Option 1

You can elect to make a stamp duty payment on completion – at the relevant rate – on the whole value of the property (i.e. the current rate on a £250,000 property is 1 per cent and therefore a payment on completion of £2,500.) This option means that should you purchase further shares in your property, usually known as staircasing, you will not have to make any further stamp duty payments.

Option 2

Your other option is to elect to make a stamp duty payment – again at the relevant rate – on the share you are purchasing (i.e. the current rate on a purchase of a £100,000 share is 0 per cent and therefore no stamp duty would be payable on completion.) This may seem the more attractive option to take but if you have plans to purchase further shares in your property, those transaction(s) may attract stamp duty at the relevant rate in the future.

As we know, the first-time buyer stamp duty tax relief comes to an end on 24 March 2012 and consequently many first-time buyers are hurrying to take advantage of electing option number 1, as they can still seek the relief at 0 per cent up until this date.

It is always essential that you ask your solicitor about all the options open to you, so that you ensure you choose the best option for you!

The statement included further details of the NewBuy Guarantee scheme, which was initially announced as part of the Government’s Housing Strategy, and is expected to become available from Spring 2012. Further details on the scheme are available here.

The NewBuy Guarantee scheme, which has been developed jointly by the Home Builders Federation and Council of Mortgage Lenders, aims to assist buyers to buy a new-build home if they have a deposit of at least 5 per cent. The scheme will allow eligible borrowers to secure up to a 95 per cent Loan-to-Value mortgage on new-build houses and flats from participating builders in England. All mortgage lenders and house builders have been invited to sign up to the scheme. Further details are here.

The Government is supporting the scheme to help those home buyers who are unable to purchase a property because they do not have a large enough deposit.

The scheme applies to new-build residential properties (priced up to £500,000) that are being sold for the first time or for the first time in their current form. The scheme is for primary ownership only and is not available for shared ownership, shared equity purchases, second homes, investors, or buy-to-let. To be eligible for the scheme, purchasers must be UK citizens or have a right to remain indefinitely in the UK.

The Government anticipates that the scheme will help 100,000 households buy a new home.

The new online system will provide conveyancers with instant Buildmark cover information and access to all the associated documentation. This is good news for purchasers of new homes as it should help to speed up the conveyancing process.

Conveyancers will be able to:

1. Check whether a property is covered by Buildmark prior to exchange of contracts;

2. Complete the acceptance form online; and

3. Check and download all of the NHBC documentation, including the Insurance Certificate, policy documents, warranty status, and the CML Cover note.

The new process will allow any amendments to be made directly on to the system, thus avoiding the delays and costs associated with having to issue revised paper-based documents.

The change is good news for both homeowners and housebuilders.

As well as generally speeding up the conveyancing process, there should also be fewer cases where contracts are exchanged for the purchase of new homes where cover is not in place. In the event that there is a problem with the cover (e.g. if cover is not available as the builder or developer is no longer registered with NHBC), then that information will be available to view immediately. Builders and developers will also benefit because there will be no acceptance-related paperwork to store or send.

The note provides an overview of what Build Now, Pay Later is, the advantages it brings to housebuilders, and the terms which government departments will ask developers to bid on when they are disposing of their land.

The Build Now, Pay Later scheme is intended to make it easier for developers to manage their development cash flow, as they do not have to pay upfront for the government-owned land. Housebuilders will pay for the land after they have started work on the new homes, meaning that they can start building immediately.

The scheme has been launched in conjunction with the Government’s decision to release public sector land for housebuilding, with the aim of building 100,000 new homes by 2015. The need for new homes is urgent, as recent figures have revealed that housebuilding is now at its lowest levels since the 1920s (click here for more details.)

In its note, the Government has admitted that Build Now, Pay Later is not appropriate for all sites, and will tend to be more beneficial on larger more complicated sites which will require significant capital investment to unlock.

There are two Build Now, Pay Later models: Phased Payments and Risk Sharing.

The Phased Payments model is where the land value or base price is apportioned across a number of phases with specified dates for when payments will be made. The housebuilder bears less initial risk, as payments are linked to completed or sold phases. The timing of payments and percentage of land value paid on completion of each phase can be varied to suit the risk characteristics of the site.

The Risk Sharing model allows housebuilders to share the risk and reward from the movement in house prices and the subsequent revenue generated. However, the risk of fluctuations in development costs will be borne by the housebuilder.

Increasing housebuilding is one of the Government’s key objectives in its Growth Review, and it is also hoped that the Build Now, Pay Later will create and sustain thousands of jobs in the construction sector.

Under these Regulations, a tenant will have the right to ask their landlord to allow a competitor electricity supplier to distribute electricity to him or her via the cables and electricity system in the building.

Previously, it has been usual practice for landlords of multi-tenanted buildings to choose an electricity supplier and simply recharge the tenants the cost of the electricity supply they use (mainly through the service charge or by measuring use through electricity meters.) Tenants have had no right to demand a change of electricity supplier or to ask for their own individual supply. However, from now on, even if there are several tenants in the building, each tenant can potentially ask for a different supplier rather than agreeing to the one chosen by the landlord.

On receipt of a request by a tenant to change electricity supplier, a landlord must respond in writing within ten working days to either (1) confirm that it will provide the tenant’s choice of supplier with the necessary information, or (2) explain why the tenant cannot have a separate supply (e.g. the cabling within the building has insufficient capacity, or that to increase its capacity would have a substantial adverse financial impact on the landlord). The landlord must obtain approval from Ofgem for any charges it seeks from the electricity company for the use of the electricity distribution system in the building.

