CML Form Updates - what you need to know
05 November 2018
From 1st July 2017, the Council of Mortgage Lenders was integrated into a new trade association known as UK Finance. As part of this transition, a new Disclosure of Incentives form came into effect on 1st August 2018, which House Builders must complete in respect of any property involving a mortgage from a lender that is to be occupied or purchased for the first time. The purpose of the form is to provide the lender with full details in respect of all financial aspects of the transaction and other pertinent information regarding the property being offered as security.
What are the main changes?
The new UK Finance Disclosure of Incentives form is more detailed that its predecessor. In addition to the various matters covered in the old CML form, the following matters are now included in the new UK Finance form:-
- New build warranty scheme details.
- Tenure (ie. Freehold or Leasehold).
- Details of ground rent and/or service charge payable in respect of the Property.
- Information specific to apartment developments.
- Information applicable to part-exchange transactions (ie. transactions in which the Builder is acquiring the Buyer’s existing property as part of the consideration for the Property being sold).
The form has been published for use throughout the UK, so there are various references which are not applicable to Northern Ireland. For example, Section 9c of the form which refers to ‘Commonhold’ tenure will never be applicable to Northern Irish properties, as this class of title only applies in England and Wales.
Can deposits paid to a solicitor be paid to a builder/developer?
This will depend on the terms of the Building Agreement. If the Building Agreement provides that the deposit is to be held by the Builder’s solicitor as ‘agent’, then the deposit may be released to the Builder upon formation of the contract. If the contract states that the deposit is held by the Builder’s solicitor as ‘stakeholder’, then the Builder’s solicitor will not be permitted to release the deposit to the Builder until completion of the sale. We find that most Builders are unwilling to accept a contractual condition for the deposit to be held on a ‘stakeholder’ basis.
Can a booking deposit be retained if a transaction falls through?
It is typical for 50% of the booking deposit to be refunded to a Buyer who decides not to proceed, but this is determined on a case by case basis as it will depend on the terms of the Reservation Agreement signed by the Buyer when they booked the site.
What if the House Specification differs from the Brochure?
Under the terms of a standard Building Agreement, a Builder is obliged to build the Property in accordance with Plans and Specifications lodged with and passed by the appropriate Local Authority. It is important not to deviate from the Specification without reference to the Buyer, as to do so can be costly in terms of time and money. However, the Brochure should contain a disclaimer advising that it is for illustrative purposes and should not be relied upon in terms of dimensions/measurements. Further, the Building Agreement should not make any reference to the Brochure.
Maeve Corrigan is a solicitor in Carson McDowell’s Real Estate department and acts for a number of House Builders/Developers. Should you require any advices in relation to residential development, please do not hesitate to contact Maeve on +44 (0) 28 9024 4951.