Are you aware of the potential pitfalls of buying a new-build property?

Lindsey Faulkner, of our Conveyancing Team, discusses the hidden dangers of purchasing a new-build property.

Recently, the BBC’s Victoria Derbyshire highlighted a trap for new-build home buyers in the UK. According to the report, thousands of home-owners are finding out that they have purchased new-build, long-leasehold properties where the cost of purchasing their freehold is now unaffordable.

Why purchase a new-build?

New-build properties appeal to home buyers for several reasons. Many people like that they will be the first and only people to have so far lived in the property and as it’s new, repair and redecoration costs should be very minimal for the first few years. Buying a new-build can have its pitfalls for the unwary or the poorly advised.  

Leasehold Properties

There has become an accelerated trend where new-build houses are being sold as leasehold with purchasers being told that they will be able to obtain the freehold of their properties at a later date. This means that buyers don’t immediately own the land on which their property stands. What isn’t being communicated clearly to potential buyers is that developers are selling on the freehold to an “independent” company who then inflate the cost of the freehold tenures to unaffordable prices for their own profit.

Freehold Tenures

Although many developers and companies allow people to do so, there is no automatic right to being able to purchase the freehold of a property you have on a long-term lease, as would be the case with a block of leasehold flats.  

Other potential issues that can arise with new-build properties are as follows:

• Possible Delay in Completion

We have, in the past, acted for new-build purchasers whose purchase has been put on hold due to issues between the developer and the Local Authority amongst other issues which may delay the completion. This has the potential to delay completion of a development or to stop the development entirely. These issues are rare, but they are possible. Such issues often cause problems with mortgage offers expiring or where temporary tenancies for the buyers are coming to an end.

• Management Companies

Another pitfall of purchasing a new-build property are the costs associated with having a management company. Sometimes, the management companies set up to maintain the development are not structured correctly which can cause problems for the residents after completion. Further, most new-build developments require home-owners to contribute to maintenance and repair by way of service charges and/or ground rent payments, which are not fixed costs. These are usually made monthly (or annually) and can increase the cost of living on the development quite substantially.  The cost of maintenance for shared spaces can also be extremely high. For example, shared driveways where weeds need removing, or repaving needs to be undertaken can substantially increase costs.

The Process of Buying your own new-build

The purchase process is like that of an older property, however, it is common for developers to suggest that proposed purchasers use their recommended legal advisors to complete the transaction. This is often done to help provide a smooth transition between the parties, however, most buyers prefer to use their own, separate solicitor who is fully independent and is acting only in the interests of their client. Many developers have 28-day exchange deadlines for new-build properties to secure the sale. This means that your legal advisor must have everything in place ready for the deadline. Depending on the circumstances, this can be difficult to achieve.

How can we help?

Our goal at Bradley Haynes Solicitors is to help you purchase the new-build property that you have set your heart on and to make sure that all the potential pitfalls have been dealt with and explained, so that you can make an informed choice to buy the property.

Bradley Haynes Solicitors has a specialist residential property team that are here to provide tailored advice to suit individual circumstances, including whether purchasing a new-build or leasehold property is really the right decision for you.

We appreciate that purchasing your first house to get yourself onto the property ladder, or buying your family home to raise your children, can be a life-changing decision and it is vital that you get the support you need.  

For further information or to make an appointment please call us on 01905 900 919 and one of our specialist property team will be more than happy to help.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at 14 February 2017. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.