New build deposit

Richknott83

We’ve just bought a New build house from a small local developer, and have been told we need to exchange contracts in 12 weeks at which point a 10% deposit is due. The house won’t be finished until August.

I understand this is fairly standard practice, but my concern is what happens to our deposit if anything happens to the developer between exchange and completion (such as going bust). The warranty provider is Build Zone but I haven’t been able to find anything definitive to confirm if this would be protected or not as it would be under NHBC. Has anyone had any experience of this?

peter3hg

Incorrect advice

Richknott83

Unfortunately this isn’t true - almost always it gets paid to the developer. That’s why warranty providers like NHBC will cover loss of deposit. I’ve confirmed with my solicitor this is the case, but they haven’t been able to confirm the situation with the warranty protection as haven’t been given the paperwork yet.

Being asked for a £5k reservation fee now, so might just have to try and hold off until my solicitor can look into it and advise, as I don’t want to put £80k at risk.

canaldumidi

I can't answer your question, but I wouldn't pay out anything (reservation or exchange) until you are 100% happy you understand the financial and legal implications.

eddddy

Whilst the Build Zone warranty doesn't seem to provide deposit protection - it looks to me like it's a condition of the warranty that the developer must arrange deposit protection separately.


i.e. If the developer wants to issue Build Zone warranties, they must also find another company who will provide deposit protection insurance.

Here's a snippet from Build Zone's website:

CODE OF CONDUCT FOR HOME BUILDERS (Build-Zone New Home Warranty)


The Build-Zone Code of Conduct for Home Builders has been set up to ensure that the interests of home buyers are protected before, during and after the purchase of a new home.

The code applies to all developments benefiting from a Build-Zone new home warranty and requires the home builder to:

• Ensure the home buyer’s deposit is protected – how this is done needs to be confirmed to the home buyer.

Link: https://www.build-zone.com/home-buyers

So check this with the developer - then inform your solicitor, so they can make sure it's included in the contract, and that evidence of cover is provided at exchange of contracts.

Richknott83

Cheers eddddy, thanks really helpful and put my mind at rest!