Key terms in New Build Conveyancing
NHBC is an acronym for the National House Building Council (NHBC).
The NHBC Buildmark requirements begin when the foundations are laid.
There is a 10 year warranty provided for new build properties whereby for the first 2 years you would claim for defects against the builder directly, with the NHBC in reserve if required.
For years 3-10, you would claim for structural defects with the NHBC itself.
When the builder has completed the build of the property, the NHBC inspector will examine the property and issue a Buildmark cover note if their requirements are met, which will allow your solicitor to activate the NHBC cover.
However there are some exclusions to the cover which may mean that you are unable to claim through the scheme.
Help to Buy
This is a government scheme where you can borrow up to 20% of the value of the property (or 40% for a property in London).
You must meet certain criteria including the property price must be less than £600,000 and you must be purchasing the property as your only private residence. You cannot let the property or use it for any commercial use. However, you do not need to be a first time buyer.
On repayment you will need to pay the same percentage of the value of the property as you borrowed.
This may be more or less than you initially borrowed, depending on the market value of the property at that time.
The loan is interest free for the first five years, although there is a small admin charge payable.
In year 6, an interest rate of 1.75% applies. From year 7 onwards, the interest increases by 1% plus any increase in the Retail Price Index.
A charge will be placed on your title deeds in favour of the Homes and Communities Agency, similar to that of your mortgage lender.
If there is a period of time between exchange and completion, you may consider placing a unilateral notice on the developer’s Land Registry title to protect your interest in the land.
This means that other people will be aware that you have a contract with the developers.
This is particularly useful if the developer becomes insolvent as it provides you with a layer of protection.
CML is an acronym for the Council of Mortgage Lenders.
The developer will complete a UK Finance Disclosure of Incentives form and send it to your solicitor.
Your solicitor will review the form and send it to your lender, with your consent.
The form discloses key information to your lender, including details regarding the development, plot, buyer, developer and any incentives that have been offered.
‘On Notice’ and longstop date
You will be exchanging contracts, which will make the transaction legally binding. However, the property may not yet be built and you will not have an exact date when you can collect the keys.
Your developer will give you/your solicitors a set amount of days notice of when your purchase will be completing. This is usually between 7 and 14 days and is defined in the contract.
From the date of exchange, the developer has a set period to build the property.
This time frame is set on exchange of contracts, depending on the progress of the build at the time of exchange.
If the property is classified as weatherproof at the time of exchange then the longstop date will be 2 months from the anticipated completion date to complete the property.
If the property is not weatherproof at the time of exchange the developer will have 6 months from the anticipated completion date to complete the property.
If this period expires and your developer has not served notice then you can withdraw from the transaction without any financial penalty.
Exchange deadline and anticipated completion date
The developer will give you 28 days to exchange contracts.
This is either 28 days from the date of reservation, or 28 days from when your solicitor receives the contract paperwork, depending on who your developer is.
The anticipated completion date is the best estimate that the developer can give for when your house will be completed.
They cannot give you an exact date, due to a number of factors that need to be taken in to account with the build program, including bad weather and obtaining materials.
Deposit held as agent
In conveyancing, a deposit is traditionally held as stakeholder. This means the solicitor at the top of the chain will hold the deposit on behalf of the other parties.
With new build properties, the deposit tends to be held as agent, which means the deposit can be released to the developer. This will be a term of the contract.
There is an element of risk here, as if the developer becomes insolvent, the deposit may be lost.
Usually the deposit will be 10% of the purchase price, but if you are using the Help to Buy scheme, the deposit will be 5% of the purchase price.
Purchasing any property can be a stressful and confusing time and so it is important to instruct solicitors who can clearly explain the process and support you through the transaction.
Royds Withy King work closely with developers in the local area to try and make your purchase as seamless as possible.