If you are in the process of buying a new build home but have not yet completed the purchase, there are some things to think about that you may not have considered yet. Below are some tips and tricks that could help you avoid or deal more effectively if problems arise later on.
Article by Wingrove Law. This is not legal advice. You should satisfy yourself in respect of any arrangements you enter into and seek specialist independent legal advice if unsure.
Before Signing Reservation Agreement / Exchanging
Plans and Drawings
Before you sign a reservation agreement, you will usually be shown copies of plans, drawings and specifications for the home you are looking to buy. However, it is common practice for the housebuilder to refuse to give you copies (‘copyright’ being a common excuse).
Later on, however, they will send you their standard term contract which should include an obligation to build in accordance with those plans, drawings and specifications. If you don’t have copies, how will you know if they have built in accordance with them? You won’t, which is the point. It is a way of them limiting their liabilities to you under the contract.
Insist on getting copies before you sign the reservation agreement if possible, and certainly before you exchange contracts. If they refuse, get creative. Maybe ask to be left alone to pore over the details for a while and use the opportunity to take photos with your phone, that kind of thing. Don’t be shy! If you don’t get copies before you commit to the purchase, you might not get another chance.
Choose Your Own Conveyancing Solicitor
Use your own choice of conveyancing solicitor, not use the housebuilder’s recommended conveyancer (even if doing so would save you a bit of money). Ideally, have someone in mind before you go house hunting so you can provide their details when asked at the reservation stage and avoid a hard sell to use their nominated conveyancer.
Concerns with using their nominee include that the housebuilder may have pre-approved the advice to be given to you, so you could enter into the transaction without as full an understanding of the risks, costs or other aspects of the transaction compared to using a completely independent conveyancer.
The modest saving you might make on conveyancing fees by using their nominee may not look like good value if things don’t turn out the way you expected later on.
New Home Warranty Agreements
Make sure you read the new home warranty arrangements before you exchange contracts. These are unlikely to offer as much cover for construction issues as you might expect. What cover they do offer could be lost easily if you don’t follow them to the letter.
Transaction Risks
Don’t assume your conveyancing solicitor will advise you on the risks of the transaction. Chances are they won’t. They usually only deal with the transactional aspects of transferring title to you and dealing with the purchase monies. Buying a new home, even with 10-year new home warranty cover, can be risky. Any problems with it will be yours to deal with after you complete the purchase. You cannot send it back if you don’t like it. It isn’t a toaster.
It would be prudent to budget for professional fees of snagging inspectors, surveyors and specialist legal advisers in relation to construction defects after you complete the purchase. Better to budget for these and not need them than to go ‘all in’ and then find yourself out-gunned by the housebuilder and warranty provider whose interests are aligned in seeking to limit what if anything gets done to fix construction defects.
Free £100k !?
TOP TIP: fancy getting £50k-£100k for (almost) free? Take out a legal expenses insurance policy that covers contractual or construction disputes (check policy terms very carefully) BEFORE you exchange contracts, and keep renewing the policy after you buy.
Most legal expenses insurance policies exclude cover for disputes that arise before you incepted the policy. If you buy e.g. household insurance with legal expenses cover for the day you complete the purchase which most people do, chances are it won’t pay out in the event you want to sue the housebuilder for breach of contract over major defects because you will have entered into the contract before you arranged the insurance.
YOU MUST GET THE INSURANCE IN PLACE BEFORE YOU EXCHANGE CONTRACTS.
For the sake of £50k or £100k cover (the usual limits on these kind of policies), it is undoubtedly worth you spending a few hours trawling the market for policies and checking the small print to see if they definitely will cover disputes with your housebuilder. It is undoubtedly also worth the risk of paying for an insurance policy you might end up not needing if you happen not to complete the purchase for some reason.
Having legal expenses insurance in place would mean the insurer would pay your costs of legal action against the housebuilder, and the housebuilder’s legal costs if you were ordered to pay some of those, up to the limit of indemnity. So, if you do this right, it could be worth £50k-£100k or whatever the limit of indemnity is, for the price of a fairly basic insurance policy.
