Consumers can face unfair terms and conditions when buying newly built homes and need more protection, according to a report by the Office of Fair Trading (OFT).

The report found that the homebuilding sector is broadly competitive but warned that buyers can experience problems with “the sales process including reservation fees, the clarity of information provided to homebuyers and potentially unfair terms and conditions in contracts”.

There could also be issues relating to faults in new homes and delays to moving in dates.

Following the study by the OFT, representatives of the homebuilding industry have agreed to form a body to draw up a code of conduct and provide a redress scheme which it hopes to have in place by 2010. If the industry fails to deliver on its promise then the OFT will look to create a statutory redress system.

The OFT Chief Executive John Fingleton, said: “We have found the homebuilding market to be generally competitive, with no evidence that individual homebuilders have the ability to restrict supply in order to inflate prices or to hoard land for anti-competitive reasons.

“However, we have concluded that homebuyers need more protection when buying a new home and we have worked hard with the industry to help it develop a new approach to self-regulation that will improve consumer protection.”

The findings of the OFT show that the public can be at risk when they enter into contracts with builders for the delivery of homes that may cost hundreds of thousands of pounds. The move towards drawing up a code of conduct and redress scheme is welcome but doesn’t offer any protection at the moment.

It is still important that homebuyers should seek legal advice before signing contracts to ensure everything is fair and that the project will be managed according to their wishes.