Buying a New-Build Home – Key Considerations

Manisha Bhula, in our Residential Property team, explores the things pros and potential cons of buying a new build home and a few tips.

Energy-efficient, chain-free and often marketed with additional incentives, new build properties are a popular choice for many buyers. Nevertheless, when buying a new build home, be sure to familiarise yourself with the key considerations in the new build conveyancing process.

Instruct an experienced solicitor or licenced conveyancer

The new build conveyancing process is more complicated than most types of conveyancing. There are greater risks associated with a new build purchase and, therefore, instructing an experienced solicitor or licenced conveyancer is crucial.  The builder will often recommend a conveyancer, but you should consider whether their choice is in your best interests.

We can help you with a new build a purchase. If an issue arises, it is likely that we will have seen it before and know how to resolve things quickly and cost-effectively. 

Common features of the new build conveyancing process

• Finance – most developers will want to see evidence of a suitable mortgage offer before contracts can be exchanged. Ensure that your finances are in order before starting the conveyancing process. There is a danger that the mortgage offer will expire before the property has been constructed, so it is important to agree a longstop completion date (see below). 

• Reservation fee – a reservation fee may be payable in order to reserve a new build property for a set period (usually 28 days). The sum will be deducted from the final purchase price upon completion (but is non-refundable if contracts are not exchanged within the stipulated period).

• Exchange deadline – a deadline will be set so that you must exchange contracts before the expiration of the reservation period. A developer will usually understand if this deadline is missed due to your solicitor or licenced conveyancer making enquiries about the property.

• Deposit – a deposit will be requested (usually 5% - 10% of the purchase price) and is often paid to the seller’s solicitor upon exchange of contracts. If property prices fluctuate within that period, and you cannot secure a mortgage for the balance, then you risk losing your deposit. Again, it is important to agree a longstop completion date (see below). 

• Warranty – a new build warranty must be arranged. This can provide you with deposit protection from exchange of contracts, and warranty cover for structural defects for up to ten years after completion. 

• Searches – we can obtain information about the new build and local area to help you decide whether the property is suitable for you. The results of the searches reveal information about liability to repair any local parish church, planning permissions, building regulations, roads, sewers, drainage, and the local environment.

• Variation of boundaries – the contract is likely to allow for variation of boundaries on the plot plan. This is to ensure that the title plans exactly match the boundaries on the ground after completion.

• Snagging – any errors or defects (be it cosmetic or structural) should be highlighted in a snagging survey at the end of construction. The best time to undertake the survey is before the final payment is made as any issues that arise after you have moved in could be disregarded as post habitation wear and tear. It is important to have a snagging provision written into your contract as this will define the process of inspection necessary to compile a list of errors or defects for the builder to rectify. 

• Anticipated completion dates – new build homes are not normally fully constructed upon exchange of contracts, therefore, it is common not to be given a fixed date for completion. Instead, completion of the new build conveyancing process often occurs ‘on notice’ from the developer’s solicitor or licenced conveyancer to complete when the property is finished and ready to occupy (often 10 working days within receiving the notice).

• Related sales – unless you are a first time buyer, the (above mentioned) anticipated completion dates can pose a challenge for the buyers of your existing home, as they will expect to be given a fixed completion date. Good communication is essential so that everyone in the chain has their expectations managed in relation to timescales. 

• Completion – upon completion of the conveyancing process, an official handover of the new build will take place. This will include collection of the keys and owner’s manuals. A defect reporting procedure will also need to be agreed upon. Ensure that you are given copies of all guarantees relating to the property, including all white goods (cookers, fridges and boilers), windows, flat roofs, damp proofing and timber.

• Longstop completion date – you should insist on a “longstop” completion date requiring the developer to use reasonable endeavours to complete construction of the property by a certain date. If construction is delayed beyond this date then you will be entitled to withdraw from the purchase without losing your deposit. Delays are often unforeseen and can be caused by unreliable contractors, poor weather conditions, or the developer going into administration. The longstop completion date is usually 12 months from the anticipated legal completion date and there is little room for negotiation.

• The Consumer Code for Home Builders – must be adhered to by all developers offering NHBC, Premier Guarentee and LABC warranties.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.