The death of simultaneous exchange and completion?

The time between exchange and completion has shortened considerably and more and more transactions are concluded through  simultaneous exchange of contracts and completion.

The recent Court of Appeal decision in Santander v R. A. Legal Solicitors has cast serious doubt on whether this practice is exposing conveyancing solicitors to the possibility of a breach of trust claim

The decision at first instance in Santander v R. A. Legal Solicitors  [2013] EWHC 1380 (QB)  confirmed and clarified the Court of Appeal's decision in Nationwide v Davison’s [2012] EWCA Civ 1626 as to when solicitors should be relieved from the consequences of their breach of trust.

The facts are as follows.  R A Legal Solicitors had acted for the purchaser of a property, for which Santander’s predecessor, Abbey National, had made mortgage funds available to the buyers solicitors to facility the buyers purchase.

Unknown to the buyer’s solicitors, those solicitors acting for the seller had been acting dishonestly, and the buyers solicitors had transferred the purchase sums before a first charge in favour of the lender had been acquired and an existing charge discharged.

The Queen's Bench Division held that, whilst the buyer’s solicitors had acted in breach of trust in releasing the funds advanced, the they were relieved of all liability in respect of that breach since the shortcomings of the solicitors handling in relation to the transaction were not an effective cause of the lender’s loss.

On appeal, the Court of Appeal did not agree and  found in favour of the lender finding:

“The failings of RAL ( buyers solicitors ) formed part of a larger picture of the shoddy performance of a conveyancing transaction from start to finish, which leaves me in no doubt that it would not be fair to excuse the firm from liability, in whole or in part.”

Significantly, and central to the success of the appeal  is the fact the Buyers solicitors  sent an unqualified certificate  of title to Abbey on the 13th July, even though they were waiting to inspect a copy of a 1986 Transfer. Their view was if the Transfer contained anything untoward Abbey’s money could be returned. This was done in order to speed up the eventual process of exchange and completion.

Condemning this practice the Court of Appeal stated:

“The appropriate way of dealing with delays is to persuade lenders to move faster or remit the funds to be held to order in advance of an unqualified CoT. To my mind the pretense that the investigation of title has been completed when it has not is a method of dealing with that difficulty which borders on dishonesty. The submission that unqualified CoTs are given frequently prematurely makes this misconduct all the more serious.”

This was one of many failings on the part of these solicitors and which viewed collectively pointed to a firm who had acted recklessly with the handing of money belonging to a third part to whom the solicitors owed a duty of care.   The other failings included the incomplete submission of requisitions, the submission of the mortgage monies to the seller’s solicitors in the absence of an undertaking to hold the monies to the order of the solicitors, failure to check the replies to requisitions and a total disregard of the completion code.

Rob Hailstone of the BOLD Group which represents a number of conveyancing practices today issued a very helpful note on the lessons to be learned from this decision and which act as a timely reminder to all practitioners to carry out an urgent review of processes.    I have set out these ‘lessons’ below.

More significantly however are the questions this decision leaves unanswered relating to the duty of care owed to a lender in circumstances where a simultaneous exchange and completion take place. 

The questions are as follows:

Is there a breach of our obligation to the lender to submit a COT in circumstances where we have certified that we are satisfied there is a good and marketable tile, but we have yet to exchange contracts?  Or putting it another way, should we only ever submit a COT once exchange has taken place?

If  a COT can be submitted before exchange, is it permissible given the CoA ruling to send mortgage funds over to the sellers lawyers (after making checks on the solicitors and checking carefully replies to requisitions) in readiness for completion providing we have a full and satisfactory undertaking from the sellers solicitors to hold the monies strictly to our order?

If is not then does it follow that simultaneous exchanges and completions on mortgage related transactions should no longer take place?

Here are Rob’s tips (rh@boldgroup.co.uk)

·         Raise your requisitions making sure that all relevant questions have been specifically highlighted and asked

·         Make sure that the replies to requisitions correspond to the correct questions, are specific, detailed and accurate

·         Do not submit your CoT until all title investigations have been completed to your satisfaction

·         Do not hold on to the mortgage advance if completion is delayed, without consent from the lender

·         Make sure that the Completion Code applies and it has been formally agreed to Complete by Post

·         Make sure that you receive all outstanding documentation by post immediately after completion, including any undertaking or form of discharge

·         Take correct and swift action if completion does not take place, outstanding documents are not received and/or vacant possession is not granted

·         In an ideal world (the judges seem to think we work and live in one), do not submit a CoT until exchange has taken place and do not agree a completion date that is less than five working days from exchange. Maybe we should get lenders to stipulate that this has to occur, thereby eliminating the dangerous and stressful practice of simultaneous exchange and completion?

