What should you do before conveyancing starts?
The first step is to arrange your mortgage. Most mortgage offers are only valid for six months which means that if your property is not ready within that time frame, you may need to reapply. Some lenders offer new build mortgages which have longer deadlines.
Before you pay a reservation fee to reserve a new build property, check what the developer will do to protect you if building work is delayed due to a shortage of building materials or extreme weather conditions. For example, is there a warranty in place that protects you from losing the deposit you pay on exchange of contracts if there are delays beyond anybody’s control?
Make sure you know what you are buying. Ask to see the plans for the property, including electrical plans and landscape drawings and look at other new build properties the developer has built to ensure you are happy.
Finally, check what incentives the developer is offering. Sometimes developers allow buyers to choose fixtures and fittings or offer to pay stamp duty land tax (SDLT).
How does the new build conveyancing process work?
Conveyancing is the process of transferring legal ownership of a property from one person or business to another. Like every type of conveyancing, new build starts as soon as you make an offer on a property.
1. Find a specialist new build conveyancing solicitor
To speed up the new build conveyancing process, it is advisable to find a solicitor as soon as you start looking at properties. That way, you can complete initial paperwork such as proof of address and proof of identity so your solicitor can hit the ground running when you make an offer. This is particularly important with new builds because time is of the essence.
2. Pay a reservation fee
To reserve a new build property, you need to pay a reservation fee which can be anything from £500 to several thousands of pounds. This fee is deducted from the final price you pay for the property, but it is non-refundable if you do not exchange contracts on the property within an agreed timeframe.
Before making a reservation, it is important that you have agreed a mortgage in principle with your mortgage lender.
3. Conveyancing checks are carried out
Once you have paid your reservation fee, you usually have just four weeks to exchange contracts otherwise, you lose your reservation fee. Choosing a specialist new build solicitor for conveyancing is vital as they understand the need for speed.
Your solicitor will carry out the following processes:
- Make sure all relevant planning permission has been obtained and that the property meets planning permission regulations.
- Check that roads are adopted and drains and all utilities are in place.
- Carry out local authority searches such as water searches, environmental searches and other searches applicable to the local area.
- Check title deeds for any restrictive covenants that could stop you from making certain alterations to the property in the future.
- Check that a ‘snagging provision’ is written into your contract with the developer. This is particularly important if you are not allowed to view your property before it is fully constructed. A snagging provision means a builder will have to correct any issues quickly.
- Talk to you about the new build guarantee that is in place and check that it fully protects your interests.
4. Instruct a snagging surveyor
Most newly built properties have a ten-year NHBC (National House Building Council) warranty which provides you with protection against any structural defects that occur. However, it can take a long time for the NHBC to resolve issues, so it is vital that you instruct an independent surveyor to carry out a snagging survey before you complete on your property, if possible.
Make sure you know exactly what is covered in the warranty.
5. Exchange of contracts
You pay a 10-30% deposit on the property and exchange contracts with the developer. At this point, you are legally committed to purchasing the property.
Your mortgage lender will have instructed their surveyor to conduct a valuation of the property as soon as construction is complete. If the property's value falls between the time you paid the deposit and sale completion, your mortgage provider may not lend you the money you need to pay the balance. You will then find yourself in breach of contract with the developer.
To protect yourself from this, it is advisable to find out whether the sale price written in the developer’s contract is locked or not. If it is locked, ask the developer what will happen if prices fall or rise between now and completion. Warranties such as NHBC can protect your deposit, but this may only be up to 10%.
Completion is when you pay the final balance for your new build property, and you receive the keys and all relevant documentation. If your completion day is delayed by more than six months the
Consumer Code for Home Builders gives you the right to withdraw from the transaction and receive a full refund.
Before completion, your solicitor will carry out final property searches and complete all the documentation that transfers legal ownership of the property to you. They will also arrange for mortgage funds to be ready for completion day.