New Build Terminology: A Guide

By Surrenden Invest | June 26, 2017
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New builds are an increasingly attractive option for those who are looking to relocate or invest in their first property. To help you prepare for this important purchase, we’ve put together a comprehensive guide to the terminology that you’re likely to come across when buying a new build home.

General Terms

Vendor

Often used as a more formal alternative to ‘seller’ to describe the individual who has put the property up for sale.

Contract

A legal document that will set out the main terms of agreement between the vendor and the purchaser. It will typically contain details such as the names and addresses of each party, and the price of the transaction. Both the vendor and the purchaser will be required to sign their own copy of the contract ready for exchange.

Off-plan

This refers to a new build property that has not been built yet.

IFA

An abbreviation used to describe an Independent Financial Advisor.

Ombudsman

This refers to an independent professional body (or bodies) who are tasked with investigating grievances on behalf of customers. They may take on cases involving estate agents, solicitors or insurance companies.

The Process

Reservation Fee

This is a payment that is made at the point that the property is taken off the market. It will then be deducted from the exchange balance.

Deposit

This is the part of the purchase price – the lump sum – that is paid by the buyer on exchange of contracts.

Memorandum of Sale/Sales Letters

Sometimes referred to as a Notification of Sale, this is a document which records the transaction between the buyer and the vendor. It will contain information on the price of the property, the personal details of both parties, and contact details for their separate lawyers. It may also specify any special conditions of sale which have been negotiated – for example, some buyers or vendors may request that they are ready to exchange by a certain date). The Memorandum of Sale is not a legally-binding agreement.

Searches

This refers to the process whereby checks will be carried out on local council records to obtain information on any relevant planning applications and restrictions that may affect the property.

Subject to Contract

This term is often used to suggest that the property is in the process of being sold, but agreements are not yet legally binding.

Exchange of Contracts

This refers to the point at which copies of signed contracts from both parties are swapped by solicitors. The buyer’s deposit will also be handed over. Once the vendor and the buyer have exchanged, the contract is binding by law and neither of these individuals can back out of the agreement without facing financial consequences.

Completion Date

On this day, the legal transaction will be finalised and all documents and funds will have been distributed. Normally, the vendor’s solicitor will ask the estate agent to release the keys to the buyer at this time, too. In the case of new builds, ‘short stop’ and ‘long stop’ dates may also be specified; the developer will expect to have finished all building works by the short stop date, but MUST have completed the build by the long stop date.

Requisition on Title

This refers to any enquiry that relates to the completion agreements.

The Property

Land Registry

This refers to the government department which records ownership of the land and any conditions pertaining to it.

Survey

This is an initial inspection of the property that is carried out by a professional, qualified surveyor. Depending on the type and condition of the property, the buyer may instruct the surveyor to carry out either:
  • A valuation report – this is mainly completed for the benefit of the mortgage company.
  • A Homebuyers’ report – this provides the buyer with important information on the overall condition of the property.
  • A full structural survey – this is a more in-depth report that examines structural detail and provides more comprehensive recommendations.

Property Information Form/Fixtures, Fittings and Contents Form

Both forms need to be completed by the seller to determine what will be left behind in the property at the point of sale. They will also include details on guarantees.

Seller’s Pack

This is typically made up of a Property Information Form and a Fixtures, Fittings and Contents Form, along with the title deeds and a copy of the draft contract.

Snagging

This involves the developer touching up paintwork, adjusting appliances and making good any other minor issues within the property prior to the buyer entering the property.

Energy Performance Certificate (EPC)

This important document will contain comprehensive information on energy use and performance at the property, along with its estimated carbon dioxide emissions and fuel costs.

Mortgages

Mortgage Offer

A formal written offer made by a bank or building society to lend an approved amount to purchase a property.

Mortgage Redemption Figure

The amount required to repay the outstanding capital/interest of a mortgage.

Repayment Mortgage

Your monthly repayment includes part interest and part capital repayment. So long as you meet all of the payments required by the lender on time, your mortgage will gradually reduce until it is repaid in full.

Ownership and Charges

Title Deeds

Legal documents that prove ownership of land/buildings and the terms on which they are owned.

Transfer of Title

This is the document that effectively passes ownership of the property from the vendor to the buyer.

Stamp Duty or LBTT (Scotland)

This tax, which is paid by the buyer, is calculated by analysing the percentage rate that is applicable to each portion of the property’s sale price.

Leasehold

This will grant the buyer with ownership of the property itself, but not the land it is built on. If a property is leasehold, the owner will normally need to pay ground rent to whoever owns the freehold. Please note that leasehold terms are offered on terms of between 125-999 years.

Ground Rent

The annual fee which the leaseholder will pay to the freeholder.

Maintenance/Service Charge

A charge paid towards a freehold or leasehold property. It normally applies to apartments/flats.

Estate Charge

This is a charge which is made the upkeep of the overall site.

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