Buying a New Build Property: All you need to Know

The legal side of buying a new build home is more complex than the standard conveyancing process when buying. That’s because the potential for something to go wrong is much higher with a new build purchase; issues like non compliance with planning regulations, failure to arrange NHBC inspections, incomplete agreements for roads and sewers, failure to plan maintenance of common parts of a development and so on can cost you dearly if not done properly. This means that finding a good conveyancing solicitor to oversee the purchase of your new build property is essential. As well as helping with the potential issues above, they will also ensure that the contract is in your favour, that your deposit is fully protected and that there is a ‘long-stop’ completion date for the property to be finished by.

 

It’s common for the developers’ solicitor and sales team to exert huge pressure on you to complete, particularly coming up to their year-end to exchange on purchases, even where there are clear conveyancing problems. If you have a good, independent conveyancing solicitor, they are less likely to bend under pressure from the developer and act in your interests.

 

Before new build conveyancing begins:

Several things need to happen before the new build conveyancing process kicks off. The first is to ensure your finances are in order, and most developers will insist that mortgage finance is secured before contracts are exchanged. However, most standard mortgage offers are only valid for six months. If the property you intend to buy is not completed within that period, you may have to apply for an extension from your lender (subject to a reassessment of circumstances) or face having to reapply for the mortgage later. Alternatively, you could try to find a lender which offers a specific new build mortgage deal with a longer (nine month) deadline.

 

Check what you’re buying before making a reservation: 

Buyers should ask to see all specification details relating to the build as well as full landscape drawings and electrical plans. You should also visit other sites built by the developer (preferably of a similar design) to ascertain whether these properties meet your standards and requirements. See questions to ask when buying a new build. Many developers will offer various incentives such as the opportunity to choose fittings and appliances or free parking where a charge would normally be applied. In some cases, Stamp Duty costs may be included within the costs as well. These are important details so always make sure you are aware of what is included in the price.

 

Secure your new home:  

You may need to pay reservation fees when an offer is made, or a sale is agreed upon, to ‘reserve’ a new build for a set period (usually 28 days). This also facilitates the legal process leading to an exchange of contracts. The fee, which can be anything from £500 to £2,000 or even more on a ‘high end’ property, will be deducted from the final purchase price upon completion but is non-refundable if the buyer fails to exchange contracts within the stipulated period or pulls out of the sale completely. Therefore, always ensure that your mortgage is agreed in principle before making a reservation. The Consumer Code for Home Builders specifies that a reservation agreement is issued which details the purchase price, exactly what is included within that figure as well as the nature and estimated cost of service charges or management fees. You’ll want to ask for this if it isn’t given proactively.

 

When buying a new build property, buyers are usually asked to pay a deposit of between 10-30% of the total price as payment to the developer's solicitor.  The buyer must also sign a contract agreeing to buy the property at its current advertised price and to pay off the balance at completion. If property prices fall within that period and the buyer is unable to secure a mortgage for the remaining balance due to perceived reduction in security, the deposit will be lost due to breach of contract. The house-builder can also sue for the difference between the agreed price and lower price achieved at resale, as well as legal fees incurred.

 

When considering this transaction, it is important for buyers to establish if the contract price is locked at exchange, and what happens if prices rise or fall before completion. New build warranties such as NHBC or Premier Guarantee will normally protect a full deposit against builder insolvency; however, they may only cover 10% in some cases. If there is an unreasonably long delay in construction, buyers have the right under Consumer Code for Home Builders to withdraw from purchase and claim a refund.

 

The conveyancing solicitor should also undertake searches related to new build properties such as checking planning permission was obtained and roads are adopted properly; highlighting any restrictive covenants; explaining whether property is leasehold or freehold; obtaining results of local searches; setting out details of the lease; how common areas are managed; etc.

 

It is best practice for buyers to have a snagging provision written into their contracts before final payments are made so any errors or defects (cosmetic or structural) can be identified by independent surveyors before completion. This ensures that builders have responsibility for any remedial work on defects which occur within first two years after purchase. After that point, NHBC warranty will cover specified structural problems with most new builds coming with ten-year warranty protection, though it is important to note this insurance often favours builders’ interests over buyers’ when resolving outstanding issues.

 

Congratulations! You're now ready to take the final step in your new build conveyancing process. Your conveyancing solicitor will begin by collecting all the necessary documents, including leases, deeds and other legal instruments that are required for completion of the transaction. Once all the documents have been collected, they will then be reviewed to ensure that everything is in order and that there are no disputes between parties. 

 

Once your conveyancing solicitor has completed their review, it's time to arrange a date for exchange of contracts. This is when both parties commit to the offer and all legal paperwork is signed off officially. After exchange takes place you can start planning for your move-in day.

 

On this day make sure you have access to keys, building log books and owner's manuals so you can get started on familiarising yourself with your new home as soon as possible. It's also important to check whether any guarantees were issued relating to certain parts of the property such as white goods, windows or damp proofing or timber so you can make claims if necessary later on down the line.

 

With all these things taken care of, you'll soon be settled into your new home!

 

The conveyancing process usually begins once an offer has been made. You’ll need to find and instruct a conveyancing solicitor as soon as the offer has been accepted.  

This in an area in which specialise  so please call us for a quote on 01603877067