We believe our new build flat should be ready in three months’ time and have just been advised our mortgage offer has expired. What should we do?
This article was first published by City AM, Friday 15 March 2019.
There are a few issues for you to consider. You do not say whether you have received formal notification from the developer requiring you to complete in three months. Usually, a contract for the purchase of a property not-yet-built will contain a procedure stating that completion is on notice ie the developer will notify you your flat is built in accordance with the terms of the contract and ready for you to buy.
This will trigger a very strict timescale, 21 or 28 days, for example, within which you will be required to complete the purchase of the flat. From experience, the new flat is often not ready by the original deadline.
Most mortgage offers are only valid for six months and there are other factors to consider when the mortgage is for a new build property. For example, your lender may have placed a limit on the amount it is willing to lend, which is less than if it was an older property.
You may need to reapply for your mortgage and you need to consider if there has been any material change in your circumstances in the past two years. The lender may wish to revalue the property to check if the original valuation is still accurate, which may lead to an increase or decrease in the amount the lender is prepared to lend. Your lender may also retain some funds from the loan until it is satisfied that certain issues relating to the development and / or flat have been dealt with.
There are other issues you may want to check. For example:
- inspect the property to ensure that the flat contains the finishes, appliances or any other terms you have agreed with the developer;
- prepare a snagging list of any defects relating to the flat. Snagging and minor defects do not usually allow you to delay completion and the developer has a certain period of time within which to fix any problems;
- the contract usually allows the developer to make some variations to the layout and sometimes the size of the flat. Take time to measure up and check this is in accordance with the contract;
- some developers will circulate a specific note relating to ‘moving in day’. For example, if there are many of you completing on the same day, there will be allocated times you can use lifts, parking facilities and unloading bays;
- the impact of any ongoing or neighbouring works in the rest of the development.