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JGM, Solicitor
Category: Scots Law
Satisfied Customers: 12091
Experience:  30 years as a practising solicitor.
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Hello, I am based in Scotland and am looking to purchase

Customer Question


I am based in Scotland and am looking to purchase a home from plan.

The builder originally wanted to treat this home purchase as a "self build" project and for us to finance the build - However we struggled to access a "self build" mortgage and we are now reverting back to purchasing through a conventional mortgage (which we will apply for when building completed at end) but with a deposit to be paid now before building commences.

The builder is now looking for a £20,000 deposit from me and I would like to draft a simple contract to protect myself and therefore need your advice and assistance.

I would obviously like to protect my deposit in the unlikely event that the builder goes bankrupt and/or fails to deliver on the remainder of the build.

The name of the company is Lomond Group - they will do the build.
The owner of the plot is the Directors sister - Corrina ??? (in personal name)

The protection we are looking for is that in the unlikely event that the builder fails to live-up to his promise to complete the build within a set-term duration then they will either:-

a). Return the deposit to us in full without hindrance or debate or
b). Give us first right of refusal to purchase the plot at a rate of £100,000 less the deposit of £20,000
c). All ownership of copyright, designs, certificates, drawings and permissions will be transferred to me at such a time.

Can you kindly assist with some advice and wording on this matter?

***** *****on
Submitted: 3 years ago.
Category: Scots Law
Expert:  JGM replied 3 years ago.
Thank you for your question.

Drafting a contract for the purchase and sale of land and a building contract are outwith the scope of this site. These should be done by a solicitor acting specifically for you. However I will give you some general words of advice.

Firstly make sure that you know you are dealing with. Lomond Group Limited is a dissolved company which was based in London. There is a company based in Glenrothes called Lomond Group Scotland Ltd. If this is the company that you are dealing with, make sure that they are designed properly in all correspondence and contract documentation.

Dealing firstly with the eventuality that you raise that the builder goes "bankrupt". The company will not go bankrupt. It could, however, go into liquidation, receivership or Administration. In any of those insolvency events, as they are known, it is highly unlikely that you would see your deposit again nor would you be in a position to insist that you can purchase the plot and obtain the intellectual property rights in the plans etc. A liquidator, receiver or administrator will be looking after the interests of the bank and the creditors as a whole, not just your interests.

Where you are not purchasing the plot until the property is completed you have no rights to the plot or the building on it whatsoever, apart from the contract you have with the builder. An insolvency practitioner may or may not decide to continue with that contract and you cannot take that risk.

For that reason I suggest that you do the following:

1. Enter into the usual type of missive whereby you will buy the plot from the builder, pay the deposit and pay the balance upon completion.

2. Investigate the possibility of the builder obtaining a performance bond so that if he does suffer insolvency, the completion of the property will be covered by insurance.

3. If a performance bond is not possible, take a standard security over the property. That means that if the builder goes out of business you can call up the security and enjoy status as a secured creditor. Essentially you can enter into possession of the ground and whatever has been built on it at that stage.

4. Make sure you are given a copy of all the plans etc along with the planning permission and building warrants etc. make sure that it is part of your contract with the builder that if the building is not completed within a particular period of time or if the builder goes into insolvency, the contract automatically assigns the intellectual property rights to you.

These are my general thoughts but you must take specific advice from your own advisers before paying any money to this project. I do hope that everything runs smoothly for you and that you end up with a beautiful new house.

I hope this helps. Please leave a positive response so that I am credited for my time.