How do the terms of a new build property differ from any other?
This article was written for and published as original content in the East Anglian Daily Times property section.
When buying a newly built property from a Developer, the Contract between you as a Buyer and them as a Seller will tend to be much more detailed than a Contract relating to a Property which has already been built. This article looks at some of the key differences.
The main difference is that there will often not be a fixed date for completion. The reason for this is that Developers often sell “off plan” where they expect a Buyer to enter into a Contract even where the Property is not yet fully built nor ready for occupation.
When this happens, the Contract must explain how the completion date will be set. Completion is normally on notice so that it takes place, for example, within ten working days of the Developer certifying that the Property has been built and signed off by Building Control.
There will often be a “Long Stop Date” which is the latest date by which completion has to happen and the first date on which a Buyer can pull out.
Another difference between the terms includes a clause in relation to the deposit. On exchange of contracts, a buyer will always be asked to put down a deposit which they could potentially lose if they fail to complete. In standard contracts, the deposit is generally held by one party as “the stakeholder”. This means that the nominated person, or firm, has to hold on to the deposit until completion takes place and to return it to the party entitled to it if completion fails.
In new build contracts, the deposit is more commonly held as “Agent for the Seller”. This means that the Developer’s Solicitors are allowed to release this money to the Developer after exchange so that the Developer can use the sum towards the further costs of materials and other matters. As a result, it can be harder to recover the original deposit funds if completion does not take place as planned.
I would always recommend that you take formal legal advice prior to entering into a Contract, particularly in relation to a newly built property.
If you would like advice on buying a property, please contact the expert Residential Property team at Thompson Smith and Puxon by emailing enquiries@tsplegal.com or by calling 01206 574431.