A new build solicitors guide to the buying process

Jan 19, 2024

What is the New Build conveyancing process?

Once you have reserved your property (paid your reservation fee and signed the reservation form with the developer) and instructed your solicitor (returned your completed inception form), we will send you some initial paperwork for you to complete and return. This will cover all the information we require surrounding your personal details and source of funds. Once all of this is completed, we can start legal work and begin to progress towards exchange – we would order searches, check through your mortgage offer, prepare your report, post your paperwork and eventually exchange. At the point of exchange, your file will be passed to our completion and registration teams. These teams arrange setting up anything required for completion and ensure you make it to completion successfully and smoothly. Following this they will ensure any disbursements are paid (the estate agent’s commission invoice for example) and arrange for an application to be lodged at land registry to register you as the new owner of the property.

When should I instruct a solicitor?

You can approach various solicitors to request quotations prior to officially reserving your property. However, we would suggest that you wait until your reservation agreement is signed before you have a file opened and begin any work.

Will your fees change at all?

Our fees are a fixed rate, meaning the legal fees will not change throughout your transaction. However, should a situation arise where an additional cost is incurred we would discuss this with you accordingly. Our legal fees should also not be confused with disbursements. Disbursements are third party fees which are out of our control and would be charged regardless of which solicitor you instruct. Disbursements can be subject to change slightly over the course of your transaction but we give our best estimation. Please note that our fees are heavily discounted for sites upon which the developers recommend us i.e. we are their ‘panel solicitors’. We can do this due to our extensive knowledge of the sites, the developer and their legal teams.

Who will be dealing with my file?

Once your file is opened you will receive an email containing all details regarding initial paperwork. This email will also contain the contact information for the fee earner who oversees the work carried out for that site and the person who will deal with your file day-to-day. It is helpful to note that should neither of these people be available for any reason, any member of the team would be happy and able to help.

Why is it better to use a New Build specific or recommended solicitor?

Generally, a new build specific or recommended solicitor will be familiar with the time frames that are expected by the developer and they will be able to prioritise the work to meet or even surpass the deadlines in question. At Herrington Carmichael, typically your solicitor will have dealt with the site previously which means we can ensure as fast a turn around as possible. Overall, this means the transaction should progress smoothly and efficiently.

Why is it also beneficial to use the recommended solicitor for my related sale?

It is useful to instruct a recommended or new build solicitor for any related sale as they will be better equipped to deal with the time pressures that come with having a developer at the end of a chain. This means that we can better prioritise files to fit with the expectations of the chain and keep all parties well informed throughout the entire transaction.

How long does the transaction typically take?

Typically, new build transactions will have deadlines (i.e. to exchange within 28 days of reservation) and so they are dealt with as quickly as possible. It is possible to complete the transaction within a couple of weeks in cases where for example there is no chain, the property is already ‘build complete’ and we receive all the necessary information and documents in a timely manner. Sometimes there are unforeseen circumstances which mean transactions are delayed possibly for a couple of months – usually due to issues in a chain or leasehold sale requirements. It is hard to give an exact time frame, however we will be sure to update you throughout the process and the site office should be available to provide you with specific build updates at any point.

What is the initial payment for?

We request an initial payment of £450 from you when we open your file. This is used to pay for searches, any documents we need from land registry, verifying your ID etc.

Is the initial payment in addition to your legal fees?

The £450 initial payment will not show as a separate charge on your quotation and any part of the £450 which is not used for searches or disbursements will be taken off your final bill at the point of completion.

At what point throughout the transaction are payments needed and what are the payments for?

There are three points throughout your transaction where we request payment.

  1. Your initial payment on account (£450) – requested when a file is opened
  2. Your exchange deposit (typically 10% of your purchase price, less your reservation fee) – requested prior to exchange of contracts
  3. The balance to complete (this is the entire balance remaining needed in order to complete, including our legal fees and your stamp duty payment) – requested around a week before completion

What is the best way to make payment?