Considerations for tenants

1. The cost of physically changing the electrical cabling system (or installing additional cabling) must be met by the tenant or electricity company; and

2. Tenants may be able to obtain better electricity deals than those offered by their landlords.

Considerations for landlords

Landlords do not have to do anything until a tenant makes a request for a separate electricity supply. However, if a request is made, they must:

1. Allow electricity companies access to carry out necessary works and to read meters;

2. Install additional infrastructure, if required; and

3. Cooperate in agreeing a ‘switching’ date and a reconciliation of charges between the outgoing and incoming suppliers.

It is prudent for landlords to look at their current electricity supply arrangements, particularly if they have fixed-term contracts at a fixed price, based on previously assumed levels of electricity consumption. It may also be possible for landlords to improve the terms of the existing supply, so that tenants have less incentive to request their own supply.

On the plus side, if a tenant receives a direct electricity supply, that tenant’s electricity consumption will not count towards the landlord’s requirements under the Carbon Reduction Commitment Energy Efficiency Scheme.

Will these new Regulations result in an army of tenants demanding to exercise their new right to change electricity supplier? Probably not – tenants are likely to be deterred by the prospect of high infrastructure and installation costs, which will probably outweigh the financial benefits of switching to a cheaper electricity supplier.

Following on from the Government’s recent introduction of a new-build indemnity scheme to help purchasers of new-build properties who are struggling to obtain a mortgage, the Council of Mortgage Lenders has said that over the past few months it has received a “steady trickle” of enquiries from local councils who want to be able to offer mortgages to local residents.

But are local councils really able to offer mortgages?

Well, actually yes. Despite what most people may think, local councils are able to offer mortgages without having to register with the Financial Services Authority, which regulates mortgage lending.

And they used to be popular.

During the 1960s, 1970s and early 1980s, thousands of homeowners had mortgages with their local councils. Local councils were able to offer cheap mortgages, mainly because they could borrow money at rates that were only slightly higher than those available to the UK Government; however, by the mid-1980s these loans became less attractive when mortgage finance became more readily available from banks and building societies.

And it also appears that established lenders are prepared to work with local councils in offering mortgages.

In March this year, fifteen local authorities across the UK agreed to put money into a Lloyds TSB scheme – entitled Local Lend a Hand – to increase the deposits of first-time buyers trying to buy a home in their areas; in some cases, first-timers have been able to buy a home with a deposit of as little as 5 per cent.

Borrowers can be rest assured that if they take out a mortgage with their local council and fall into arrears, the local council must uphold the FSA’s Treating Customers Fairly requirements (as any bank or building society would have to.)

Whether the local council mortgage makes a full national comeback remains to be seen, but for homebuyers in certain parts of the country it could be a viable option.

The introduction of a new-build indemnity scheme, aimed at increasing the supply of affordable mortgage finance for new-build homes will be welcomed by cash-strapped first-time buyers with little savings. The scheme will be available to all potential buyers, subject to appropriate mortgage underwriting criteria, except buy-to-let investors and second home owners.

Under the scheme, homebuyers will be able to purchase a new-build house or flat with only a five per cent deposit. Housebuilders and the Government will contribute up to 95 per cent of the cost of the home to an indemnity fund, which will be used to pay out to a lender if a buyer defaults and where there is a shortfall if the property is repossessed.

The scheme is open to all housebuilders and all lenders operating in England. Mortgages will be available under the scheme from March 2012.

According to the Government, the following lenders have agreed in principle to participate in the scheme: Barclays, HSBC, Lloyds Banking Group, Nationwide, RBS, Santander and Yorkshire and Clydesdale Banks.

The Government has also confirmed that more than 25 homebuilders have agreed in principle to participate in the scheme: Barratt Developments, Crest Nicholson, McCarthy and Stone Retirement Lifestyles, Bellway, Fairview New Homes, The Miller Group, Bloor Homes, Galliford Try, Persimmon, Bovis Homes Group, Gladedale Group, Redrow, Taylor Wimpey, Antler Homes, Grainger, Stewart Milne, Aquinna Homes, Jones Homes, Places for People Group, Banner Homes Group, Morris Homes, Strata Homes, CALA Group, Nicholas King Homes, Urban Renaissance Villages Ltd, Croudace Homes Group, Octagon Developments, William Davis, and Heyworth Developments

Also, social housing tenants will encouraged to buy their homes after the Government offered them up to a 50 per cent discount under the Right-to-Buy scheme.

However, as expected, the Government confirmed that the stamp duty land tax relief for first time buyers will end on 24 March 2012, as planned. The loss of this relief is disappointing. Although the Government said that the relief had been “ineffective” in increasing the number of first-time buyers entering the property market, it is highly probable that there would have been fewer first-time buyers if it hadn’t been in place.

EPCs provide information on how energy-efficient a building is and make recommendations on how to reduce that building’s energy use and carbon dioxide emissions.

