Purchasing a new build property offers purchasers the unique experience of owning an untouched property to put their mark on and potentially lead to a smoother conveyancing process as they are chain free. However, it also comes with its own set of challenges.
New Build Conveyancing Process
As mentioned, the conveyancing process for new build properties differs from the traditional process. This is because when you agree on a sale price for a new build, the property is often still in construction, and you will not be able to view the property in its finished state until further down the conveyancing process and often close to completion. It is therefore important that you are satisfied with the information and the architect’s design provided by the development company before you commit to the purchase. Not only this, but it is also crucial to understand the process that goes into purchasing a new build property which will be detailed below.
Securing the Property Through Making a Reservation
To secure the chosen property, the purchaser will often need to pay a reservation fee to the developer which will reserve the property and take it off the market for a specified period. You will commonly need to exchange before the end of this period and this fee will not be refunded if you pull out of the transaction but will be deducted from the final purchase price at completion. Therefore, it is advisable that you are once again certain that you are satisfied with the property you will be purchasing and if you require mortgage finance, you should make sure you have obtained a mortgage offer before paying this fee. Following the payment of the reservation fee, the developer will provide you with a reservation agreement which should contain a full breakdown of the purchase price and detail the management fees and other charges going forward like service charges.
Review of Documentation and Searches
Similarly to all purchases, your conveyancer will carry out searches and review the documentation provided to give you an understanding of how the property looks legally. Although new build purchases often complete quicker than traditional purchases, this stage can be lengthy due to the high volume of documentation that must be reviewed. Examples of what you can expect from your conveyancer during this process is as follows:
- Ensure the planning process has been correctly adhered, as with building control.
- To be certain that there will be in place the appropriate building warranty at completion.
- Ensure there is sufficient protection in place in relation to the design and construction process and the extent to which the Developer can change some elements of the design or construction or the materials used in the construction of any new home which they consider are not major changes.
- Provide details of the Completion Date, if it is to be fixed or put down as being ‘on notice’. Checking agreed longstop dates that the build cannot go past.
- Establish a Snagging Process, this allows you to visit the property before you complete and see any potential defects yourself and ask the developer to remedy these as soon as possible.
- Detail what happens in the event the Property is not built in time and your right to withdraw.
- Disclose to you the rights that benefit the property and those that burden the property (actions you cannot carry out or what you must contribute financially towards.
Exchange of Contracts
Like all purchases, in order to legally agree a date to complete, exchange of contracts must take place.
As mentioned, this must take place during the reservation period and if you have a related sale, it is highly advisable to make sure that your purchaser and the rest of the chain is also ready to exchange at this time.
Not only this, but if you are purchasing a new build property that is still in construction, you will not be able to set a completion date when you exchange as the developer will unlikely be able to confirm an exact date the property will be ready. Instead, you will have to agree to a completion on notice, meaning that once the property is finished, the developer will serve notice on the buyer to complete during a specified period.
This understandably could result in a somewhat complicated exchange and completion process if you are also selling a property as the chain will have to agree to this arrangement which will often involve detailed amendments to contracts.
At this stage, you will be required to pay the deposit stated in the contract, which is commonly 10% of the purchase price.
Completion
Once the developer has notified you of that the property is weatherproof and ready to complete, your conveyancer will transfer the purchase funds to the developer within the date specified and the keys will be released to you, and you will be able to move into your brand-new home.
Following this, your conveyancer will arrange the payment of stamp duty land tax and will register your ownership of the property at the Land Registry.
Points to be aware of:
The importance of an experienced and well-respected conveyancer in dealing with a new build purchase is paramount. As discussed, there can be unpredictable delays and issues in the new build conveyancing process and there are steps in the process that are unique to new builds. Therefore, it is crucial that you instruct a firm that has experience in dealing with new build properties.
There can be understandable hesitation when it comes to purchasing a new build property as you do not truly know what you are buying as you will often only be able to obtain a survey close to the completion date or even after completion. However, there are protections that are put in place to put your mind at ease.
The National House Building Council (NHBC) is an independent non-profit organisation which aims to protect new build purchasers through providing an insurance policy. The Buildmark warranty is a popular option which provides coverage for a 10-year period and will run from the day your home is signed off by the inspector.
Over the initial first two years from the signing off period, the warranty covers you against any physical damage to your home caused by the defect, which results in the Developer failing to construct in accordance with the NHBC standards.
Under this part of the warranty, it is the Developers responsibility to carry out repairs necessary. However, the Developer is not responsible for items such as shrinkage or condensation, due to the property drying out, general wear and tear and a damage arising from failure to maintain the property.
For the next eight years following the initial two year period, the warranty covers you against putting right any major damage caused by a defect in the load bearing structure of your home, or by subsidence, settlement or heat affecting the structure, damage caused by defect to the roof tiles and slates, external walls, rendering, tile hanging, floor decking and screeds, defects below the ground drainage system, defective chimneys and flues causing a danger to the Health & Safety of the occupants.