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“New build conveyancing is a very specialist area, as the process involved differs from that of a traditional purchase. Our expert New Build Conveyancing Team will advise and guide you through the entire process. Indeed, clients often contact us for guidance even before paying a reservation fee to the developer.”New Build Solicitors
There is a very good reason to choose specialist new build solicitors for your conveyancing. That is because the new build conveyancing process differs significantly from a traditional purchase. The primary reason for this is that you typically commit to buying your home before the building work has finished – or even started. However, new build conveyancing is also more complicated than standard conveyancing because the potential for issues to arise is considerably higher. Possible 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 it is essential to find an experienced new build solicitor to oversee your purchase. Here is an overview of the new build purchase and conveyancing procedure, highlighting several key issues to consider.
“Jill Cade was so professional and completed everything efficiently and effectively. Her communication skills were excellent.” S.T.
Contents
- Check out the developer
- Get a ‘mortgage in principle’
- Instruct your new build solicitors
- Is the property right for you?
- Be prepared to haggle
- What is included in the purchase price?
- Ground rent, service charges and estate management fees
- The new build conveyancing process
Check out the developer
Buying an older property offers you the reassurance of time. Due to its age, a wealth of information will be available about the property and the surrounding area from the current owners and other sources.
Conversely, when purchasing a new build, you will be the first occupant. Therefore, you are placing considerable trust in the developer, and it is essential to do your homework. There are several things you can do:
Check online reviews
A great place to begin is HomeViews, where you may discover that homeowners have shared their reviews about developers, management companies, developments, and individual properties (possibly similar to yours). Additionally, the Home Builders Federation publishes regular rankings of developers based on feedback from homebuyers.
Check whether the developer is signed up to a code of standards
This should be clearly stated and, if applicable, will outline the standards of building and customer service you can expect as well as providing a complaints procedure. There are several new build codes, the two main ones being:
- Most developers are signed up to the Consumer Code for Home Builders, which allows homeowners to escalate disputes with developers for free.
- Launched in 2022, the New Homes Quality Code is set to supersede the Consumer Code for Home Builders, with many developers already signed up. The code has established a New Homes Ombudsman Service (NHOS), where homeowners can escalate disputes with developers at no cost. However, it is important to note that properties purchased under the Help to Buy equity loan scheme are not covered.
Get a ‘mortgage in principle’
A mortgage in principle is essentially written confirmation from a lender regarding the amount they may be willing to lend you, subject to a full mortgage application. In addition to helping you calculate your purchase budget, having a mortgage in principle is a valuable asset when negotiating on price.
Instruct your new build solicitors
Once you have an offer accepted on an older property, it typically takes several weeks before exchange of contracts. However, in new build conveyancing, exchanging contracts usually occurs about a month after reserving the property, although the completion date will be very fluid, depending on whether or not you bought off-plan. Therefore, it is essential to instruct new build solicitors promptly.
See also: Is buying ‘off plan’ a good plan?
However, instructing us early means we can offer you advice and guidance even before you reserve your property.
“Thank you for your amazing service from start to finish. As new build newbies, we appreciated your excellent advice throughout.” A.D.
Is the property right for you?
A significant difference when buying an older property is that your new build home may not yet physically exist. Even when construction begins, health and safety considerations may prevent you from viewing your property before it is finished. Nevertheless, you will still need a complete understanding of what you are buying. However, even with the full specifications, including the architect’s landscape drawings, it is often difficult to envisage the finished product. Therefore, it is always a good idea to visit other sites by the same developer. If possible, explore sites completed a few years ago to see how they have blended into their surroundings.
Be prepared to haggle
Never assume that the advertised price of the property is non-negotiable. You will have the best chance of negotiating the price down before paying a reservation fee.
If your property is part of a block, check the prices of the others. If yours is more expensive, inquire as to why. It may include a parking space, a garage, or another feature that the others lack. Conversely, if yours lacks a feature that the others possess, it is time to negotiate!
It is also worth checking the prices of similar properties in the area on sites such as Zoopla and Rightmove. Additionally, how long has the property been on the market? Is the developer struggling to sell?
Finally, find out the developer’s financial year end on the Companies House website. They may be more open to considering an offer as their year-end approaches.
What is 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!”
Ground rent, service charges and estate management fees
Although legislation abolished ground rent for most new build properties in 2022, you may discover that your new build home is burdened with estate management fees. Furthermore, if your new home is leasehold, you will likely be required to pay service charges as well.