Subject to Parliamentary approval, the Government intends to make the following changes:

1. The duty to commission an energy performance certificate (EPC) before marketing a property will be extended to the sale and rent of residential and non-residential buildings;

2. The current 28-day period within which an EPC should be obtained using “all reasonable efforts” will be reduced to 7 days. (However, there will be an additional 21-day period during which the EPC can be obtained if it has not been secured within the initial 7-day period);

3. The requirement to include an EPC with written particulars will apply to all residential and non-residential buildings, whether offered for sale or rent. It will not be possible to only include the asset rating;

4. The powers of Trading Standards Officers (TSOs) will be increased so that they can force estate agents and letting agents (and not just landlords or building owners) to prove that an EPC has been commissioned and to produce a copy of it for inspection. This will mean, for example, that TSOs will be authorised to require estate/letting agents to produce evidence that an EPC has been commissioned in circumstances where they are marketing a building without one;

5. An air-conditioning inspection report (if required) will have to be lodged on the central EPC register. (This will no longer be voluntary); and

6. Regulation 5 of the Energy Performance of Buildings (Certificates and Inspections) (England and Wales) Regulations 2007 will be amended to make it clear that the provision of the EPC cannot be delayed until shortly before the parties enter into a contract for sale or rent.

These changes were supposed to have been implemented in two stages – on 1 July 2011 and 6 October 2011, so we will have to wait and see whether the Government sticks to its new April 2012 date. It certainly seems strange that the Government is pressing ahead with these changes in spite of their stated intention to reduce the burden of red tape on businesses.

In the paper, the RICS suggests that a home’s sustainability features should be reflected in its market value. Consequently, when assessing a property, residential property valuers will need to be fully aware of both sustainability policy and each building’s “sustainability characteristics”, such as its energy efficiency rating; the materials used in its construction; its energy-efficient features; its proximity to public transport links; and its potential to be adapted to occupiers’ changing needs in the future.

The launch of the paper indicates that sustainability is likely to become an increasingly important factor in residential property valuation.

Through FirstBuy, the Government and housebuilders will jointly offer a 20 per cent equity loan to eligible first-time buyers to help them purchase a new-build property. The first-time buyer will then have to provide a five per cent deposit and obtain a 75 per cent mortgage on the rest of the property. The loans will need be repaid on the resale of the property.

Mr Shapps has now confirmed that over 100 housebuilders will take part in the FirstBuy scheme, by offering their new-build homes for sale to first-time buyers. A full list of these housebuilders is available here (Excel Spreadsheet.) The Government has also confirmed that the Halifax, Nationwide, Barclays, and The Melton Mowbray Building Society will be offering loans on these purchases.

This scheme is to be welcomed by both first-time buyers and housebuilders who have struggled in the recession. It will particularly benefit those buyers who can afford the monthly mortgage payments on a property, but who have been unable to purchase a house because they simply haven’t saved enough money to put down a 10-20 per cent deposit. To find out if you are eligible to take part in the scheme, please click here.

The first homes are expected to become available in September 2011.

The consultation paper, Relaxation of planning rules for change of use from commercial to residential, includes proposals to amend the Town and Country Planning (General Permitted Development) Order 1995, so that it will be permissible to allow a change of use from Class B (business and industrial uses) to Class C3 (dwelling houses) without having to obtain planning consent.

Under these proposals, more land would become available for housing, by permitting empty commercial buildings to be converted into new homes. This move follows the Chancellor’s announcement in his recent Budget that the Government would consult on proposals to increase the categories of changes of use that can be made without the need to apply for planning permission.

The consultation paper seeks views on a number of areas, including:

1. Whether a change from use class B1 (offices, research and development, and light industry) to C3 (dwelling house) should be allowed without express planning permission (subject to effective measures being put in place to mitigate the risk of homes being built in unsuitable locations);

2. Whether a change of use from classes B2 (general industrial use not within class B1) and B8 (storage and distribution) to C3 should be classed as permitted development (subject to effective measures being put in place to mitigate the risk of homes being built in unsuitable locations); and

3. Whether current permitted development rights that allow a change from class A1 (shops) and A2 (financial and professional services) to a mixed use (including one residential flat) should be widened to allow for more than one dwelling.

The consultation paper also asks for comment on whether the Government has identified all the possible problems/issues that could arise from widening permitted development rights, and what measures might be needed to mitigate against those problems.

The closing date for responses is 30 June 2011.

Buyers of new build properties will be particularly interested to know that following the 2004 Barker Review and the 2008 OFT Homebuilding Study in the UK the Consumer Code for Home Builders was put together.  The purpose of the code is to ensure that home buyers are treated fairly, can rely on the information they are given and have access to quick low cost dispute resolution when things go wrong.

Whilst this does not have a statutory basis for purchasers, and is therefore not enforceable through the courts, the industry’s top structural guarantee providers, most notably NHBC, Premier Guarantee and LABC,  have subscribed to the Code and require that any Home Builder offering their guarantee comply with the provisions of the Code.

Some notable points for Buyers and Home Builders :- 

●  The builder must display a Copy of the Code and provide copies, without charge, to any purchaser who asks for a copy, and all buyers who actually reserve one of their new build properties.

● When a buyer wishes to purchase a property from a Home Builder, they must now be given a reservation agreement setting out the terms on which they have agreed to buy the property.  This reservation agreement allows the hopeful buyer a period in which the Home Builder agrees not to sell the property to any other interested party.  This is not new to the larger home builders, who have adopted this procedure for a number of years, but will have an effect on smaller or start up Home Builders.    At this point a reservation deposit is normally paid over to the Home Builder, by the buyer (typically between £500 and £2500 depending on the value of the property).