Good News for Home Buyers - Cost of moving is set to reduce in Spring

The cost of buying a home is to be reduced shortly following an announcement from the government agency responsible for maintaining the register of property titles, The Land Registry.  

If you have purchased a property you will be aware that on the sale of any property the buyer’s solicitor has to apply for registration of the transfer with the Land Registry, and pay a fee for the service.

The good news for home buyers is that the Land Registry has announced that it will be halving the fees it charges home buyers as from 17 March, with the immediate consequence that the transfer fee for an average-priced home will fall from £190 to £95.

This registration fee is payable after the purchase transaction completes, so the benefit of the reduced fees will be passed on to buyers whose purchases are completed on or after 17^th March.

The amount of the fee is based on a scale varying with the purchase price.

This reduction has come about due to the Land Registry’s electronic Document registration Service (e-DRS) which allows buyers’ solicitors to submit the majority of transfer applications digitally.   This has also led to a reduction in the time it takes to register the title with the Land Registry. 

Here is a guide to the new fee structure for the electronic submission of applications.

Purchase price	Old fee	New fee
£0 to £50,000	£40	£20
£50,001 to £80,000	£70	£20
£80,001 to £100,000	£120	£40
£100,001 to £200,000	£190	£95
£200,001 to £500,000	£270	£135
£500,001 to £1 million	£540	£270
Over £1 million	£910	£455

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Housing Market - 2013 Review and 2014 Predictions and Fears

2013 Summary

In January 2013 the Nationwide Building Society measuring price changes from December 2011 to December 2012 showed a national fall of 1% leaving the average price of a property at just over £162,000.

Moving to the end of the year this picture has changed dramatically with the latest data disclosing the average price at £174,500 and national increase of between 5 ( Nationwide) and 7.7 %(Halifax).  This has been fuelled by increased transactions and a dramatic increase in mortgage lending. The Land Registry has a more modest estimate of value growth if 3.1%.

Whichever of these statistics  you rely on it is clear that that there has been a significant increase in prices within the last 12 months. 

The Nationwide reported in November a 34% increase in mortgage lending. 

As for total transaction numbers, the Council of Mortgage Lenders estimate this will exceed one million, which compares favourably with the 1.6million figure for the boom years 2006 and 2007.

The rental market has also faired extremely well this year with the monthly lettings index from Countrywide disclosing average national rents up 4.2pc over the year to November. The increase in property value has however had a negative impact on the rental income relative to property price yield, with the yield, according to the specialist buy to let lender Paragon, falling from 6.7% to 6% on the year ( November 2013 to November 2014)

2014

House prices are predicted to continue to rise with the Government predicting a 27% price increase by 2018.  

It is also predicted by one leading buy to let broker that buy to let transactions are likely to increase in 2014 by at least 25%. 

All good news but what are the possible barriers to these predictions becoming reality?

Interest rates remain at a record low but what is likely to happen if these suddenly increase.  Looking at the varying views on this most commentators believe we will not be seeing an increase until the early part of 2015. 

Another fear relates to the global economy and how this still remains in a very unstable state.  Central banks remain unclear about how and when to remove the colossal stimulus they have provided for their economies over the past five years and of how this will impact on growth.  On top of this is the fact that many of the problems which led to the near collapse of the banking system has still to be addressed.  All of this has led some commentators to predict that we may be on course in 2014 for yet another economic crisis. 

in conclusion with everything else being equal 2014 should be a good year for those working in the property industry though given the unexpected collapse in 2007 who am I to say this can be guaranteed!  Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Confusion around liability for church repairs continues

October of this year saw the introduction of new rules on Chancel repair liability.

This is the liability of an owner of land to pay for repairs to the chancel of a parish church. Owners affected include individual homeowners as well as ecclesiastical organisations, universities, colleges and others. Land does not have to be near a church building in order to be liable.

The amount of this liability can often be significant and  therefore this is an issue which you must ensure your legal advisor addresses when purchasing or remortgaging your home. 

Prior to the change of law introduced in October this liability if it existed in an area including the property you were purchasing or remortgaging  you would be exposed to a demand whether or not you were ware of its existence.   For this reason a competent property lawyer would carry out a search to see if the  liability existed and if it did to take out insurance to protect you if a claim was brought. 

