Newly built properties in the United Kingdom - The Legal Issues

Newly built properties in the United Kingdom

When talking about newly built properties in the United Kingdom this means a house or flat which has been built usually within the last two years. Often this will be purchased directly from a developer or in some cases will have had one previous owner.

There is a continual development of new build properties in the UK with this proving an extremely lucrative market for developers. It is also in many cases a good option for individuals wishing to purchase a property and in a lot of cases is the preferred option for first time buyers.

What are the advantages of purchasing a newly built property?

Newly built properties are in most cases free of any required maintenance before an individual can move in. A lot of older properties often come with such problems as damp, wood rot or some form of structural issues. Often this is one of the main reasons why younger first time buyers will take the option of purchasing a new build as they view the only expense purchasing the property as they will not need to hold any money back for any maintenance work.

Newly built properties will often come with all white goods already installed again removing an added cost following purchase of the property. Furthermore, many newly built properties are also located within gated communities or will often have garages attached.  This may be viewed as a safer option security wise than many older properties where cars are simply parked outside on the road in front of the house.

Are there any issues or disadvantages when purchasing a newly built property?

Certain issues may arise in relation to the mortgage for the purchase of a newly built property. These issues are as follows:

  • Many mortgage lenders will often require a higher initial deposit for the purchase of a newly built property – in some cases this deposit will be as high as 20 or 25 per cent
  • Some mortgage lenders may require small monthly payments but this will be countered against a deposit which may be as high as 50 per cent for flats built in the last two years
  • In many cases an extra 10 per cent deposit will be added to the already existing deposit in relation to flats or houses built within the last two years
  • Some mortgage lenders will not lend at all if the building is more than five stories tall
  • At the mortgage application stage it is also common practice for mortgage lenders to down value the property – this may result in a smaller mortgage offer than would be provided for an older property meaning that buyers may struggle to find the rest of the money to purchase the property

Is it legal for the mortgage lenders to impose these conditions on the purchasers of newly built properties?

It is perfectly legal for mortgage lenders to impose these kinds of conditions on purchasers of newly built properties meaning it is imperative for the purchaser to consider all possible options when entering into a purchase of one of these properties.

What should I try and do to counteract this?

To counteract this when an individual is purchasing a newly built property they should ensure that they are able to gain the best possible price through a bargaining process. In many cases this may constitute asking for real reductions in the price.

Is there anything else which I should be aware of?

Often the developer of a newly built property who is selling it to an individual buyer will offer something called a gifted deposit scheme. Under this kind of scheme the developer will agree to boost the potential savings of the buyer by paying a lump sum on the completion of the sale.

Buyers should be extremely careful when something of this nature is offered as it may not help in securing a mortgage for the property. In many cases mortgage lenders will not look favourably on these schemes and will use them as an indicator to show that the property was overpriced in the first place. If this is taken to be the case it is extremely likely that the mortgage application will be refused.