When buying a new build property, there are a lot of terms and phrases which may be used that you don’t understand so we’ve produced this helpful guide to explain it all.
Exchange is when contracts are exchanged i.e. swapped between the seller’s and buyer’s solicitors. Each solicitor will hold their client’s signed contract and will exchange details over the telephone. At the point of exchange, the transaction becomes legally binding and no party can withdraw without facing penalties. On exchange, a completion date can become fixed and you can start making arrangements e.g. book removals, notify utility companies etc. However, often with a New Build property, contracts are exchanged before the property is fully built and completion will therefore be on notice.
Searches are carried out against a property to provide useful information to a buyer and their mortgage lender. There are standard searches which are normally carried out and which are required by a mortgage lender. There are also additional searches which can be done depending on your requirements and the location of the property. We will advise you on the searches available and confirm which searches you require. We will also provide copies of the searches to you and advise you on the contents of the search results.
When you are buying a New Build property, the developer will normally set a date by which contracts need to be exchanged (the Exchange Deadline). This date is normally 21 or 28 days from the date that the purchase is agreed. If contracts are not exchanged by this date the developer may re-offer the property for sale. BHW New Build understands these deadlines and how important it is for them to be met.
Sometimes developers will offer their buyers certain incentives if they agree to buy one of their properties e.g. paying the buyer’s Stamp Duty or providing a discount on the price.
New Build properties come with the benefit of a New Build warranty to cover the buyer for any structural defects in the build of the property for a certain period. The most common warranty is the NHBC warranty which will cover the property for any structural defects in the first 10 years.
This is the date by which the developer estimates the property will be fully built and the date on which legal completion can take place i.e. the date which you can move in!
When contracts are exchanged before the property is fully built, completion will normally be on notice. This means that when the property is finished and signed off by the New Build warranty provider, the developer’s solicitors will serve notice on the buyer’s solicitors confirming the date by which legal completion must take place. A developer’s solicitors will normally allow 10 working days from the date the notice is served for completion to take place.
A developer will usually ask for a reservation fee to be paid when you agree to buy a property to secure your plot. This fee is generally refunded on completion. However, if you withdraw you may not get this amount back.
When you buy a New Build property, the developer’s solicitors will prepare all of the legal documentation including documentation which is normally prepared by a buyer’s solicitors. You will therefore be required to pay the developer’s solicitors a document fee or engrossment fee on completion. The amount of the fee will depend on the developer but it is normally approximately £100.00 to £150.00.
When you buy a new build home using a part exchange scheme, the developer will offer to buy your existing property from you at an agreed price based on independent valuations. This can help you to avoid all the stress of trying to sell your house on the open market, managing and paying for estate agents, and worrying about house buying chains.
On some developments, the builder will transfer certain areas such as landscaped areas, communal parking etc to a management company who will maintain these areas, subject to payment by each home owner. If a management company is appointed, each home owner on the development will be required to pay a service charge (either monthly or annually) to the management company to cover the cost of the required maintenance.
This is an agreement between the developer and the Council to ensure that work carried out on the highway by the developer reaches adoptable standards and, when it does, that the road will be adopted.
This is an agreement between the developer and the water company to ensure that work carried out on the sewers by the developer reaches adoptable standards and, when it does, that the sewers will be adopted by the water company.
This is an agreement which the developer enters into with the Council. In exchange for the grant of planning permission, the developer will be under certain obligations i.e. to provide affordable housing and to make educational contributions etc.
When a house or land is purchased by two or more persons their interests in the property can be held in two ways:
Under a joint tenancy the joint owners together have an undivided interest in the property. On sale of the property during their lifetime the net proceeds of sale are split equally between them. On the death of one joint owner the property automatically transfers to the other joint owner/owners without any transfer document. The last surviving Joint Tenant becomes sole owner of the property. A joint tenancy is the normal way in which property is held between husband and wife although there is no reason why, if the joint owners agree, it should apply in other circumstances.
Under a tenancy in common the joint owners each have a separate share in the property. We would recommend tenancy in common if the joint owners are not married and do not contemplate marriage in the foreseeable future. It is also the more appropriate way to hold property if the parties acquired it on a commercial basis, for instance for development and resale. Where there is a tenancy in common it is normally implied that the joint owners hold the property in equal shares. However if this presumption would be unfair (e.g. if one joint owner has contributed more to the property than the other joint owner) it is possible for the document to state in what shares the property is held. Joint owners holding property under a tenancy in common can sell or give away their share without the other’s knowledge or permission.
A declaration of trust (or trust deed) is a deed entered into between tenants in common to formalise the arrangement of how they wish to hold the property (e.g. 70/30) or to state the monetary amount which each owner should receive if the property is sold.
Buyers and Tenants Beware
What happens on completion day?
The day of completion is a pre-arranged date on which the financial and legal formalities are concluded and the ownership of the property is transferred from the seller to the buyer.
Below we answer some of the common questions on completion day.
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Help to Buy is here to help. And it's not just for first time buyers. Help to Buy can help you get onto the property ladder, or move up it.Visit Website
The calculator works out the Stamp Duty Land Tax (SDLT) you'll have to pay for residential purchases.Visit Website
NHBC is the UK's leading independent standard-setting body and provider of warranty and insurance for new homes.Visit Website
For all applications received at Land Registry offices on or after 17 March 2014Visit Website