Since the 13th October the liability will, in general terms, only be binding on you if the person or body who has the right to make the claim has registered the liability with the Land Registry.  In other words, you would only be exposed to the liability if notice of the existence  is shown in the title document of the property to be purchased or remortgaged.  

I say this is the general rule but there are situations when even if the liability was not registered  prior to the 13th October at the Land Registry it may still be binding on you. 

Registered land

For registered land, where a notice has not been entered, liability for chancel repair will continue until the first transaction for value is registered at the Land Registry (not a dealing at nominal value or a gift or transfer on inheritance) after 13 October 2013.

This means if the right to claim for the cost of church repairs was not registered with the Land Registry by the 13th October, it could still be binding on you when purchasing a property after that date. If you are purchasing a property after the 13th October and there have been no change of ownership in the interim it is important to check the Land Registry register for any notice of chancel liability which may have been registered before you exchange contracts and to also ensure your solicitor takes steps with the Land Registry to provide you with a protection period between exchange of contracts and registration of your ownership with the Land Registry. 

You should also consider taking out protection against the liability if you are remortgaging or gifting property 

Unregistered land

In the case of unregistered land, chancel repair liability will continue to exist in the same way; If any chancel repair liability is not protected by a notice or caution before your ownership is registered, you will take the property free from this liability.

In short when purchasing or remortgaging or gifting a property please ask you solicitor for reassurance that steps to protect you from this liability will be taken. 

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

CQS and Lender Exchange - Lets keep an open mind

Before we become defensive and begin casting negative thoughts lets wait for the detail to be supplied.   Why do we all  look at  the introduction of new systems as an attack on our profession?  We should  for the moment keep an open mind, writes David Pett, Director of MJP Conveyancing Limited. 

My thoughts in the meantime are as follows:

A platform of this type was inevitable and if it is introduced properly can only serve as an effective means of combating fraud and ensuring consistency on lender panel criteria.   The sooner the profession comes to terms with the fact that conveyancing is there for the serious players and not the ‘dabblers’ the better it will be for us all.  Why should we not accept with open arms a system which will allow us to apply to join all panels with one application and hopefully one fee?   Why not allow a system to operate which will ensure consistency in application of anti fraud and money laundering measures?  The Santander portal should demonstrate to us all that  lenders are entitled to be stringent in their vetting and control over firms who handle their money.  I am shocked by the level of contribution to the solicitor indemnity fund which we are expected to make this year.  We should all be asking ourselves why is so high and what is being done to ensure that those who do not have correct and effective systems and processes in place are not allowed to practice in property law.

Surely a portal of this type must be a more attractive option than separate representation.   If firms can not get onto the panel of lenders then there must I agree be good reason for this and if there is then we should respect that.  Looking at the Land Registry Data there are literally thousands of firms who only undertake a few completions each month - is it completely unthinkable that these firms should be excluded from lender panels?

As for the Law Society Portal do we need this, surely the money would be better spent promoting CQS firms to the public and looking at ways of changing and improving our archaic system for conveying property.  Why spend money building a system when the current system as we all know does not work!   Madness. Why also waste time and money building a system when the national protocol around which it will be built is not compulsory.   What happens when one firm who has bought into the portal deals with a firm which has not or where there is chain and one firm is sitting outside the portal?

Why also add costs to the process when most firms who take conveyancing seriously already have sophisticated case management systems? These systems will need to be adapted and integrated so as to avoid duplication  - yet more cost which we could do without. 

At the end of the day we all know that whatever the Law Society touches turns to dust as the Law Society’s HIP offering clearly demonstrated.  Do we therefore need to worry or be pro active in our response to their proposals?   They approved a contractor without consultation with members and are now determined to waste our money on a scheme which has ‘doom’ written all over it. 

I hope I am proved wrong. 

My property transaction is moving much too slowly. How can I speed it up?

Despite what you may hear from family and friends conveying a house or flat is not as straightforward as you may think.    There is not such animal as a ‘straightforward’ transaction and in the majority of cases there are issues which need to be addressed not only on your behalf but also on behalf of your lender if  you are borrowing money. 

Conveyancing takes time – most ‘delays’ are nothing of the sort, it just takes time to get searches and replies to enquiries and in many respects your solicitor is dependant on others over whom there is little control to provide input.   If you are in chain, everyone goes at the pace of the slowest link.  

Do ask you solicitor why things are going at the pace they are. Some are more proactive than others – if they are vague or don’t return phone calls then it is worth pressing them or asking to speak to a partner or director.

