New build exchange to completion query

London68164

I have a question regarding post exchange of contracts for a new build property. We recently had a new mortgage offer and completion date is Jan/Feb 21 but are yet to exchange our contracts. Part of me worries that with the figures we are seeing at the moment there potentially could be a second spike of COVID. My partner works in the hospitality industry and is currently on furlough with the hope of returning in October. If there was a second spike and the company was affected further, I think there is a high chance of them being made redundant. Obviously once we have exchanged contracts (which I’m sure is fairly imminent in the new build timeline) we have entered that legally binding agreement with the developer until completion and with a change In circumstances, this mortgage offer could be withdrawn. If that’s the case we could lose our deposit which would ultimately be our life savings. I was wondering whether anyone had any advice about this and how we can manage the situation as best as possible?
I wonder how much we can delay the exchange of contracts so that we know what happens when the furlough scheme ends and can see whether there will be a further spike in COVID and any fallout from this?
I also heard some people talking about rider clauses entered into the contracts so that should the sale be affected by something COVID related then we can leave the sale and be refunded our deposit. Again is this something that is fairly common place and should I be asking out solicitors to ensure this is included in the paperwork?
Thanks for your help!

SMR710

If your partners job has the potential for redundancy and you're not confident you can afford the house (I.e. bank agrees by their affordability checks) then I would not be looking to buy said house ☹ if you exchange then cannot complete, you will lose your deposit and could even be liable for further costs depending on your contract (such as upgrades/ extras / developer legal fees etc)
It's a rubbish time isnt it. But banks assess on your perceived ability to repay over the term of the mortgage so dont do anything you cant potentially afford even in the next 6-8 months. 
Good luck either way.

davidmcn

London68164 said:

I also heard some people talking about rider clauses entered into the contracts so that should the sale be affected by something COVID related then we can leave the sale and be refunded our deposit.

I haven't seen any drafting on how "something COVID-related" is being defined. Sounds a bit nebulous. If you were, say, made redundant, would you have to prove that was "COVID-related" rather than for other economic reasons?

OldMusicGuy

We are in the process of buying a new build and had a coronavirus rider added to our contract for sale. I don't have the contract to hand but what I remember was that it allowed for delays to the agreed dates in the event of coronavirus impacting the transaction process. So, for example, if the notice to complete had been issued (giving us 10 days to complete on the purchase) but there were delays such as a solicitor falling ill then the standard penalty provisions would not be enforced straight away. It was more about protecting the solicitors if they were unable to perform tasks in line with the agreed dates due to coronavirus.

What it definitely did not do was to allow us to back out of the sale with no penalty once we had exchanged. So if you are concerned that you might lose a mortgage offer, you will be taking a big risk in exchanging. Your only choices will be to wait until all this is over or try to exchange and complete on the same day, which I think will be tough with a new build as usually they like to exchange pretty quickly.

Get a copy of your draft contract of sale asap and take a look. These will be the legally binding terms that you will be agreeing to.  

bucksbloke

I think it depends on the developer. I know people who have a rider which states if mortgage is withdrawn or NTB deadline not met due to COVID they do not forfeit deposit. 

OldMusicGuy

bucksbloke said:

I think it depends on the developer. I know people who have a rider which states if mortgage is withdrawn or NTB deadline not met due to COVID they do not forfeit deposit. 

So OP you must get a copy of your draft contract of sale and see what COVID-19 rider if any is in there. You might be pelasantly surprised....or you might not!