LesleyPrice (FCILEx), Head of New Homes & Shared Ownership at Lawcomm Solicitors, sheds a light on what key things we need to look for when reviewing documentation for your new-build home, and what the pitfalls can be for you if this isn’t done thoroughly
As a buyer of a new home, whether on the open market or through an affordable housing scheme, there is one stage of the process that seems to sometimes take forever; the stage of raising enquiries. In this article, we touch on some of the key aspects we look into during this process and why it can often seem to be the longest stage of the transaction.
THE CONTRACT AND TRANSFER OR LEASE
Developers will usually want to standardise the format of contracts, transfers or leases across a development site. This makes it easier for them to produce and means all owners on the site hold their properties on the same (or similar) terms. However, just because paperwork in New-Build cases is standardised, doesn’t mean errors can’t sometimes occur. We still need to check that the documents have been drafted correctly. We also need to check the paperwork produced to us matches what was agreed in the sales office. We need to compare the terms in your documents, for example price, allowances and practical issues such as parking spaces match the agreement you made with the sales office at the time you made your reservation. We need to make sure that what you are signing up for to exchange is the same as what you reserved on the day.
Land Registry title to a development site is often a complex affair. The land under development may well be a mix of different parcels of land, each of which have different rights and obligations attached. Many of these will be historic or in case of land that has changed hands many times simply unknown. The title will often also be subject to a number of prior transfers and deeds that all need reading through carefully.
Where matters affecting the title have not been fully revealed to the Land Registry or where there are older restrictions that may restrict development of the site the developer may have put in place indemnity insurance. We need to make sure all this of the historic title information is checked and that any insurances offered are fully enforceable.
You would think it would be a set conclusion that all the land included in the development belongs to the seller and that everything on the plans matches the layout of the site on the ground, but this is not always the case. Land Registry boundaries are usually based on the latest versions of the ordinance survey and the older title deeds, not a physical inspection. Development and plot plans are usually drawn up at the beginning of the development of a site before building has even commenced. This means there can be variances between what the plans intend and the actual layout of the boundaries and roads and pathways on the site itself. We will carry out our checks with the Land Registry to make sure, as far as we can, that all of the land on the site belongs to the developer and the boundaries are correct. Please note, however, that we do not inspect the site. When your conveyancer sends you your plans you need to check these very carefully as you are our eyes on the ground to tell us if something doesn’t look right.
When you apply for planning permission on an existing home for a conservatory or small extension, the planning process can be quite daunting. But at the end of it you get a planning consent that confirms whether your planned works is acceptable, but there may be a couple of conditions attached, such as the overall height or brick colouring. New build planning is a much more complex process. There will often be multiple conditions attached to the planning, numerous different updated versions of the planning permissions and changes made to the planning as the build progresses. We, as your solicitors, need to check all these versions and variations carefully because the conditions attached to the site have the potential to carry over to your new home and if they are not met, they can be enforceable for up to 10 years (not all the conditions can be met straight away). There may even be conditions still outstanding when you complete in which case, we need to make sure there are sufficient legal obligations in place to make sure the developer cannot complete your site and move on leaving you liable.
Most new developments, especially on larger sites, come with numerous planning agreements that can run to hundreds of pages. These are the agreements the developer has entered into with the Council and Utilities supply companies when they ask for permission to build your home. Why are these important to you? The two main things we look for when reading planning agreements are:
Conditions that have been attached to these agreements that the developer needs to comply with and;
Financial agreements by the developer to pay money to the Council or Utility companies in connection with getting the site set up.
Many of these contributions are paid up front, but some are paid in installments or become due after you will have completed and moved into your new home. We need to check for both you and your lender that these obligations and costs do not become your responsibility when you complete.
We need to make sure the agreements are backed by sufficient legal guarantees or insurance so if the developer does not fulfill their obligations or becomes insolvent, you and the other homeowners on the estate do not end up facing large bills as a result.
BUILDING CONTROL AND WARRANTY
Your new home will come with a new home warranty. The National House Building Council (NHBC for short) are the most common, but there are a number of different schemes. We need to check the individual warranty providers terms and conditions to make sure it is the right type of warranty for your home and that all the conditions have been met to enable you to make a claim in the unfortunate event issues arise. If you are buying under a shared ownership scheme, you are buying a part share in the property and so the NHBC guarantee will initially be entered into between the Housing Association and the NHBC. They will retain all documentation for this, although you will have the benefit of it. If you have any issues with the property that you believe may be covered under the warranty, then you should contact the housing association as a point of first contact and they will investigate the issues and if needs be make a claim under the warranty for you
SERVICE AND ESTATE CHARGE ARRANGEMENTS
There will be areas on the site that are not being sold to individual buyers. This could be the communal areas in a block of flats or the roads and open areas on an estate of houses. There will also often be shared facilitates and utility supply wires and pipes that someone needs to take care of in the future once the site is finished and the developer has moved on. We need to make sure we have a satisfactory answer to who will be responsible, how will maintenance costs be dealt with and who will organise collecting the money for the work that needs doing. These arrangements all need to be in order to make sure you know who to contact if repairs need doing and how much you may be paying in the future towards the cost of the estate as a whole.
You would think that by this point having read all the paperwork the searches are primarily for your lenders benefit. You may be surprised when we get the results and need to raise further questions about them. As mentioned before, planning on a site is a very dynamic process and often the searches will contain more up to date information than the original site papers as the planning process is an ongoing one. We may have to go back and ask for more up to date planning documentation and we may have to go back and check specific aspects of the planning to make sure the planning obligations have been met and all payments due from the developer are up to date. The searches may reveal details about the area surrounding the site such as mobile phone masts, flood risk or rail developments, such as HS2, that may require specialist investigation or further searches to make sure you are aware of any matters that may impact the value of your home.
While each new build plot may often be very similar, each purchase carries a unique variant; you, the buyer. You may have knowledge of the site which we do not. Usually you will have visited the site, have had discussions with the sales team and you may be familiar with the location in which your home is being built. Once you have read all your paperwork you may have your own individual questions that you want us to raise, and as you have a unique perspective on the development and how you want to live in your new home, these are just as important to the process as the technical questions.
So, while the process of raising enquiries can be a frustrating time, it forms a vital part of the process. It is often the stage in which you have the least involvement because it deals with the more technical aspect of your purchase. However, it is a vital stage to ensure that all the legal aspects of your purchase have been investigated thoroughly and you know what your rights and responsibilities are, allowing you to relax and enjoy your new home.