Estate agents can be important in chasing the seller and rest of chain to return documents as your solicitor will only be dealing with the other solicitors involved on your sale and/or purchase. Remember however estate agents have a vested interest in ensuring that transactions are progressed promptly and therefore some do become embroiled in the game of blame apportionment.   Don't always believe an agent if the agent says its your solicitor who is dragging his or her heels. 

Imposing a deadline can sometimes work but it is risky. It should only be used if you are actually prepared to withdraw if it is not met. Imposing a deadline should only be used if people really are delaying – there is a good chance that it will not achieve anything as if there is a genuine hold-up then it will be impossible for it to be resolved any quicker and will just aggravate everyone involved in the chain. 

If there is a major delay you will need to decide whether you are happy to wait or not. Please try to keep a good relationship and a three way dialogue with conveyancer, agent and your seller or buyer.  This is the best way to ensure that a transaction goes smoothly – just remember, some things do take a while!

Always work with and not against your solicitor and keep in mind that your solicitor may be handling a large number of transactions in addition to yours.    Only ever contact your solicitor if is absolutely essential.  Many solicitors find it difficult to progress transactions because of the time they spend ion the phone answering routine client requests for updates. 

Some solicitors operate as we do online updating software which makes it easy to obtain progress reports 24/7. MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Will the Mortgage Guarantee Scheme trigger a 'Boom and Bust' legacy for the Conservative Party?

The mortgage guarantee scheme is designed to help first-time buyers and existing property owners move up the housing ladder providing borrowers with a 5% deposit the opportunity to buy property worth up to £600,000.

The Government will guarantee up to 15% of the loan at a cost to the lender, allowing the borrower to access cheaper mortgage deals.

This differs from the first stage of Help to Buy.   That scheme allows people taking their first step onto the property ladder to borrow up to 20% of the value of a new build home from the Government, interest-free for the first five years.

Borrowers need a 5% deposit and must take out a mortgage to cover the remaining 75% of the cost of the property.

After the five-year interest-free period ends, borrowers will be charged a fee of 1.75% of the loan’s value. This fee will increase every year at 1% above inflation.

These fees only count toward the Government loan and come on top of the mortgage repayments. Borrowers must pay back the equity loan when they sell the home or at the end of the mortgage period - whichever comes first.

The mortgage guarantee scheme  - Help to Buy 2 - is available to both first-time buyers and existing homeowners buying new build and older properties.

Borrowers will need a 5% deposit, while the lender will be able to buy a guarantee from the Government covering up to 15% of the value of the property.

Both phases of the scheme are available on properties worth up to £600,000.

So what are the pitfalls?

If house prices fall, hundreds of thousands of buyers on the scheme could be left in negative equity.

If a property is repossessed because of default of the borrower, the Government will guarantee 75% of the part of the loan above 80% of the loan to value. The borrower will meet the other 25%.   If there is insufficient funds to meet the loan the borrower will still be liable to the lender for the whole of the loan even the part guaranteed by the Government.

The other key question is whether mortgages offered through the scheme will actually be any cheaper than those on the market at the moment, and whether enough lenders will take part.

Banks need to pay a charge to have their mortgages guaranteed by the Government, so are likely to build this sum into the total cost of the loan.  It is likely that a sum equivalent to 1% of the value of the property is to be placed into a reserve to cover defaulters.  The cost of this will be passed onto the borrower.

Are these schemes the real solution to Britain’s housing crisis?  Will they not keep house prices artificially high, giving people no choice but to take out large loans that could run out of control if interest rates rise?

Cambridge University study found last year that although shared ownership schemes allow them to buy their first home, they do nothing to help them buy their next home.

Cynics will say all of this amounts to nothing other than political engineering reminiscent of the type of policy that led to the ‘boom and bust’ years.  Ironic in some way given this is a Conservative policy.     We will just need to see what time brings. 

MJP Conveyancing  are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Property Law Implications of Fracking

What is Fracking?

It is a process whereby natural gas is extracted from beneath the earth though hydraulic fracturing.  It is not a new process; it has taken place in this country for many years now. 

This type of mining has in the United States led to a substantial reduction in the price of gas for industry and consumer – a reduction of around a third. The Government is hoping for a similar result in the UK  given the existence of massive reserves of shale gas.

There is no legal framework for governing Fracking within the UK. The Government hopes the current safeguards built within environmental and planning law will be sufficient to protect the environment and communities.

So who owns the shale gas? 

In the US it belongs to the landowner whereas in the UK the Crown owns it (Petroleum Act 1988).  So there is unlikely to be Dallas like windfalls on offer.