The quickest and easiest way to make any of the necessary payments would be via bank transfer – our bank details can be found within our initial client care letter, as well as our report document, and if you wish to check these details prior to making any payment, you can do so by phoning our accounts team.

For large payments which you may not feel comfortable sending via bank transfer or you have a daily limit, we suggest going into a bank branch and arranging for them to send a CHAPS payment for you.

You can also make payments via card or cheque, however these payments take between 7 and 10 working days to clear so needs to be borne in mind for exchange and completion deadlines. Card payments made over the phone for completion funds cannot be accepted.

What is the stamp duty rate?

FTB Buyers (FTB)

Property or lease premium/transfer value

SDLT rate for UK Resident

For NON-UK Resident

Up to £425,000

Zero

2%

£425,001 to £625,000

5%

7%

Over £625,000

AS BELOW

AS BELOW

 

BUYERS WHO ARE NOT FTB (or purchasing for more than £625,000)

Property or lease premium/transfer value

SDLT rate for UK Resident

For NON-UK Resident

Up to £250,000 

Zero

2%

£250,001 to £925,000

5%

7%

£925,001 to £1.5 million

10%

12%

Above £1.5 million

12%

14%

 

HIGHER RATE TRANSACTIONS

Property or lease premium/transfer value

SDLT rate for UK Resident

For NON-UK Resident

Up to £250,000 

3%

5%

£250,001 to £925,000

8%

10%

£925,001 to £1.5 million

13%

15%

Above £1.5 million

15%

17%

 

To calculate your Stamp Duty payable on your purchase, please visit the following link:

https://www.tax.service.gov.uk/calculate-stamp-duty-land-tax/#/intro

Do all purchasers need to be first time buyers to qualify for the stamp duty relief?

Yes, in order to qualify for the stamp duty first time buyer relief, all purchasers must be first time buyers.

What are the following fees included in your quote in relation to?

  • Document/Engrossment fee
    • This is a third party fee charged by the developer’s solicitors, on all plots, for the creation and engrossment of your contract paperwork.
  • Notice fee
    • This is a third party fee charged by the developer’s solicitors for notifying the management company of your new ownership and that there is a charge over the property (i.e. a mortgage)
  • Retention
    • This fee is requested and kept on your file to cover any additional searches that need carrying out between completion and registration so that we do not have to ask for additional funds later on. Certain searches expire and need renewing after completion whilst your application is pending with the land registry. If these funds are not used, they will be returned to you once your registration is complete.
  • Bankruptcy fee – why are we charged for 2 lots of bankruptcy fees
    • We are required to carry out a bankruptcy search on each purchaser’s name prior to exchange. These searches expire after only 6 weeks, so to keep in line with our compliance checks, we are required to carry out another bankruptcy search on each purchaser prior to completion.
  • Service charge
    • This is a third party fee charged by the developer’s solicitors on all plots, for the overall maintenance of the development. Maintenance of the development’s communal areas is dealt with by the developer until such time as the management company takes over, if any. There will be an apportioned amount of service charge payment requested on completion.
  • Stamp duty form fee (part of our legal fee charge)- is this needed even if I have no stamp duty to pay
    • Regardless of whether or not you have any stamp duty to pay, at the point of completion we are required to complete and submit a return to HMRC.

How do I claim my HTB ISA bonus?

HTB ISA government bonuses can only be claimed if your purchase price is £250,000 or below for properties outside of London and £450,000 for properties within London. The funds you have saved in the account can be used regardless of whether you are eligible for the bonus.

You will first need to close your HTB ISA account and withdraw the funds before requesting a closing statement from the provider. We will then provide you with a declaration to complete, which will need returning to us with that closing statement.

We will then arrange requesting the bonus. This will be sent directly to our account and we will hold this on file until such time as it is needed for completion.

How do I use my LISAs/ISAs?

LISA and ISA funds can be used toward your exchange deposit or your final balance at completion. You just need to advise us at what stage you wish to use the funds so that we can make the necessary arrangements.

The process for each provider varies slightly but we would suggest contacting your LISA/ISA provider in the first instance and either:

  • request an investor declaration (for you to complete and forward to us) and a conveyancer declaration (for us to complete)

OR

  • passing on the details of the person dealing with your file so they can contact us.