●  Previously if the hopeful buyer did not proceed to exchange contracts, being the point at which the purchaser is contractually committed to purchasing the property from the Home Builder, then the Home Builder would often retain the reservation deposit paid.  Under the Consumer Code for Home Builders the builder is obliged to return the reservation deposit to the buyer (although they may first deduct such money as is necessary to cover their reasonable costs).  This will mean that buyers  will not proceed to buy a property they are not entirely happy with for fear of losing their reservation deposit.

●  All sales and marketing material must be clear and truthful, to include a brochure or plan showing the layout, appearance and position of the property within the development as a whole.  Home Builders are currently bound by the provisions of the Property Misdescriptions Act 1991 which could lead to a Trading Standards complaint, investigation and possibly a prosecution for those concerned.  However, this provision within the Consumer Code is likely to mean more to an aggrieved purchaser, as it is an easier course for redress.

●  The Contract for Sale must, under the Consumer Code, detail realistic and reliable information about timing of construction, completion and handover. This is perhaps the most exciting change for a buyer.  Previously most Home Builders contracts provided that completion would take place once construction had been completed, which could take several months or in some cases even years.  One national home builder had a clause within their contract providing that handover could be up to 5 years from the date on which contracts were exchanged.  Home Builders would usually provide buyers with an estimate of a handover date but there would be no penalties if they missed this date.  Home builders must now include a date in the contract setting out the date on which they realistically anticipate  the property will be completed and also termination date, which will allow a buyer to withdraw from the purchase and recover their deposit, if the property is not completed by the termination date.  The termination date must be no more than 12 months for an apartment and 6 months for a house from the anticipated date, where the property is not watertight or 4 months and two months from the anticipated date respectively where the property is watertight at the point of exchange of contracts 

●  A buyer must also now be given an accessible after-sales service  and explain what this includes, who to contact and what guarantees apply to the Home, including what health and safety precautions should be taken when living on a development where work continues. In addition the Home Builder must have a system for receiving handling and resolving the home buyers calls and complaints and must also co-operate with suitably qualified professional advisers appointed by the home buyer to resolve disputes.  This will be of comfort for buyers to know as if the Home Builder fails to deal with any issues, such as areas which need rectifying or perfecting following completion, they can refer the matter for an adjudication under the Code. 

●  This after-sales part is important also because the Code does not just benefit the first purchaser of the property, but any subsequent purchaser for up to two years from the date of completion of the build. 

●  An adjudicator can make an award of up to £15,000.00 and accordingly it is vital that Home Builders also obtain good professional advice from a New Homes specialist before marketing their properties for sale.

Solicitors acting on behalf of Home Buyers of newly constructed properties also need to be aware of the code so that they can competently advise their clients what to expect and what protections are in place. 

Unfortunately adjudications under the code have not been reported in the industry or legal press, but the annual report is due to be published shortly, which should evaluate the effectiveness of the code.   Keep an eye on our website for further information once the report has been published.

There are some exclusions to this and the new rate will not apply to purchases after the 6th April where contracts were not entered into before the 25th March 2010, on the proviso that contracts entered into before this date have not been subsequently varied or assigned.

The new rate also only applies to entirely residential property and, for example, would apply in the case of the purchase of part of garden land, but would not apply in the case of the purchase of farm land where there is a farm house on the site.

One school of thought is that those buyers purchasing at the high end of the market are not going to put off by the 1 per cent hike and that the increase will make no difference to demand for property at the top end.  Jack Jones of Investec Specialist Private Bank has said that “the high-end property market appears to be quite robust to adverse changes in tax”, whilst others, following the budget in March 2010, have said that the unexpected hike in the stamp duty on more expensive properties would knock confidence in the property market and do very little to assist the Government’s finances.

The Government’s belief is that the move will go a long way in order to fund the deficit created by increasing the stamp duty threshold for first-time buyers from £125,000 to £250,000. It is thought that this incentive will cost the Government £160m over the first three years, as the extra revenue from the 5 per cent tax fails to fund the shortfall from the stamp duty holiday. However, as the stamp duty holiday was proposed to only last for two years and the new 5 per cent tax is indefinite, it is expected that long-term the Government will benefit from the increase in duty.

It is difficult to foresee exactly what will happen and whether the increase in stamp duty will make a material difference to the housing market, as the number of houses purchased in this bracket is somewhat smaller than properties purchased at the lower end of the scale. Some people have predicted that the rise in stamp duty for very expensive properties will lead to an increase in avoidance.  It will certainly be interesting for home buyers, the Government and the economy as to how the housing market will evolve as a whole.

But here is some good news.

Stamp duty on property (SDLT) has to be one of the most hated taxes out there.  It is a tax on mobility and, like VAT, is imposed on cash which in most cases has already been taxed.  Not only that but it makes moving house a lot more expensive.  Hence the spread of stamp duty planning in recent years, even to transactions which in the past would never have been considered for this.

So a ray of sunshine in the doom and gloom is welcome.

An SDLT case was heard in the Tax Chamber of the First-tier Tribunal towards the end of last year.  Deputy Judge Charles Hellier heard arguments over a scheme used to avoid SDLT on the £65.1m purchase of a property in London’s Regent Street in October 2006.  The SDLT scheme in question involved a subsale of the property to a partnership resulting in no SDLT being payable.

This was the first occasion a court or tribunal has considered an SDLT scheme and its importance lies in the attitude of tribunal to the technical arguments SDLT schemes rely on.

