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New build conveyancing is a specialist area as the process involved differs from a traditional purchase. A significant reason for this is that you usually commit to buying your home before building work has finished – or even started. However, new build conveyancing is also more complicated than the standard conveyancing process when buying because the potential for something to go wrong is much higher. Potential problems include:
- Non-compliance with planning regulations.
- Failure to arrange NHBC inspections.
- Incomplete agreements for roads and sewers.
- Failure to plan for the future maintenance of common parts of a development.
This means that finding an experienced new build conveyancing solicitor to oversee your purchase is essential. Here is an overview of the new build conveyancing procedure, highlighting several key issues to be aware of.
New build conveyancing: Is the property right for you?
A significant difference from buying an older property is that your new build home may not yet physically exist. And even when construction commences, health and safety considerations may preclude you from viewing your property before it’s complete. Despite that, you will still need a full understanding of what you are buying. But even with the full specifications, including the architect’s landscape drawings, it’s often difficult to envisage the finished article. It’s therefore a good idea to visit other sites by the same developer. If possible, check out sites completed a few years ago to see how they have matured into their surroundings.
What’s included in the purchase price?
Check carefully what the purchase price includes. At the very least, you should ask questions such as:
- What equipment is included, particularly in the kitchen?
- Are carpets included?
- Will the garden be turfed and boundary fences erected?
Also, many developers offer a variety of options and incentives. These may be tangible, such as a choice of fixtures, fittings and appliances, or financial, such as an offer to pay your Stamp Duty. Discuss your wish list with the site agent. They may say no, but remember the old saying, “if you don’t ask, you don’t get!”
New Build restrictive covenants
Be aware that new build developments impose restrictions on each new plot owner. Typically, these include (but may not be limited to) prohibitions on:
- extending or altering the external appearance of the property.
- carrying on a business from the property.
- parking commercial vehicles and caravans outside.
Financing a new build property
Once you decide to proceed, the first step is ensuring your finances are in place. It’s important to remember that most mortgage offers are only valid for six months. If you cannot complete within that period, you will either need to apply for an extension to the existing offer or apply afresh. However, some lenders offer bespoke new build mortgage products with extended deadlines.
New build conveyancing
The new build conveyancing process does vary, but a typical transaction is likely to proceed along the following lines.
Reservation agreement and fee
On agreeing to the sale, you must pay a reservation fee, often within 28 days. Depending upon the property’s value, this will likely be somewhere between £500 and £2,000. The developer deducts the fee from the final purchase price, but you stand to lose the reservation fee if you cannot exchange contracts within the specified time period. The reservation agreement should contain a full breakdown of the purchase price, including the cost of management fees and other charges.
New build conveyancing searches
You will have a pretty good idea of what your new home should look like physically. However, your new build conveyancing solicitor must carry out searches to see how things look legally. Some examples of these searches include:
- Checking the developer has the appropriate planning permission and the property is constructed in full accordance with it.
- Checking the proper adoption of roads, that drains and utilities are properly established, and obtaining results of other relevant local searches.
- Highlighting any restrictive covenants written into the lease or registered against the freehold (see above).
- Explaining whether the property is leasehold or freehold and, if leasehold, setting out details of the lease. In 2022, the government banned the sale of new build houses as leaseholds, aside from a few exceptional circumstances. If you are buying a new build leasehold flat, beware of the charges associated with buying a leasehold. It’s also worth noting that even those buying a freehold house may still be subject to new build estate management fees, which can be high.
- Long-stop completion date: New build delays are common, but they can cause problems if they go on for too long. Your new build conveyancing solicitor will ensure there’s a ‘long-stop’ completion date written into your contract. This means you can walk away and receive a full refund if they don’t finish the work by that date. It’s advisable to ensure the long-stop date falls before your mortgage offer expires. Not doing so risks a hefty financial penalty if the offer expires and you cannot get another mortgage in time.
New build exchange of contracts
Usually, a developer sets a deadline for the exchange of contracts, typically 28 days from the date that you reserve the plot. Before exchange, you will need to have your mortgage offer. If you have a related sale, your purchaser and the rest of the chain will also need to be ready to exchange contracts by the date specified.
On exchange of contracts, you will also have to pay a deposit of between 10 and 30% of the total purchase price. The contract states the agreed price and the balance payable by you on completion. New build warranties such as NHBC or Premier Guarantee usually protect a full deposit against builder insolvency, although it only covers the first 10% in some cases.
Buying a property still under construction means that the property’s value could rise or fall before completion. Therefore, it’s essential to ‘lock’ the price on exchange of contracts.
New build snaggings
It’s crucial to have a snagging provision in the contract allowing you to view the property before completion and itemize any deficiencies for the developer to rectify. It’s crucial to carry out the snagging survey before completion, as the developer may argue that issues raised afterwards are down to the wear and tear of your habitation.
Although you cannot delay completion for minor defects, the contract should require the developer to remedy the defects as soon as possible after completion.
NHBC
A new build property comes with a ten-year NHBC warranty, providing you with a degree of insurance against structural defects. However, the process can prove time-consuming.
New build conveyancing: Completion process
Unless the property is very close to physical completion, few developers agree to a fixed completion date, merely an estimated date. The main reason for this is that adverse weather conditions may slow the construction progress. In most cases, completion is required on two weeks’ notice.