A lot of folks like the concept of purchasing a brand-new house. A clean slate with the extra advantages of being chain-free, energy-efficient, and including a new construction guarantee.
However, the legal procedure of purchasing a new construction may be more difficult. True Solicitors, specialists in residential conveyancing, describe the formalities needed to buy a newly constructed property.
Why is conveyancing more complicated for new built property?
Compared to other forms of conveyancing, new build conveyancing is more complicated since there are greater risks associated with things going wrong during construction, such as:
- Violation of planning restrictions.
- Not scheduling NHBC inspections
- Developers breaking their commitments to build roads and sewerage.
- The construction of homes that deviates from the original blueprints.
Therefore, it is crucial to hire a property lawyer with experience handling the complexities that can affect buying a new construction. A competent attorney will make sure that the contract is in your favor, that your deposit is safeguarded, and that there is a “long-stop” completion date in place in addition to helping to detect any of the aforementioned problems.
Related: How conveyancing should be
This is the deadline by which the developer must declare that construction is complete and that the property is prepared to be delivered to the buyer. This usually occurs 12 months after the scheduled completion of the legal process. The buyer has the right to terminate the contract and get their money back if the developer fails to complete the property by this deadline.
In order to meet their end-of-financial-year expectations, the developer’s sales staff and attorney often hasten the property’s completion date. Before committing to a completion date, a qualified attorney will resist their pressure and make sure the deal is legally sound and in your favor.
What will the conveyancing agent be watching for?
Your conveyancer must see to it that specific searches are done on the new construction, such as:
Verifying the Planning License: Verifying that the property has the correct planning authorization and that it has been constructed in line with that permission. that roads have been adopted, that drains and services, such as gas, electricity, and water supply, are linked. They’ll also carry out any more pertinent local searches.
Determine if the property is leased or freehold: A newly constructed apartment will be a leasehold property. Leasehold homes sometimes have high yearly service fees that go toward maintaining the grounds and interior shared sections of the property. Therefore, it’s critical to understand the costs involved, their projected annual growth rate, and the precise scope of their coverage. For more information, see our page describing the distinctions between leasehold and freehold.
Discovering any restrictive covenants: Your lawyer will go through the lease to see if there are any clauses that prohibit you from making specific improvements to the property. For instance, forbid you from including an extension at all or without prior consent.
What is the conveyancing procedure for new construction?
As soon as your new construction house or land is acquired, the conveyancing procedure begins. Early on should be the best time to get a lawyer. Here is how it works:
1. Protect the property.
Securing the property is the first step. This often entails paying the developer a reservation fee when you submit an offer to purchase the home or apartment in a new construction. This stops the developer from agreeing to sell your plot to another buyer and safeguards your right to proceed with the purchase for a certain amount of time, often 28 days. Additionally, it offers you the chance to revoke your purchase within the specified window of time.
The developer determines the reservation fees, which may be as little as £100 or as much as $2000 or more for more costly, high-end properties. When the transaction is complete, the sum will be subtracted from the total price you will pay for the property. You will forfeit the reservation money if you decide not to complete the transaction.
Your mortgage must have been agreed upon in principle before you agree to pay the reservation fee. This document outlines the general amount that a lender is willing to offer you in order to purchase a home. Because it demonstrates that you are a serious buyer, developers and real estate agencies often only accept bids from prospective purchasers who have a mortgage in principle.
The developer should provide you a reservation agreement that contains the following information:
- The cost of the acquisition
- What is included in the price, such as the property’s furnishings and fittings.
- The anticipated yearly service charge and management fees, as well as the scope of the expenditures (for leasehold).
Buyers must be offered a reservation agreement, according to the Consumer Code for Home Builders. You should ask the developer for one if one is not given to you.
2. Inform the attorney
As soon as you’ve made a reservation on a property, you should hire a conveyancing attorney to handle the formalities of giving the developer ownership of the property on to you.
To get a copy of the draft contract, your attorney will collaborate with the attorneys for the developers. They will make sure the contract is favorable to you and point up any problems they find. They will:
- Verify planning and building permissions.
- Check the availability of gas, power, water, and drainage on the land.
- Look for any restrictions on free speech.
- Determine if the property is freehold or leasehold.
- Search local government databases.
- Verify the terms of your official mortgage offer.
At this time, you must additionally get NHBC new-build insurance. Verify that the provisions of the coverage protect you against any problems that could emerge, including structural damage. Insurance is crucial when using a mortgage to make a purchase.
When your conveyancing attorney is satisfied that all matters have been handled, they will exchange contracts with the attorney for the developer. You will also have to pay your deposit at this time, which is normally 10% of the total purchase price. The money will be sent to the developer’s attorney by your attorney. A contract committing you to buy the property for the asking price now in effect and to pay the remaining amount upon completion will also need to be signed.
To safeguard the buyer from any increase or decrease in real estate prices before completion, your solicitor should make sure that the contract price is “locked” upon exchange. Alterations to a property’s value might make it more difficult for you to get a mortgage in the future.
Additionally, your conveyancing agent will do any necessary final searches and bankruptcy checks.
The ultimate step of the procedure is completion. For new construction, completion typically occurs 10 working days after the developer has completed the construction and Structure Control has deemed the building to be structurally sound.
You must make sure that the mortgage lender’s valuer can conduct the final inspection within the ten days and that a snagging list can be created. Any aesthetic or structural faults with the property are noted on a snagging list and reported to the developer. For instance, smeared paint or a malfunctioning roof, etc.
The developer should next start working to address any problems mentioned in the snagging report.
Your lawyer will also handle the Land Registry registration of your ownership and the payment of any required stamp duty. They will also send you your guarantee certificate and register your ownership with the NHBC.