Buying off-plan – whether a family home or an investment property – has never been a straightforward proposition. However, the Covid-19 pandemic has thrown the new build industry into a tailspin even though some would consider this part of the residential property market to be better placed than other areas of the market to get through this period unscathed. Here we answer some of the questions we’ve been asked about buying a new-build home.
What do I do if completion is on notice?
Off-plan acquisitions are always unpredictable by their very nature, but the restrictions placed on builders and developers have exacerbated this – many housebuilders have simply found themselves unable to complete developments as a result of construction sites being closed down. For that reason, buyers shouldn’t panic – very few housebuilders are going to bully struggling buyers into completing. Of course, they’re worried about their bottom line (like everyone else) but more important than that is the long-term reputation of the company.
What is the Government advice?
At the end of March, the Government issued advice about buying and selling homes during the lockdown. In short, the message was that all parties – developers and buyers alike – shouldn’t panic (and definitely shouldn’t pull out of transactions), but should be prepared to be flexible. Specifically, in relation to new-build properties, the advice was that transactions should continue on the basis that the properties are vacant (although official guidance should be followed in relation to home removals).
If I need a mortgage, are the banks going to be reasonable?
In the first three weeks of lockdown, we saw something of a knee-jerk reaction from banks, building societies and other lenders, which was basically to close the doors to all new applications. Happily, however, it seems that more lenders are now agreeing to extend mortgage offers where completions are delayed in the interests of public health. UK Finance in particular, has urged its members to work with their customers to find ways to extend their mortgage offer for up to three months.
How can Lawyers help?
Lawyers and conveyancers have been quick to adapt. Within days of the lockdown being announced, legal professionals had developed a standard process for moving completion dates. Clauses which have come to be known as ‘corona-clauses’ have cropped up in more and more plot sales contracts or, where contracts have already been exchanged, in riders to those contracts.
Generally, these clauses deal with Covid-19 “impacts”, meaning that a buyer or a member of his/her family is self-isolating in accordance with Government guidelines, that they have been in contact with someone displaying symptoms of Coronavirus or that they have been ordered to stay at home in accordance with the Government lockdown. The effect of the clause will be that completion is delayed until the relevant impact has come to an end and, critically, the right of a party to serve ‘Notice of Complete’ is suspended while the impact continues.
We are encouraging all of our housebuilder clients to agree to the insertion of Corona-clauses because, after all, the current situation is only going to be temporary. Customers have long memories, and will not look back fondly on companies who sought to exploit this unprecedented situation.