Buying a new build home: legal pitfalls to avoid

New build homes have many benefits, including high specs and the ability to customise your home by purchasing off-plan. However, it’s always recommended to instruct a specialist lawyer with new-build expertise – Associate Stephanie McDonagh explains why you need an expert, and the key things to watch out for when buying a new build.

Leasehold versus Freehold

It’s common in the UK to buy properties as leasehold, especially flats. This is where you own the home, but not the land it sits on. Ownership of the property is also set for a period, which can be a number of decades or centuries depending on the length of the lease. Owning a leasehold property also involves paying them a fee called ‘ground-rent’ to the person who owns the land, the freeholder.

The recent scandal over new-build homes being sold as leaseholds was addressed by the government in 2019, although this legislation has not yet been made law. This issue was further exacerbated by clauses in new-build leases which meant ground-rent would double every ten years, making it extremely expensive in the long-term, and therefore difficult to sell the property. Mortgage lenders will even refuse to lend on homes with this type of lease.

Leases can also hold other unfair clauses, fees and create issues when selling or re-mortgaging your home, which is why it is so important to have a specialist lawyer, Stephanie tells us.

“There are a number of legal issues to look out for when buying a new build property, such as, non-compliance of planning regulations, ensuring deposit funds are adequately protected from the point of exchange and reviewing roads and sewers agreements over the whole development. On top of this, developers will usually set a deadline for exchange of contracts of four weeks from reservation of the home. This is a very small window to review all the legal paperwork and ensure buyers are adequately protected, and is why I would urge buyers choose experienced new build lawyers when purchasing a home.”

New-Build Finances

If you’ve been considering a new-build property, you’re probably already aware that you will need specialist financial arrangements, such as a new-build mortgage, as well as help to buy loans which are only available for new-builds.

As the person responsible for organising finances during exchange and completion, your solicitor needs to be on top of the additional complexities that come with new build homes.

“A new build solicitor will be able to work with the many unique financial aspects of a new build transaction. This includes factoring in the mortgage offer expiry dates with completion of the build for off-plan homes, protecting your deposit funds should the developer go into liquidation before completion, and liaising with Help to Buy to ensure the relevant authority is obtained at each separate stage of the purchase transaction.”

Guarantees, planning permission and searches

Developers should include a new build home warranty on completion of the property purchase. Depending on the type of warranty provided, it should offer the buyers 6-10 years protection from any structural defects to the home. Your solicitor should make sure this is in place, as well as negotiating which fixtures and fittings – such as appliances – are included in your purchase.

Your solicitor will also be responsible for checking whether planning permission was obtained and that all planning conditions have been satisfied; making sure that building control completion certificates have been issued; and reviewing the local authority search results which contain information regarding any issues of contamination, rights of way and flooding.

“A lot can go wrong with a new build, not just as the homeowner but also should you decide to sell,” Stephanie says, “However that’s where having a good quality, experienced solicitor can make life a lot easier. We can protect clients from a number of potential issues further down the line by asking the right questions and making sure the correct documents are in place during the conveyancing process.”

If you’re looking for a solicitor to assist with your new build purchase, you can get in touch with Stephanie and the team at the details below.

If you are looking to make a move in the property market yourself or would like to speak to our property team about referring a client, please don't hesitate to get in touch on 020 3146 6300 or hello@lauruslaw.co.uk.