First-time buyers: Cooke Painter offers legal support to first-time buyers as numbers hit all-time high.
For the first time in over a decade, 2017 hit record high numbers of first-time buyers, according to figures released by UK Finance, the trade body for Britain’s banks.
According to the official figures, a total of 365,000 buyers, an annual increase of 7.4%, took ownership of their first home in 2017. Property experts say that schemes such as the governments ‘help-to-buy’, lower deposits and cheaper mortgage deals have all contributed to this trend. The data also showed signs of a less buoyant ‘buy-to-let’ market, which continues to be impacted by tax and regulatory changes.
More good news for homebuyers came in January with data from the Halifax, showing a ‘swift deceleration in price growth’. The firm reported that house price inflation had moderated to 2.2% after price falls in early 2018.
With the current year showing positive signs of being a good time to get on the property ladder, Wajid Darr, Cooke Painters conveyancing expert, offers his guidance to property buyers on taking care of the legal side to moving home. This simple guide explains what you should expect from your lawyer and what part you, as the buyer, will play in the conveyancing process:
The buyer is responsible for communicating any key details or concerns to be checked out.
Help your legal professional to understand and identify any issues. Communicate clearly if you have any concerns or worries about the new property so that your lawyer can ensure the proper checks are made. For example, if you plan to run a business from your new garage or love the outlook from the field next door, make sure you mention this to your legal professional so that they can check any planning requirement or restrictions.
The role of your lawyer in the conveyancing process.
A lawyer’s role is to look into the legal aspect of the purchase and be the conduit between you, your estate agent and any building society, bank or mortgage provider. This would include planning permissions, issues being investigated, checking entitlement for the sale, boundary responsibilities as well as financial obligations and buyers rights to property usage. They will not be able to help with any building, structural or working orders and you will need a surveyor to report on these issues. They can, however, advise on the feasibility of future building projects by reviewing any legal restrictions that may apply.
Cover all the bases.
A reputable conveyancing professional will explain the part they play in the process from the outset, in plain language, answering any queries or concerns that you may have. Make sure that you ask any and all questions as early as possible. Once contracts are exchanged, it is generally too late to do anything about issues raised as you will be legally committed to the purchase as the buyer of that property.
What should you be doing to protect yourself?
Technical checks and surveys should be left to professionals such as solicitors and surveyors, however, this is your new property and there are steps that you can take to feel secure in your property purchase decision. Visit the house a few times to look for practical issues that you can highlight to your appointed professionals; look out for shared right of way, problems with walls, roofs or windows etc. Remember your solicitor will not visit the house so they won’t be aware of things like bus stops outside or overhead power lines unless you tell them. Going back to the property or street on different times and different days could help to provide an alternative aspect on what living in the area would be like. Your lawyer will usually send you a ‘title plan’ showing the boundary for the property in red. It’s a good idea to take the plan along with you to the property and make sure that the shape on the plan is in accordance with the physical situation on site.
Arranging payments and fees.
Most lawyers these days are upfront with their fees and payment process. Discussing your funding arrangements with your solicitor from the outset will help to alleviate any issues that may occur later on. You will both be clear on any expectations around the amounts to pay and how these funds will be transferred to your lawyer.
At Cooke Painter, we undertake all types of property transactions, from the purchase of a house or flat for a first-time buyer, to complex commercial property transactions. Find out more about our conveyancing services.
Our conveyancing experts will guide you through the process and explain all the costs in full, including disbursements, which is any money we pay on your behalf to a third party, and agents fees where applicable. Our team will ensure that you understand from the start all the steps and fees involved so that there are no sudden surprises. We offer fixed fee work in the majority of straightforward conveyancing transactions, please use the contact us form to ask for a free estimate.Read More
Property fraud occurs when an individual attempts to claim ownership of a home that another individual owns. A fraudster who is successful in this endeavour can take numerous actions, such as remortgaging or even selling the home.
Properties that are unoccupied, or where a landlord may be absent for whatever reason, are at particular risk. The new HM Land Registry property alert service has been set up in order to limit cases of fraud – all for free.
How the property alert service works
The award-winning system operates by way of allowing individuals to monitor up to 10 registered properties free of charge, whether that be your own properties, or the properties of friends and relatives.
Whenever certain activities occur for a registered property that you are monitoring, you will receive email updates, allowing you to take any necessary action required to ensure the security of the properties.
