Advice for buyers of new-builds on the legal process that differs from the norm

Richard Wisnia of Switalskis solicitors gives buyers of new-builds information on the very different buying procedure.

Buying a new-build differs from the usual process of purchasing a home

The legal process of buying a new home differs in many ways to purchasing a second-hand house, especially where the property is still in the course of construction. Richard Wisnia, Director and Head of Switalskis Solicitors’ new-build conveyancing department, highlights some key differences, along with useful tips for prospective homeowners thinking about buying from new.

Time scales. Unless the new home is built, prospective buyers should expect it to be a condition of their reservation that “exchange of contracts” – the legal process when housebuilder and buyer formally commit – should be achieved as early as four to six weeks from the date the new home is reserved. This will apply even if the property is not likely to be structurally complete for some considerable time.

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Legal Completion. At exchange of contracts, the purchaser won’t know or be given an exact date for “Legal Completion” – the day the keys are handed over. Logistically, the housebuilder won’t be able to offer certainty about when the house will be fully built. So, when contracts are exchanged, a process will be agreed which, once it has run its course, will lead to Legal Completion at a future point in time.

This does of course create uncertainty, especially where reservation is made many months ahead of build. However, in advance of exchange of contracts, the housebuilder will provide an estimated Legal Completion date. If the house isn’t built by that estimated date, the housebuilder will have a further period of time (usually a number of months, dependent on property type and build-progress at the point of exchange of contracts) to finish building the house.

If the housebuilder has failed to finish the build by the end of this extended period, the purchaser should have the opportunity to walk away if they wish, with their deposit returned.

Chain of Transactions. This chain can be lengthy and complex. If the purchase of your new home is dependent on the sale of another property, the chain will need to be made aware at the outset, not only of the housebuilder’s time scales for exchange of contracts, but also of the process for Legal Completion (outlined above) under the contract.

These two elements are not common in the second-hand market, so it is crucial to make sure, directly, or through selling agents or conveyancers, that all parties in the chain are aware from the very beginning of these requirements, not only to avoid delays in meeting the exchange of contracts deadline, but also to avoid the possible collapse of a chain where these factors will simply not be acceptable to the other parties.

Customer/Housebuilder Relationship. The relationship between a buyer and a housebuilder is that of “business to consumer”, so it will be no surprise that contract terms are prepared on a standard basis by the housebuilder.

From experience, it is rare for changes to those terms to be agreed, unless there is a clear error. However, as consumers, buyers will benefit from the protections given by the “Consumer Code for Homebuilders”, www.consumercode.co.uk, ensuring they are given key information about the property, contract, time scales and termination

rights.

Getting the right advice. Independent professional advisers, both legal and financial,with experience and a strong reputation in the new-build property market can be invaluable.

Conveyancers with prior knowledge of a housebuilder’s standard paperwork or a particular development could offer a saving in terms of time. Any legal representative you instruct must be independent.

Switalskis solicitors. www.switalskis.com