And the winner was…..the taxpayer.

The judgement has not yet been published but watch this space as this article will be followed by an examination of the tribunal’s approach and a consideration of how this will impact on future schemes.

The Green Deal, which is included in the Government’s Energy Bill, will allow homeowners and businesses to take out loans to improve the energy efficiency of their properties (e.g. through cavity wall/loft insulation, heating and lighting improvements.) The loans will be paid back over a fixed period through the savings that the property owner makes on his or her heating and fuel bills.

However, many people are unaware of this scheme, and a new CBI survey has suggested that three-quarters of the general public do not even consider the energy efficiency of a property when buying or renting a home. The CBI’s concerns and recommendations for making the Green Deal work can be read here.

There have been some other developments in February concerning the offering of greater financial incentives to make the Green Deal more appealing:

1 February: The Housing minister Grant Shapps said that the Government may extend the Green Deal scheme for energy efficiency improvements to new-build homes (rather than just existing homes.) He said that the Government would consult with the housebuilding industry on how the scheme could be adapted to help housebuilders meet the costs of building a zero-carbon home. Housebuilders have indicated that they would be keen to use Green Deal money to make zero-carbon housing developments more viable.

14 February: The Financial Times newspaper reported that that the Chancellor of the Exchequer, under pressure from the Department of Energy and Climate Change (DECC), is considering giving homeowners a rebate on stamp duty in return for them joining the scheme and making their properties more energy-efficient. This move, which could be announced in the spring Budget, has been backed by a number of companies and organisations, including Marks and Spencer and the British Retail Consortium. The CBI has also admitted that changes to stamp duty may be necessary in order to encourage take-up of the scheme.

Further details of the Green Deal scheme (including the financial benefits to property owners) are here.

The Energy Bill does not contain any provisions that force landlords of both domestic or non-domestic properties to sign up to the Green Deal and make energy efficiency improvements; however, the Bill does contain powers for the Secretary of State to create regulations at a future date should it be deemed necessary.

The Energy Bill is currently being debated in the House of Lords, with the DECC anticipating that it will be consulting on draft secondary legislation for the implementation of the Green Deal in autumn 2011.

Currently, the highest rate of SDLT payable on residential property is 4 per cent, which is chargeable on all purchases exceeding £500,000.

However, that is about to change.

In March 2010, the former Labour Government announced that a new 5 per cent SDLT rate on purchases of residential property of more than £1m would come into effect from 6 April 2011. Despite a change of government in May 2010, the newly-elected Coalition Government confirmed in its June Budget that the 5 per cent SDLT rate would still be brought in.

Matthew Arnold & Baldwin residential property partner Richard John has spoken to The Watford Observer about the issue. To read this and find out more about the impending change, please click here.

If you have any concerns about the SDLT rise, please contact Richard at richard.john@mablaw.com or on 01923 202020.

If you miss the deadline it could be costly, as paper returns filed after this date could mean a £100 penalty.

An alternative to paper-filing is to file your return online, which benefits from a January deadline.

If you would like assistance in preparing and filing your tax returns, please contact James Odds on 01923 202020 or james.odds@mablaw.com.

The Treasury have just now issused the following press release, which we will consider in more detail and comment on in due course.

Financial Secretary to the Treasury announces changes to restricting pensions tax relief

Financial Secretary to the Treasury, Mark Hoban MP, announced today that the annual allowance for tax-privileged pension saving will be reduced from £255,000 to £50,000, and the lifetime allowance will be reduced from £1.8 million to £1.5 million. This will replace the complex proposal legislated for by the last Government in the Finance Act 2010.

This measure will raise £4 billion per annum in steady state and will help reduce the record Budget deficit that this Government inherited. It will be targeted at those who make the most significant pension savings. An annual allowance of £50,000 will affect 100,000 pension savers 80% of those will have incomes over £100,000.

The Government is committed to protecting individuals on low and moderate incomes as far as possible. To protect individuals who exceed the annual allowance due to one-off “spikes” in accrual, the Government will allow individuals to offset this against unused allowance from previous years.

We will also consult on options enabling people to meet tax charges out of their pensions in November.

In order to protect the public finances it is necessary to introduce the reduced annual allowance from April 2011. The Government plans to introduce the reduction in the lifetime allowance from April 2012.

Mark Hoban said:

We have abandoned the previous Government’s complex proposals and developed a solution that will help to tackle the deficit but not hit those on low and moderate incomes. We have taken a tough but fair decision.

The Coalition Government believes that our system is fair, will preserve incentives to save and – compared to the last Government’s approach – will help UK businesses to attract and retain talent.

The CBI argues that decreasing the deficit should be done by controlling spending rather than increasing taxes.   Specific points made by them include:

• The CBI wants to see a broad definition of business assets (which would benefit from tax relief) to prevent disincentives to investment or start-ups, and the tax should be structured to minimise the impact on long-term investment.
• The CBI is encouraged by the Dyson commission’s support for the R&D tax credit and urges the Government to retain it in its current form.
• Changes to tax treatment of pensions, planned to come into force from April next year, are unnecessarily complex and expensive to administer, and in their current form would make it harder for UK businesses to attract and retain global talent.

Undoubtedly, their concerns are echoed across the country.  I have spoken with many clients concerned about their own position if capital gains tax increases on 22 June.  Whilst there are steps which can be taken prior to then, the time for doing so is getting increasingly tight.

