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Contract reassignment explained

Published: 07/04/2021

What does ‘contract reassignment’ mean? 

It means that you are buying a new build property from a private seller, rather than the developer. The seller is simply reassigning the benefit of the exchanged contract to you as the end user. A solicitor will represent the seller and the developer will have their own solicitor.

What is the difference from purchasing from a developer?

The third-party would have invested a capital sum when they exchanged the contracts for the ‘off-plan’ purchase, which you will repay, plus any agreed additional sum, upon exchanging contracts with them.

Reassignments creates a direct legal relationship between you and the developer, as if you had brought from the developer in the first instance. This is a more effective and more straightforward process than drawing up subcontracts and transferring the ownership of the property.

Does the developer play a part in the purchase of a reassigned contract? 

The developer will provide most of the documentation to the seller’s solicitor and provide answers to the queries regarding the development itself. They will also provide the draft paperwork to the seller. The developer's solicitors will complete the sale of the property once you have exchanged the reassigned contract with the original buyer. After the assignment has taken place, there will be a direct relationship between you and the developer.

Are there any problems in finding a lender for this type of purchase? 

The majority of lenders are reluctant to lend on the purchase of reassigned contracts, so you must work with a mortgage broker who should be familiar with the reassignment process, to try and secure the best mortgage possible.

Is a Mortgage Offer required before or after the reassignment? 

If the completion date is more than six months after the assignment, in may not be possible to secure an offer until closer to the completion date.

If completion is anticipated less than six months from the date of the reassignment, we recommend you have an offer in place before execution of the reassignment.  If you do not have an offer in place, you may find you're liable for the initial deposit and any agreed uplift, without the funds necessary to complete the purchase.

Is there a limit to the number of times a contract can be reassigned before completion?

Developers will usually allow one reassignment of the contract but it depends on each developer and the timeline for the completion of the unit.

Should my solicitor obtain the usual searches from the local authority? 

Lenders will require these before lending on the property. If you are not borrowing any of the purchase money, it is at your discretion. We recommend obtaining searches to ensure you have the full picture, as well as protecting your position when it comes to selling the property. While you may be a cash buyer, when you come to sell, your purchaser may not be.

What is the 'uplift', and when do I have to pay it?

The uplift is the amount you have agreed to pay over and above the original purchase price. When you exchange, you will be responsible for paying the initial purchaser's deposit, as well as the agreed uplift (if any), which is the difference between the original purchase price agreed and what you are purchasing the property for.

If you are buying the property for less than the original purchaser agreed, the seller is responsible for paying any shortfall. In such circumstances, you would send the deposit as a percentage of the agreed new price, while allowing the original purchaser to make up the price difference. The purchase price on completion will be registered at the original agreed sale price rather than any decreased figure subsequently agreed between you and the seller.

We hope that the above questions and answers satisfy the majority of the queries you may have about this process but please get in touch with our sales manager, Manuela Conti, if you are considering such a purchase and she will be happy to guide you through each step.
020 3137 1445
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