Purchasing a New Build Property – How to avoid Potential Pitfalls
Properties exist in all different shapes, sizes and designs. While some people are drawn to period properties, others are attracted to owning a new home. If you are considering purchasing a new build property, there are a few things to be aware of, as the process differs from buying a ‘second –hand’ home.
New build benefits
New builds offer many benefits which include energy efficiency, the most up to date fixtures and fittings and the option to customise to meet your specific needs.
The ‘Offer to Sell’
When purchasing a new build property, the builder’s solicitor will issue the first formal letter, known as an ‘Offer to Sell’. In this Offer to Sell, a builder will specify a date of entry, a timescale for the purchase and the conditions which will govern the contract. In most cases, there is little room for negotiation on these timings and conditions. Therefore, if there are any terms that you do not find to be agreeable in an Offer to Sell, in most instances you will either have to accept the conditions contained therein or walk away from the purchase. This is likely to mean that the builder will retain the reservation fee which you will have paid up front directly to them.
Instructing your own Solicitor
A builder may encourage you to use their recommended conveyancer, but it is important that you instruct a solicitor with new build transaction experience to ensure that the contract favours you as much as possible.
There are a number of key areas to be mindful of:
Date of entry
If you have a specific date in mind a new build may be problematic. Builders usually fix a date of entry, within their Offer to Sell including a clause enabling a 6-12 month delay to the date of entry to allow for unforeseen construction setbacks. Be wary, as delays can lead to additional storage or rental costs, and may also lead to issues with your ‘Offer of Loan’ (mortgage).
The Offer of Loan
An Offer of Loan or mortgage offer typically expires after six months. If you have agreed to the new build purchase, but the date of entry is delayed, your Offer of Loan may need to be reissued. If your circumstances have changed, your mortgage provider may change the terms of the mortgage offer, or may not lend to you at all. If a lender is no longer willing to lend at the point of reapplication, then you could find yourself in a legally binding contract to purchase a home which you are now unable to fulfil. If this does happen, the builder could seek penalties for breach of contract and any reservation fees paid will be retained by the builder.
Purchasing ‘off plan’
If you have purchased ‘off plan’, (where the property has not yet been built and you are purchasing on the basis of plans and specifications), you must ensure that you are happy with these prior to entering into a contract. You need to be confident that the plans and specification information are sufficiently detailed for you to have an accurate picture of what you are purchasing.
New Builds are affordable
New builds are an attractive prospect for both experienced purchasers and first time buyers. They can be more affordable for first time buyers as support from Help to Buy schemes is available, as well as the fact that you will be paying for the property at ‘face value’. However, as with any home purchase, checking the details and undertaking due diligence is extremely important.
RCCW’s residential property team are experienced in both ‘old’ and new home purchases and can help you navigate the house buying process. Find out more about how we can help here: https://www.raeburns.co.uk/services/private-law/property-services/