News
22 August 2008
Property Developers' Incentives: New rules from 1 September
With concerns regarding falling house prices at an all time high, lenders are becoming ever more vigilant to potential fraud centring around the price of new build properties. There has been comment in the press that some smaller building societies are reluctant to lend on new builds especially flats due to concerns over values being artificially inflated due to developer’s incentives being offered and not fully disclosed.
That said, developer’s incentives such as a 10% deposit being paid for the buyer or free white goods, are valuable marketing tools in a climate in which it is already becoming more difficult to sell properties.
In an effort to make the offering of such incentives more transparent and to improve the flow of information to all parties in the transaction, the Council of Mortgage Lenders, via their handbook, have issued a Disclosure of Incentives Form. The CML in conjunction with Home Builders Federation, Homes for Scotland and The RICS have also issued guidance on the use of these forms.
One important change for developers to be aware of is that the RICS have changed their professional standards for valuers in the “Red Book” and lenders, via the CML handbook, have changed their instructions to solicitors acting on behalf of the lenders.
The changes are being introduced from 1 September 2008. It is intended that the completed disclosure of incentives form be completed for every new build property, whether or not there are incentives being offered. The form should be available at the site office for the valuer to see if it is requested.
The form will also have to be sent to the buyer’s conveyancer. Due to the importance being placed on this form by both valuers, lenders and conveyancers, it is advisable for them to be completed by the developers head office or the selling conveyancer. If site staff agree additional incentives, developers should ensure that such staff are trained in the correct way to complete the form.
It is thought that most if not all lenders will at the very least require that the conveyancers acting on their behalf have sight of a completed form as a part of the conveyancing process, therefore the earlier in the process the form can be provided the quicker the transaction can proceed to an exchange.
If you require any further information regarding Disclosure of Incentives Forms please contact Rebecca Howle on 01782 205 000 or email rebecca.howle@beswicks.com
Uploaded: August 2008
The information contained in this article is not intended to be a comprehensive study, nor to provide legal advice, and should not be relied upon or treated as a substitute for specific advice concerning individual situations.
Back to news list