Before You Reserve a New-Build Home: A Checklist

Reserving a new-build home is the point where a house hunt turns into a financial commitment, even though contracts are still some way off. You pay a fee, sign a reservation agreement and start a countdown to deadlines on your mortgage, your solicitor and exchanging contracts. Work through this checklist before any money changes hands.

What a Reservation Fee Actually Buys You

A reservation fee is money you pay a developer so they take the plot you want off the market while you arrange your mortgage and legal work. Fees commonly range from £500 to £2,000, and under the First Homes scheme, where the local council checks your eligibility, the fee is capped at £500.

• Ask what the fee covers. It should secure the plot at an agreed price, not pay for anything else. Some estate agents outside the new-build market have started asking for similar fees, so check who is taking the money.
• Ask when it is refundable. Under First Homes, the fee is refunded if your application is unsuccessful. On the open market, the answer depends entirely on the agreement.
• Do not confuse it with a deposit. A reservation fee is not a deposit in the legal sense and is not covered by the same protections as a cooling-off period on some other contracts.
• Understand its limits. A reservation agreement is not the contract to buy the property. Neither you nor the developer is yet bound to complete the sale.

Reservation fees also appear when buying through the Modern Method of Auction or a shared ownership property, so the same checks apply.

Read the Reservation Agreement Before You Sign

The reservation agreement is a short contract in its own right, separate from the eventual sale contract, and it is enforceable even though the main purchase is not yet agreed. Check that it sets out:

• The plot and the reservation period. This is commonly 28 days, though 14 or 42 days is possible depending on how far the build has progressed.
• The fee and its treatment. Whether it is fully refundable, partly refundable or non-refundable, and in exactly which circumstances.
• The reserved price and any incentives. What you agreed to pay and what the developer promised to include at the point of reservation.
• Your deadlines. When you must instruct a solicitor, provide proof of funds or a mortgage in principle, and exchange contracts.
• The developer’s cancellation rights. When they can cancel the reservation and what happens to your fee if they do.

Handy tip

Get an agreement in principle before you visit a development. It shows the developer you can plausibly borrow and helps you judge whether the reservation deadlines are realistic. Our guide to what a mortgage agreement in principle tells you explains its limits.

Build Warranties: What Ten-Year Cover Does and Doesn’t Include

A build warranty is insurance-based cover for newly built homes, and most new homes come with one. The NHBC Buildmark policy, a widely used example, runs for ten years in three stages:

• Before completion: protection for your deposit if the builder becomes insolvent between exchange and legal completion.
• Years 1 and 2: a builder warranty period in which the builder is liable to put right defects reported to them, backed by the warranty provider’s guarantee and resolution service.
• Years 3 to 10: insurance cover for damage caused by defects in specific parts of the home, such as foundations, subject to a minimum claim value set out in the policy.

Know what is excluded as well:

• Items covered by other insurance, such as buildings and contents cover or manufacturers’ warranties on boilers and appliances.
• Alterations made after the final inspection, including extensions and loft conversions.
• Theft or accidental damage.

If the home has had a previous owner, ask whether earlier claims have used up some of the policy’s financial limits. Keep the policy booklet and certificate; your conveyancer should give them to you.

Why New-Build Mortgage Offers Can Run Out of Time

A mortgage offer comes with an expiry date, and a new-build completion date can move. House purchases in general can take months to progress from an accepted offer to completion, and the government has estimated that transactions which collapse cost consumers around £400 million a year. Build in some slack between the two dates.

• Compare dates. Check how long your mortgage offer lasts against the developer’s expected completion date and the notice they say they will give before completion.
• Ask what happens if completion slips. If an offer expires, you may need to reapply, and the rate available could differ from the one you reserved. Our guide to deposits and loan-to-value explains how your deposit shapes the deals you can access.
• Sequence matters on scheme homes. Under First Homes, do not submit a full mortgage application until the council has issued an Authority to Proceed, because applying earlier can incur costs and cause delays.
• Budget for the gap. You pay your deposit and become legally committed at exchange of contracts, which may be some time before the developer hands over the keys.

Incentives and Part-Exchange Offers: The Trade-Offs

Developers often sweeten a reservation with free goods or cash back. On First Homes properties, incentives must not be worth more than 5% of the discounted purchase price. Elsewhere, what applies will depend on the seller and the agreement you sign, so treat every offer as a trade-off rather than a gift.

• Compare incentives with a price reduction. A lower price reduces your loan and your interest, which can be worth more than furnishings over the life of the mortgage.
• Tell your lender. Lenders have their own rules on how incentives affect what they will lend, so disclose them and ask early.
• Part-exchange means one buyer. The developer buying your current home removes chains and uncertainty, but you have less scope to test whether the price is the best you could get.

Snagging Surveys and the After-Sales Process

Snagging means identifying small defects in a new home, from paint blemishes to doors that do not close properly. You can inspect the property yourself, or pay a professional to carry out a snagging survey, ideally before completion or soon afterwards.

• Report defects in writing during the first two years. This is the builder warranty period, when the builder is liable to put right defects reported to them.
• Keep records. Photograph issues, note dates and keep copies of everything you send, so problems are easy to evidence later.
• Know the later route. From year 3, claims are insurance claims for damage caused by defects, and the damage must be notified during the policy period.
• Flats have an extra step. If the problem is in a shared part of a block, such as a communal staircase, the claim may need to go through the managing agent.

What to Ask the Developer Before Handing Over Money

• Exactly what does the reservation fee cover, and in what circumstances is it refunded?
• How long is the reservation period, and can it be extended if exchange is delayed?
• What is the anticipated completion date, and how much notice will I get?
• Which build warranty covers the home, and may I see the policy document before I reserve?
• What incentives are included, and are any of them capped or conditional?
• Who do I report defects to after I move in, and how quickly is the builder expected to respond?

More on this site

• What a Mortgage Agreement in Principle Tells You and What It Doesn’t: useful before you reserve, so you know what an agreement in principle does and does not prove.
• Deposits and Loan-to-Value: How Your Deposit Shapes Your Mortgage: explains why the deposit you pay at exchange affects the rates available to you.
• How Lenders Work Out How Much You Can Borrow for a Mortgage: helps you judge whether the reservation deadlines are achievable before you commit.

Your questions

Is a new-build reservation fee refundable?
It depends on the reservation agreement. Under the First Homes scheme, for example, the fee is refundable if your application is rejected, but other agreements may make it non-refundable in stated circumstances.

What does a ten-year new-build warranty cover?
Cover is usually split into stages. A typical policy includes deposit protection before completion, a two-year period when the builder must put right reported defects, then eight years of insurance for damage caused by defects in specific parts of the home.

Do I need a mortgage offer before reserving a new-build home?
You do not usually need a full mortgage offer, but an agreement in principle helps show the developer you are a serious buyer. Under the First Homes scheme, you should not submit a full mortgage application until you have an Authority to Proceed.

What is a snagging survey?
It is an inspection of a new home for small defects, such as unfinished paintwork or poorly fitted doors, before or shortly after you move in. Defects found during the first two years should be reported to the builder.