New Build Property and Conveyancing
The purchase of a new build property is a more complex transaction than the purchase of an existing house or building, and some matters additional to those relevant to a purchase of an existing property must be considered.
The main characteristics of a new build property transaction which make it different from an ordinary sale/purchase transaction are;
- It is the sale/purchase of a ‘new property’
- It is a sale of part. The developer will usually own the whole site and is disposing of it in the form of housing plots.
- The developer may adopt a slightly different Conveyancing procedure from that normally encountered. The developer does this for his own convenience when dealing with a large number of sales simultaneously.
A developer will not normally adopt National Protocol for Domestic Conveyancing as such when dealing with new-builds, but will at the start of the transaction supply a package of information, which is very similar to the Protocol package but in a different form. This will usually include copies of the relevant planning permission, building regulation consent, Highways Act Agreement and the Water Industry Act Agreement and Bond.
When acting for you in the purchase of a new build property your Conveyancing solicitor should ensure that the following documentation/information is obtained;
Planning permission – they should check whether planning permission has been granted. Check whether any attached conditions have been or will be complied with.
Building Regulations consent – they should check that building regulations consent was granted. The building regulations control and the methods and materials to be used in the construction of the property to ensure that proper standards are maintained in all new-build properties. The lack of building regulations consent in a new build property may suggest that it has not been constructed to the proper standards.
Structural guarantee – Some form of structural guarantee should be offered. If any structural defects develop after purchase, the buyer may not be able to obtain compensation from the developer as he may no longer be in business. A structural guarantee is likely to be a condition of the mortgage offer in relation to a new build property.
The NHBC ‘Buildmark’ scheme provides a ten year two-part guarantee. The developer agrees to remedy all defects which occur within two years of purchase. In the case of a default the NHBC will itself step in. After the first two years, the NHBC provides an insurance style guarantee that it will rectify specified structural defects arising in the house during the next eight years. Structural defects are defined to exclude, for example, defective plasterwork or decorations.
Although the NHBC Buildmark scheme is the most common, other similar insurance-backed schemes do exist, for example the Zurich Mutual Newbuild Scheme. Alternatively, if the building work was supervised by, for example, an architect, a certificate to that effect will allow a claim to be brought against such person in the case of structural defects arising out of negligent supervision.
Estate Roads – The new estate roads are likely to be adopted (become publicly maintained) at some point in the future. Your Conveyancing solicitor should check that a Highways Act 1980 section 38 Agreement has been entered into with the developer and the highways authority. This is an agreement between both parties that the developer will be responsible for the roads. The agreement must be supported by a financial bond, issued by a bank or insurance company, in a sufficient amount to cover against the developer defaulting on the Road Agreement.
Drains and sewers – Your Conveyancing solicitor should check whether the ownership and maintenance of the drains has been or is to be transferred to the water authority. To protect the buyer of a new-build property. It is important that a Water Industry Act 1991 section 104 Agreement and Bond has been entered into. This works in a similar way to the Highways Act Agreement.
Easements –The contract should provide for the grant to the buyer of all necessary easements. These must include:
- a right of way over the estate roads until adopted;
- a right to use the drains and sewers;
- a right to use all the pipes and cables for all the other services, for example, gas, electricity, telephone.
- a right of access to maintain these services.
When looking to purchase a new build property, buyers will often be asked to exchange contracts and commit to the purchase even before the house is built. Buyers, therefore, will have to exchange contracts without actually seeing the house they are buying.
Buyers are often tempted by the sales incentives that accompany new build homes, such as payment of legal fees, supply of white goods and furnishings. From the beginning of September, lenders will require builders or developers of any new-build properties, converted or renovated property to complete a new ‘disclosure of incentives’ form. This will be reinforced in the CML’s Lenders’ Handbook, which sets out specific requirements for conveyancers acting on behalf of lenders in property transactions.
Completion of a new build property is different from buying a property in the second hand market. With builders having to rely on various factors such as supply of materials and weather conditions, no fixed completion date can ever be given. When the property is structurally complete, the builder gives written notice to the buyer that it is ready and the completion must take place within the period specified in the contract, usually 10 working days.
As you can see, buying a brand new property is completely different from the normal house buying process.
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