9 January 2015 by Sonal Ghelani

Buying ‘Off Plan’: The pros and cons of purchasing a newly constructed home

The Government pledged in their Autumn Statement to build tens of thousands of new homes to try and deal with the housing shortage with which the country is faced . As such, brand new properties are becoming readily available and are often an attractive option for buyers whether for investment purposes or to live in. They are energy efficient, chain free, and are generally built to a high specification.

If you are considering buying a new build property there are various pros and cons you should consider as follows:

Pros:

1.  Incentives

Developers will often sell a new flat or house with the benefit of financial incentives, such as a contribution to your legal fees, your stamp duty or the deposit.  These can all help to ease the financial burden.

2.  Structural Warranty

Most new build or newly converted properties come with a structural warranty which is an insurance product that provides cover to the structure of the property. This protects against defects due to the design, workmanship or materials that have been used to build the property. This cover is normally for 10 years.  Such warranties give you assurance that the property has been built to a high standard.

3. Energy Efficiency

Current regulations require new builds to be constructed to high energy efficiency standards.  Many homes have the latest double glazing and boilers or even solar panels fitted all of which will assist in reducing both energy usage and costs to homeowners. Properties must also include up to date safety features including fire safety and compliance with the latest building codes.

Cons:

1. Finance

The new development may not be completed for several months or years after you have exchanged contacts. If you require finance you will need to ensure you are able to either have a mortgage approved in principle or will be able to obtain one when you are required to complete. Often mortgage offers are only valid for 6 months, so you should bear that in mind.  Failing to ensure you have finance in place for when you are required to complete, could mean you risk losing the deposit and reservation fee as well as  being sued for breach of contract and loss suffered by the developer.

2. Reservation deposit

Normally with new properties you are required to pay a reservation fee to secure the plot, this can be several thousand pounds. If you subsequently change your mind, you would lose that reservation deposit.

3. Delay

There may be circumstances which arise causing the developer not to  complete construction within their initial estimated timeframe thus meaning that completion could be delayed. Contracts normally include a long stop date to ensure that if you decide you cannot wait beyond a certain time you are able to withdraw without risking losing your deposit and reservation fee.  Also long delays could potentially mean that property prices change and the sum you have contracted to pay doesn’t reflect the market at the time of completion.

For more information on new properties please contact Sonal Ghelani on 020 7288 4705 or sonalghelani@boltburdon.co.uk

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