Once we have the necessary forms or have been contacted by the LISA/ISA provider we can request the funds accordingly.

How do incentives work?

Incentives offered by the developer will be deducted from your balance due at the point of completion, so you effectively pay less rather than having any money transferred from the developer to you.

The deposit noted in my mortgage offer is different/larger to the deposit you have asked for at the point of exchange – why is this different?

The deposit amount referred to in your mortgage offer relates to the entire amount of funds being put towards your purchase by you, aside from your mortgage. The deposit that we ask for prior to exchange of contracts (the contractual deposit) relates to 10% of your purchase price, less your reservation fee.

What if the deposit funds or balance is coming from my related sale?

If you have a related sale and are relying on those proceeds to fund your purchase, including the deposit, this will be noted on file and we will make arrangements accordingly. If the sale is not able to offer sufficient funds to cover the 10% deposit needed for your purchase, you may be required to make up the shortfall with your own savings, or alternatively we can approach the developer and query whether a lower deposit can be agreed.

Is the deposit always 10%?

As standard, the deposit requested at the point of exchange is 10% of the purchase price less your reservation fee, however in some situations the developer may agree to lower deposits. It would be beneficial to discuss or mention this first at the point of reservation, but we can also discuss this prior to exchange as necessary.

What do I need consent for, from the developer?

Each developer will have slightly different requirements when it comes to needing consent for various things. Some examples of things you may need consent for are:

  • Pets
  • sheds/summerhouses

What is a local search?

A local search gathers information from the local authority to provide you with important information about your property and the surrounding area. It typically includes information on planning permissions, building regulations, conservation areas, tree preservation orders, proposed developments and enforcement notices.

What is an environmental search?

An environmental search provides information about any potential environmental risks that could affect your property. It typically includes information on contaminated land, flood risk, radon gas and ground stability, amongst other issues.

What is a drainage and water search?

These typically include information about water supply, sewerage connections, drainage systems and any public sewers or water mains that may affect the property.

How long do searches take?

The lead time for searches varies depending on which search is ordered and the demand that our search providers are experiencing. When we get to the point of ordering searches, we will be able to provide a more accurate time scale but a rough estimate is 1 – 10 days.

What are the lender requirements/why do we need to report to your lender?

All lender requirements vary slightly and we may have to report certain points to them to ensure they are happy i.e.  incentives or gifts. This is not uncommon and is not something you should be concerned about. Any special conditions of your lender will be laid out in your offer.

What are the AP01 and AP03 forms for?

The AP01 and AP03 forms are for the appointment of a director and/or secretary for the management company. These forms are requested by the developer’s legal team although not on all sites. It is likely that on each site there will be someone who volunteers for these roles however in the event that this is not the case the forms will go into a ballot and residents will be selected at random to fulfil the roles. If you do not feel as though you will be able to fulfil the role to the standard that they expect or if you have no interest in the role, you can resign and they will choose someone else.

What are covenants?

Covenants are legal requirements on property owners to either do or refrain from doing certain things. Typical covenants on new build developments include things like:- you must not build any additional structure on the property such as a shed or greenhouse, you must not extend the property, you must not keep or breed certain animals in the property, you must not park commercial vans over a certain weight on the development.

What is exchange?

Exchange is the point in which your signed contract is dated and you are legally bound to complete the transaction – you can no longer withdraw from the transaction without losing your deposit funds. Up until exchange of contracts either party can withdraw at any time without any legal implications.

What is completion?

The completion date is the day that the final balance will be transferred and you can collect your keys.

What is the difference between an on notice completion and a fixed completion?

It is common with new build properties that they will not be ‘build complete’ and ready for occupation at the point of exchange. In this case you will be given an ‘on notice’ completion date. At the point of exchange you will be provided with an anticipated legal completion date and a long stop date (a date beyond which if the property is still not ready, you can withdraw from the transaction). As soon as your property is ready for occupation, the developer’s solicitors ‘serve notice’ and provide a completion date – as standard this is 10 working days after notice is served but will depend on the terms within your contract.