After signing up, you will also receive bi-yearly reports on the properties that you are monitoring, specifying any activity that may have occurred regarding those properties. Here is some more information regarding the free service:
- The property you want to monitor must be registered with HM Land Registry in England and Wales;
- You must have registered for a property alert account;
- Email alerts will be sent when searches and applications are made against monitored properties;
- Upon receiving an email, you should take action immediately;
- The email received will detail who you should contact to take further action;
- You do not have to own a property to monitor it;
- If you do not have access to the internet, you can use the service by calling the Property Alert team on 0300 006 0478.
The benefits of using the system
The service can be used by anyone who has a particular interest in any property but will be very useful for landlords who have unoccupied properties, or where they may be absent, for example, those who may be living abroad.
To register for an online account, go to propertyalert.landregistry.gov.uk
For further guidance on residential property, or if you feel you would benefit from legal advice surrounding your properties, contact Wajid Darr on 0117 971 6765, or via email firstname.lastname@example.org.Read More
Mihaela Hyett este un avocat al Curtii Superioare England and Wales UK. Recent, a acordat asistenta juridica unor clienti romani care locuiesc in UK si care intentionau sa achizitioneze pentru prima data o proprietate imobiliara in UK.
Clientii cu inima indurerata, i-au marturisit Mihaelei ca inainte de a fi informati de serviciile juridice oferite de Mihaela in capacitatea sa de avocat in UK (UK solicitor), au intimpinat chiar din prima zi dificultati insurmontabile in procesul de transferare a proprietatii.
Dificultatile se datorau nu numai barierelor lingvistice dar si diferentelor majore dintre cele doua sisteme legislative
De exemplu unii clienti intentionau sa foloseasca in achizitionarea proprietatii in UK fondurile pecuniare provenite din vinzarea unei proprietii in Romania.
La prima vedere documentul aparea a fi originalul intocmit the un Notar public in conformitate cu prevederile legale din Romania. Datorita experientei legale si lingvistice, Mihaela imediat a realizat ca documentul nu era original cerut. Clientul nu avea nici o intentie de deceptie ci doar necunostinta si confuzie.
In acest context daca avocatul din UK nu intelege continutul sau legalitatea documentului prezentat, clientul se afla in fata unei situatii deosebit de neplacute. Aceasta poate avea un efect distructiv asupra relatiei client-avocat. De asemenea clientul poate intimpina costuri aditionale legate de traducerea sau legalizarea documentelor dupa cum este cazul.
In alte situatii clientii achizitioneaza o propietate in UK cu fonduri provenite de la membrii ai familiilor lor. Donatorul doneaza clientului fondurile necesare fara a pretinde ceva in schimb. Aceasta este situatia tipica a unei donatii. Alteori insa asa numitul “donator” ataseaza anumite conditii. Aceasta este situatia tipica a unui imprumut deci nu a unei donatii. Avocatul din UK trebuie sa discearna si sa concluzioneze care este adevarata intentie dintre partile creatoare ale raportului juridic, precum si care sunt obligatiile corelative ce revin fiecaruia.
Fie ca este cazul unei donatii sau a unui imprumut, fiecare situatie are implicatii legale specifice pentru banca din UK care ofera clientului un credit imobiliar sau ipotecar. Avocatului din UK ii incumba o “bona fide” obligatie de a informa banca si a intreprinde anumite masuri dupa cum este cazul.
Avocatul din UK are o obligatie deosebit de oneroasa in a explica clientilor romani si asa numitilor “donatori” din Romania, cerintele bancii din UK.
Vestea buna este ca Mihaela a putut si poate in continuare sa rezolve enigma si sa adreseze altele similare. Mihaela vorbeste romaneste si a studiat si practicat dreptul in Romania. Aceasta complementeza benefic faptul ca Mihaela este un avocat calificat in UK cu toate drepturile de practica in UK.Read More
They all confessed how until they found out about Mihaela, they faced insurmountable difficulties right from day one in the conveyancing process in the UK. The difficulties were not only due to the linguistic barriers but also to the major differences between the two legal systems. For example many of them have sold a flat or a house in Romania intending to use the sale proceeds to purchase a property in the UK.
Chancellor exempts many first time buyers from Stamp Duty and introduces a new higher rate for properties over £1m
In order to boost the housing market the Government announced that until 24th March 2012 first time buyers of properties below £250,000 will not be liable to Stamp Duty.
For those people who already own a property, a purchase of up to £125,000 will also be exempt and properties between £125,001 and £250,000 will be subject to Stamp duty of 1%.
The rate for stamp duty where a property exceeds £250,000.00, but is less than £500,000.00 remains unaltered at 3%, and for a property over £500,000.00, the rate remains at 4%. A higher rate of 5% has been introduced for properties over £1m.
