How to solve a prob­lem over de­posits on new prop­er­ties

Yorkshire Post - Property - - PROPERTY - Sharon Dale

QUES­TION: I am re­lo­cat­ing from West York­shire to the Bris­tol area with my em­ploy­ment and am in the process of sell­ing my home in a Wake­field sub­urb and buy­ing a new property in Bris­tol.

The property I am buy­ing is a new-build house and the de­vel­oper is a well known and es­tab­lished UK builder. This de­vel­op­ment com­pany has its own “in house” le­gal depart­ment and do not use the ser­vices of an es­tab­lished firm of so­lic­i­tors or li­censed con­veyancers.

The ex­change of con­tracts is sched­uled to take place by the end of Fe­bru­ary but an is­sue has arisen re­gard­ing the pay­ment of the ten per cent de­posit on ex­change.

My buyer’s con­veyancer is in­sist­ing that my con­veyancer must hold the de­posit to be paid by my buyer and will not agree for this to be paid over on my pur­chase. The rea­son given is if the de­posit is paid to the de­vel­oper’s le­gal depart­ment it will be banked by the de­vel­op­ment com­pany and is at risk if some­thing un­to­ward hap­pens and the con­tracts are not com­pleted.

I do not have suf­fi­cient funds of my own to pay a sep­a­rate de­posit to se­cure my pur­chase and the de­vel­oper’s le­gal depart­ment is in­sist­ing I pay over a ten per cent de­posit to ex­change. They add that if I am un­able to do this they will re­mar­ket the property. Is there any so­lu­tion to this?

An­swer: The de­vel­oper sale con­tract should be sub­ject to the Law So­ci­ety’s Stan­dard Con­di­tions of Sale 5th Edi­tion. In trans­ac­tions whereby so­lic­i­tor or li­censed con­veyance firms are in­volved for both sides, the de­posit can be legally and se­curely passed be­tween the firms in the chain of trans­ac­tions, be­ing held by the so­lic­i­tor/ con­veyancer at the top of the chain pend­ing le­gal and fi­nan­cial com­ple­tion of the con­tracts.

A small num­ber of the larger de­vel­op­ers have their own le­gal de­part­ments. It is a reg­u­la­tory re­quire­ment that a qual­i­fied so­lic­i­tor or reg­is­tered li­censed con­veyancer heads the le­gal depart­ment and en­sures com­pli­ance by that depart­ment to the terms and con­di­tions of the Stan­dard Con­di­tions of Sale, and op­er­ates in ac­cor­dance with the Coun­cil of Mort­gage Lenders Hand­book.

How­ever, the de­posit re­ceived will be paid into a bank ac­count in the name of the de­vel­op­ment com­pany and if the com­pany should col­lapse then the bank ac­count, and all as­sets, will be frozen pend­ing res­o­lu­tion of the com­pany’s fi­nan­cial af­fairs.

The de­vel­oper will be of­fer­ing a build­ing war­ranty, most likely pro­vided by the Na­tional House Build­ing Coun­cil or Pre­mier Guar­an­tee. Both these com­pa­nies pro­vide a guar­an­tee in re­spect of the ten per cent de­posit and this should pro­vide your buyer and his con­veyer with suf­fi­cient com­fort in re­spect of de­posit.

It is im­por­tant for your con­veyancer to check that the de­vel­op­ment on which you are buy­ing has been ac­cepted by and reg­is­tered with the build­ing war­ranty provider. If not, then no such cover or war­ranty will be avail­able.

One other point to be con­sid­ered is the le­gal com­ple­tion date. If the property you are look­ing to buy is not build com­plete, it is un­likely the de­vel­oper will agree to a fixed and spe­cific com­ple­tion date. The de­vel­oper will, in the cir­cum­stances, struc­ture the le­gal com­ple­tion date in the sale con­tract to oc­cur within a pe­riod of work­ing days, usu­ally ten, from the date of fi­nal build com­ple­tion of the property.

Your buyer may not agree to these terms as to the com­ple­tion of your sale and it may be you will have to com­plete your sale ahead of your pur­chase.

Please bear in mind any re­demp­tion penalty payable upon your cur­rent mort­gage may not be can­celled out if you do not com­plete your sale and pur­chase si­mul­ta­ne­ously; as­sum­ing you are tak­ing out your new mort­gage with the same lender.

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