Protecting deposit between exchange and completion

Danz123

I am a FTB and have a mortgage offer in place for a new build due for completion in Nov 19 (pushed back from Oct 19). The mortgage offer however expires end of November, so in the event of any further delays (not impossible) we would have to get an extension from the lender. If the extension isn’t granted however, or if there are further delays and our extension expires, will we be on the hook for this and potentially lose our deposit if we are unable to secure another lender?

It seems totally odd that if there are delays to the build – something completely out of our control – and our valid mortgage offer expires and we are unable to secure another offer quickly, we could lose our entire deposit.

I have therefore asked my solicitor if a clause can be put into the contract to cover us for build delays and that there will be no penalty to us if our HTB/mortgage offers expire and we are unable to renew these successfully (unlikely, but nothing in life is guaranteed). No response so far from solicitor. Has anyone seen this type of clause inserted into a contract before, or am I barking up the wrong tree?

Any ideas of protecting our deposit if things go south after exchange with potential build delays and the expiry of a mortgage offer? Always good to apply some risk management from the outset rather than just hope for the best and trust third parties to hold up their end of the bargain.

SpiderLegs

Was your solicitor recommended by the developer?

Danz123

SpiderLegs wrote: »

Was your solicitor recommended by the developer?

Yes. We were recommended about 5 different legal firms and we picked one of them.

Freecall

Danz123 wrote: »

– and our valid mortgage offer expires and we are unable to secure another offer quickly, we could lose our entire deposit.

Not just your deposit, unless you have special provisions in your contract you will still need to complete or compensate the developer for any losses they incur while they wait for you to arrange new finance.

Welcome to the world of new-build housing purchase. Your solicitor should explain all this in some detail.

Danz123

Freecall wrote: »

Not just your deposit, unless you have special provisions in your contract you will still need to complete or compensate the developer for any losses they incur while they wait for you to arrange new finance.

Welcome to the world of new-build housing purchase. Your solicitor should explain all this in some detail.

So in a nutshell - I could face financial armageddon because of developer's overrunning on their build schedules causing their buyer's legitimate paperwork to expire. No strategies of mitigation then or am I entire at their mercy?

davidmcn

Danz123 wrote: »

No strategies of mitigation then or am I entire at their mercy?

You can negotiate a longstop date to be added to the contract, allowing you to walk away once it's gone past a certain date. Pretty commonplace.

SpiderLegs

Danz123 wrote: »

Yes. We were recommended about 5 different legal firms and we picked one of them.

Perhaps they don’t want to annoy the developer that is paying them a wedge for not asking difficult questions.

An independent solicitor would not have that conflict of interest.

Freecall

Danz123 wrote: »

So in a nutshell - I could face financial armageddon because of developer's overrunning on their build schedules causing their buyer's legitimate paperwork to expire. No strategies of mitigation then or am I entire at their mercy?

That's a fairly extreme way of phrasing it but if you have entered into a contract, you are obliged to complete and if you don't the other party (the developer) will be able to claim any losses from you.

In practice, if it only causes a a sort delay those losses could be tiny and may not be claimed anyway.

Of course if there were a sudden housing crash or credit squeeze or you lost your job then it would get more serious.

If you think there is going to be a delay, speak with your lender and try and get an extension is the answer.

... and remember, it may never happen!

chunkytfg

Just to confirm. You have not exchanged contracts yet?

Danz123

davidmcn wrote: »

You can negotiate a longstop date to be added to the contract, allowing you to walk away once it's gone past a certain date. Pretty commonplace.

This is helpful and I am aware of this, but this doesn't necessarily address the immediate issue of the mortgage expiring if there are significant build delays and exposing me to the risk of onerous penalties if I can't secure another lender. I will discuss with my solicitor about the longstop though.

Danz123

chunkytfg wrote: »

Just to confirm. You have not exchanged contracts yet?

That's correct, but it's imminent - likely in the next couple of weeks.