Things to Consider When Buying a New-Build Property

The conveyancing process when buying a new build property is more complex than for a standard registered property, and the solicitors’ fees will accordingly be higher.

Developers will usually ask for a non-refundable reservation fee. Try to ensure this fee is as low as possible; it should not be more than £1,000-£2,000. You should ask that the reservation fee be refundable if there are serious issues with the title or the land. 

Questions to ask before paying any non-refundable reservation fee.

• Does the reservation have an expiry date?

• Is the property Freehold or Leasehold?

• If Leasehold, what is the term of the lease? The preference is 999 years.

• If Leasehold, what is the ground rent? Be aware that this will be in addition to any other outgoings each year and can be substantial. Check whether it will be reviewed in the next 5-10 years. If the ground rent is going to be over £250 and/or there is a review that could be considered adverse you may have some additional points that will need to review with any lender and potential issues when you come to sell the property if you have not been able to secure the Freehold Title. 

• If Leasehold, when will the Freehold be available to buy and at what cost? Enquire why the developer is not offering the Freehold straight away.

• Is there going to be a Management Company? Will, there be a service charge payable to the Management Company and how will this be calculated? Check if it will be referred to as a ‘rent charge’ rather than a service charge.

• If there is a reference to a ‘rent charge’ which can apply to Freehold or Leasehold properties; these charges, as described in one of our previous blogs, can cause problems securing a mortgage and may affect the saleability of the property when you come to sell in the future.

• Will there be any covenants on the title; this applies to Freehold and Leasehold properties. If there are covenants, ask to see them to check that you can comply with them before providing the reservation fee.

For further information or for any property enquiries, please contact Richard, our Practice Development Manager, rbruce@fionabruce.co.uk or phone 01925 263273

The contents of this article do not constitute legal advice and are provided for general information purposes only.