New build properties can be attractive to buyers for various reasons, although there are differences in the new build conveyancing process. Developers target first-time buyers with government schemes to help them buy new homes and get on the property ladder.
Owning a new-build property has many advantages. One significant benefit is that these properties are chain-free. Another benefit is that new-build properties come with a 10-year warranty. Additionally, new-build homes are built to be energy efficient.
Moving into a new build home can be easier than with an older one, but the new build conveyancing process can be more complicated.
How does the new build conveyancing process differ from other types of residential conveyancing?
Conveyancing for new builds can be more intricate and complex compared to traditional residential conveyancing.
Potential challenges you may face when buying a new build include:
- Checking for compliance with planning regulations
- Ensuring there is a suitable newbuild warranty
- Ensuring there are adequate agreements for new roads and sewers
- Ensuring there are adequate provisions for the future maintenance of common parts of a development
- Ensuring that there are suitable rights of way and for passage of service media, such as electricity wires.
To avoid risks, hire a conveyancing solicitor who knows how to handle the new build conveyancing process. They will identify any potential issues and protect your best interests
If you are buying “off-plan” and the property won’t be physically complete by the time exchange of contracts occurs, your conveyancer should ensure that developers have a deadline, known as a ‘long stop’ completion date, to finish the sale or return your deposit. This deadline is often set for 12 months after the expected completion date, or is set in-line with the builders cautious estimate of when the property should be complete.
It is also advisable to make sure that you have a snagging provision included in your contract, which will allow you to raise any issues in build quality that you may discover after completion.
Finding the right new-build property for you
Before you pay any reservation fee make sure you do your due diligence to find out as much about the development and the housing developer as you can. This is more important if you’re planning on buying “off-plan” which, as mentioned earlier, means you’re reserving a property before the house is even built.
If the developer has any other sites, it’s worth going to see houses of a similar build to make sure you’re happy with the style and finish of the property.
Check for any extra details that have been included in the price as additional incentives. For example, some developers will include appliances and fittings, or some may include Stamp Duty, so it’s important to know what these things are before making a decision. If you are buying with a mortgage, your mortgage lender will need to approve any incentives.
Making an offer and securing your new home
Before the new build conveyancing process can get underway, you’ll need to secure your plot with the developer. This will involve paying a reservation fee set by the developer.
The reservation fee will be deducted from the agreed sale price when the transaction of the property completes. However, if you do decide to walk away from the purchase it’s non-refundable.
It’s important to know that before making a formal offer and paying a reservation fee you should have a mortgage in principle. Most developers and estate agents will want to see that you have this as it then demonstrates that you’re a serious buyer.
Upon acceptance of your proposal, the developer should provide you with a reservation contract that includes:
- The agreed property purchase price
- What the purchase price includes, such as fixtures and fittings in the property
- Estimate the expected yearly service fee and fees for management, including what expenses are included for properties with leaseholds or freeholds that have private roads or communal spaces.
The Home Builders’ Consumer Code mandates that buyers should receive a reservation agreement. If you don’t receive one, you should ask the developer for it.
The new build conveyancing process
Reserving your new build property
Once your offer is accepted and the reservation fee is paid, you are protected for a period of time, usually 28 days, to go ahead with the purchase. This also prevents the developer from selling your property to another buyer.
Reservation fees for new build properties can vary and are set by the developer; the more high end the development the higher you can expect the fee to be.
Starting the conveyancing process
Your conveyancer will handle the legal process of transferring ownership of the new property from the developer to you and they will make contact and work with the developers’ solicitors on your behalf.
The first thing they will ask for is a copy of the draft contract and the title documents and begin your conveyancing searches.
Your conveyancer will:
- Verify approvals for planning and building regulations
- Confirm the property’s access to utilities such as gas, electricity, water, and drainage
- Check that the property will be connected to mains drainage
- Establish whether the roads are to be private or publicly adopted
- Establish whether there will be an ongoing maintenance charge for roads or amenity areas, which is very common in newbuild properties
- Investigate any restrictive covenants present
- Carry out searches with the local authority
- Review the terms of your official mortgage offer
Exchange
When all searches and enquiries have been completed and both parties are ready, your conveyancer will exchange contracts with the developer’s conveyancer to finalise the transaction.
At this stage it’s standard practice that you will be required to pay a deposit, typically this is 10% of the property’s purchase price. Your conveyancer will then transfer the funds to the developer’s conveyancer.
If the property is fully constructed, a completion date will be set at exchange.
Completion
Once exchange has happened, your conveyancer will tie up any loose ends, such as bankruptcy checks, ahead of completion. The housebuilder will confirm with you when the property is likely to be finished and allow you to set a date for completion.
Where the property was not structurally complete at exchange, once the developer finishes construction and the property passes a structural inspection by Building Control to ensure it is safe, the developer will serve a “Notice to Complete” on the buyer. This gives the buyer 10 working days to complete the transaction. During the 10-day window, you should instruct the final inspection to be carried out by your mortgage lender’s valuer, as well as providing any further funds needed to complete the purchase to your conveyancer.
At this point, it is advisable to prepare a snagging list. Once completed this list will act as an inventory to notify the developer of any aesthetic or structural issues with the property which they need to put right.
Finally, on completion, your conveyancer will also arrange payment of Stamp Duty Land Tax (SDLT), if applicable, along with registering your ownership of the property with the Land Registry. They will also document your purchase of the property with the NHBC and dispatch the warranty certificate to you.
Looking to purchase a new-build property? Make sure you appoint a legal expert with experience in managing new-build conveyancing. Get your instant conveyancing quote from Enact today.
