New Build Conveyancing – Purchasing New Build

This article is designed to explain the usual contractual conveyancing conditions contained in the standard conveyancing contracts of sale used by developers when selling a new build property . Purchase conveyancing on a new build property from a developer is quite different to conveyancing an existing property. There are different issues and time scales, so our specialist new build conveyancing team of experts will work for you to ensure that the purchase of your new build home proceeds as quickly and hassle free as possible.

The article also aims to inform you of the most important things that you need to be aware when purchasing a newly built property and to give you advance warning of various matters relating to the overall conveyancing transaction that you might not have thought about.

Up until recently, in virtually all new build conveyancing cases, the developer’s property solicitors will not agree to any change to the new build contract documentation and if you want to buy the property you are stuck with their conditions however one-sided in favour of the developers they maybe. We were very much used to a “ take it or leave it “ approach even were our conveyancing lawyers were asking for reasonable contract provisions. Times have changed over the last year and developers (and their property solicitors) are slightly more flexible. Provided you are aware of the possible pitfalls and make appropriate allowances in certain cases everything should proceed at the least risk of inconvenience or risk to you.

In nearly all cases the developer will require an exchange of contracts within a prescribed time frame ( normally this is about 28 days or less) , after which they reserve the right to remarket the property and or revise the price – often upwards. The quicker you can get a mortgage offer (if you have having a mortgage) the better, as this will nearly always determine whether or not we will be in a position to exchange contracts. New Build contracts often state that you have had the opportunity of inspecting the overall site plan at the site office and also the ‘spec’ of the property and the materials used.

The reality is that very few buyers look at the site plan. It is common for new build contracts give the developer the option of switching materials in the event of unavailability of a product, provided of course that this does not significantly alter the property to be purchased. One should look to see that the replacement materially should be of similar standard and not aversely affect the value of the property.

The new build contract will refer to a plan in the Lease or Transfer ( depending if the new build is leasehold or freehold ) identifying the new build property but this is for identification purposes only and whilst it is unlikely that the actual boundary position will change, the developer reserves the right if they consider it necessary to change the plan and if necessary the physical boundary be it a fence or whatever, provided that such variation does not largely lessen what you were expecting to get in the first place. Fridaysmove were recently able to renegotiate the price of the contract on the basis that the balcony on a new build flat was significantly smaller than on the original draft lease plan. You normally have no right to be compensated if they do alter the boundary either before or after exchange of contracts.

More often than not you will not be entitled to delay completion, ie, refuse to pay the balance of the purchase price, on the basis only that there are minor defects, or things to be attended to. For instance, if skirting boards need to be finished or the path gravelled etc.. You must complete and rely on the developer’s word that such work will be attended to after you have taken possession of the house. You should be aware that you will normally be required to agree a “snag list” with the site office about ten days prior to completion, of things to be attended to by the developer.

In many new build conveyancing cases it may be that the development is a number of years away from completing that there is little point in having a mortgage offer prior to exchange.  That being said, you need to be aware that there is a significant risk that as the property markets fluctuate that property may go down in value and therefore you may struggle to obtain a mortgage at the level that you would like prior to completion of the purchase of the property.  Very many buyers in the current climate have been caught out when committed to purchase a new build property some years ago and that as property prices have fallen as lenders tighten their requirements, many buyers have found it impossible to complete transactions.  Failing to complete on a new build property has exactly the same legal consequences as failing to complete on a second-hand property, namely that you will be liable for significant levels of interest and damages.  Failing to complete on any conveyancing transaction should not be taken lightly as there are serious legal implications.

Very few developers are prepared to agree a cut-off date by which a property should be finished and ready for completion.  Whilst developers often communicate in correspondence (and sometimes through their sales team) they very rarely agree to their being tied into a completion date and often will not even agree a long stop date (a cut-off date set long in the future).  This is because developers realise that there are often matters outside their control such as lack of materials or disputes with builders that can dramatically slow down the building process of a development.  Recent case law has established that buyers who have attempted to rescind the contract on the basis that developers have gone beyond their estimated completion date have failed.

Some times the developer will not allow snagging at all. Please see bellow suggested clauses to allow for snagging :

Within one month of the expiry of 6 months from the date of issue of the Certificate the Buyers Representative shall prepare a schedule of defects and shrinkages occurring within 6 months or from the date of issue of the Certificate (“the schedule of defects and shrinkages”)

The Developer shall at its own expense and within 3 months of the preparation of the schedule of defects and shrinkages procure the remedying of the defects and shrinkages provided that where necessary the Buyer shall permit the Developer and all persons authorised by it upon making a reasonable prior written appointment to enter the Premises in order to remedy the defects and shrinkages to the reasonable satisfaction of the Buyer’s Representative and the Developer shall procure that the person so entering shall cause as little damage and disturbance as reasonably possible and shall make good to the satisfaction of the Tenant all damage caused thereby.

There is often no contractual obligation on the part of the developer to put right anything that is not on the list and your act of taking possession denies you any legal recourse in requiring other items to be attended to by the developer. So be sure to include everything that requires attention on the list to be agreed prior to completion with the developer through their property solicitors. As is the case with estate agents when buying an existing property you will not be entitled to rely on anything that has been said to you by the staff at the site office unless it is either included in the contract or referred to in written information prepared by the developer’s property solicitors. It is vital therefore that if anything of any great importance has only been confirmed to you by sales staff by word of mouth, that you advise your conveyancing lawyer about it so that it is recorded in the contract with developer’s property solicitors or licensed conveyancers.

Convention dictates that a buyer is expected to pay a deposit at the point where contracts are exchanged. Usually the deposit is 10% of the purchase price, although, these days it is generally the amount you pay from your own funds taking into account your mortgage advance. This deposit in the sum of 10% will be forfeit if you break the new build contract and fail to complete.

Fridaysmove are used to working with new build developers and their property solicitors and new build property sales teams. As conveyancers we are often asked to act on developments by new build property developers. Over the last few years we have acted as preferred conveyancers for hundreds of new build property buyers. Even in this tough property market Fridaysmove Property Lawyer maintains dedicated new build conveyancing lawyers ensuring that you receive expert new build conveyancing advice.