comply with the core requirements of the Consumer Code, then fine.  However, there are three points to note:

1.      the mandatory requirement that Home Buyers be given reliable and realistic information about when the construction of the Home may be finished;

2.      the mandatory requirement that the sale contract contain an anticipated date of legal completion;

3.   the mandatory requirement that the contract clauses area clear, fair and comply with the Unfair Terms in Consumer Contracts Regulations 1999

Termination Rights

 7

The Guidance to Requirement 3.1 says Home Buyers should have the right to terminate a contract and get their deposit and Reservation fee back if, after Contracts have been exchanged, changes are made to the design, construction or materials of a Home that significantly and substantially alter its size, appearance or value.  Can further guidance be provided about what constitutes a significant or substantial change?  Does a Home Buyer have an absolute right to reject a change to the appearance of a home or is there a test of reasonableness that can be applied?

It identifies an important principle that must be covered in the Contract of Sale, that the Home Builder cannot significantly or substantially alter the size, appearance or value of the Home without gaining the agreement of the Home Buyer.

It is up to the individual Home Builders to state how the changes will be dealt with.  For example, the Contract could state how practical issues such as the timescales in which the Home Buyer must give their approval for the changes or exercise their right to terminate the Contract.

The Contract may also go into more detail about what constitutes a minor (or significant) change.  Different terms may apply to a Home that is being sold for example well in advance of its construction or completion.  It may be for example that changes are anticipated because details of materials, finishes or appearance have not yet been agreed by the planning authorities.  If the circumstances have been made known to the Home Buyer in the pre-purchase information and are reflected in the contract terms, it may not be reasonable for the Home Buyer to exercise a right of termination.  Any terms and conditions must satisfy the Code’s Requirements to be fair, and comply with the Unfair Terms in Consumer Contracts Regulations 1999.

Home Builders should also consider Code Requirement 2.1, which states that a brochure or plan should be provided before the Home is purchased that reliably shows the layout, appearance and plot position of the Home.  The information provided before purchase should be consistent with the information provided after contracts have been exchanged.  If there are still matters to be resolved on the design, materials and appearance of the Home, disputes at a later date may be avoided if areas where changes may take place are advised or the circumstances under which there may be changes are explained.  The principle that should be satisfied is that Home Buyers must be given enough pre-purchase information to help them make suitably informed purchasing decisions.

8

 

Where a home owner believes that the necessary circumstances have arisen that would allow them to terminate the contract, what happens if the Home Builder disagrees?

Matters relating to the contract of sale will have to be decided by a court of law.

Whether or not a Home Buyer has the right to recover monies from the Home Builder can be decided by the independent dispute resolution service available under the Consumer Code.

 

Early Legal Completion

 9

Can legal completion take place earlier than that written into the contract?

The Contract of Sale can provide for the contract date to be the latest date by which notice to complete or completion shall take place and then provide for earlier completion if agreed between the parties.