New build homes are hugely appealing for existing and aspiring homeowners alike across the UK. There are lots of practical reasons why that’s the case and becoming the first ever owner of a new property is simply an exciting prospect in and of itself for many people.
On the practical side of things, new builds can often be bought chain-free and with the help of deposit unlock incentive schemes. They’re also more likely to be energy efficient than older buildings, so you can potentially save money on your energy bills, and new builds tend to be located in safe, clean, appealing neighbourhoods with plenty of available parking.
Nevertheless, it’s important to be aware as well that more checks and assessments are generally required as part of any new build conveyancing process, and your purchase could be at least a little more complicated in general, as compared to a more typical homebuying transaction.
With all that in mind, here’s a look at 10 key points to carefully consider before you take the plunge and pursue your purchase of a newly built property.
1) The Developer’s Reputation
As a prospective new build property buyer, you’ll naturally want to feel completely confident in the credentials and capabilities of the company responsible for developing what could soon be your new home. To that end, before you officially commit to a purchase, you should investigate previous projects undertaken by the developer whose properties you’re interested in. Check out their previous work online or in person and consider any customer reviews you can find to help establish a sense of their overall reputation.
2) Reservation Fees
Reservation fees are required of any would-be buyers of under-construction properties. That fee will generally be somewhere between £500 and £2,000. In return, the fee payer secures a claim to a plot on a specified residential development. Once you’ve paid the reservation fee, your buying price should then be frozen and the developer ought to take the earmarked property off the market for between 18 and 42 days.
Crucially, any reservation fee you pay will typically be non-refundable, so you could lose outif your deal falls through. However, the relevant amount paid should be deducted from your purchase price if your transaction moves ahead as intended.
3) The 28-Day Exchange Deadline
Property developers selling new build homes often insist on a 28-day exchange deadline, which gives buyers less than a month to go from reserving their plot to exchanging their contracts. Exchanging contracts doesn’t mean a property deal has concluded but it means both parties – the buyer and the seller – are legally committed to moving ahead with an ownership transaction. Developers demanding a quick turnaround on new build deals significantly heightens the importance for buyers of ensuring access to specialist conveyancing support.
4) Structural Warranties
Structural warranties are insurance policies required by mortgage lenders that legally protect new build homeowners against incurring the costs of fixing major problems or defects relating to their properties. Popular providers of these warranties in the UK include the National House Building Council (NHBC), LABC Warranty, and Premier Guarantee.
The coverage provided by structural warranties generally means that your developer is responsible for fixing any snagging issues or electrical/plumbing faults at your property for a period of 1 to 2 years after you’ve taken ownership. Thereafter, the warranty period moves into a ‘structural insurance’ phase, whereby you are effectively insured against any major issues with your property’s foundations, or its walls, chimney or roof, for example.
5) Snagging Issues
Snagging issues are a common feature of the new build property buying process. The term refers to minor defects or unfinished work at a newly built and recently acquired property. Those issues could be, for example, scratches to paintwork, uneven floorboards, or imperfect plastering jobs. Problems with electrical connections, plumbing work or windows and doors would also fall into the category of ‘snagging issues’ for which developers usually remain responsible. ‘Snagging surveys’ can help new build buyers resolve these kinds of issues in advance of their move in dates.
6) Completion Delays
Unfortunately, delays to the completion of construction work at new build developments is far from unusual. When you’re buying ‘off plan’, your build might run over a scheduled completion timeframe for a variety of reasons such as supply chain disruptions, bad weather or a lack of available tradespeople. It could also be that certain regulatory approvals take longer than anticipated or there are delays to the process of connecting your property to local power lines, sewage works or internet supplies.
7) Estate Management Charges
Anyone who buys a new build property in the UK might need to pay ‘estate management charges’ to the private companies responsible for maintaining shared communal spaces around their homes. Those spaces might include private roads, green spaces, pathways or play areas, for example.
The average estate management charge on a new build is £358 per annum. However, the level at which these fees are levied varies significantly and can increase over time. Details about estate management fees should always be outlined clearly in any contracts you sign prior to acquiring a new build property.
8) Property Searches
As with all property transactions, a conveyancer will need to carry out a variety of legally relevant searches on your behalf if you’re intending to buy a new build home in the UK. They will need at the least to conduct ‘local authority searches’, ‘environmental searches’, and ‘drainage and water searches’. However, other searches might also be necessary, depending on where you live in the country. Any such searches are routine but important processes designed to find out if there are any problems relating to a given property that prospective buyers really ought to know before they become its new legal owners.
9) Mortgage Offer Enquiry
Mortgage lenders sometimes feel the need to investigate or more closely reassess the details of deals they’ve offered prospective buyers of newly built or under-construction properties. To that end, they might decide to conduct extra checks to establish to their own satisfaction whether a new build property is likely to retain its supposed market value. For mortgage lenders, the worry is that valuations on new builds or ‘off plan’ homes can be less reliable than those associated with older properties. Lenders are also sometimes concerned that ‘deposit contribution incentive schemes’ offered by developers might impact the loan-to-value ratios informing their mortgage offers.
10) Legal Checks
Legal checks always need to be carried out on behalf of new build property buyers. The aim is to ensure beyond doubt that a transaction is being undertaken on the basis of a full understanding of all relevant details pertaining to the property and the realities of its legal status.
With new builds specifically, these legal checks focus particularly on planning permissions, building regulations, developer warranties, restrictive covenants, adoption agreements, developer title and capacities, leasehold Vs freehold status, and commitments made by developers to contribute towards local infrastructure.
If you are buying a property off plan, then your legal checks will also need to involve references to construction timeframes and the risk of significant delays.
New Build Buyer Checklist
- The developer’s reputation – investigate previous developments and customer reviews
- Reservation fees – pay a fee upfront to secure your plot but be aware it’s non-refundable
- Structural warranties – get insured to cover costs of snagging issues or long-term structural problems
- Estate management charges – find out upfront about what ongoing fees you might be charged
- Legal checks – make sure your specialist new build conveyancer asks all the right questions on your behalf
If you’re buying a newly built property anywhere in England or Wales, visit our New Build Conveyancing Solicitors page where we can guide you through all the legal details involved in the process.