Top of chain purchasing new build, how to manage exchange and completion

TCPIP_Fox

Just looking for general guidance and experiences from others in a similar situation.  

My vendor is purchasing a new build after pulling out of their initial purchase.  The estate agents advised their new build will be ready mid Jan which is fine.  My buyer is an FTB, they’ve requested to my solicitors they need two months notice for their landlord.  So we’re looking at two months maybe one to complete after exchange.

what I’m trying to gauge is how the completion works for new builds.  From what I’ve read new builds have exchange within 28 days and completion within 10 days.  But, since my buyer needs two months can my vendor accommodate that request? 

I’ve asked the estate agents if the vendor is willing to rent if their house isn’t ready.  Still waiting on a reply.  

I’ve also considered living with family if my buyer wants to complete as soon as they’re ready.  But, I’m not sure if I can put my mortgage porting on hold?  

TIA

eddddy

TCPIP_Fox said:

what I’m trying to gauge is how the completion works for new builds.  From what I’ve read new builds have exchange within 28 days and completion within 10 days.  But, since my buyer needs two months can my vendor accommodate that request? 

The way it usually works with newbuilds is...

• The developer wants the buyer to exchange contracts within 28 days of the offer being accepted.

• There is no completion date specified (because the developer cannot be sure when the house will be ready)

• But there should be a longstop date - say in March 2022. If the house isn't ready by then, the buyer can choose to walk away without penalty.

• When the house is ready, the developer will give the buyer 10 days notice that they must complete. (The developer might give that notice at anytime after exchange of contracts - i.e. it might be on a day in December or January or February, etc)

You or your seller can 'break the chain' by agreeing to move into temp accommodation.

But bear in mind that it's possible that you exchange contracts on, say, 1st December - and the developer immediately gives notice that completion will be in 10 days time - on 10th December. (So you have to complete your sale and purchase on 10th December as well.)

So with this setup, the bottom line is you cannot commit to giving your buyer 2 months notice of completion.

HTB_newbie

Have you asked your buyers why they need two months notice? Most rolling contracts require one months notice. I suspect they’ve asked for two to ensure they have time to put in one months notice on a particular day of the month. It might be useful to know when that day is given that mid January is arguably less than two months away. 

Does your vendor need the funds from their sale for their onward purchase and so need the rest of the chain to complete within 10 days when the builder gives them notice? Do they also need you to exchange by their schedule with the builder? 

Having the vendor go into temporary accommodation if the new build is delayed is one possible solution and your buyer gets given a completion date now. Another option would be to see if your vendor would be prepared to compensate your buyer for losses resulting from having to work to the builders schedule. For example if they were prepared to pay a portion of your buyers last months rent, your buyer would be happy to move at the speed of your vendor. Otherwise it is explaining to your buyer the situation that two months notice can’t be provided and they deal with this at their end.

anselld

it is not particularly short notice which is the main issue as 10 days notice of completion from exchange is not unreasonable and buyers would normally have to deal with this if coming from rental.  

The main issue is early exchange with completion on notice, ie not fixed.  This is your buyers problem to deal with and you need to avoid taking ownership of the issue or becoming stuck in the middle.  You have done the right thing to push this back to your buyer and if they cannot resolve it would probably be best to remarket.

peterhjohnson

TCPIP_Fox said:

I’ve asked the estate agents if the vendor is willing to rent if their house isn’t ready.  Still waiting on a reply.  

They might say yes initially but then change their mind when they explore the rental market and find that (as in many areas) it's even more difficult than the owned market.

TCPIP_Fox

eddddy said:

TCPIP_Fox said:

what I’m trying to gauge is how the completion works for new builds.  From what I’ve read new builds have exchange within 28 days and completion within 10 days.  But, since my buyer needs two months can my vendor accommodate that request? 

The way it usually works with newbuilds is...

• The developer wants the buyer to exchange contracts within 28 days of the offer being accepted.

• There is no completion date specified (because the developer cannot be sure when the house will be ready)

• But there should be a longstop date - say in March 2022. If the house isn't ready by then, the buyer can choose to walk away without penalty.

• When the house is ready, the developer will give the buyer 10 days notice that they must complete. (The developer might give that notice at anytime after exchange of contracts - i.e. it might be on a day in December or January or February, etc)

You or your seller can 'break the chain' by agreeing to move into temp accommodation.

But bear in mind that it's possible that you exchange contracts on, say, 1st December - and the developer immediately gives notice that completion will be in 10 days time - on 10th December. (So you have to complete your sale and purchase on 10th December as well.)

So with this setup, the bottom line is you cannot commit to giving your buyer 2 months notice of completion.

Thanks! the new build completion makes a lot more sense now.  I’ll just have to see how things pan out and see what my buyer says if we ask for a shorter completion time 

TCPIP_Fox

HTB_newbie said:

Have you asked your buyers why they need two months notice? Most rolling contracts require one months notice. I suspect they’ve asked for two to ensure they have time to put in one months notice on a particular day of the month. It might be useful to know when that day is given that mid January is arguably less than two months away. 

Does your vendor need the funds from their sale for their onward purchase and so need the rest of the chain to complete within 10 days when the builder gives them notice? Do they also need you to exchange by their schedule with the builder? 

Having the vendor go into temporary accommodation if the new build is delayed is one possible solution and your buyer gets given a completion date now. Another option would be to see if your vendor would be prepared to compensate your buyer for losses resulting from having to work to the builders schedule. For example if they were prepared to pay a portion of your buyers last months rent, your buyer would be happy to move at the speed of your vendor. Otherwise it is explaining to your buyer the situation that two months notice can’t be provided and they deal with this at their end.

I didn’t think of asking the vendor to cover my buyers rent.  I highly doubt they’ll agree to that, but they agreed to renegotiate the sale price after I said I’ll pull out, so who knows.  

rexmedorum

I'd query why 2 months? Are they aware that it's usually just 1 month on the tenants side? And if just 1 month, what's a couple week's overlap really in the grand scheme of things?

eddddy

rexmedorum said:

I'd query why 2 months? Are they aware that it's usually just 1 month on the tenants side? And if just 1 month, what's a couple week's overlap really in the grand scheme of things?

Although the month's notice is from the first day of the tenancy month.

So there's the worst case where the developer gives 10 days notice to complete on the 2nd day of the tenancy month. So that could mean 7 weeks of overlap.

TCPIP_Fox

rexmedorum said:

I'd query why 2 months? Are they aware that it's usually just 1 month on the tenants side? And if just 1 month, what's a couple week's overlap really in the grand scheme of things?

That's the buyer's tenancy notice period in their agreement.  they need to give 2 months notice to their landlord to end the renting agreement.  it probably is just one, but saying two for a buffer? going to get it all clarified with the solicitors as my buyer maybe ready for exchange as they had the mortgage offer come through.