If your property is build complete at the point of exchange, and has received sign off by the warranty provider (i.e. NHBC, Premier, etc.), then you will exchange with a fixed completion date. This means that you can discuss your preferred date with the developer prior to exchange and will have a set date for moving in that is agreed by both parties when you exchange.

When must I insure the property?

The developer is responsible for insuring the property until the point of completion. After this point it is your responsibility and is a requirement of your lender (if you have a mortgage). At completion we will require evidence this is in place when you have a lender and cannot complete with out it.

If you are purchasing a leasehold property, insurance will be the responsibility of the landlord.

What does the new build warranty cover (NHBC, LABC, Premier, etc.)?

The warranty on your property will cover any structural defects caused by faulty material or poor workmanship during construction – it should be noted this does not mean any general wear and tear. After completion you will receive the documents in relation to your warranty.

What can I do about build delays?

If there are build delays which mean your completion is pushed past the anticipated date that was given at the point of exchange, unfortunately there is nothing you can do if you are still within the longstop date. If the delays mean that your notice is not served before the given long stop date, then you do have the right to withdraw from the transaction and receive your deposit monies back in full. If you decide to withdraw before this date the developer is entitled to keep your funds.

What happens if we, as clients, fail to meet completion for any reason?

If a fixed completion date has been agreed or notice has been served and you as the client fails to meet this date (i.e. you do not send your completion monies on time etc.), the developer reserves the right to serve something called ‘special notice’ and if you fail to complete after receiving special notice the developer can withdraw and keep your deposit funds. This will effectively give you longer to complete – typically another week to ten days – however this comes at a cost. If special notice is served you will be charged a fee to cover the cost for serving the notice, in addition to a daily interest; details of which will be provided at such time as this happens.

How do we deal with snagging?

Snagging will not delay your completion in any way. You can upon checking the property before completion compile a list and request confirmation from the developer when these will be dealt with. In addition, if you notice any snagging issues with your property once you have completed you can compile a list and liaise with the site/customer care team, who will arrange for these to be fixed accordingly.

Where are future service charge payments made and is this likely to change?

Once you have completed and are due to pay the next instalment of service charge, you will be responsible for contacting the management company (the developer will be responsible until such time as the management company takes over) and arranging your future payments directly with them. The service charge is decided by the management company and has the potential to change. You will be notified of any changes before they are charged and will be provided with a breakdown of the budget each year so you can see where the funds are being used.

Why can’t I find my new address on websites for deliveries etc.?

The site office is responsible for registering the address with royal mail, but it can of course take some time for the address to become widely available online. This should not cause too many issues but where necessary companies are usually understanding and can help if you contact them.

An example of this is, it can be difficult to find the address on comparison sites for insurance, however if you contact them over the phone and explain it is a new build they can usually assist.

When will I receive the deed to my property?

All of your property deeds will be posted to you once your application has been completed at the land registry, their turn around times can vary and currently are taking anywhere between 1 year – 2 years. If you need evidence of your completion for things such as school places in the interim, we can arrange to send you scans of your signed paperwork and a letter confirming completion.

How can I expedite my registration?

Applications at the land registry can only be expedited if they are holding up the progress of another transaction (i.e. a remortgage or sale). If you provide any evidence of this our team are happy to then expedite the application for you.

What do I do with all of the documentation that comes with my report and are sent after completion?

Prior to exchange, we will send you a report document containing all the information you need with regards to your property and the site at which you are buying. With this, we will send all necessary supporting documents such as planning etc. On closing your file after registration, we will send all documents such as, signed transfer, registration documents, NHBC certificates. These documents will need to be kept safe as you may be asked to produce them when and if you ever come to sell in the future.

If you have any other queries please give us a call, there will always be someone available to assist.

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Annari Holmes

Annari Holmes

Partner, Head of New Build Conveyancing

Ellan Skeet

Ellan Skeet

Apprentice Paralegal, New Build

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