Every month the Farrer & Co Residential Property Partners give us a brief insight into their working lives. This month we provide an overview of buying a property in the course of construction.
The Brief
Our clients had found the ideal family home on the perfect street for them – with a twist – it was not yet physically completed. The clients saw the potential to work with the developer to ensure that their dream house was finalised to their ideal specification but were concerned that buying a construction project could be risky.
Executing the Brief
At the outset we explained the importance of really clear heads of terms and a detailed specification for the works that were still to be carried out. Our clients had several meetings with the developer, with support from us in the background to ensure that the price they were willing to offer included the design and finishes they were expecting. We made recommendations for a project manager to produce the specification and to oversee the completion of the works to the required standard. The contract negotiation was the most involved work on this purchase and did require our client to be pragmatic and (with our advice) to weigh up risks and take decisions on tricky issues.
We advised the clients to instruct a surveyor to inspect the property to ensure that the planning permission had been complied with to date and that the building work was being carried out in accordance with building regulations and the party wall awards. We ensured that the developer would be offering a 10-year new build guarantee as part of the package of warranties and guarantees to be provided on completion.
The finance of the purchase also required careful consideration and planning. As there would be over six months from the point of exchange to completion, we had to consider and advise on the risks of obtaining a mortgage post-exchange, including from a valuation perspective. We also advised on the availability of development finance, as our client wanted the option to complete the purchase and take on the remainder of the works if the seller did not perform on the contract by the completion date.
The debrief
Our client was willing to engage in a more complicated transaction and take some risks in order to achieve their goals. We were pleased to advise on those risks and give the commercial, pragmatic advice they needed to make the mechanics of the deal work and document it in a manner that they can enforce on (in the unlikely event they need to!).
We are always happy to act for clients on more complicated transactions and our construction team, who assisted with this deal, have provided this longer guide that looks at the issues to consider when buying a property in the course of construction.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
