11 August 2016
Nine Top Tips For First Time Buyers Looking at New Homes For Sale
With a lack of housing in the UK, companies are being put under pressure to build new homes faster than ever before. But will this rush to build decrease the quality of new homes?
Buyers often make the mistake of putting down a deposit on a new-build home having only seen a show home or a floor plan. Home buyers should instruct an experienced property solicitor to get their expert advice and ensure they have reviewed this list of what to check before buying a new-build:
- NHBC Registration
Builders and developers should be registered with the National House Builders Council (NHBC), or the property should have the benefit of a building guarantee under a scheme that complies with the Council of Mortgage Lenders requirements. Such schemes are there to provide buyers with protection if structural defects arise.
To sell homes with NHBC Buildmark cover, all registered builders must comply with the NHBC Standards which set out the technical requirements for design, materials and workmanship in new home construction.
- Leasehold Properties: Length of Lease and Restrictions on Use
If you are looking at buying a leasehold property, as opposed to a freehold property your legal advisor will provide details on the length of the lease (also known as the lease term).
Leases on new properties are usually for a term of 99 or 125 years – you should ensure the lease term on your leasehold property is at least 60 years. This will help to ensure you are able to take a mortgage out. You must be careful if you are buying a newly renovated property where the lease may have been granted some time ago.
Your legal advisor will also advise on whether there are any restrictions on how you use the property in the lease.
Service Charge and Other Hidden Costs
If you are buying a new house on an estate or a flat or apartment where you pay costs on maintaining communal things like gardens or lifts then it is likely there will be a service charge.
Service charges have the potential to be costly over time, particularly if the legal documentation is not drawn up properly by the builders’ solicitors. Legal advice is crucial in getting things right from the outset. Your legal advisor will seek to amend the documentation to protect your interests.
In addition, the landlord’s permission may be required for structural alterations to the property, or should you wish to sell the property in the future. There are usually charges for obtaining permission and you will be responsible for paying these.
- Know if and When You Can Pull Out of the Transaction
This will be determined by general legal principles and how the sale and purchase contract is drafted. Your legal advisor will also look to add provisions in case of delays, which can give you the ability to withdraw from the transaction.
Once contracts are exchanged, your purchase becomes legally binding. You cannot pull out of the transaction or change the amount you are going to pay for it. If you do, there are serious implications, and you run the risk of losing your deposit.
- The Deposit
You will usually have to pay a deposit of either five or 10 per cent at the time when you exchange contracts. You will probably have to pay a preliminary deposit to secure the plot too. Check if this can be deducted from the purchase price.
Be wary of when you pay your deposit because completion is potentially some distance in the future there is a potential risk that the developer becomes insolvent in that time and you lose your deposit as a result.
You should also be careful about how the deposit will be held by the seller and check it can't be released to the seller on exchange.
Mortgage offers usually have time limits and delays inevitably arise when buying a house. So if completion drags on and you have arranged finance early on you could lose your initial mortgage offer or it may end up being on different terms.
You should keep your mortgage company and your legal advisor updated with what stage of completion you are at when buying a house.
- Fixtures and Fittings - What’s Included
Check and double check what is included in the sale. Usually, a fixtures, fittings and contents form (FFC form) will be attached to the sale agreement.
Some builders offer additional incentives to buyers, but these may be plot or house purchase price specific.
The show-house may be furnished with top quality items. However, the reality can be very different for other plots on the estate where items can be of poor quality, or even missing. Your legal advisor will add contractual provisions to the sale agreement to ensure that items included in the sale are of a similar quality and standard.
You must let your legal advisor know if there is anything in the FCC form that is incorrect as this must be addressed before contracts are exchanged.
- Property Plan
New build properties do tend to be smaller than other properties. Your legal advisor will show you a plan of the property and you must check that this matches with what has been agreed with the builder.
Before the exchange of contracts, your legal advisor will also prepare a pre-contract report that covers the title of the property and the terms of the contract to buy your new home. This report should detail any rights of way affecting the property and whether there are restrictions on how you can use the property.
Your legal advisor will carry out a number of property searches and enquiries.
These are very important as they can reveal information about who is responsible for the roads and whether there are any development proposals close to the property. In addition, enquiries can be raised if the property falls within a flood risk area as this will affect the cost and availability of insurance.
- The True Cost
Make sure you know the true cost of buying and that you have sufficient funds to do so.
You will need to factor in all of the following:
- Mortgage Arrangement Fee - The fee charged by your lender for arranging the loan.
- Survey - Your lender will charge a valuation fee for checking that the property offers sufficient security for the loan. In addition, you may decide to pay a surveyor to carry out a more detailed survey should you have any concerns or a snagging survey when the property is nearly completed.
- Legal Fees
- Search and Enquiry Fees
- Stamp Duty Land Tax - SDLT is a tax paid on residential purchases over £125,000 in England, which is due within 30 days of your purchase. First time buyers in England can now benefit from a tax relief on purchases up to £300,000.
- Land Transaction Tax - LTT is a tax paid on residential purchases over £180,000 in Wales as of April 1 2018, which is due within 30 days of your purchase. As of April 1 2016, Second Homes and Buy to Let properties in both England and Wales are subject to higher rate tax.
- Removal Costs
Helen Thorn is a real estate lawyer working at Slater and Gordon Lawyers in Manchester.
For legal assistance in buying residential property contact Slater and Gordon Lawyers on freephone 0800 223 0083 or contact us online and we’ll be happy to help.
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