Buying a New Build Property
Buying a new-build property has the same pros and cons that come with buying an existing property. In-Deed’s comprehensive guide breaks down what’s involved on the conveyancing side of buying new, outlines the upside of a new home and explains any potential pitfalls.
A new-build property is a popular choice for many buyers. Energy-efficient, chain-free, at a fixed price and with low running costs and high specifications, a brand-new home is an appealing option. Buying a new-build property has the same pros and cons that come with buying an existing property. This comprehensive guide breaks down what’s involved on the conveyancing side of buying new, outlines the upside of a new home and explains any potential pitfalls.
New-build properties come with their own particular set of issues, so In-Deed always suggests working with a solicitor who has experience in the purchase of a new-build. All the solicitors we work with have the knowledge and experience of new-build conveyancing.
The construction of any new property requires planning permission, so the first thing your solicitor will do is check that the appropriate authority has been granted and the property constructed precisely in accordance with the planning permission.
When a property is part of a new estate, the planning permission will refer to the estate as a whole, not the individual plots. Your solicitor may then have to ascertain that the entire estate complies with the planning permission.
Other issues that an experienced new-build conveyancing solicitor will know to check on are that appropriate agreements are in place relating to roads and sewers being adopted by the local council; that access rights and routes for other services are in place; negotiate on a completion date or on retaining some funds where any problems or snagging is to be resolved by the builder.
Making an offer on a new-build home follows a slightly different route to the typical purchase transaction. You may have to pay a reservation fee to reserve a plot for a specific period, usually 38 days. This reservation fee, which ranges from £500 to £1,000, will be deducted from the purchase price if you then go on to complete the purchase of the property. However, be warned – it is non-refundable if you pull out of the transaction. As you will be spending money from the minute you spot a place you want to buy, it makes having a specialist property solicitor on your side from the start essential. You will also need to have a mortgage agreed in principle before you can reserve a property, and again having a solicitor instructed to deal with a lender is also good practice.
Contracts are often exchanged on a new-build long before you can move in, or completion as the legal term has it. A mortgage offer is typically valid for a maximum of six months, creating the risk that the particular mortgage deal you have been offered or even the mortgage itself may be withdrawn before completion. If you fail to complete your purchase because your mortgage offer has been withdrawn, you will lose your deposit and you will also be liable to the developer for any losses they suffer as a result. In-Deed’s specialist property solicitors will act to protect you from this outcome by asking for a “long-stop date” to be entered into the sale contract. This is the date by which completion must have taken place or you can withdraw from your offer without penalty. This “long-stop date” should necessarily be before any expiry date on your mortgage offer.
Buying “off-plan” means purchasing a new-build before its construction has started. This can be good for both you and the developer ¬– the developer gets the revenue up front to start the build and you can usually negotiate a hefty reduction on the price, as much as 20 percent in some cases. Buying off-plan means you can also personalise your property by choosing the kitchen, bathroom fittings and tiles, appliances, flooring and other items.
There are disadvantages to buying off-plan, however. Your property may not turn out as you expect. Plot location, size, scale and dimensions of the property should all be checked and you should ensure those details are included in the sale contract. Check out the developer’s other sites where possible to see a property of the same or similar design.
Most developments have a show home that sits on the best plot and is finished to high specification and fitted out by an interior designer. Show homes are useful guides to size, dimensions and finishes. However, you should view a show home with a wary eye because the developer has spent a lot of money to make this look the perfect home. For example, all the lights will be on to make it look airy, while glass furniture and mirrors create a feeling of space. And those fittings and appliances that look a million dollars in the kitchen and bathroom may be of higher quality than the ones you will eventually get.
There is one other good thing about a show home ¬– eventually it has to be sold. And you can often negotiate a great deal with the developer to buy the home and all its contents.
There are some genuine advantages to buying a new-build property. You get a brand-new home to move into, with no one else’s kooky idea of décor to deal with. So, why else should you consider buying new?
- Energy efficiency
- Chain free
Modern building regulations ensure that builders must meet certain standards regarding a property’s energy efficiency. This makes them more environmental sound while also saving you money on your energy bills. They can include features such as:
- Insulated cavity walls
- Insulated roofs
- Insulated external doors
- Energy-efficient heating and hot water system
- Double glazing
- More efficient water systems to reduce water usage
Anyone who has bought a home before is probably familiar with the dreaded chain, where your sale or purchase depends on someone else’s sale or purchase going through. As a new-build naturally has no current occupier, there is no onward chain for you to worry about.
