NEWLY BUILT PROPERTIES
Buying a brand new property can be an attractive
proposition. It is possible to negotiate extras or changes to the specification
to customise it to requirements from day one; and as the building is new one
can normally expect minimal maintenance for at least a few years.
There are a few additional legal considerations to be
aware of in new builds.
Consumer Code
The Consumer Code for Home Builders is a voluntary code
for developers and is now in its 4th edition. The Code aims to
ensure that all home buyers are treated fairly, know what levels of service to
expect, are fully informed about their purchase and their consumer rights, and
are provided with a speedy low cost dispute resolution scheme to deal with
complaints.
The code is supported by the major providers of 10 year
warranty insurance (see below).
Contract
The developer usually has a standard form of contract
which he will not easily agree to vary. A point to watch is how the deposit
will be held between exchange and completion. If this is not as “stakeholder”
i.e. neutrally between the parties until completion, this is slightly more
risky for the buyer.
Timing will depend on progress with the construction.
Often contracts are exchanged before the building work is finished so instead
of a fixed date for completion, when the balance purchase money is paid and
keys are released, completion will be on notice (probably 2 weeks). If there is
a related sale the buyer of that property will need to agree the same notice
period.
The contract will stipulate how minor variations from the
specification will be dealt with and also any boundary discrepancies which
arise.
Because the transaction involves dividing one large area
into smaller plots, the documentation will include provisions for maintenance
of new boundaries and rights to access drains and service installations across
neighbouring properties.
Planning and infrastructure
The contract should specify that the building will be in
accordance with planning consent for the development and a building regulations
certificate should also be available when construction is complete.
Appropriate agreements for estate roads and sewers to be
constructed should be available to the purchaser and these should be checked to
make sure that no liability will fall on the individual plot buyers.
10 year warranty
Buyers’ solicitors should check that a 10 year warranty
with NHBC or an equivalent organisation will be available from completion. This
protects against majors defects in construction for a period of up to 10 years.
Mortgage lenders
Mortgage lenders will need to be consulted on various
points for example if the deposit is held as agents for the vendor, if the
estate roads and sewer agreement are not available and a retention is required.
The mortgage lender must also be made aware of any incentives through the
normal disclosure of incentives form e.g. where the developer offers to reduce
the price for a quick exchange or pay the buyer’s stamp duty land tax. The
mortgage lender must also be consulted in the unusual case where stage payments
are involved as this will involve release of the mortgage advance in separate
tranches.
Communication
It pays to keep in touch with the site office to check
progress and also report any relevant matters agreed to your solicitor
including reservation fees paid, extras ordered and the costs of these and any
dates that are given for estimated completion of construction works.
Alison Fielden & Co
The Gatehouse Dollar Street Cirencester GL7 2AN
T: 01285 653261.
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