However to mine the gas the contractor still needs the consent and the cooperation of the landowner to be able to drill down for the extraction to take place. If the drilling company proceeds without their consent and co-operation, it could face delays in starting or continuing to drill or it could find itself unable to drill or continue drilling at all. One project could given the horizontal drilling involve a multiple of landowners as the local authority and the regulators.

Can a landowner claim compensation?

A Government licence is needed to extract it. The licence holder can obtain ancillary rights under the Mines (Working Facilities and Support) Act 1966 - for example, to occupy land, to obtain a water supply, to dispose of effluent, to erect buildings and to lay pipes. The court will grant such rights if it is not possible to agree terms with the Landowner.

Compensation and costs can be sought from the contractor and if necessary awarded by the Court though the measure of that compensation will be based not on the value of the extraction by the contractor but rather the financial loss the landowner will suffer by not having the land available to use.

Common Law and Statute therefore offer protection to the landowner and financial recompense as well as costs will be available.  How the law dovetails with the owners of mineral rights (which need to be registered at the Land Registry by 12 October 2013) and the rights of adjoining land whose land the process may damage/disturb remains to be seen.

MJP Conveyancing  - David Pett

Beware of the Help to Buy Scheme

The Help to Buy shared equity scheme designed to get people onto the housing ladder has its benefits but those who may be enticed by developers to make use of the ‘leg up’ must exercise some caution.

There are clearly signs that the property market is recovering, with the Royal Institution of Chartered Surveyors reporting that demand rose to its highest level for more than three years after the April launch of Help to Buy. New buyer inquiries were at their highest level for more than three years, and the scheme was starting to make an impact, the institute said.

However some of the methods developers are using to market their properties to first-time buyers who might be eligible for the Help to Buy shared-equity programme are being called into question.

What is the Scheme?

Under the scheme, which is expected to trigger 74,000 sales, the taxpayer provides an interest-free loan of 20pc of the purchase price for five years, to enable a borrower to buy a newly built property. Home buyers still need a 5pc deposit, but this additional loan should enable them to buy a property they couldn't otherwise afford. Help to Buy mortgages can be used on properties valued up to £600,000.

Participating mortgage companies will then grant an advance of the remaining 75pc of the value. After five years, the homeowner has to pay interest on the outstanding 20pc at a rate of 1.75pc, although this will rise by inflation plus 1pc annually thereafter.

However, it has been reported that developers are marketing their properties at prices 20pc below the correct asking price, implying that the equity loan is a discount or free gift.

A property for sale by a certain large developer, for example, priced at £439,500, was also advertised separately at £351,600 – indicating that the property was cheaper than it actually was.

Slicing money off the price implies it is a gift from the Government. It is not. An equity loan is precisely what it says it is. It is a loan that has to be repaid. This may encourage people to take on debt, which is not understood, or to overstretch themselves and buy properties bigger than they can afford.

New homes tend to be more expensive. According to the latest report from Halifax, the average cost of a newbuild home is £233,822. This compares with the average property price of £166,000 in April.

Indeed, a large section of the mortgage market has turned its back on the new shared-equity scheme. Only Halifax and NatWest, both part-owned by the Government, have embraced the scheme enthusiastically, although Woolwich is also offering Help to Buy loans.

So what are the pitfalls of this scheme?

·    You can participate only if you do not own any other property.

·   If you want to buy the Government out, you can do so, but there will be costs. You can increase your equity, but only in 5pc slices. Each time the property must have an independent valuation, which you will have to pay for.

·    You may also face problems if you want to extend or alter the building, as you have to seek approval, which may not be forthcoming. Increasing the value of the property through a large extension can make subsequent equity valuations problematic.

Advice

·     Buying a new property means you will be invariably be paying more for the property than the equivalent second hand property so make sure you look to negotiate the price down.

·    Look to work out how much you will paying under the scheme and the mortgage in 5 years time – will you be able to afford it.

·     Don’t be drawn in by misleading sales talk.

·     Remember it will  be expensive to increase your equity in the property.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Do not purchase a New Build Property without first reading this....

Buying a property which has yet to be built, or which is newly constructed should be approached with care and here are some tips which will help:

Remember those friendly and helpful people within the sales offices are sales people and are no different from those people who you would find in car and double-glazing showrooms.  They are paid on results and work under the pressure of targets.   Once they have you signed up they will be your best friend and be in regular, sometimes daily, contact until they have collected all of you money.   There are many instances when this shadowing could be conceived as harassment.  If you consider there is undue pressure look to see if the developer subscribes to the Consumer Code for Homebuyers (http://www.consumercode.co.uk) and make a complaint.

