Mortgages, missives & maintaining momentum

As market uncertainty continues following last month's mini budget, the number of mortgage products available has reduced and, in general, mortgages are now being offered at much higher rates. In these uncertain market conditions, how can housebuilders put themselves in the best position to conclude Missives for sale quickly?

Be organised

• Have all title deeds ready to go so that they can be examined quickly by the purchasing solicitor. Include a note on any matters which are likely to require explanation to anticipate any queries;
• Where possible obtain Development Plan Approval (DPA) prior to releasing the development so that there is certainty on what is being acquired and the extent of any common areas. DPA can only be obtained where there is a registered title, but an application for DPA will often accelerate an application for registration of the underlying title, which again can assist with title examination; and 
• Finalise a Deed of Conditions (DoC) in a standard housebuilding format and ideally have that registered before releasing the development. This provides certainty for purchasers and avoids the need to qualify Missives for a purchaser to be satisfied on the terms of the DoC.

Conclude Missives timeously

• Ensure that timescales within reservation forms are adhered to and Missives chased and deadlined appropriately; and
• Where revisals to Missives are permitted, it can help to have agreed boilerplate clauses to ensure consistency across all contracts and speedy turnaround of Missives.

Conditional Missives

• Where Missives are to be conditional on funding, have an agreed time frame for a mortgage offer to be received and suspensive conditions purified to allow time to re-market if necessary;
• Be clear - on what will happen to the reservation fee and/ or deposit if mortgage funding is not obtained. Any deduction from a deposit should reflect the costs actually incurred. Re-marketing fees, legal fees, etc. could be recouped from the buyer where they are not subsequently able to purify the suspensive conditions;
• For consistency, house builders should agree their own form of conditional clause setting out what the purchaser requires to evidence as regards the application for funding and in what circumstances the purchaser can withdraw if not obtained by the longstop date; and  
• Housebuilders should also consider whether this is to be a condition for the benefit of the purchaser only, with a deemed purification provision or whether they also require to be satisfied that the purchaser has funding in place to avoid any issues further down the line if the purchaser is unable to complete.

Conditional on sale

• While the conditionality around sale of a dependent property can be covered in a funding condition, and so limiting the number of suspensive conditions, it may also assist in getting sales over the line to allow the purchaser to conclude expressly conditional on sale with specified time frames for purifying the condition; and 
• Alternatively, housebuilders may look at allowing a period for the purchaser to market their property and if not sold within that time the transaction may convert to a part exchange contract. Or allow the housebuilder a period to carry out their own marketing and if not concluded within that time, allow the purchaser to resile.

With the current uncertain mortgage conditions, it is even more important for developers to have certainty that sales are to proceed once Missives are concluded unconditionally and that settlement will happen when the property is ready. An organised, consistent and clear approach can keep the momentum up and allow Missives to conclude as soon as practicable.