However, if you are in any doubt as to the stamp duty payable it is advisable to seek legal advice
Stamp Duty Land Tax payable on residential property purchases on or after 1st April 2016.
The Government will be implementing new Tax rules for residential property where completion takes place after 31st March 2016. The information set out below is from the Government consultation document and sets out how they are expecting the new rules to work. We will not know exactly what the new rules are until much closer to the implementation date, probably after the budget to be announced on Wednesday 16th March.
The consultation paper attempts to cover all possible scenarios when someone is buying a house or flat. As long as all of the purchasers of the property you are buying only own one property (the one you are buying) at the end of the day when you complete your purchase, there will be no additional Stamp Duty Land Tax (SDLT) to pay -assuming the Government stick to what they have put in their consultation paper. Please check through the information set out below to see whether you will be paying the extra SDLT. If you are, the SDLT will be an extra 3% of the whole purchase price of the property. For instance, if you are buying for £200,000, the usual SDLT is £1500. If you have to pay the extra tax you will be paying £7500 ( £1500 + £6000 extra tax).
Please note that if you are buying your first property, the extra tax will not be payable. If you are selling your main residence and buying a replacement main residence the extra tax will not be payable. For other situations, please have a look at the scenarios set out below. For any further advice please get in touch with us.
How to check if a purchase of a property by an individual is liable for the higher rates.
How to check if a purchase of a property by an individual is liable for the higher rates
When the higher rates will apply
The higher rates will not apply if at the end of the day of the transaction an individual owns only one residential property, irrespective of the intended use of the property.
Example 3: X sells a property which was her main residence and purchases a new residential property. At the end of the day of the transaction she has one property, so X will not pay the higher rates of SDLT.
Example 4: Y is purchasing his first property. At the end of the day of the transaction he owns one property, so he will not pay the higher rates of SDLT. This is regardless of whether Y intends to use it as a main residence or, for example, a rental property.
Example 5: K, who lives in rented accommodation, sells the only residential property he owns, a buy-to-let, and purchases another buy-to-let. At the end of the day of the transaction he owns one property, so he will not pay the higher rates of SDLT.
If at the end of the day of the transaction an individual purchaser owns two or more residential properties, whether the purchaser pays the higher rates or not will depend on whether they are replacing their main residence (further details on what is a main residence are given below).
If the purchaser has sold a previous main residence within 18 months before the day of the transaction and the transaction is a purchase of a new main residence, the purchaser will be considered to be replacing a main residence. Where an individual is replacing a main residence the higher rates of SDLT will not apply.
However, if the purchaser is not replacing a main residence (either because they have not sold a previous main residence within the last 18 months or the property being acquired is not a new main residence), the higher rates will apply.
Recognising that there may be certain circumstances where purchasers may end up in difficult circumstances, some purchasers will be eligible for a refund of the additional SDLT paid – this is discussed in more detail below.
Example 6: Z already owns a main residence and is purchasing a property that will be used as a buy-to-let. At the end of the day of the transaction she owns two properties and has not replaced her main residence, so the higher rates will apply.
Example 7: A owns both a main residence and a second home. She sells her main residence and purchases a new one. Although she has two properties at the end of the day of the transaction, she has replaced her main residence so the higher rates will not apply.
Example 8: H owns a main residence. He is purchasing a new main residence, but rather than selling his previous main residence he will rent it out. At the end of the day of the transaction H owns two properties and is not replacing a main residence (as he is not selling his previous main residence), so the higher rates will apply.
Example 9: N purchases her first property, which she will use as a buy-to-let. At the end of the day of the transaction she owns one property, so she will not pay the higher rates of SDLT, even though she is not using it as her main residence.
Two years later, N purchases a residential property which she will use as her main residence, but she decides to keep her buy-to-let property. In this instance, as she has two properties at the end of the day of the transaction and has not replaced a main residence (as she has not sold a previous main residence), the higher rates will apply.Example 10: O is a buy-to-let investor with 10 residential properties in his portfolio. He also owns one residential property which he uses as his main residence. He decides to sell his previous main residence and purchase a new main residence.
At the end of the day of the transaction, he owns 11 properties – his new main residence and his 10 buy-to-let properties. However, as he has replaced his main residence he will not pay the higher rates of SDLT.
Married couples and civil partners
Married couples and civil partners who own one property at the end of the day of a transaction will not pay the higher rates of SDLT. However, if either of them owns more than one residential property they may pay the higher rates when purchasing another property.
