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Joshua
Joshua, Lawyer
Category: Property Law
Satisfied Customers: 25988
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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A property developer has offered an extension to the

Resolved Question:

A property developer has offered an extension to the existing long stop date. The off-plan build has ta***** *****er than expected. They have offered an interest rate on the deposit as an incentive. Is this a normal process and would it not be prudent to negotiate a better rate?
Submitted: 1 month ago.
Category: Property Law
Expert:  Joshua replied 1 month ago.

Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience.

  1. For the avoidance of doubt, the position here is that the builder is behind schedule and is not likely to complete the build and make it available for completion by the long stop completion date so has asked if you are willig to consider an extension and has offered to pay you an incentive for your agreement being interest on your deposit. Is that correct?
  2. Are you willing to consider an extension either in principle or in return for an incentive?
  3. Will there be any isues with your existing accomodation if there is a delay to your purchase?
Customer: replied 1 month ago.
Hi Joshua,1. Yes, correct.
2. I would be fine with an extension in return for an incentive.
3. There would be no issues with any existing accommodation.Kind regards
Steve
Expert:  Joshua replied 1 month ago.

Thank you. There is then no difficulty with what is proposed except that if you are obtaining a mortgage with your purchase two issues immediately spring to mind:

1) you will need to ensure your offer remains valid at least up to two weeks after the new proposed long stop date. Take care not to agree a long stop date which is beyond the expiry date in your offer without obtaining a written extension to your mortgage offer because you do not want to find yourself in a position where you are required to complete but have no mortgage offer any more because it has expired.

2) All incentives must be disclosed to your lender. The developer will therefore need to let you have a new incentives disclosure form which you can give to your lender. It is unlikely any new modest incentive will have any significant impact on your offer though if the mortgage is at the limits of what the lender is prepared to lend to you it is possible they may revise down the loan in line with the incentive offered - ie. if the incentive was worth say £500 it is conceivable that the mortgage loan may be reduced by the same amount.

Otherwise it is a question of ensuring you appreciate that you will be bound to complete on notice up to the point of the new long stop date so notwithstanding the above take care not to commit to too long a long stop date to ensure that you are not locked into a contract for too long just in case there are any changes to your life in the future.

Your solicitor will be able to agree a variation to the contract subject to your instructions.

Does the above answer all your questions? If it does, I should be very grateful if you would kindly take a moment to click a rating for my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Customer: replied 1 month ago.
1) Does point 1 assume I have a mortgage offer? At this point, I do not have a lender in place. The existing long stop date was set at 31st Aug 2017 and they are now proposing April 2018. The new estimated completion date is 31st December 2017.2) Again, does this assume I have a lender in place? If so, it seems my only consideration is the length of the new long stop date.3) Is it normal in such a situation where an extension has been proposed to simply accept the interest rate on offer? Would it not be prudent to negotiate, or is this not generally recommended?Kind regards,
Steve
Expert:  Joshua replied 1 month ago.

1) Yes

2) Yes

3) There is no approved form of practice in this respect. There is nothing stopping you requesting a higher rate of interest and similarly no obligation on the developer to agree a higher rate of interest. It depends how much the developer wishes to retain you as a buyer and a calculation on their part how likely you are to pull out if they do not agree. They will be mindful of the fact that you will have already incurred legal costs unless these were offered free as another incentive. By way of guidance if you were late in completing they would be entitled to charge you usually 4% above base rate (this is usual "contract rate" in the contract). Obviously this right does not apply but given the situation is that they are unable to complete this figure may be a useful yardstick by which to measure their offer and on which to negotiate if you consider you wish to try to improve their offer.

Does the above answer all your questions or is there anything I can clarify or help you with any further?

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