NHBC cover based on low value

In previous postings I have mentioned that the property I am purchasing was already sold at a considerably reduced price in September by the developer to a relative and that I am therefore buying not from the developer, but from that first purchaser.

I am now advised by my solicitor that because for NHBC purposes the price declared was that low price I mentioned (approx £30,000 less than the current offer price), NHBC cover was obtained in the low sum.

Therefore, I would be acquiring a property which as far as the NHBC is concerned is "worth" some £30K less.

Would this raise warning bells in anybody? It does with me!

MM

Reply to
MM
Loading thread data ...

I would presume that the premium that the developer pays to the NHBC is based on the sale price. So if the developer sells for £x he is not going to pay a premium based on £x+30K, even if the NHBC would accept it.

Reply to
Tony Bryer

However, if I needed to invoke the NHBC to cover serious defects in the next six months to a year or so, the value as far as they are concerned would be the low price the property originally sold for. Surely I could be at a considerable disadvantage here?

MM

Reply to
MM

Since I wrote the above I have been informed by the NHBC that the market value should have been declared for purposes of obtaining NHBC cover, not any discounted price. The discounted price, based on what other similar new properties on the development were selling for 6 months ago, was considerably below market value.

MM

Reply to
MM

I would have thought that it would be based on the rebuild value like house insurance, which is vastly different to market value.

Jon

Reply to
Jonathan Pearson

I can only go on what the NHBC advice line told me today. They said that if the declared price originally given by the developer for purposes of obtaining NHBC cover had not been the market value, but a discounted price, then that was wrong and that the *market value* (she stressed this) should be the price quoted. Which makes me wonder, why was it done this way? No one yet has been forthcoming with the answer. Only that it *was* done that way, i.e. bought by someone else in September, then immediately placed on the market again at some £30K more, which is approximately (give or take a couple of grand) the current market value. I smell some kind of rat.

MM

Reply to
MM

MM,

The situation in selling very quick is very common at present, it basically happens because you only need to put down a very low deposit to secure a new build (200-500 quid), thus in a buyers market particularly in cities, people/speculators but down deposits on plan at the start of the development, 6-18months later the houses have gone up in price, and your

200-500quid outlay (okay plus selling costs etc) could end up as a 50k profit, if after 18months the houses haven't gone up you simply pull out loosing your 500quid deposit and legal fees - it sort of betting I suppose, but the odds are very stacked in your favour - its the easiest way to make money with little risk, however due to the market slow down I suspect that houses wont go up / will go down - so no more winners.

Thus all that has happened in your case is the vendor is a winner - the house will be totally perfect and probably never been lived in - hence is still brand new - due to the 30k difference in NHBC prices, I wouldn't worry too much - the NHBC cert isn't worth that much (although your mortgage provider will insist on it) and in any case it only begins from 2-10 yrs, initial problems in the 1st two years is down to the builder - which is the time most likely when things go wrong! - the sewerage is again only a minor problem / something that you would have to put up with, at least your water bills will be lower as you will only be paying for clean.

If I were you I'd try to relax a bit and try not to worry about things too much - I know its difficult when I bought a new build 7 years ago - I couldn't sleep for nights and was worried that I'd paid too much for it - it only doubled in price and allowed me to move into an area where I wanted to live.

Jon

Reply to
Jonathan Pearson

Sounds like the developer trying to reduce his tax burden. Sell to relative for £30k less, thus saving company/builder from paying tax on that £30K. Relative then sells on for £30K more, only home so profit not subject to CGT. Developer and relative then split £30K profit.

Cheers Clive

Reply to
Clive Summerfield

Why should you smell a rat regarding the value the developer put on If you think carefully all the clues are in your posts Developer builds and sells to a relative at a discounted price. A short time later the relative sells it at the higher price. All correct up to yet? Now the bit that developers wont say cos Mr Tax Man might hear. Guess where the extra money might go. OK I think by now you may be thinking along the same lines as me. Straight answer is that this happens a lot to smaller developers to save them tax. You do not pay tax on your main home so in a small development of a few houses one may be put aside for the develpoer (or family) to live in and sell quite quickly after. As for the NHBC warranty how can you put a value of say £200K when the tax man knows you sold it for £160K?

Reply to
Mike Taylor

On one point you raised: "...the NHBC cert isn't worth that much (although your mortgage provider will insist on it) and in any case it only begins from 2-10 yrs, initial problems in the 1st two years is down to the builder..."

But if the house has already been sold to someone else, would the builder still be responsible to the second owner (me) for the first two years?

MM

Reply to
MM

Yes, this is pretty much the kind of conclusion I had come to. The property is, by the way, unlikely to be the vendor's main residence, as the vendor lives hundreds of miles away and this property has never been occupied. I don't know whether it is possible to arbitrarily declare a different property to be one's main residence, however.

If CGT was payable because it was not the main residence, what would a 'gain' be calculated on? You see, these kinds of questions keep popping up and are disturbing me into thinking something is well dodgy.

I am NOT concerned about whether someone made a fat profit, although the fact that the NHBC guarantee was based on the much lower selling price. But I *am* concerned that a future buyer may also hear warning bells (he or she will see exactly the same information I am now getting) and the property could prove difficult to sell.

MM

Reply to
MM

50-50

But if it isn't the main home?

True. But the "value" was a very low one, arbitrarily so.

MM

Reply to
MM

Since the rebuild costs will typically be only a small fraction of the purchase price, then probably not.

Reply to
John Rumm

I would suggest talking to your lawyer - but I would expect that like a warranty on a car etc, its transferable. If it is transferable you also need to check what is covered as it normally only affect major things such from roof tiles falling off to subsidence. In our new build we did loose a few tiles one night due to a storm (as did about 15 -20 of the other houses in the street), although the builder had left site, an agent was down looking at every ones roof even before I got up, and the roofs were all fixed over the next few days.

Jon

Reply to
Jonathan Pearson

Hmm, sounds like a tax fiddle to me. Maybe the IR would be interested?

Regards Capitol

Reply to
Capitol

HomeOwnersHub website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.