Incentives to buy
Builders often put together generous incentives to make their new-builds more attractive to buyers. Examples of incentives are:
- Part of your deposit paid
- Stamp Duty Land Tax paid
- Kitchen appliances included
- Flooring and blinds included
A new-build comes with the benefit of a builders’ guarantee that usually lasts for 10 years and protects you from any issues arising from the construction. The National House-Building Council (NHBC) often provides this protection in the form of its Buildmark warranty and insurance.
Members of the NHBC must maintain its building standards and rules, giving you the confidence that the property is built to a high quality. The NHBC will inspect the property to check that standards are maintained during construction.
All builders who are members of the NHBC will issue a 10-year warranty and insurance policy to protect you against any major problems.
Building regulations require that the developer builds in security and safety features to the property’s specification. This may include:
- Secure external doors
- Smoke alarm
- Carbon monoxide alarm
- Burglar alarm
- External lighting
As with buying any property, there are disadvantages to buying a new-build, which we discuss in detail here.
If your property is only part-built or not built at all, then completion will not be on a fixed date but instead be described as “on notice”. This is because the developer cannot give a guarantee when the property will be finished. There is usually a clause in your contract that states completion must take place within a certain period, usually seven of 14 days after the notice has been issued. The “on notice” date then becomes the contractual completion date.
While there is no onward chain to concern you, the builders’ construction timetable will dictate when your purchase can complete. And because your contract is “on notice”, the developer is not obliged to meet your deadline. Builders often need to sell additional plots before they have the finance in place to complete the build on the plots they have already sold. Predicted completion dates are often pushed back.
Quality or size not what is expected
You will often move into a new-build without seeing the finished product and realise the property is smaller than expected or perhaps a lot closer to the neighbours than you anticipated. Developers may try and fit as many properties as possible on to the land, with an impact then on quality and size.
“Snagging” is the process of listing any minor errors, items that need repair or defects in the property that the builder must fix. Before you hand over the final payment, you should carry out a thorough inspection of the property to identify any issues that need addressed. Examples include:
- Doors or drawers that do not open or close properly
- Taps that drip or leak
- Faulty water pressure
- Cracks in plasterwork
- Draughty windows or doors
- Creaking staircase
- Leaking radiator
- Check that the builders are members of the National House-Building Council (NHBC). All members must build to NHBC standards and rules with the Council inspecting the property during construction. You will receive a 10-year NHBC Buildmark warranty from the builder once completed if they are NHBC members.
- Look at the site maintenance. A disorganised or poorly managed site may reflect the builders’ attitude and indicate shoddy standards.
- Check the background of the builders. Look for reviews online and if they have won any awards – or brickbats. Look for word of mouth recommendations.
- Check if the property will have a warranty from Zurich Principal, Premier or the NHBC, all of whom issue a 10-year warranty. This will only cover major structural repairs, but issuing it is also an indication of how reputable the company is.
- Negotiate – the developer is unlikely to budge on price, but you can often get them to offer other incentives, particularly if you are a first-time buyer with a mortgage already agreed in principle or a cash buyer ready to move at a moment’s notice.
- Find out when the developer’s financial year ends. Some will cut corners around this time to meet targets. But it’s also a good opportunity to secure even more generous incentives if you can cut a deal.
- Instruct a property solicitor early on. That will mean you have a specialist on side to negotiate the terms and clauses in your contract that will keep your money safe. Choose someone with new-build experience. All the solicitors on the In-Deed nationwide panel are experienced in dealing with new-build purchases.
- Consider using an independent snagging company to inspect the finished home professionally, ideally before completion so any snags and deficits can be addressed by the developer before you move in.
- When you have an NHBC warranty, inspect your home every six months during the first two years. The developer is obliged to fix any defects, and if they don’t, the NHBC will. Faults caused by normal shrinkage and drying out are not covered by this warranty.
- Don’t skimp on insurance. Ensure your building and contents policy includes legal protection, which will be helpful if you have to take the developers to court.