If you want to speak to an advisor about CGT increases please call 01923 202020.

The thinking behind this is that the rate is (relatively speaking) low at 5% compared to 17.5% VAT, which is what is already charged on certain types of insurance, such as travel insurance.  We also charge less IPT than some other EU countries.

The other thing which can’t have escaped notice is that premiums are already rapidly increasing and once people have forgotten about the budget they’ll probably blame their insurers.

The only people who are likely to benefit from this are meerkats.

Shortly, these are the facts. Miss Jones, “a peripatetic hairdresser”,  was 26 when she met Mr Kernott in 1980 and 3 years later they were sharing her caravan,  a year before their first child was born in 1984. In 1985 Miss Jones sold her caravan and she and Mr Kernott jointly purchased a house for £30,000.  The purchase was funded by £6,000 of Miss Jones caravan sale proceeds and an interest only  mortgage in their joint names, backed by an endowment policy, also in their joint names. Mr Kernott was to do some repairs and refurbishment at the property, principally an extension, the size and effect of which was apparently to increase the value of the property by 50% on its purchase price.  In law,  although they clearly made different initial  financial contributions, they bought it as joint tenants, without specifying their respective interests, an ommission still depressingly common today. No declaration of trust was drawn up or any form of cohabitation agreement. The judgment makes no mention of whether the parties made wills or if they did what they provided, so it is probably fair to assume that they were “paperwork lite” in their arrangements, as is so often the case.

Miss Jones and Mr Kernott had a second child in 1986. Miss Jones continued as a home hairdresser and Mr Kernott was variously an ice cream salesman or a builder or on benefits. Mr Kernott gave Miss Jones £100 a week as housekeeping and that, with her earnings, met all the household outgoings, including the mortgage and endowment payments. Mr Kernott appears to have bought the extension materials and built it.

In 1993, 13 years after their relationship started and 8 years after their house purchase, Miss Jones and Mr Kernott parted. She stayed in the house with the children. The Court of Appeal don’t tell us where Mr Kernott then went, but by 1996 he was buying a property for himself.  From the time they separated, Mr Kernott paid nothing towards the house and gave nothing to Miss Jones for the children, although he saw them from time to time. Miss Jones redecorated several times over the following years, replaced the flat roof on Mr Kernott’s extension and added a gate and fences to the property.

In 1995, the property owned by Miss Jones and Mr Kernott was put on the market, but didn’t sell. In 1996 the joint names endowment policy was surrendered and divided equally, Mr Kernott using his share as the deposit on his new house. In 2006, once the property was no longer their children’s home, Mr Kernott asked Miss Jones for his share of the value of it. In 2007, Miss Jones launched an application under the Trusts of Land and Appointment of Trustees Act 1996 (often referred to as TLATA), seeking a declaration that she owned the entirety of the property, or that if she didn’t then she had an interest both in this property and the one that Mr Kernott had subsequently bought in his sole name using part of the joint endowment policy proceeds; Miss Jones later abandoned this alternative claim before the trial judge in Southend. In March 2008, Mr Kernott served a notice of severance of joint tenancy, ostensibly converting the joint ownership to a tenancy in common in equal shares. At the conclusion of that trial in April 2008, based on his analysis of their respective financial contributions to the property over the years, HHJ Dedman concluded that Miss Jones was entitled to 90% of the value in the property and Mr Kernott the remaining 10%, a conclusion he felt able to draw from the authorities of the House of Lords in Stack v Dowden (2007) and the Court of Appeal in Oxley v Hiscock (2004) and Goodman v Gallant (1986), the major decisions on beneficial interests in property. At that time the equity in the property was assessed to be £218,300; by comparison, Mr Kernott’s equity in the house he owned in his sole name stood at around £268,000.

Unfortunately for Miss Jones, two out of the three judges hearing Mr Kernott’s appeal in the Court of Appeal, saw it differently. On their analysis, a property bought in joint names, with no express indications to the contrary, is owned equally. On their view there had been no change to that ownership over the years, notwithstanding arguments that one had contributed more financially than the other, one had done more work on it than the other, or one had (and the other hadn’t) occupied it solely for some years.

In the leading judgment of Wall LJ, following Stack v Dowden “the conveyance into joint names…created joint beneficial interests and the parties agreed that when they separated they had equal interests. There has to be something to displace those interests, and I have come to the conclusion that the passage of time is insufficient to do so, even if, in the meantime, [Mr Kernott] has acquired alternative accommodation, and [Miss Jones] has paid all the outgoings.”  Consequently, Miss Jones owes Mr Kernott around £109,000.

Unless and until the Supreme Court see it differently, this remains the approach the Courts are required to apply in such cases. It can be avoided by evidence of an agreement to the contrary, either express or to be inferred. Rather than leave it to a judge to decide, best advice must be put such agreements in place, in writing, and compare periodically the arrangements the documents envisage with what is happening in fact.

Legal costs in dealing with and fighting boundary disputes are notoriously out of line with the monetary value of the issues in dispute and the effect on neighbour relations and stress high. “Principles” take over and costs mount to £1000s before you know it.  The alternative  is for the parties to try to resolve matters by agreeing terms with eachother on the best terms possible for both parties. There might be no winner and no loser, but a solution which both parties can live with without incurring huge costs and without further souring relations.

