Legal Guide To Buying an Off Plan Property in the UK

by Jessica Lloyd on February 22, 2014

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Buying Property UKIt’s becoming increasingly difficult to pick-up a bargain in the UK property market these days. Demand exceeds availability, so vendors can afford to overprice their property with the reality of getting a quick sale. However you may be still able may pick-up a good deal by purchasing an off-plan property.

So what is off-plan property?

This simply means agreeing to buy a home while it is still under construction or even before construction has commenced. Buying off-plan is often an appealing option for buyers who want a new, hassle-free property or for those looking to invest. It allows the purchaser to put down a 10% deposit initially, whilst the next instalments are staggered. In that period of construction, the cost of the property will be fixed at the market value of the date you buy. The value and not the cost of the investment can grow substantially which can reap financial rewards.

Benefits and Incentives!

1. One of the advantages of buying off the plan is that you will pay the current market price for a property, though it will be completed in the future. If the market experiences growth, the property you purchase off the plan today may increase in value when you decide to sell two years later.

2. Securing a high value asset for a low initial capital outlay – While a deposit is made to secure the property (usually 10%), the entire payment doesn’t need to be paid until the property has been built.

3. As mentioned above, the developer agrees to be responsible to remedy all defects which occur within two years of purchase. After its expiration the NHBC provides an insurance style guarantee that it will rectify specified structural defects arising in the property during the next eight years, giving you a 10 year warranty.

4. Be aware of certain perks that may be available to you when buying off the plan. These can include the following:
a. Stamp Duty Land Tax may be paid for you. This means that the purchase price is inclusive of SDLT.
b. Free floor finishes and Window treatments
c. The possibility of free parking if there is usually a charge.

5. If an off plan property is re-sold before completion of construction, an investor would save on a stamp duty (1-4%, depending on property value) if not already included in the purchase price, which is paid only for constructed properties.

6. Look out for furniture packs as this is the simplest, quickest way to get a property ready to let/sold. Remember, buyers would ideally like to have a fresh canvas and the flexibility to choose their own floor plan and colour schemes.

Things to Look Out For!!!

1. Falling property market – There is a risk that you may pay too much for a property if the market falls between the exchange of contracts and building completion. If this does occur you may find it difficult to secure finance for the full amount. Simultaneously, the value of the investment in real terms can either fail or increase.

2. Insolvency – Buyers should ensure the developer is reputable and has insurance so that if they go insolvent, you will get your deposit back or it may be that another developer steps in and completes the build. Use a solicitor to protect your interest. You need to ask what the options are if this occurs; will you get your money back and what guarantees do you have?

3. Failed expectations – As many builders do not allow you to see the property until construction has completed, there is a risk that what you envision is not what you will receive. The quality of work may also not meet your standards.

a. Look at other properties by the developer to get a feel for the quality and layout.
b. Ask to see all specification details including a full set of landscape drawings, electrical plans . Note that new builds do have a 10-year warranty from the National House Building Council. Newly built properties in the UK come with a structural guarantee. It is essential that an investor is given this as this will inevitably be a condition of any mortgage offer given to a potential buyer in relation to the sale of the flat or house. The NHBC ‘Buildmark’ scheme is the most widely used.

4. A word of caution – It is important to make sure your contract allows you to sell on your new investment at any time of your choosing as some developers may put restrictive clauses into their contracts. However, it is very important to remember when making a commitment to an off plan purchase you are exchanging a contract for a property acquisition and therefore, if there is a market correction, you are still liable to acquire the property at completion at the contract price.

5. Completion – Under the Consumer Code for Home Builders, you have the right to withdraw from a purchase and receive a full refund if the completion date is unreasonably delayed by more than six months.

6. Purchasing a phased development – Find out when the rest of the development will be finished, otherwise you run the risk of owning part of building site for the first few years.

7. Planning – Find out whether there are any other planning applications nearby which could impact your new home. Above all, ensure your solicitor does the necessary research on the company behind the development.

Follow all of these points and off plan property can be a great way to buy.

However, ensure that you follow these last few pointers:

1. Only buy from construction/development companies with a proven record.
2. Once the contract has been signed don’t sit back and hope for the best.
3. Make regular trips to the site and discuss any concerns with your solicitor and or the developer.
4. ALWAYS seek professional, independent advice.

If you have any questions regarding Off-Plan property and would like advice on how you can buy Off-Plan and would like Verto Group Legal to assist you please contact me at or phone 0203 078 5767.

Image: Flickr (A.Cleaver)

Jessica Lloyd

Jessica Lloyd

Head of Property at Verto Group Legal
I head the Real Estate Department at Verto Legal. I specialise in dealing with commercial property transactions including all aspects of acquisitions and disposals work, landlord and tenant matters.
Jessica Lloyd

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