Property Development Offer to Completion – Stage Two
Congratulations! You put in an offer for a property, and it’s just been accepted. You’re eager for the property development to begin but – now what?
Where do you start? How do you complete the purchase? Or add GDV to the property? Can an architect help add value to your property?
The Architect plays an important role if you are purchasing a site or property with the aim of adding value through development. Architects are involved at various stages of the conveyancing process, particularly before an offer has even been made. They help to analyse a project’s potential by assessing the constraints of a site and seeing what’s possible.
We call this service our “Project Health Check” and if you need help on a scheme, let us help you here.
RIBA 0-3
After your offer is accepted, solicitors will carry out local authority, environmental and utilities searches. This is so all parties can understand, and be made aware of, any further constraints. The architect steps in to undertake these searches, as a solicitor requires the red line boundary of the site.
If it’s a straight-forward purchase with no conditions of gaining planning approval before completion (usually through an “Option Agreement”) before making a funding application, RIBA stages 0-3 will be conducted by the architect.
You can find out more about RIBA Stages here.
The funding application process results in the building illustration being agreed upon with a finance lender. Your mortgage broker will ask for various information such as Assets and Liabilities (what you own that falls under either category, such as house, pensions and savings, and loans, debts, and mortgage), and a Self-Assessment for tax. Most developers are self-employed, and it’s rarely the case if not. Credit searches will come under this as well. The lender will also review the development itself to ensure there is a minimum 20% profit margin.
Part of this process requires the contractor’s estimated build cost for the development. This build cost requirement and the collation of financial information is dependent on finance type. This process is applicable to development finance only. Here, initial plans are required from the Architect, so they can give a cost estimate for the works. This is known as a two-stage tender process which allows for contractors to be involved at an early stage. Once further detailed plans are available, there’ll be a more detailed cost breakdown.
Once this funding application is made, you’ll then receive a mortgage or finance offer.
Property Development Design
At the same time as the finance process, solicitors will draft contracts and report on the title following enquiries received by the seller. The architect will assist with clarification of the design, such as the site constraints and legal aspects.
When both parties agree and all reports and the mortgage offer are concluded, contracts are exchanged. The contract will be executed, and you will be required to sign personal guarantees, debentures, and charges depending on the requirements of the finance lender.
At this stage, if it’s an “option agreement (subject to planning)”, this is where RIBA stages 0-3 will take place, conducted by the architect.
Then, on the agreed date within the contract – congratulations, once more! – the purchase is completed.
If there are no financial or time constraints throughout the project, the RIBA stages 0-3 will take place here. This is once the purchase is complete, which means minimum risk of upfront costs to you without any surety of owning the site or property.
