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When purchasing a new build, buyers are regularly faced with exchanging contracts and committing to the purchase before the property has been built. This is known as purchasing “off plan”.
Reservation Agreements:
A reservation agreement will be drawn up between the developer and buyer’s respective solicitors which will contain a deadline for exchanging contracts; this is usually 28 days but will vary depending on the developer. A reservation fee is payable under the agreement which is usually refunded at completion but could be lost if the exchange deadline is not met.
Home Warranty:
A new home warranty is an insurance policy that protects the buyer from any structural defects when purchasing a new build. Most large developers will have guarantees in place that cover buyers for up to 10 years and smaller developers will follow a similar process. Your solicitor will check that this cover is put in place before completion. If a buyer is purchasing with a mortgage, most lenders will insist on warranty cover because of the uncertainty over the value of the property arising under an “off plan” transaction.
Additional considerations:
Your solicitor will need to check that the correct planning permission and building regulations have been sought and that the house is built in accordance with the relevant permission. A contract will be carefully drafted to include a “snagging provision” which will allow the purchaser to reclaim costs from the developer for any smaller defects not covered by the home warranty.
Completion on notice:
Once contracts have been exchanged, there is unlikely to be a set completion date due to all sorts of delays that may occur. However, once the property works have completed, a notice will be served on the buyer’s solicitor. This will usually be a time-period of between 10 – 14 days in which your solicitor must ensure all of the above is satisfied to meet the completion deadline.
It is important to instruct a specialist solicitor or conveyancer familiar with the additional complexities involved in a new-build transaction to ensure the tight timescales are complied with.
If you would like any further information or advice in relation to buying or selling a property, please contact us on 01384 410 410 or send an email to residentialconveyancing@georgegreen.co.uk. You can also get a free quote by using our conveyancing quote tool on our website.