The way mortgage funds are released on new builds is to change in April.
The Council of Mortgage Lenders (CML), the House Builders’ Federation, new homes warranty providers and the Law Society have overhauled the procedure for signing houses off at completion.
Bernard Clarke, spokesman for the CML, explained: ‘What has been decided is that, following discussions with house builders and warranty agencies, funds will not be released until there has been an undertaking from the builder that the property has been completely finished, there has been a pre-handover inspection and certificate, and the conveyancer has been told on behalf of the buyer.’
Between January and June 2002 8,665 properties were signed off after completion and, according to the CML, 78% of properties fail their final inspection due to construction issues, while 22% fail for administrative reasons.
Andrew Frankish, director of mortgage broker, Mortgage Talk, pointed out that it is the responsibility of the builder to forward a copy of the pre-handover certificate to the purchaser’s solicitor.
‘Without sight of this certificate, the solicitor will not be able to request funds from the lender, and therefore will be unable to complete the transaction. These new rules will offer house buyers greater certainty that their new homes will be fully built before the date of legal completion,’ he said.
The changes will affect all home buyers purchasing a new property from the National House Building Council, Zurich or Premier Guarantee registered builders.
The regulations will not apply to self-build, or where the construction or conversion of a new property is being supervised by a professional consultant without a new home warranty scheme.
‘It is a small number of properties that are affected, but it can cause major problems for homebuyers who may have to move into uncompleted properties,’ said Clarke.