If you have already had the pleasure of buying a home in the past, you will be aware of some of the aspects of the conveyancing process. However, if you are now considering a new build property there will be some key differences that you may not be expecting.
These might include:
A Reservation Deposit
A reservation deposit is paid by you to the developer of the property and secures your interest. This acts as a way for the developers to ensure that a purchaser is serious about buying the property, particularly as there could still be a lengthy time scale before completion. This deposit is often non-refundable.
The developer will often set a deadline for exchange to be within a specific timeframe of their choosing. This is often 28 days but will vary from developer to developer. Again, this incentivises the more committed purchasers although this deadline can be extended provided your conveyancers can show they are actively working to reach exchange as soon as possible. This allows for unforeseen complications which can arise within a conveyancing transaction. It is therefore not uncommon for the deadline to be somewhat ignored, although the developer will retain the right to enforce, should they wish to exercise it – beware!
Timescales for conveyancing
A standard freehold transaction would normally take around 8 weeks with leaseholds taking on average 12 weeks (leaseholds are more in-depth due to the need to review and work on the Lease and having the landlords as an additional party). As many new build developments are leasehold, clearly this hugely exceeds the “28-day exchange” deadline set by developers. It is therefore key to instruct an experienced conveyancer who has the knowledge and expertise to deal with the pressure and workload that comes with any new build transaction.
Key factors to look out for!
Note that many new build developments are leasehold, although the government are thinking of banning the sale of new build leasehold houses (leaseholds are necessary for flats) as there is no real reason why a free-standing house should be sold subject to a lease. However, before these laws are passed you should be careful of the following:
- Ensure the Lease is for a good term, at the very least 90-150 years and preferably 999. Lenders take great care in assessing their risk when providing funding and a short lease term, for example less than 60 years, will be a huge stumbling block to securing finance. Not to mention that any prospective buyer in the future will equally be less interested for the same reasons, should you come to sell your property later on.
- Be aware that developers will often try to push you into using a “connected” conveyancer. This should be avoided at all costs and you must stand firm. The developers are already exerting great pressure with deadlines and so an independent conveyancer who is looking out for your best interests, and not a quick sale for the developer, is essential.
- Delays are not unexpected! Developers often make the conveyancing process more difficult with potential issues over non-compliance with building regulations, lack of NHBC inspection or failure to secure rights over roads and sewers etc. These pitfalls are common, and any conveyancer will need to ensure these elements are addressed and not “accepted” for the sake of a speedy transaction.
- If the development is not yet completed and you are buying “off plan”, pay careful consideration to your mortgage offer’s shelf life. Most mortgages expire after 6 months and delays in the building’s construction are very common. Note it is not guaranteed that your lender will simply renew your existing mortgage offer with the same conditions should it expire. To help avoid issues like this, it is recommended that you opt for new builds that are estimated to be completed within 2-3 months after exchange.
Get in Touch
If you are thinking of purchasing a new build property then please contact Alan Warnes, one of our conveyancing specialists and he and the team would be glad to assist you. Alan can be contacted on [email protected] or 0118 958 9711.