|
With increasingly more people buying new build properties, our New build residential conveyancing is a specialist area as the process involved differs from a traditional purchase. Below, I provide an overview of the procedure and highlight several key issues to be aware of when buying a new build property.
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 there will be restrictions imposed on each new plot owner. Typically, these will 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 to ensure 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
Once the sale is agreed, you will have to 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 fee will be deducted 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 exchange of contracts
Usually, a developer will set 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, which is almost always 10% of the total purchase price. The contract will state the agreed price and the balance payable by you on completion.
Buying a property still under construction means that the property’s value could rise or fall before completion. It’s therefore essential to ensure the price is ‘locked’ 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 itemise any deficiencies for the developer to rectify. This snagging survey should be carried out before completion, as the developer may argue that issues raised afterwards are down to the wear and tear of your habitation.
Although completion cannot be delayed if the defects are minor, 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 to be time-consuming.
New build home completion process
Unless the property is very close to physical completion, few developers will 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, you will be required to complete on two weeks’ notice.