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Lenders will ask builders or developers of any newly-built, converted or renovated property to complete a new 'disclosure of incentives' form. The aim is to ensure that any discounts or other incentives offered by developers are disclosed to the lender. This will ensure that any mortgage is granted on an accurate valuation, and help prevent fraud.
Making sure that a mortgage offer is based on the true value of the property provides more effective protection for both lenders and borrowers. This will help reinforce lenders' confidence in the market for newly-built property, which has fallen due to recent experience of losses and frauds.
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In the past, lenders have been concerned that valuation and conveyancing processes do not always capture discounts and incentives available from developers.
The CML has amended its standard industry instructions to conveyancers, requiring them to get a copy of the completed disclosure of incentives form from the conveyancer acting for the developer. The CML's initiative is supported by the Royal Institution of Chartered Surveyors, the Law Society of England and Wales, the Home Builders' Federation, Homes for Scotland and the Construction Employers Federation.
Commenting on the new measures, CML's Director General Michael Coogan said: "These measures to reinforce confidence in the accuracy of valuations of new-build properties will help underpin this segment of the market. This is particularly important at a time of limited funding availability for house purchase transactions. If developers ensure that they are transparent, and disclose any discounts or incentives on offer to buyers, lenders' confidence should start to return. In the meantime, recent lender experience means buyers of new-build properties will be expected to provide significant deposits so that lenders can manage their risks."
(CD/JM)
