RECORD money: TRADE BODY READY TO CLOSE THE DOOR ON INFLATED DEALS FOR NEW-BUILDS.
The Council of Mortgage Lenders (CML) said it was introducing new standards for the conveyancing and valuation of these properties following concerns from lenders that they were not always informed about the discounts and incentives being offered by developers.
With many builders offering deals on new homes in a bid to meet sales targets in the current market downturn, lenders have expressed concern that they could inadvertently be advancing more than the true price paid for the property.
Typical incentives include developers offering to pay buyers' deposits, or legal and moving fees, or even offering cash-back incentives on completion of the sale.
But lenders are concerned these offers are not reflected in the official asking price.
The CML warned in February that the valuation difficulties surrounding newbuild properties had attracted fraudsters, leading to a disproportionate increase in the number of frauds perpetrated against new-build flats located in city centres.
As a result, some lenders have reduced the loan-to-value ratio they are prepared to advance on a new-build apartment - demanding deposits of up to 25 per cent in some cases - while others have stopped lending on them altogether. Under the changes, which come into force on September 1, builders and developers of newly built and converted properties will have to complete a new disclosure of incentives form, which will consist of 12 questions to establish details of all financial and non-financial incentives being offered.
This will be reinforced by the CML's Lenders' Handbook which sets out the specific requirements for conveyancers acting on behalf of lenders in property transactions.
The Royal Institution of Chartered Surveyors (RICS), which has been working with the CML, is also making changes to its Red Book, which sets out the rules used by chartered surveyors when making asset valuations.
From the beginning of September, it will be mandatory for RICS members to obtain a copy of the disclosure of incentives document.
The Home Builders' Federation and Homes for Scotland have also recently reinforced their own codes of conduct to encourage greater transparency about discounts and other incentives, while a number of major builders are also taking steps to address the problem.
LOOPHOLE: Loan deals
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|Publication:||Daily Record (Glasgow, Scotland)|
|Date:||Jun 12, 2008|
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