There are often occasions where so detailed corners of the law do not emerge unless one has to deal with them in a particular case. The NHBC Sheltered Housing Code (“the Code”) is one such example. It is an important Code as it governs the relationship between the residents, the builder/developer, the purchaser and the management organisation. It results in a higher threshold of protection for the residents which in effect means increased responsibility for all other parties.
If you are considering purchasing retirement housing in the course of business or as a home, or if you are a builder/developer or a management organisation, you will need to know how this Code affects you before making any legal commitment.
Key Characteristics of the Code:
In order to understand the Code, one must firstly define its key characteristics. It applies to sheltered housing which is purpose built for elderly people and which forms part of a group of self-contained accommodation accompanied by management services. The builder or developer of the sheltered property can choose to register with NHBC and in effect place any sheltered property under the requirements of the Code.
The main function of the Code is to create a further legal relationship between the registered builder or developer, a scheme’s management organisation, the purchaser and/or resident. A management agreement is created stipulating duties that must be carried out by the management organisation and this agreement must be created with every key devolution of proprietary interest.
Where the purchaser is acting in the course of business, he will have to give an undertaking to provide a Purchaser’s Information Pack to all residents, to have a Management Agreement with the management organisation and to ensure these covenants are obtained on any future sale or transfer. The builder/developer has a similar obligation in having to ensure the above are carried through.
The Role of the Management Organisation:
It is any person or body which is responsible for the management, maintenance, repair or renewal of the sheltered housing or of any communal facilities or for the provision of services to the residents. The builder/developer or the purchaser acting in the course of business will have to choose a management organisation which due to the Code has enhanced duties under the Management Agreement.
The Management Agreement in the case where the vendor of the property is not to have the role of a management organisation, will be signed by the vendor and the management organisation before the purchaser exchanges contracts.
In the case where the vendor is also to act as the management organisation, the management agreement will be signed by the vendor and the purchaser and it must be entered into at the same time the purchaser exchanges contracts.
In both of the above circumstances an undertaking must be given by the Management Organisation that it will enter into a binding legal obligation with each Purchaser of the sheltered housing to perform the undertakings of the Code.
The duties to be performed by the management organisation are plenty and they include the following:
• All sales literature provided to purchasers under the Purchaser’s Information Pack is to be accurate.
• There must be specific procedures followed concerning the annual budget, review of charges and accounts, including proposed annual budget, minimum one annual meeting with purchasers, audited accounts by an independent accountant made within six months of each accounting period provided to the Purchasers.
• The management organisation has to recognise a Residents Association with 51% or more of its members being purchasers of the sheltered housing and to encourage that all residents become members of the Association.
• Further points concern the need for a complaints procedure, detailed services requirements, warden related requirements if a warden is to be used, maintenance of an emergency alarm system, insurance requirements, repairs and maintenance requirements, re-sale and transfer of management requirements.
• There is also a requirement to set up a sinking fund on or before the first sale of the first dwelling in the sheltered housing so as to use it for long term repairs, renewals and improvements.
Main Details of Purchaser’s Information Pack:
Key points relating to the obligations of the Management Organisation are found in the information that needs to be contained in the Purchaser’s Information Pack and they include but are not limited to the following:
• Landlord and Management Organisation:
Details on both of them, their relationship, an undertaking that the Management Organisation will enter into a binding legal obligation with each purchaser of sheltered housing and information on the Management organisation.
• Purchaser’s legal rights:
A schedule is attached to the Code on how they are to be set out. Also a summary of main provisions of the lease and, if a freehold interest is purchased, then a summary of main provisions of the freehold transfer plus details of any covenants.
• Consultation and complaints procedure
Details on what procedures there are and how they take place, the complaints and grievances procedure must contain a timetable for action on complaints made by purchasers or residents.
• Charges and service charges
Details on all payments, fees or charges to which the purchaser is to be liable to the landlord or the management organisation or another body.
• Service, repair and re-sale details
Details and requirements on services, warden, alarm system, repairs, rights and obligations of Purchasers when the Sheltered Housing is resold.
Insurance cover to be arranged by the management organisation or the landlord. There are several insurance requirements such as having buildings insurance which must include the cost for providing alternative residential accommodation, engineering plant insurance, employer’s liability insurance, public liability insurance and communal contents insurance.
Overview of the Code:
As described in the above parts of the article, it can be seen how the Code creates quite a detailed array of obligations which result in a substantial burden for the parties involved. It can also be noted that the Code clearly benefits the residents in so much as to provide them with information, services and protection. Therefore, in venturing to get involved in NHBC registered sheltered housing, any interested party should firstly review its position and duties under the Code.