• At the outset you will be asked about whether you have a mortgage and a solicitor to undertake the legal work.   You will be steered towards making use of the developers preferred brokers and solicitors.  These are ‘partners’ who have been chosen to work with the developer as the developer expects those partners to report to them regularly and to do all they can to ensure the developer meets its sales targets.  The sales team will push you to use these partners often saying it will be less expensive and a lot quicker.  More than often it is not.  I have heard of a case where a potential purchaser who was insisting on using her own solicitor was told she could only do so if the developer’s head office permitted it!  There is also a high level of misinformation given about other conveyancers e.g 'they are too slow', ' they are not very good'. 'we would not recommend them' etc 

• The use of the developers preferred partners should be avoided for several reasons

• How can you guarantee that the preferred partner is not acting with only you best interests at heart?  The ‘tie in’ with the developer could lead to a conflict of interests. They might be less willing to advise you not to purchase in fear that if they did this could lose a tie to a lucrative source of work. This a particular risk when purchasing a leasehold new build property and when advising on onerous rent review clauses.  

• You may not be getting the best deal in town.   You may be able to get a more competitive fee/mortgage product elsewhere if you were able to shop around.

• Make sure before you sign the reservation form and part with your hard earned cash that you seek legal independent advice because once signed you may if you withdraw lose your reservation fee.  If the developer subscribes to the Code you should be able to recover most of your reservation fee. 

• Many developers are selling more properties on the back of the Government’s Help to Buy Scheme.    This is a gift from heaven for some sales teams as is makes the sale that much easier.  Beware however of signing up before understanding fully the ins and outs of the scheme.  I doubt many of those selling understand the scheme and are failing to provide any or an adequate explanation of its workings at the point of sale. For further information visit here: https://www.gov.uk/affordable-home-ownership-schemes/help-to-buy-mortgage-guarantees    Keep in mind you may be paying more for the property than you might have otherwise paid if you had purchased outside the Help to Buy Scheme.  Always get the property independently valued. 

• There are other important aspects of the purchase which you may not be told about at the time you are asked to sign the reservation form

• If it is a leasehold flat you will be required to pay an annual service and ground rent charge even if the estate is not fully developed. This can amount to an extra payment of £200 – £1000 each year.  The ground rent charge is likely to be reviewed and increased from time to time. Make sure you understand the basis of the review.  Onerous rent review clauses could make the property difficult to sell.  My advice is not to purchase a new build leasehold where there is a rent review clause that provides for the rent to double at regular intervals. 

• If it's not a flat you may still be required to make a contribution towards the cost of maintaining shared facilities such as a play area for example.

• You will be required to pay a contribution to the cost of the developer’s legal costs even though the documentation is on a word processor and takes little effort and resource to produce.

• It is unlikely that you will see your final completion statement detailing extras and other expenses until a few days before you complete making it difficult for you to query figures.

• There is a date by which you must exchange otherwise you will lose your reservation fee. Make sure you are happy with this deadline and if you agree   new deadline make sure it is confirmed in writing and be careful as it is known that contracts can be withdrawn before exchanged with little notice, especially if the sales office can find a buyer who might be prepared to pay a higher price.  

• The contract and other legal papers you will be required to sign are looked upon as ‘closed’ meaning the developer will generally not allow your solicitor to make any changes to the provisions it contains.  

In conclusion my advice is as follows:

• Ask yourself is a new build the right property for you  - don’t get carried away with the sales talk. 

• Always take independent legal advice on the legal aspects of the purchase before signing a reservation form and handing over the reservation deposit.  If in doubt see if you can agree a reduced deposit so as to minimise the penalty if you have to pull out before signing the contract to purchase. 

• Resist the pressure and tactics deployed to persuade you from the using the developers preferred legal or broker partner and make a free choice on the advisor you choose to look after your interests.

• Make sure the sales person tells you all about the Help to Buy scheme if it applies and also about all hidden costs such as service charges and ground rent.

• Find out before you sign what other building is to take place around the plot you are purchasing and when will the whole development be concluded.  Ask also about the developer’s policy on Social Housing and where this part of the development is to be based.  These are important factors since they could impact on you use and enjoyment of the property.

• If the purchase involves a doubling rent review clause keep well way from the property. 

MJP Conveyancing are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidp@mjpconveyancing.com