A new-build property can be appealing to buyers for a number of reasons. However, developers often gear their marketing towards first-time buyers with some government supported schemes available to help them get on to the property ladder through the purchase of a new-build home.
The fact that a new-build is chain free, it comes with a new build warranty, and that it is energy efficient are just a few benefits to boast about. Yet, while a new-build home can allow buyers to move in without the stress associated with older properties, the conveyancing process can be a little bit more complicated.
How does new build conveyancing differ from other types of residential conveyancing?
New build conveyancing is more complex than other types of residential conveyancing because the risk of things that could go wrong is greater. Potential risks 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
Therefore, appointing a conveyancer who will act in your interests to ensure you’re not left with any costly oversights made by the property developer is crucial.
Finding the right new-build home 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 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.
Making an offer and securing your plot
Before the 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 and will protect your rights to go ahead with the purchase for a set time, typically around 28 days, meaning the developer cannot agree to sell your plot to another buyer. Likewise, you also have the right to withdraw from the sale during this time.
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.
Once your offer has been accepted you should be issued with a reservation agreement from the developer which will include:
• The purchase price
• What is included in the figure such as fixtures and fittings in the property
• What the annual service charge and management fees are likely to be, and what the costs cover (for leasehold or a freehold with private estate roads or amenity areas)
The Consumer Code for Home Builders states that a reservation agreement is to be given to buyers. If you are not provided with one you should request it from the developer.
The conveyancing process
At the point that your offer is accepted, and you’ve paid your reservation fee you should look to instructing a conveyancing solicitor to manage the legal process of transferring ownership from the property developer to yourself.
For new-build properties exchange is required within four weeks so you need to act quickly to ensure both you and the developer are legally bound to proceed with the transaction. Whilst this 28 deadline is always set, it is rarely achieved in reality.
Your conveyancer 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 title documents.
Your conveyancer will:
• Check planning and building regulations approvals.
• Ensure that the property has access to gas, electricity, water and drainage
• Check for any restrictive covenants
• Establish if the property is leasehold or freehold
• Conduct local authority searches
• Check the conditions of your formal mortgage offer
As with any conveyancing, once your conveyancer is satisfied that all issues have been resolved they will exchange contracts with the developer’s conveyancer. 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.
Once exchange has happened your conveyancer will tie up any loose ends, such as bankruptcy checks ahead of completion. Your housebuilder will confirm with you when the property is likely to be finished and allow you to set a date for completion.
Typically, for new-builds, completion takes place 10 working days after the developer has finished the building work, and the property has been signed off as structurally secure by Building Control. During the 10-day window, you should also instruct the final inspection to be carried out by your mortgage lender’s valuer.
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 register your ownership with the NHBC and forward the guarantee certificate to you.