Protection for new build buyers?

pieroabcd

Hi,
since I'm interested in buying a new build, I'm wondering what kind of protection is in place for the buyer. For example, if the contract reads "delivery in september 2021", but  the delivery is delayed because the builder is not in time, what kind of compensation could I ask? When I asked a builder if there's any penalty for them if they delayed they said "no penalty", on the other side they told me that I have to actively chase my solicitor because if they didn't receive the paperwork in the expected time they would remarket the house.
Even if I asked a compensation, what would be the chance of having it, considering that the process would cost time and money?
I can already imagine having to pay a mortgage for a house that is still being built, or maybe having to search a new mortage because the bank is no more willing to lend the money for a house still not ready.
It looks all quite unbalanced to me.

Also, in other countries when paying the deposit for a new build there's a kind of freeze on the deposit (I think that the term is "surety"), that means that the money is transferred from the buyer to the seller, but the bank puts a freeze on it, making it impossible to access the funds until the freeze is removed. Is there anything like this in the UK?

teachfast

That's called escrow and there are services in the UK but I doubt the developers would agree to that. While the housing market is as it currently is, they have you by the short-and-curlies I'm afraid.

comeandgo

You would not pay a mortgage on a house not built but you may need to source another mortgage if your current offer has a time limit.  You need a solicitor not recommended by the developers who will insist on certain conditions but then again, the developers are selling houses so quickly they may refuse to sell to you.  Buy a piece of land and do a self build.  Not always possible but it’s quite the norm in rural areas.  You then call all the shots.

SDLT_Geek

pieroabcd said:

Hi,
since I'm interested in buying a new build, I'm wondering what kind of protection is in place for the buyer. For example, if the contract reads "delivery in september 2021", but  the delivery is delayed because the builder is not in time, what kind of compensation could I ask? When I asked a builder if there's any penalty for them if they delayed they said "no penalty", on the other side they told me that I have to actively chase my solicitor because if they didn't receive the paperwork in the expected time they would remarket the house.
Even if I asked a compensation, what would be the chance of having it, considering that the process would cost time and money?
I can already imagine having to pay a mortgage for a house that is still being built, or maybe having to search a new mortage because the bank is no more willing to lend the money for a house still not ready.
It looks all quite unbalanced to me.

Also, in other countries when paying the deposit for a new build there's a kind of freeze on the deposit (I think that the term is "surety"), that means that the money is transferred from the buyer to the seller, but the bank puts a freeze on it, making it impossible to access the funds until the freeze is removed. Is there anything like this in the UK?

The norm is that completion of your purchase only happens when the construction of the house has been finished and it is signed off. 
But builders rarely guarantee a date for completion.  Sometimes there is a "long stop date" after which you can back out.

AdrianC

pieroabcd said:

since I'm interested in buying a new build, I'm wondering what kind of protection is in place for the buyer. For example, if the contract reads "delivery in september 2021", but  the delivery is delayed because the builder is not in time, what kind of compensation could I ask? When I asked a builder if there's any penalty for them if they delayed they said "no penalty"

If it's delayed beyond the long-stop date on the contract, you can walk away.
Apart from that, the completion date is just an estimate.
If you don't like those terms, don't buy off-plan.

on the other side they told me that I have to actively chase my solicitor because if they didn't receive the paperwork in the expected time they would remarket the house.

If you don't exchange contracts, you aren't committed to the purchase, legally. Nor are they.
Of course they can remarket - subject to the terms of the reservation.

When you exchange contracts, you agree the completion period once the property's ready.
If you breach that, you're breaching the contract.

Even if I asked a compensation, what would be the chance of having it, considering that the process would cost time and money?

You won't persuade them to put that into the contract.

I can already imagine having to pay a mortgage for a house that is still being built

You don't drawn down the borrowed money until completion, when you move in, so that's not an issue.

or maybe having to search a new mortage because the bank is no more willing to lend the money for a house still not ready.

That's what the long-stop's for.

It looks all quite unbalanced to me.

Then buy a house that's already built.

Also, in other countries when paying the deposit for a new build there's a kind of freeze on the deposit (I think that the term is "surety"), that means that the money is transferred from the buyer to the seller, but the bank puts a freeze on it, making it impossible to access the funds until the freeze is removed. Is there anything like this in the UK?

What are you wanting to achieve with that?

When you exchange contracts, and pay that initial 10% over, you are legally bound to the contract.
Your £30k or however much is not going to be the difference between the developer going bust or not, if the long-stop is reached...

pieroabcd

Well, if there's no exchange of contracts before the completion and before the long stop date then it's all good. I thought that the exchange would happen before, but i must have been confused.
Thanks very much!

pieroabcd

comeandgo said:

You would not pay a mortgage on a house not built but you may need to source another mortgage if your current offer has a time limit.  You need a solicitor not recommended by the developers who will insist on certain conditions but then again, the developers are selling houses so quickly they may refuse to sell to you.  Buy a piece of land and do a self build.  Not always possible but it’s quite the norm in rural areas.  You then call all the shots.

that would be a dream :-) , but the rural side is my own personal nightmare.

user1977

pieroabcd said:

Well, if there's no exchange of contracts before the completion and before the long stop date then it's all good. I thought that the exchange would happen before, but i must have been confused.

No, you've misunderstood the advice above. Exchange of contracts will (typically) happen some time before completion. The long stop date is what enables you to pull out of the contract if construction takes too long.

pieroabcd

user1977 said:

pieroabcd said:

Well, if there's no exchange of contracts before the completion and before the long stop date then it's all good. I thought that the exchange would happen before, but i must have been confused.

No, you've misunderstood the advice above. Exchange of contracts will (typically) happen some time before completion. The long stop date is what enables you to pull out of the contract if construction takes too long.

ah, so i have to  make sure that the long stop date isn't unreasonable and doesn't fall past the end of the mortgage offer.
Thanks for pointing this out.

superblade

For info though you can typically extend your current mortgage offer by an additional 6 months. We're buying a new build that is about 10 months to completion. We have to extend the mortgage offer in November to cover the next 6 month period. Ask your broker / mortgage company if they allow extensions for new builds and if so how long for.

newbuildbudget

We are buying a new build and queried this. Estimated completion is August and our long stop date is 6 months on. We have already exchanged (as is completely normal on a new build), but if we are not in the house by end of Feb 2022 we are fully within our rights to pull out and they will return our deposit to us as they are in breach of contract.