The government will treat married couples and civil partners living together as one unit. This is consistent with other areas of the tax system including Capital Gains Tax private residence relief where married couples are entitled to relief on one residence between them.
This means that:
- married couples and civil partners may own one main residence between them at any one time for the purposes of the higher rates
- property owned by either partner (and any minor children) will be relevant when determining if an additional property is being purchased or not. Therefore, an individual
- buying a property may be liable for the higher rates if his or her spouse or civil partner has an existing residential property. If the spouse or civil partner then sells that
- residential property they may be able to claim a refund
Married couples and civil partners are treated as living together, and therefore as one unit, unless they are separated:
- under a court order; or
- by a formal Deed of Separation executed under seal.
In each case the marriage or civil partnership must have broken down. Where a married couple or civil partners sometimes live apart (but the relationship has not broken down), which property is the couple’s main residence will need to be determined by the facts (more detail is available in section 2.8).
Example 13: Mr and Mrs I own a main residence together. They decide to purchase a second home jointly. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 14: Mr and Mrs L own two residential properties jointly. Although they spend time in both, only one of these properties is their main residence. If they sell the residential property that is their main residence and purchase a new main residence, they will not pay the higher rates, as at the end of the day of the transaction they own two properties but are replacing their main residence.
However, if they sell the property that is not their main residence, their second home, and purchase another second home, they will pay the higher rates, as at the end of the day of the transaction they own two residential properties and have not replaced their main residence.
Example 15: Mr and Mrs M are married. Mr M owns a home (which he purchased on his own before he was married) where the couple live as their main residence. Mrs M then buys a property to be rented out. At the end of the day of the transaction they own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 16: Mr A marries Mr B. They each own a property (which they purchased individually before they were married and used as their respective main homes). Mr B then sells his former main home and purchases a new property to rent out.
At the end of the day of the transaction Mr A and Mr B own more than one residential property and are not replacing their main residence, so the higher rates will apply.Example 17: Ms C and Ms D are in a civil partnership. Ms C owns a property (which she purchased on her own before her civil partnership) where they live together as their main residence. However, Ms C and Ms D decide to separate. After they have separated under a court order, Ms D decides to purchase a property.
At the end of the day of the transaction Ms D owns one residential property, so the higher rates will not apply.
There are many scenarios where two or more people may own or purchase property jointly.
The government proposes that if, at the end of the day of a transaction, any of the joint purchasers has two or more properties and is not replacing a main residence, the higher rates will apply to the entire consideration for the transaction. This provides simplicity and aligns with other areas of the tax system.
However, as the purchased property may be a first property for one or more of the joint purchasers, the government is keen to hear from respondents as to whether this is the fairest outcome.
Example 18: F and G own a property jointly. F decides to purchase a buy-to-let property on his own. At the end of the day of the transaction he owns two properties and has not replaced his main residence, so the higher rates of SDLT will apply.
Example 19: B and C are purchasing a property together. This will be B’s first property, but C owns another property that she is not selling. For C, this will be an additional property as, at the end of the day of the transaction, she will own two properties and is not replacing a main residence. Therefore, the higher rates of SDLT will apply.
Purchasing a property for children to live in
The government appreciates that in many cases individuals and couples may help their children to get onto the property ladder. Whether the higher rates of SDLT will apply will depend on the structure of any transaction, and in particular who owns the property purchased.
Example 20: Mr and Mrs J own a main residence together. They decide to purchase a property for their children to live in. At the end of the day of the transaction Mr and Mrs J own more than one residential property and are not replacing their main residence, so the higher rates will apply.
Example 21: I owns one residential property. He decides to purchase another property jointly with his daughter. The property will be his daughter’s first property. At the end of the day of the transaction, I owns more than one residential property and has not replaced his main residence, so the higher rates will apply.
Example 22: T helps her son, S, purchase his first residential property. She gives him money towards a deposit and acts as a guarantor on the mortgage, but will not jointly own the property with him. At the end of the day of the transaction S will own one property, so the higher rates will not apply.
Determining whether a purchaser is replacing an only or main residence
Where a purchaser (or, in the case of joint purchasers, all purchasers) own one property at the end of the day of a transaction they will not pay the higher rates. Purchasers will only need to determine whether they have replaced a main residence if they own two or more properties at the end of the day of the transaction.
In that situation, a purchaser will pay the higher rates of SDLT if they are not replacing their main residence. If they are replacing their main residence, they will not pay the higher rates.In most cases, where individuals move house they may purchase and sell property on the same day (for example, if they are involved in a chain of transactions). However in some circumstances people may sell their old main residence some time before, or some time after, purchasing a new main residence.
