Published: 07/04/2021What does 'contract reassignment' mean?
It means you buy a new build property from a private seller rather than the developer. The seller reassigns the exchange contract's benefit to you as the end-user. A solicitor will represent the seller, and the developer will have their solicitor.
What is the difference between 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 create a direct legal relationship between you and the developer as if you had brought from the developer in the first instance. This is more effective and straightforward than drawing up subcontracts and transferring property ownership.
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 give 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 property sale once you have exchanged the reassigned contract with the original buyer. After the assignment, there will be a direct relationship between you and the developer.
Are there any problems in finding a lender for this type of purchase?
Most 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, securing an offer may not be possible 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 the execution of the reassignment. If you do not have an offer, 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. It is at your discretion if you are not borrowing any of the purchase money. We recommend obtaining searches to ensure you have the whole 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 and the agreed uplift (if any), which is the difference between the original purchase price and what you are purchasing the property for.
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. If you buy 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.
We hope that the above questions and answers satisfy most of your queries about this process. If you are looking to buy property in central London, Circa London is a London independent estate agents. Call us on 020 3137 7877 and we will be happy to help you search for your new home.