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Buying a Newly Built Property

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By Jonathan Potter

There are some distinct advantages to buying a newly built property. You get the benefit of moving into a property that does not require immediate repairs and decoration. You often have the benefit of a warranty for the construction of the property meaning that if there are any structural defects then you can claim against the warranty for a period of up to 10 years from construction.

We have a great deal of experience of dealing with the legal aspects of buying newly built property at TWM Solicitors. Whilst there are many advantages to buying newly built properties, there are a number of aspects that buyers should be aware of before committing to buying the property.  We set out below just a few aspects for buyers to be aware of from our experience:-

1. You do not always get a warranty for the construction of the property

In some cases, a qualified person such as an architect or surveyor will issue a professional consultant’s certificate for the construction of the property.  This is not a warranty but instead a certificate from them to say they have supervised construction of the property and the construction meets required standards. If it subsequently transpires there are defects then the consultant will not immediately rectify defects as typically occurs with a warranty, but instead the professional consultant is likely to resist liability in consultation with their insurers. A professional consultant’s certificate is thus of less comfort than a warranty.

2. Construction warranties do not cover all defects in a property

Minor defects are not covered in construction warranties. Typically, developers insert in purchase contracts that they are not liable for any minor defects. Some developers do allow a clause in their contracts for them to remedy minor defects (snagging items) after completion. In that case, you would normally have to identify to the developer within a very short period after completion any snagging items, and if you did not do so, then they would not be liable to remedy any minor defects.

In absolute ideal terms, a clause could be agreed in the contract providing for a sum to be held back by the developer’s solicitors on completion of your purchase from the purchase price until you were satisfied minor defects had been remedied. This is only accepted on very limited occasions.

3. You may have to pay additional sums on top of the purchase price

The first typical fee is a document fee charged by the developer for producing the original Transfer Deed or Lease. This fee is usually approximately £125 plus VAT.

The more substantial fee is a payment on account for the service charge or maintenance charge for the property. This will almost always apply when you are buying a flat and could apply if you are buying a house if it is located in a private estate. It is impossible to say what the charge will be as this varies substantially between developments.

4. Completion of construction can be delayed and you have no remedy

Developers may insert in their sale contracts anticipated completion dates which usually only refer to a month of a particular year. There is usually provision in the contract though to say the developer is not liable to you for a delay in this date unless the delay goes beyond a minimum of 2 months from the anticipated completion date. There is also usually a further provision to say there will be no liability if completion is delayed due to factors outside of the developer’s control. The net effect is it will be difficult for you to have a remedy against the developer if completion is delayed so you should not make specific plans for completion until the developer confirms construction is complete.

5. You have to have your money ready for completion on short notice

Usually developers will give you a maximum of 10 working days notice of completion. This means it is crucial you do not have your funds tied up in savings accounts that cannot be withdrawn quickly. It also means it is vital if you need mortgage funds to buy the property that you have a valid mortgage offer when notice is served by the developer and have already dealt with the lender’s requirements. This is because lenders almost always need at least 5 working days notice to get funds from them once you have complied with their requirements.

If you do require a mortgage, you should be aware mortgage offers usually are only valid for 6 months. This means if the property is not due for completion for 3 years, for example, that your mortgage offer will have expired. If market conditions or your circumstances change then you may not be able to get a new mortgage offer. You should therefore be very careful about buying a newly built property if you require a mortgage, that you will be able to obtain the funds needed to buy the property when completion is due.

6. The layout or materials for the property can change and you have no remedy

It is usual developers insert in their contracts that if the size or layout or materials of the property change slightly then you will have no claim for this.  Most developers state you can rescind the contract and get your deposit back if a major change is made, but a minor change does not give you any remedy.

These are just a few examples of typical issues to be aware of when buying a new property. An experienced residential property solicitor will make you aware of these issues before you contract to buy a new property. TWM Solicitors have the experience to assist you with this process.

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