New build estate management fees, often referred to colloquially as ‘fleecehold’, have become the industry norm, despite being rare twenty five years ago. These recurring fees cover the maintenance of shared facilities, including car parks, play areas, communal gardens, pavements, and private roads.
However, buyers often find themselves liable for high freehold estate management fees for inadequate service. But unlike leasehold service charges, there is no tribunal available. Instead, the only option is taking the matter to the county court, which can prove very expensive.
“I have never been so impressed with a solicitor’s work when moving home. Jill was fabulous throughout a difficult process and a difficult time of year. I have already recommended.” T.B.
New build solicitors: the new build conveyancing process
The new build conveyancing process does vary, but a typical transaction is likely to proceed along the following lines.
Reservation agreement and fee
Upon agreeing to the sale, you must pay a reservation fee, typically within 28 days. Depending on the property’s value, this fee is likely to be between £500 and £2,000. The developer will deduct this fee from the final purchase price; however, you will forfeit the reservation fee if you cannot exchange contracts within the specified period. The reservation agreement should contain a detailed breakdown of the purchase price, specifying the cost of management fees and other applicable charges.
Beware that reservation fees are often non-refundable or only part-refundable after a specific period. While most developers offer a 14-day ‘cooling-off’ period, always check the exact length of the cooling-off period before paying the reservation fee. Other things to check in the reservation agreement include:
Details of the property type, plot number, development name, postal address (if available), parking places, etc.
- The total purchase price.
- Your cancellation rights.
- The estimated completion date.
- When the reservation period ends.
- Is the property freehold or leasehold?
- Details of any management or service charges.
- Anything you will not own or will not own immediately.
New build conveyancing searches carried out by new build solicitors
You will have a fairly good idea of how your new home should look physically. However, new build conveyancing solicitors conduct searches to assess the legal aspects. Some examples of these searches include:
- Verify that the developer has obtained the necessary planning permission and that the property is constructed fully in accordance with it.
- Verifying the proper adoption of roads, ensuring that drains and utilities are appropriately established, and acquiring the results of other relevant local searches.
- Highlight any restrictive covenants included in the lease or registered against the freehold.
- Explaining whether the property is leasehold or freehold and, if leasehold, providing details of the lease. In 2022, the government banned the sale of new build houses as leaseholds, except in a few exceptional circumstances. If you are buying a new build leasehold flat, be cautious of the charges associated with buying a leasehold. It is also worth noting that even those purchasing a freehold house may still be liable for new build estate management fees (see above).
- Long-stop completion date: New build delays are common, but they can cause issues if they persist for too long. Your new build conveyancing solicitor will ensure that a ‘long-stop’ completion date is included in your contract. This means you can walk away and receive a full refund if the work is not completed by that date. It is advisable to make sure the long-stop date is set before your mortgage offer expires. Failing to do so may result in a significant financial penalty if the offer expires and you cannot secure another mortgage in time.
New build solicitors: exchange of contracts
Typically, a developer sets a deadline for exchanging contracts, usually 28 days from the date of reserving 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 must also be prepared to exchange contracts by the specified date.
Upon exchange of contracts, you will also need to pay a deposit of between 10% and 30% of the total purchase price. The contract specifies the agreed price and the balance payable by you upon completion. New build warranties (see below), such as NHBC or Premier Guarantee, typically protect the full deposit against builder insolvency, although they may only cover the first 10% in some cases.
Buying a property still under construction means its value may fluctuate before completion. Therefore, it’s essential to ‘lock’ the price upon exchange of contracts.
New build snaggings
It is essential to have a snagging provision in the contract that allows you to inspect the property prior to completion and detail any deficiencies for the developer to rectify. It is vital to conduct the snagging survey ahead of completion, as the developer may contend that any issues raised afterwards are due to the wear and tear of your habitation.
While you cannot postpone completion for minor defects, the contract should require the developer to rectify these defects as soon as possible afterwards.
NHBC
A newly built property comes with a ten-year NHBC warranty, offering a measure of insurance against structural defects. However, the process can prove time-consuming.
See also: What does NHBC cover?
New build solicitors: the new build conveyancing completion process
Unless the property is very close to physical completion, few developers agree to a fixed completion date, only providing an estimate. 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.