Housebuilders take note: important changes to mortgage approval rules
15th December, 2014
New rules introduced by the Council for Mortgage Lenders could end up delaying the sales process for new homes.
Housebuilders are advised to examine their current processes to ensure they are not adversely affected by the changes.
What is the background to this?
As part of the legal completion process when buying a house, the buyer’s solicitor has to submit a “certificate of title” to the mortgage lender. This certificate confirms that all is in order and that the title to the property is good and marketable. It also acts as a request to the mortgage lender to release the funds to the solicitor in time for the agreed completion date.
As part of the certificate of title, one of the matters that the solicitor has to confirm is satisfactory is that the property has been constructed in accordance with the relevant planning permission and has a Building Regulations Completion certificate (BRC) to confirm that its final construction has been approved by the Local Authority Building Inspector.
What has changed?
The Council for Mortgage Lenders has very recently introduced a number of changes, one of which is requiring confirmation from the Buyer’s solicitor that the BRC has been issued.
If the BRC has not been provided to the solicitor at the time the certificate of title and request for funds is to be submitted to the mortgage lender, then the solicitor has to submit a “qualified certificate of title” meaning that there is a matter which is still outstanding and which may affect the property and its value (so far as the mortgage lender is concerned).
It is likely that the mortgage lender will not release the mortgage funds to the solicitor in these circumstances and will only do so once the BRC is available.
How does this affect housebuilders?
This change means that, unless housebuilders have the BRC for a property by the time the solicitor submits the certificate of title the sale of the property is likely to be delayed, leading to a number of potential problems.
What action should housebuilders take?
Housebuilders should arrange for the Local Authority Building Inspector or approved inspector to visit and inspect a recently constructed property as soon as the NHBC (or similar) cover note has been issued by NHBC (or similar). At that point, the property is structurally complete and the issue of the BRC should be a matter of course.
Once the Building Inspector has attended at the new build unit, the housebuilder should look to ensure that the BRC is obtained from the local authority and forwarded by email or fax to the solicitor for the buyer.
This procedure should avoid potential delays at legal completion caused by the rule change.
How can Ward Hadaway help?
Our team has years of experience working with housebuilders to ensure a smooth sales process.
For more information on this issue and how this could affect your operations and procedures, please get in touch.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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