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CML introduce measures to ensure correct valuation of new builds

Jude Buttle

New measures have been introduced by the Council of Mortgage Lenders (CML), to help ensure that conveyancing and valuation processes ascertain the correct value of newly-built properties.

Builders or developers of any newly-built, renovated or converted property will now be asked by lenders to complete a new ‘disclosure of incentives' form.

The purpose is to ensure that lenders are informed of any discounts or other incentives that may be offered by developers, making sure that any mortgage approved is issued on an accurate valuation, helping to prevent fraud.

Recently Lenders have lost confidence in the newly built property market, due to scams and a number of losses. Guaranteeing that a mortgage offer is based on the true value of the property will address that problem and provide a more effective protection for both lenders and borrowers.

In the past, lenders have been concerned that valuation and conveyancing processes do not always capture discounts and incentives available from developers.

The CML is now modifying its standard industry instructions to conveyancers, requiring them to get a copy of the completed disclosure of incentives form from the developer's conveyancer.

Commenting on the new measures, the 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."

The CML's initiative is backed by a number of industry organisations, which include the Royal Institution of Chartered Surveyors, the Law Society of England and Wales, the Home Builders' Federation and the Construction Employers Federation.