Checks needed be­fore you put down de­posit on a new home

Yorkshire Post - Property - - PROPERTY - John Rob­son

I am a first-time buyer look­ing to pur­chase a new house from a West York­shire-based de­vel­oper. The devel­op­ment I am in­ter­ested in has only re­cently opened and the first phase of prop­er­ties has just ben re­leased for sale. Build­ing has only just com­menced.

I am cau­tious about paying a de­posit at this early stage but the de­vel­oper will only agree to re­serve the plot if I pay a reser­va­tion fee of £1,000. I am tak­ing out an 85 per cent mort­gage to fund the pur­chase.

What se­cu­rity do I have in re­spect of my de­posit which, as a first-time buyer, I can­not af­ford to lose?

As the houses on the devel­op­ment are not yet build com­plete and ready for oc­cu­pa­tion to se­cure the plot at this early stages means you are “buy­ing off plan”. This is quite com­mon as most de­vel­op­ers wish to se­cure sales of the plots at an early stage to en­sure quick pay­ment once the house is fin­ished. This is usu­ally a cash flow re­quire­ment of the bank who hold the loan over the ti­tle to the land and are part fund­ing the devel­op­ment.

Fol­low­ing pay­ment of a reser­va­tion de­posit, the sum of £1,000.00 is stan­dard, the con­veyancer for the de­vel­oper will is­sue your con­veyancer the con­tract. The doc­u­men­ta­tion will in­clude ti­tle doc­u­ments, plan­ning per­mis­sions and agree­ments with the coun­cil in re­spect of Sec­tion 106 re­quire­ments, road and sewer and a gen­eral in­for­ma­tion leaflet in re­spect of the devel­op­ment.

A Sec­tion 106 Agree­ment forms part of the plan­ning cri­te­ria cov­er­ing the devel­op­ment and de­tails the terms and con­di­tions set by the coun­cil to be ad­hered to by the de­vel­oper in re­spect of the pro­vi­sion of af­ford­able hous­ing, con­tri­bu­tion to­wards lo­cal road and recre­ational schemes and sim­i­lar. All new de­vel­op­ments are granted plan­ning per­mis­sion on this ba­sis.

The con­struc­tion of the devel­op­ment and com­pli­ance with Sec­tion 106 re­quire­ments is the fi­nan­cial bur­den of the de­vel­oper. It is fun­da­men­tal to en­sure there are the nec­es­sary fi­nan­cial ar­range­ments in place should for any rea­son the de­vel­oper cease to trade be­fore com­ple­tion of the devel­op­ment and as­so­ci­ated works. The present re­ces­sion in­creases this pos­si­bil­ity.

Your con­veyancer will, as part of their re­spon­si­bil­i­ties to you and your mort­gage lender, check the fol­low­ing :

The pay­ments due un­der the Sec­tion 106 Agree­ment have been made to the coun­cil.

There is a fi­nan­cial bond in place in re­spect of the com­ple­tion of the road­ways serv­ing the devel­op­ment to the High­ways’ re­quire­ments.

The prop­erty has the ben­e­fit of an ac­cept­able build­ing war­ranty such as Na­tional House Build­ing Coun­cil (NHBC) or a Pre­mier Guar­an­tee – this war­ranty will also pro­tect your 10 per cent de­posit paid on ex­change of con­tracts if the de­vel­oper ceases to trade be­fore le­gal com­ple­tion.

Ob­tain an Un­der­tak­ing from the de­vel­oper’s so­lic­i­tors to se­cure the re­lease of the plot from the mort­gage held over the ti­tle to the devel­op­ment.

Un­til the house is signed off by the lo­cal author­ity in re­spect of the Build­ing Reg­u­la­tion Com­ple­tion Cer­tifi­cate and the build­ing war­ranty cover note is in place, your con­veyancer will not be able to draw down your mort­gage loan to com­plete your pur­chase. It would be pru­dent to ask your con­veyancer to check how many of the other plots are un­der an ex­change of con­tracts. The more there are the stronger the fi­nan­cial po­si­tion of the de­vel­oper. There is al­ways a risk the de­vel­oper could cease to trade. How­ever, pro­vided your con­veyancer has car­ried out the nec­es­sary checks, your de­posit will not be at risk. Check if the de­vel­oper sub­scribes to the Con­sumer Code for Home Builders, www. con­sumer­code­forhome­builders. com

John Rob­son is res­i­den­tial con­veyanc­ing man­ager at Ford & War­ren Leeds.

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