LEGAL
The difference between buying a new build property and an existing property Purchasing a new build property is slightly different to purchasing an existing property. Here Adam Crawford, Partner at Prince Evans Solicitors LLP, looks at some of the key differences from a legal view
RESERVATION Generally, once you have an offer accepted for a new build property you will be asked to pay a reservation fee to the developer. Typically this is anything from £500 to £2,000 but can vary depending on the developer. This reservation fee will be taken as a contribution to the deposit payable on exchange of contracts. The reservation fee will often be stipulated to be non-refundable if you withdraw, or if you do not meet the exchange deadline set by the developer. The reservation form will set out the terms of your purchase of the property together with the address or plot number, the purchase price and any incentives you have agreed with the developer. The reservation form does not legally bind you to buy the property or the developer to sell the property.
INCENTIVES When you buy a new build property the developer may offer you certain incentives (for example, there may be a contribution towards your Stamp Duty or legal fees). These incentives will be stated on the reservation form and included in the contract. The incentives must also be disclosed to your mortgage lender and this is achieved by the developer completing a Disclosure of Incentives Form.
EXCHANGE DEADLINE When you buy a new build property the developer will set you a deadline to exchange contracts; this is generally 28 days (but does vary by developer) from the date it issues the contract papers required by
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your solicitor to progress the conveyancing for your purchase. If you do not meet this deadline to exchange then you may lose your reservation fee or part of your reservation fee and any incentives you have agreed. The developer may also cancel the sale to you.
CONVEYANCING When a new property is sold for the first time, whether it is a flat or a house, rights have to be granted for and reserved over the property (such as rights to use the roads, footpaths, service pipes etc), covenants/ obligations that must be observed are set (such as not to alter the property without consent) and management arrangements must be set up (such as who maintains the roads and landscaped areas). As this is the first sale of the property and these arrangements remain with the property permanently, it is especially crucial that your
solicitor ensures these are accurate and adequate for the benefit of the property, not just for you but for all future owners. Your solicitor will also check the planning permission and any planning obligations for the development and how these may affect your use of the property (for example, it is common in London for there to be a restriction preventing you from applying for a parking permit from the local council). They will also check that the appropriate building regulations and new build warranty are in place, which ensures that the new property is structurally sound when constructed. Searches will be carried out; standard searches include a Local Authority search, a drainage search, an environmental search and a chancel check, although others may be required depending on the location of the property. These will reveal important matters such as any planning entries/
First Time Buyer June/July 2022
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