OFT gets tough on housebuilders with new code of conduct

Housebuilders will struggle to sell their homes if they fail to comply with an industry code of conduct currently being drawn-up.

Rod MacEachrane, chair of the Code Steering Group, said the self-regulatory scheme would "make life difficult" for builders who tried to rip off homebuyers.

The scheme is being developed after the Office of Fair Trading (OFT) ordered the industry to provide better protection for buyers.

A statutory system - paid for by the industry - will be imposed by the OFT if the steering group drags its feet.

Early indications suggest the code - which will be in force by March 2010 - will be modelled on housebuilders' warranty schemes and penalise those who do not comply.

MacEachrane said talks with the Council of Mortgage Lenders indicated they would advise against providing mortgages for homes not registered under the code.

He said: "Those who fail to comply with the code will be disciplined and in the worst case, their rights to register under warranty schemes will be withdrawn. Logically if a builder doesn't honour the code, the ultimate sanction will be 'you are out', which will make life very difficult."

The Home Builders Federation, National House Building Council, Federation of Master Builders and Council of Mortgage Lenders are among those creating a formal body to administer the code.

MacEachrane said this body, which must be in place by December, is likely to be a non-executive board that operates like a council. It will also develop a dispute resolution service to resolve contractual matters.