New Build Conveyancing Solicitors
We understand that purchasing a new build property can come with its own set of unique challenges and considerations.
In this article, we explain the conveyancing process for new build properties, including the different stages of the process, the legal considerations, and the potential pitfalls to be aware of.
We will also discuss the necessary steps and precautions that you and your conveyancing solicitor will take to ensure a successful transaction.
Whether you are a first-time buyer or an experienced property investor, this article is designed to guide you through the conveyancing process for new build properties.
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What is a new build property?
A new-build property is a property that has been recently constructed and has never been lived in before. These properties are typically sold by the developer or builder, rather than by individual homeowners.
If you are buying a property that has not yet been build, this is known as buying 'off-plan'. When buying a new-build property off-plan, you will be purchasing the property based on plans, artist renderings, and possibly a show home representation of the finished product.
What is different about new build conveyancing?
New-build conveyancing deals with properties that have not yet been built or are currently under construction. Although no two conveyancing transactions are the same, new build conveyancing is usually more complicated than conveyancing for properties that have already been built and occupied.
The additional risks and complexities that a new-build conveyancing solicitor may have to contend with include:
Legal restrictions: There may be restrictions on the property, such as covenants or planning agreements, which can limit the buyer's ability to make changes to the property or the surrounding land.
Tight deadlines: Buyers typically have 30 days to exchange contracts following payment of a reservation deposit.
Protracted transactions: After the initial rush to exchange, there may be delay of months or even years to wait until completion. Your solicitor will need to stay on top of your file or they could forget key dates in the process.
Complex structures: You may be buying the land from one entity and contracting with a different party to build the property.
Ground rent: If the property is leasehold, there will usually be an annual ground rent to pay. Over recent years there have been problematic ground rent clauses creeping into new-build leasehold properties, particularly in relation to spiralling ground rent with leasehold houses.
Service charges: You may be required to pay annual service charges for the maintenance and upkeep of common areas and shared facilities within the development.
Tax: There may be tax complexities with new build properties. For example, new build properties are zero-rated for VAT. There might not be any Stamp Duty Land Tax (SDLT) to pay on the cost of the build.
Delays in construction: The construction process can take longer than expected, and the completion date may be delayed. This can cause a delay in the completion of the sale, and may also result in additional costs for the buyer.
Mortgage problems: Most new-build mortgages offers are valid for 6 months. If the construction phase takes longer you may need to rearrange your mortgage. If rates have increased, or lender policies have changed, this can present difficulties.
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Quality issues: The risk of sub-par construction could lead to the property not complying with Building Regulations. Similarly, if the property's construction is not acceptable, the mortgage lender may refuse the mortgage.
Service agreements: There is a risk that the developer might not have completed the necessary agreements for sewage, water, utilities and roads.
Part exchanging: Some developers will accept a buyer's existing home in part exchange leading to additional legal work.
What is the new build conveyancing process?
Once you have paid the initial reservation fee to the developer, you will typically have 28 days to exchange contracts.
Ideally you will have already chosen and instructed a conveyancing solicitor, as once you have your solicitor will have 28 days to:
- Liaise with the developer's solicitors
- Review the contract of sale
- Check the property title
- Review the terms of the lease, ground rent and service charges (if the property is leasehold)
- Carry out local authority searches
- Check for any restrictive covenants
- Read through and advise on the draft contract and lease or transfer deed
- Check planning permission
- Flag up any enquiries that need to be made, for example, relating to access roads and drainage
- Deal with Help to Buy mortgages/ISA
- Review the warranty
- Send the deposit to the builder’s solicitors
- Review your mortgage lender's mortgage terms
- Report to your lender
- Review the new build insurance policy
Once all the necessary checks have been made, the your solicitor will review the completion statement to ensure that it is accurate and that all the costs associated with the purchase have been properly accounted for.
Your solicitor will then arrange for the transfer of funds to the developer and arrange payment of any Stamp Duty Land Tax (SDLT) to HMRC
Your property will then be registered in your name at HM Land Registry (HMLR).
Is new build conveyancing more complicated?
Yes. New build conveyancing is more complicated when buying a property off-plan and new build properties. As the property will be newly constructed or even still on the drawing board, numerous complications can arise.
Non-compliance with building and planning regulations, failed or missed warranty inspections, discrepancies between plans and specifications and the final product, project delays and tight deadlines are but a few of the additional challenges involved in buying a new build home.
What happens after I reserve a new build property?
With most new-build properties you have 4 weeks to exchange contracts after payment of the deposit. If you don’t exchange within this timeframe, the developer can pull out and keep your deposit.
As soon as you have an offer accepted on a new build home, you need to immediately instruct a conveyancer and get your mortgage in place.
Will I be given a fixed-completion date?
Developers do not usually work to a fixed-completion date. Although an Anticipated Legal Completion Date (“ALCD”) will be provided, the buyer won't know for sure until a written "completion on notice" is sent to the buyer once the property is structurally complete. The buyer will usually then have to complete the purchase within 10 working days.
What is a property part-exchange?
A property part exchange, also known as "part-ex," is a type of transaction in which a buyer of a new-build property trades in their existing property towards the purchase of the new one. The developer or builder acts as a third-party in the transaction, taking ownership of the buyer's existing property and using its value as part of the payment for the new property. This can be an attractive option for buyers who wish to purchase a new-build property, but may be struggling to sell their current property on the open market. It can also be helpful for buyers who want to move quickly, as it eliminates the need to wait for their current property to sell before purchasing a new one.
What is covered under the new-build warranty?
There are several providers of new build property warranties, the largest of which is the National House Building Council, (NHBC).
Your solicitor will review the terms of the warranty on offer and advise you accordingly.,
Typically new build warranties include:
- Pre-completion deposit protection
- Protection against defects in the structure of the property that may become apparent within 10 years of the date of completion.
- Protection against water penetration into the property that may cause damage to the structure or contents.
- Protection against rising damp or penetrating damp caused by defects in the property's construction.
- Protection against damage to the property caused by defects in the service installations, such as heating, water and electrical systems.
- Protection against defects in the property that may become apparent after the initial two-year period.
Do mortgage lenders have special requirements when lending on a new-build?
Your solicitor will review the terms of your mortgage offer and any special lending requirements the mender has. New build mortgages do usually include special requirements:
Some mortgage lenders may require a completion certificate from the National House Building Council (NHBC) or other approved warranty provider before they will approve a loan on a new-build property.
Some mortgage lenders may require a larger deposit for a new-build property, as the value of the property may not be fully established until it is completed.
Mortgage lenders may also conduct a different type of valuation on a new-build property. This is because it is not possible to evaluate the property like a traditional property, which have been lived in and have a history.
Some mortgage lenders may only lend on new-build properties that have reached a certain stage of construction, such as when the foundations have been laid or the roof is on.
Some mortgage lenders only accept new-build properties that are part of the UK government's Help to Buy scheme, which helps buyers purchase a new-build property with as little as a 5% deposit.
How we can help you
If you are buying, selling, remortgaging or transferring equity in a property, our solicitor panel can help make the process as straightforward and stress-free as possible.
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Chris Salmon, Director
About the author
Chris Salmon is a co-founder and Director of Quittance Legal Services. Chris has played key roles in the shaping and scaling of a number of legal services brands and is a regular commentator in the legal press.