Alternative dispute resolution can help at the outset once solicitors are involved. Parties coming together on site with a mediator and solicitors can often focus the parties’ minds on the reality of the situation. On site resolution seems the most sensible and cost effective method of dealing with such a dispute rather than lengthy correspondence, compliance with Court procedure, the associated costs and growing animosity.  A day long mediation will be money well spent  if not to resolve matters entirely then to at least narrow down the issues remaining in dispute.  If matters cannot be resolved at such a meeting, then the parties can decide whether or not they wish to litigate and proceed with litigation but should be fully aware of the potential costs liability they may incur. This is not to say neighbours who wish to fight a boundary dispute should not, nor does it trivialise the importance of issues relating to someone’s property. It can be a commercial approach to dealing with what is otherwise an expensive and emotionally exhausting experience.

Landlords of residential properties where the annual rent is more than £25,000 are not currently required to register a tenant’s deposit with a tenancy deposit scheme but they will  need to protect that deposit before 1 October 2010. Failure to do so will result in a Landlord falling foul of the requirement to protect a tenant’s deposit in accordance with the provisions of the Housing Act 2004, leaving them open to a claim by a tenant for failing to register the deposit.

For tenants this change means greater protection as they will be afforded the rights granted to them under the Housing Act 1988. Landlords face potential claims against them for failing to register a tenant’s deposit. The change will of course impact Landlords with expensive properties in London where rents are higher than the rest of the country as well as Landlords of larger properties which are occupied by multiple tenants such as student houses where the rent is more likely to exceed the current threshold.

The changes will increase the number of tenancies coming within the Assured Shorthold Tenancy regime which will standardise procedures for Landlords to gain possession and allow use of the accelerated possession route (only open to Landlords of Assured Shorthold Tenancy Agreements).  Landlords who do not and who are required to register a tenant’s deposit will be unable to get possession of a property on a “no fault” basis until the deposit is registered, causing unnecessary delay.

Landlords – review rental levels register your deposits without delay.

Managing Agents – notify your Landlord clients immediately of the impact of this change and the steps they need to take.

We are already seeing cases in the County Courts regarding non-registration of deposits and no doubt Court offices across the country will see further cases next year arising out of these changes.

We’ve had a great discussion on this already click here and thanks for all contributors.

Q1. What is a first time buyer?
A. A person who has not acquired a freehold or leasehold interest in residential property in the UK (except a lease with less than 21 years to run) or an equivalent interest anywhere in the world.

Shimon’s comment: this is going to be hard for the stamp office to police.

The 21 year point also means that if you bought a lease which had been granted to someone else with 21 years or more on it, you won’t qualify. Alternatively, if the lease is granted to you for a term of 21 years of more then you would qualify.

I would query whether a 15 year lease which was extended so that in practice it lasted 21 years would count. Also – it seems unfair that it someone has a business property that they should be caught but seemingly this would be the case.

Q2. When is the relief available?
A. The relief is available for transactions with an effective date on or after 25th March 2010 but before 25th March 2012.

Shimon’s comment: Despite what most people are saying the effective date is not always completion. If you either pay the majority (90%+) of the price or you take possession before completion then this might also be an effective date.

Q3. How do I claim the relief? A. The relief must be claimed on a land transaction return by entering relief code 28 at box 9.

Shimon’s comment: Your solicitor should deal with this.

Q4. I want to buy a house with my partner but one of us has previously owned a residential property. Can we claim the relief? A. No. All of the buyers, when there are more than one, must be a first time buyer.

Shimon’s comment: this is particularly unfair if you have only been on the title to help out a friend or family member. Also when the house will be yours but, say, Mum and Dad help out with the mortgage (and the bank wants them on the title too).

Q5. I previously bought a house jointly with my spouse/partner. The partnership has broken up so can I be treated as a first time buyer?
A. No. Where the individual has previously acquired an interest in a residential property as a joint tenant or a tenant in common the individual is not a first time buyer.

Shimon’s comment: All property ownership will count to exclude you from the relief – even joint ownership.

Q6. Is the relief available on transfers of interests in a home between partners? A. Such a transfer normally requires a transfer from the existing owner to him/herself and the partner. Even if the partner is a First-time buyer the existing owner is not. So the relief is not available.

Shimon’s comment: Depending on the price paid for stamp duty purposes, this is not always an issue. This is a technical area and you should speak to a specialist.

Q7. Can I get relief if I have previously owned an inherited property?
A. No. In this case a person will previously have acquired a major interest in a residential property.

Shimon’s comment: for stamp duty “acquiring” a property includes when it is given to you or when you inherit it.

Q8. Can I claim the relief if I’m buying on behalf of my parents?
A. No. Relief is not available unless the first time buyer(s) are buying, for themselves, a property that they intend to use as their only or main residence.

Shimon’s comment: this is, again, going to be hard to police. It is possible than on an investigation, the stamp office would want to see hard evidence that this was being used as the main residence.

Q9. Is there an age limit on claiming the relief?
A. No. First time buyers can be of any age.

Shimon’s comment: not much to say to this…umm, minors can’t own property in their own names.

Q10. Is there a price limit on claiming the relief? A. Yes, the sum for the whole of the purchase must not exceed £250,000.

Shimon’s comment: this will include when there are multiple purchases. E.g. if you buy two houses each worth £150k from the same person you’d loose out on the relief. Another technical point this, and you should take advice. The technical note HMRC published specifically said that they wouldn’t penalise you for buying connected properties – e.g. a house with a lease over a parking space. But there will be limits to what they accept.