These situations are considered in more detail below. Where an individual sells their previous main residence after purchasing a new main residence, a refund of the higher rates may be claimed. This is discussed further in section below.
Most individuals only have one residence at any given time. Where an individual has more than one property, in most cases it will be clear which one is the main residence.
For example where an individual owns two properties, one which they live in and one which they let out.
Individuals will not be able to elect which of their residences is their main residence and therefore the treatment of a main residence for the purposes of the higher rates of SDLT may differ from the treatment for capital gains tax.
The government’s view is that any elective treatment for SDLT may reduce uncertainty but it would be open to abuse and on balance is not justified. Instead, the government proposes that whether a property is a main residence will be based on fact.
HMRC will take into account a number of factors when considering whether a given property is an individual’s main residence. These will include:
- where the individual and their family spends their time;
- if the individual has children, where they go to school;
- at which residence the individual is registered to vote;
- where the individual works;
- the location and degree of furnishing and location of moveable possessions; and
- the correspondence and registration addresses given to various organisations.
In most cases the position will be clear and few factors will need to be considered. For example, where a married couple own two properties, one of which is convenient for their work and their children’s school and where they spend most of their time, and a holiday home which they visit occasionally, the former property would be their main residence.
The government proposes a two stage test to determine whether a purchase of a residential property is a replacement of a main residence or not. The first is whether, at the time of the transaction, a property sold in the last 18 months was the only or main residence of the individual. The second is whether the purchaser of the new property intends to occupy that property as their only or main residence.
When considering the first stage of the test, the property being sold must have been the only or main residence of the purchaser at some point in the 18 months before the purchase of the new property. In the majority of cases, an individual owns only one residence throughout a period, and it is this residence that will be their only or main residence.
Where an individual has more than one residence, which of these was their main residence will be a question of fact.
The second stage of the test is prospective and based on whether the purchaser intends to use the newly purchased property as their only or main residence. Where an individual has made plans at the date of purchase to move into the new property as their only residence, it will be obvious that the intention test is met.
Where evidence clearly shows that either another property will continue to be their main residence or that the property is purchased for some other purpose (such as use of a buy-to-let mortgage or other evidence of an intention to market the property for rent) the transaction will not be a replacement of a main residence.
Delay between sale of a previous main residence and purchase of a new one
The government appreciates there may be circumstances where an individual sells a property which was their only or main residence, but there is then a period before they purchase their new main residence. The government does not want to disadvantage people in those circumstances.
The government believes that there should be a maximum 18 month period between sale of a previous main residence and purchase of a new main residence for the purpose of determining whether the higher rates apply.
The government is of the view that this is a sufficient period in the vast majority of cases.Example 23: G sold a property which was his main residence 3 months ago. He still owns another property which he lets out. Since the sale of his main residence he has lived in rented accommodation.
G then purchases a new residential property which he intends to use as a main residence.
At the end of the day of the transaction, he has two properties, but as he is replacing his main residence (he is purchasing a new main residence within 18 months of selling his previous main residence), the higher rates will not apply.
Example 24: J owns two properties, a main residence and a holiday home. He decides to move into his holiday home as his new main residence, keeping his old main residence to let out.
3 months later, J sells his previous main residence and purchases a smaller property.
At the end of the day of the transaction, J has two properties, and whether the higher rates will apply will depend on whether J is replacing a main residence.
If J intends to move into the newly purchased property as his new main residence, the higher rates will not apply.
Overlap between purchase of new main residence and sale of previous main residence
In some circumstances, individuals will purchase a new main residence before disposing of their previous main residence. This may be intended, such as where multiple properties are owned temporarily due to employment or family reasons.
In some circumstances it may be unintended, such as where a purchaser was involved in a chain of transactions and the sale of a previous main residence fell through, but the purchaser proceeds on the purchase of their new main residence.
For purchasers who experience a temporary overlap between the purchase of a new main residence and the sale of a previous one, the government does not want to increase the overall tax burden.
In these situations, at the end of the day of the purchase of a new main residence the purchaser will own two or more properties and will not have replaced their previous main residence, as their previous main residence has not yet been sold.
It may be difficult to determine whether an individual has an intention to sell their previous residential property at this point, and a careful balance needs to be struck by the government to ensure that the tax system remains robust to tax avoidance and abuse.
Therefore, the government proposes that the higher rates of SDLT should apply to such transactions. To ensure fairness, the government proposes to introduce a refund mechanism for those who sell their previous main residence within 18 months of the purchase of the new main residence.
