A difficult market made easier - completion tips for residential developers
Legal Development 18 January 2024 18 January 2024
UK & Europe
UK Real Estate Insights
How can new-build residential developers improve the chances of problem-free completions in a challenging market? Alix Murtha and Chris Carpenter set out below some practical points to help smooth the path to completion on sales of new homes.
Keep buyers updated
If buyers have been kept up to date during the build process, they will have time to arrange release of savings, valuations, mortgages, equity release and other financing options. This is especially important for overseas purchasers who may be subject to international restrictions or limits on movement of currency and more onerous lender compliance checks.
Have a full completion information pack
Residential conveyancers are under increased pressure with safety legislation, leasehold reform, and lender requirements to comply with. Ensure you have copies of evidence of satisfaction of planning conditions and 106 obligations (or an update on when the obligation will be satisfied if not a pre-occupation condition), CIL payments made, building control and health and safety compliance, new build warranties, lender consents for the Land Registry and any other items required to be provided under the sale and purchase agreement. This will enable conveyancers to quickly issue their reports or certificates to the purchasers and their lenders.
Be clear on snagging
It pays to be clear with purchasers as to which work defects will or will not prevent completion of the sale and which must be remedied before the contractual completion notice can be served. One of our developer clients let us in on the secret to their success in this area.
“Where our buyers are appointing independent snagging inspectors, our Customer Service Team ensures both parties are provided with a clear list covering which items are part of the base build and not subject to snags, so that unnecessary comments are not included in the inspection report. One of our team then accompanies the inspector on their viewing so the snags list can be agreed on the day, and this keeps buyers happy.” – Marietta Pinto-Hayes, Sales Manager for Canary Wharf Group PLC.
Prepare to serve notices
Allow plenty of time to prepare the template form of contractual completion notices triggering the completion date. Check that the addresses and permitted methods of service are correct, to avoid any claims from unprepared buyers or conveyancers that notices were not correctly served.
Watch out for any long stop dates. If applicable, ensure any ‘Delaying Factors’ or other provisions permitting extensions to the sale agreement termination date are invoked promptly, notices served and, where required, buyer approval obtained well in advance of the long stop date arising.
Protect your position
If a buyer genuinely requires more time to prepare for completion and will be in breach of contract (or any other breach such as not making stage payments), ensure that any discretionary extensions are documented to be without prejudice to the seller or developer’s contractual position, should further steps need to be taken as a consequence of the breach. The buyer should be made aware in clear terms of the consequences if they do not complete.
If a buyer ultimately cannot perform its obligations to complete the purchase, the seller should be able to terminate the sale agreement, whether under the provisions of the Standard Conditions of Sale or bespoke clauses. A property disputes lawyer should carefully check that the conditions giving rise to the seller’s termination right have occurred and that the termination notice is correctly prepared and served. Advice as to retention of deposits, further deposits, damages and liability for fees and expenses should be sought and recorded in the event of any challenge from the buyer, who may be expecting funds paid out to be returned in full.
For further insights from our real estate team see our UK Real Estate Hub. If you are a residential developer seeking advice on developer plot sales, contact Alix Murtha or Chris Carpenter in our development conveyancing team. For advice on all property related disputes, contact Jeremy Stephen, Partner in our property disputes team.