Q11. Can the relief be claimed on shared ownership transactions? A. The relief can be available but only if a market value election is made. The relief is not available if taxed as a lease. Normal shared ownership rules apply on staircasing.

Shimon’s comment: you will need to ensure that your agreements allow you to do this and your solicitor may need to review this. If you have any questions about this please contact Sarah Wilkins in our Milton Keynes office.

Q12. How does the relief apply to alternative finance arrangements? A. Special rules apply to put this form of finance on a level playing field. Under these schemes relief for first time buyers is available for the first purchase by the financial institution, where the person(s) entering into the arrangements meet(s) the qualifying conditions for relief.

Shimon’s comment: this refers to shariah compliance finance arrangements. Under many of these the bank would actually buy the property. Clearly the bank wouldn’t qualify for the relief, but there will be an exeption from the rule for shariah compliant finance.

Q13. Can I claim the relief retrospectively? A. No. Transactions with an effective date before 25th March 2010 do not qualify.

Shimon’s comment: and the relief will continue until midnight on 24 March 2012.

The BBC have reported that Chancellor Alistair Darling is to announce in the Budget that stamp duty will be scrapped on house purchases up to £250,000 for first-time buyers.

Why the Treasury would drip feed info like this when there is going to be a Budget in a couple of hours, I don’t know.

Update

The Chancellor has confirmed that this measure will be implemented plus stamp duty is incresing to 5% on properties over £1m.

The short answer, given by Arnold J in his judgment in Williams v Hull [2009] EWHC 2844 (Ch) is  “without prejudice to my position in any subsequent proceedings”.

The judge reached this conclusion in an application centered around the interpretation of a single letter sent by Mr Hull, a financial consultant, to his former cohabitant, Ms Williams, a solicitor, concerning the value and allocation of their jointly owned home and its contents, following the breakdown of their relationship.

Mr Hull had said that he thought he owned half of the property. Ms Williams contended he owned 7%, based on a draft Deed of  Co-ownership prepared, but never signed, when the property was purchased.

In his letter dated 19 October 2009 and headed “Without Prejudice” Mr Hull advanced arguments based on an assumption that he owned 12% of the property, not half. Not unnaturally, Ms Williams sought to tie Mr Hull to that concession. If the letter was validly headed “Without Prejudice” she could not, but if it wasn’t then she could.

Arnold J reviewed the established authorities and concluded that the “without prejudice” rule is founded on the public policy of encouraging litigants to settle their differences. It is intended to enable parties in dispute to lay their cards on the table  and negotiate without fear that by so doing they will have compromised their legal position, if subsequently their issues are taken to a litigated conclusion.  Whether or not a particular document bears that heading or whether proceedings have been issued is not an essential requirement; it’s all a question of context and interpretation.

On his interpretaion of three letters passing betwen these parties, the second and third of which were headed “Without prejudice”, the label was properly applied, and was not a “cloak for perjury” or a mere assetion of rights as Ms Williams had contended; consequently, the content of the “Without prejudice” correspondence should not be referred to at trial. In reaching this conclusion he reversed the decision of HHJ Marshall QC, who first considered the point.

Whilst the decision has provided clarity for these parties, issues of context and interpretation continue to mean that for the label to be effective, thought has to be given to its use.  The case also underlines that in such circumstances it remains better to be safe than sorry – if you are buying property jointly, don’t just have a deed drafted, have it signed and dated too!

In addition to the developers own schemes, developers have joined forces with local housing associations by participating in schemes backed by the Government. Indeed, properties on residential developments participating in such schemes have been quick to sell.

Homebuy Direct is one such scheme that developers have been participating in and is open to households earning less than £60,000 who would otherwise be unable to purchase their own home. First time buyers, key workers and housing association or council tenants are examples of those eligible to take part in the scheme.

Under this Scheme, an equity loan is given to the buyer by a Homebuy agent (through public funding) and the developer. These loans represent a percentage of the value of the property and are secured as second and third legal charges against the property. The Buyer then obtains the balance of the purchase price from a conventional mortgage lender.

No fees or charges are payable during the first five years of the equity loan, so what is the catch?

When the property is sold, the owner will be liable to repay both equity loans and also the conventional mortgage. The amount to be repaid will depend on the percentage borrowed. Therefore, if the property has increased in value then the owner has to share that profit with the Homebuy agent and the developer. However, there is also a risk to the developer and Homebuy agent if the property has fallen in value, as they may make a loss on the amount loaned.

We have seen a number of developers keen to participate in this scheme. This would suggest to me that they have confidence in a recovery of house prices in the near future!

The High Court initially and now the Court of Appeal have ruled that H was entitled to the commission. The test was whether the purchaser had become a purchaser as a result of the introduction by the estate agent. Y had viewed the property four times during the period in which H was the agent and Y had purchased the property as a result of H’s introduction. There was a causal link between the introduction and the ultimate purchase.

Paul Gershlick, editor of www.Upload-IT.com and a Partner at Matthew Arnold & Baldwin LLP, comments: ‘Estate agents will be pleased to see that they have finally had a case decided in their favour, after the Foxtons and Estafnous cases went against them in the last year. Looking at all of these three cases together, it is vital that estate agents get their terms and conditions professionally looked at to make sure that they are fully protected from the situations in those cases, and to avoid them losing their commissions.’