Refund upon sale of a previous main residence
This refund will be on the difference between the amount of SDLT paid under the higher rates and the amount of SDLT that would have been due under the normal residential SDLT rates.This will mean that, after the refund, the purchaser will have paid the normal residential rates of SDLT.
A refund will be allowed in situations where a purchaser paid the higher rates of SDLT on the purchase of a new main residence and within 18 months disposes of a previous main residence.Example 25: Mr and Mrs K own one property, which is their main residence. They decide to purchase another property, which they will use as their main residence, but decide not to sell their previous main residence. At the end of the day of the transaction they own two properties and have not replaced their main residence, so the higher rates will apply.
Two months after this purchase, they sell their former main residence. Mr and Mrs K have disposed of a former main residence within 18 months of purchasing a new main residence. As such, upon sale of their previous main residence they will be eligible for a refund.
Example 26: D and E are purchasing a property jointly which is intended to be their main residence. E already owns a property, which was previously used as a main residence, which he will not have sold at the time of purchase.
Upon purchase, as E will own two properties and has not replaced his main residence, the higher rates will apply. However, E then sells his previous main residence 12 months later. At this point, D and E will be eligible for a refund.
Example 27: F is selling her main residence and purchasing a new one. However, her chain unexpectedly breaks down, meaning at the end of the day of the transaction she owns two properties and has not replaced her main residence.
Therefore, she will pay the higher rates. A month later, she sells her previous main residence. At this point F will be eligible for a refund.
Example 28: Q owns a buy-to-let property. He decides to purchase a new residential property, but does not sell his existing property. At the end of the day of the transaction he owns two residential properties and has not replaced his main residence, so he will pay the higher rates of SDLT.
5 months later Q sells his buy-to-let property. As this buy-to-let property was not his main residence, he has not replaced his main residence. Therefore, he will not be eligible for a refund.
Property owned and purchased outside of England, Wales and Northern Ireland
SDLT only applies to purchases of land and property in England, Wales and Northern Ireland. A purchase of residential property located outside these areas will not pay SDLT, instead it may be liable for any property transactions tax in that jurisdiction.
Example 30: R owns a property in Wales, which she uses as a main residence. She decides to purchase a buy-to-let property in Scotland. SDLT is devolved to Scotland, so she will not pay SDLT, but the Land and Buildings Transactions Tax (LBTT) on the purchase of the buy-to-let property. The rates and structure for LBTT are set by the Scottish Government.
However, property owned globally will be relevant in determining whether a property purchased in England, Wales or Northern Ireland is an additional property. This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, they may pay the higher rates if they own property outside these areas.
Example 31: S owns a property in Scotland, which she uses as a main residence. She is purchasing her first property in England, Wales or Northern Ireland, which she will use as a second home. At the end of the day of the transaction she owns two or more properties globally and is not replacing her main residence, so she will pay the higher rates of SDLT.
Example 32: T owns a property outside England, Wales and Northern Ireland which he uses as a main residence. He decides to sell that property and purchase a residential property in England, Wales or Northern Ireland. At the end of the day of the transaction he owns one residential property globally, so he will not pay the higher rates of SDLT.
Furnished holiday lets
The government proposes that properties bought as furnished holiday lets should be treated in the same way as all other residential properties – if the property is purchased as an additional property the higher rates will apply.
Treatment of non-residential property purchases
The higher rates of SDLT will only apply to purchases of residential property. The definition of residential property and non-residential property will not change due to the introduction of these higher rates. This means that a purchaser of a non-residential property will never pay the higher rates of SDLT, even if it is later converted into residential property.
Non-residential property includes:
- commercial property (such as shops or offices);
- agricultural land;
- bare land (even where that land may subsequently be used for residential purposes);
- any other land or property which is not used as a residence;
- 6 or more residential properties bought in a single transaction; and
- A mixed use property (one with both residential and non-residential elements).
Mixed use transactions, that is the purchase of residential and non-residential properties together in a single transaction, is currently considered a non-residential transaction for SDLT purposes. The government does not intend to change that treatment.
Treatment of multiple residential property purchases
Where multiple residential properties are purchased in a single or linked transaction, that transaction is eligible for multiple dwellings relief (MDR).
Under MDR, the residential rates of SDLT are applied to the average price of each property (multiplied by the number of properties purchased) rather than applying to the entire transaction value.This brings the total SDLT due closer to the amount that would be due if the same properties had been purchased separately.
Where 6 or more residential properties are bought together, the purchaser can choose whether to apply the non-residential rates of SDLT (to the entire transaction value) or to choose the residential rates of SDLT with MDR applied.
The government intends to retain this system for the purchase of multiple residential properties.
When the new higher rates come into force this will mean purchases of multiple residential properties in one transaction, where some or all of them are additional properties, will be eligible for multiple dwellings relief, with the higher rates applied to the average price of the dwelling purchased.
For purchases of 6 or more residential properties in the same transaction, the purchaser will be able to choose whether multiple dwellings relief, with the higher rates, will apply, or the non-residential rates (which will be charged on the total purchase price).
Example 37: A developer purchases 10 additional residential properties in one transaction, for a total of £3 million. The average purchase price is therefore £300,000. He is purchasing 6 or more residential properties in the same transaction, so he can chose whether multiple dwellings relief, with the higher rates, will apply, or the non-residential rates.
Multiple dwellings relief:
The SDLT due, with the higher rates applied, on the average purchase price of £300,000 is £14,000. This is then multiplied by the number of properties (10) to give the total amount of SDLT due – £140,000.
The non-residential rates apply to the total transaction value – £3 million. As this is in the 4% band, SDLT will be due at 4% on £3 million – £120,000. In this instance, the developer will chose to pay under the non-residential rates.
The treatment of trusts and settlements:
Property is sometimes held by trustees in trusts, and to ensure the fairness and integrity of the tax regime the higher rates of SDLT will apply to some purchases made by trusts.
Purchases by trustees of bare trusts will continue to be treated as if they are made by the beneficial owner and there will be no difference in treatment compared to the beneficial owner purchasing themselves.
Trust that are not bare trusts could be used as a vehicle to hold existing property so that an individual appears to have no other interests in property at the end of the day of a property purchase.
In order to prevent this, the government intends to treat certain beneficiaries of trusts as owning interests in a residential property if the trust owns an interest in a residential property.
The government considers that beneficiaries with a life interest or interest in possession under a trust should be treated in this way.
Less immediate or certain interests like interests in remainder or discretionary interests in property could give individuals a financial interest in a property. The government considers that generally, interests in remainder and discretionary interests are too remote or insignificant to be counted as an interest held by the beneficiary.
In order to not disadvantage those whose homes are held in trust because of either inheritance or because the beneficiary is disabled, the government does not want the higher rates to apply to either the purchase of an individual beneficiary’s residence where no other property is owned by the individual or to the replacement of a beneficiary’s only or main residence.
It is the intention, so far as possible for the purposes of determining whether the higher rate is payable, to treat purchases by trustees for beneficiaries with life interests or interests in possession as if the purchase were made by the individual themselves.
Purchases by trustees where beneficiaries have no interest in possession over the property will be liable to the higher rates.
Example 38: A, the trustee of a new settlement for the benefit of B for life, remainder to C, purchases a property. B is an individual who owns no existing property. B is entitled to occupy the purchased property under the terms of the settlement. This will be B’s only property at the end of the day of the transaction, so A will not pay the higher rates of SDLT.
This is the case regardless of whether C owns a property. After this, B purchases a property in his own right. At the end of the day of the transaction, B has interest in two properties (as B’s interest in possession in respect of the property owned by the trust counts), so B will pay the higher rates of SDLT.Example 39: D, the trustee of a discretionary settlement for the benefit of individuals, E, F and G, purchases a property. None of the beneficiaries have a right to occupy the property under the trust, nor can they require D to pay them any income from the property.
There are no beneficiaries with a right to the income from the property or entitled to occupy the property under the terms of the settlement and so D will pay the higher rates of SDLT. Later, E purchases his first property. At the end of the day of the transaction, he owns one property. E’s possible future benefit from the trust does not amount to an interest in an existing property for the purposes of determining whether the higher rates apply, so E does not pay the higher rates of SDLT.Example 40: H, the trustee of a settlement for the benefit of J for life, remainder to K, owns a property which is J’s only residence. H also owns an investment property. H sells J’s main residence and then purchases a new residence that J intends to occupy as his only residence.
At the end of the day of the transaction, J has an interest in two properties (the new main residence and the investment property), but as his main residence has been replaced, H will not pay the higher rates of SDLT.The government recognises that the higher rates of SDLT will create additional requirements for agents acting for purchasers. The government expects most of the additional information that needs to be obtained from purchasers will be straightforward and uncontroversial.
For example, questions about whether the purchaser (or any joint purchaser) will own more than one residential property at the end of the day of the transaction will need to be considered. This information will need to be kept up to date by the purchaser and the conveyancer during the period between instruction and completion.
One piece of information which will be required from purchasers is whether any newly purchased residential property will be a main residence and replacing a previous main residence. This would be required in a situation where a purchaser with multiple properties at the end of the day of a transaction would not pay the higher rates.
In order to determine this, agents will need to determine whether the purchaser has disposed of any residential property within 18 months of the new transaction and whether or not that disposal was a disposal of the purchaser’s only or main residence.
Ultimate responsibility for the accuracy of an SDLT return remains with the purchaser and HMRC will provide guidance on how purchasers can determine whether the disposal of a property can be considered as a disposal of a main residence.
Conveyancers may not be best placed to judge whether a purchaser is correct about which property has been their main home. The government recognises that conveyancers are a key part of ensuring SDLT compliance and are keen to maintain this.
The government is considering how it can help conveyancers other than by providing written guidance, calculators and publicising the consequences for purchases of getting things wrong.
Issue Date : 18 February 2016
Issuing Department : Ministry of Justice (MOJ)
A banded approach to probate fees has been proposed by the Ministry of Justice (MoJ). Views are sought on proposals to impose fees of between £300 and £20,000, depending on the value of the estate. The value of an estate below which no fee is payable would rise from £5,000 to £50,000. The consultation is open until 1 April 2016.
Between 1981 and 1999, the probate fee scheme was linked to the net value of the estate. In 1999, this scheme was replaced by a flat fee scheme.
Applications for grants of probate are currently set at £155 when a grant of probate is sought by a solicitor, and £215 when the application is made by an individual. Estates that require probate but are worth less than £5,000 do not have to pay a fee.
Views are sought on a new proposed fee regime, under which a flat fee would be replaced by a banded fee approach. The fee would be proportionate to, and rise with, the value of the estate.
The value of the estate below which no fee is payable would rise from £5,000 to £50,000. According to the MoJ, this would exempt 30,000 estates from paying any fee.
Under the proposals, the following fees would apply:
- estates valued between £50,000 and £300,000—£300
- between £300,000 and £500,000—£1,000
- between £500,000 and £1m—£4,000
- between £1m and £1.6m—£8,000
- between £1.6m and £2m—£12,000
- above £2m—£20,000
The valuations are before inheritance tax is deducted.
The same fee would apply irrespective of whether the application is made by a solicitor or an individual.
The government is also considering whether grant of probate applications should be excluded from the fee remissions scheme.
According to the MoJ, the proposals would generate around £250m in additional income for HM Courts & Tribunal Service.
Responses should be sent by:
- online form
- email to: email@example.com
- post to: Jasmin Cheung, Court & Tribunal Fees Policy, Post Point 3.38, Ministry of Justice, 102 Petty France, London SW1H 9AJ
- telephone to: (020) 3334 5555
- fax to: (020) 3334 2233
The MoJ confirms the design stage of the new Probate Service will start in April 2016 and should be completed in April 2017.
Source: Consultation: Court fees—Proposals to reform fees for grants of probate
We believe in a proactive approach with our clients and explain any legal documents in detail, which is often very useful for first time buyers.
A first time buyer visited the office to discuss with Wajid the process of making an offer on a property. He had left University and was in the first year of his first job.
Wajid advised him that he should check the costs involved and his finances first before referring him to an independent Financial Adviser for mortgage advice. The clients have an option of using their own advisers or we have a database of reliable contacts.
Wajid then explained the process to the client, as well as the intricacies of what should be expected at each stage.
The client consulted a Mortgage Adviser, who confirm that he could proceed and put an offer on the property, which he did so on returning to us. The offer was successful and we started the legal process. Wajid gathered all the necessary documents (such as identification), obtained draft contract package from the sellers Solicitors and forwarded copies on to the client, advising the client throughout the process.
We believe in a proactive approach with our clients and explain any legal documents in detail, which is often very useful for first time buyers.
Wajid then raised enquiries with the seller’s solicitors and obtained searches on behalf of the client, as well as corresponding with the mortgage broker until the mortgage offer was received.
The client was updated on a regular basis throughout the transaction, and upon receipt of all enquiries, searches and mortgage offer, Wajid forwarded a Title Report and invited him to the office.
Wajid explained the mortgage offer in detail before the client confirmed that he would like to proceed, fully confident that he understood all the facts and details about the property he was about to purchase.
The client didn’t realise how simple the process could be and was really grateful for the information we gave him, since he knew what would happen at every stage both before and after completion of the purchase.Read More