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.

Well, the county of Cornwall will shortly launch a scheme of its own.

Their scheme is similar to FirstBuy, but is tailored to Cornwall only. Rather than seeking contributions from developers through section 106 agreements, Cornwall Council will offer the developer the option to sell homes at a discount of up to 40 per cent. This discount will then be passed over to the Council as an equity loan to the purchaser. (First-time buyers would have to take out a mortgage to cover the rest of the cost.) When the home is eventually sold, the Council would be repaid this percentage of the market value by the homeowner. This money will then be used to help other purchasers in the county.

The Council has said that the new scheme will also enable small and local developers to get involved (rather than just volume housebuilders, who are predominantly used in the FirstBuy scheme.)

Any scheme to help first-time buyers and housebuilders should be supported, and Cornwall Council is showing that local authorities can get involved in helping local people.

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.

The guidance applies to high street and online estate agents, property auctioneers, buyers’ agents, and solicitors and online property sites which offer services that count as estate agency work.

The new guidance focuses on two important pieces of legislation: (1) the Consumer Protection from Unfair Trading Regulations 2008, which prohibit traders/estate agents from engaging in commercial practices that are unfair to sellers, buyers, potential sellers and potential buyers of residential property, and (2) the Business Protection from Misleading Marketing Regulations 2008, which prohibit traders/estate agents from using misleading marketing when they advertise services to potential business clients or market commercial property for sale.

The draft guidance seeks to clarify how these two Regulations apply to estate agency work. It contains examples of trading practices that could breach the Regulations, and offers practical steps that businesses can take to comply with the law when they do any of the following:

1. advertise for new business, including through flyers, websites, newspaper advertisements and verbal discussions;

2. provide advice to new clients and take new instructions;

3. market properties, including when property details are put on the Internet;

4. negotiate and make sales; and

5. deal with complaints.

Currently, if you are convicted of committing a criminal offence under the CPRs or BPRs, you could face a fine not exceeding the statutory maximum , which is £5,000 (if convicted in the Magistrates Court), or an unlimited fine and/or imprisonment for up to two years (if convicted on indictment in the Crown Court.)

Also, under the Estate Agents Act 1979, if the OFT deems a business to be unfit to engage in estate agency work, it can issue a prohibition order banning the business from doing so.

The deadline for responding to the consultation is 9 December 2011. After this date, the OFT will publish its final guidance and a summary of the responses received.

The National Housing Federation (NHF) has warned that over the next ten years, home ownership in the UK will fall to its lowest level since the mid-1980s.

The NHF’s prediction follows the publication of the Oxford Economics’ ‘Housing Marketing Analysis’ report in July 2011, which paints a pretty bleak future for the housing market.

Owner occupation rates are predicted to drop to just 63.8 per cent over the next decade – the result of high property prices, strict lending requirements by banks and building societies, and the need for large deposits from borrowers. This, combined with rising rents (forecasted to increase by 19.8 per cent by 2016), long social housing waiting lists (currently standing at 4.5m people) and fewer new homes being built, all suggests a difficult future for a whole generation of people.

So, how can we avoid this bleak future for housing?

With only 67 per cent of the UK population owning their own home, an increase in the construction of new houses is required. In 2011, only 105,000 new homes were built in England – the lowest level since the 1920s – and residential planning permissions are dropping. Thing have got so bad that last week Grant Shapps, the housing minister, said that local authorities should encourage their residents to live on boats! He even said that new moorings could be eligible for the New Homes Bonus.

With so many property organisations calling for more housebuilding, for more unused public land to be made available to housing associations, and for more residential planning permissions, it will be interesting to see whether the Government sticks to its proposed planning reforms, particularly in the face of opposition from anti-growth organisations and, according to a survey by the ConservativeHome website, even a majority of Conservative Party activists.

Under the Regulations, statutory sewerage and water undertakers take ownership of all private sewers and lateral drains that are connected to the public sewerage system. A lateral drain is the part of a drain that serves a single property and which is outside of the property boundary.

The transfer of ownership will take place on 1 October 2011 – provided there are no appeals by homeowners – and will apply to residential and commercial properties. From this date, water and sewerage undertakers will be responsible for the upkeep and maintenance of such sewers and drains. Private drains that serve individual properties and which are situated within a property’s boundary will remain the responsibility of the property owner. Property owners will continue to be responsible for connections that do not drain into the public drainage network (e.g. systems that drain into private treatment facilities or to septic tanks are excluded.)

The transfer will, in the main, benefit property owners, as it should remove the possibility of a property owner being asked to pay for the repair of pipework. However, the sewerage element of water bills will probably increase to reflect the increase in the amount of pipework that the water companies will be responsible for maintaining from 1 October. Also, there are other consequences of the transfer of ownership: water companies will have a right of access to any sewers or lateral drains situated on a private property, and homeowners may find it more difficult to build on top of sewers and lateral drains.

All property owners must consider whether the transfer of their private sewer system is detrimental to them. If an owner wants to appeal to Ofwat, he or she must do so within two months of receiving the transfer notice or of it being published (whichever is later.)

This is an important decision for local people affecting a proposed large scale development near Stevenage.

The claimant local authorities challenged the decision of the Secretary of State for Communities & Local Government (SoS) to grant planning permission to build 3,000 homes and the associated infrastructure  on land to the west of Stevenage.

The SoS granted permission subject to a section 106 agreement, including various obligations such as the provision of schools. The developer and the local authorities were unable to reach an agreement on the terms of the section 106 agreement and, as such, the developer submitted a section 106 undertaking which in its view met the inspector’s requirements. The undertaking included provisions concerning a temporary schools accommodation strategy (“Strategy”) which provided education to pupils occupying the first dwellings before the creation of permanent schools.  The effect of these provisions was that there would be a bar on development until the Strategy had been submitted to the local authority, and either this had not been approved within 4 months or it had been approved but subject to conditions which were unacceptable to the landowners.

There was no time limit on the bar, but equally no positive obligation on the developer to submit the Strategy. Where the Strategy was not agreed, a different bar to development came into effect until statutory proposals had been published or approved, although if no proposals were published or approved within 18 months after the grant of planning permission, the bar on development would cease. The SoS granted permission subject to conditions.

The local authorities claimed that the SoS had erred by:

1. Ignoring a policy on renewable energy (ENG1) and which has been included in the East of England Plan (EEP) requiring developments of more than 10 dwellings to obtain 10 per cent of their energy from decentralised and renewable sources; and

2. Considering the developer’s undertaking relating to the Strategy as adequate.

Decision

The local authorities had to prove that the SoS had ignored ENG1 and that the absence of reference to the policy was not sufficient evidence that it had been ignored. There was a general reference to the EEP, but it was clear from the conditions imposed that the SoS had not taken it into account. The terms of the conditions had only been tweaked so that these would not meet the targets of the ENG1 policy. On the evidence, the SoS had ignored ENG1 and this was sufficient basis to quash the planning permission.

Making the date on lifting the bar to development relate to the grant of planning permission rather than the submission of the Strategy meant that there was a gap in which the developer could avoid its obligations (i.e. by putting in a Strategy which was not agreed.) The SoS had misunderstood the effect of the proviso, the purpose of which was to protect the developer from delays  by the local authority. The permission would be quashed on this reasoning also.

Stevenage is designated as a major housing growth point in the East of England Plan. The Plan, which was adopted in 2008, involved Stevenage Borough Council linking with neighbouring North Hertfordshire District Council to extend Stevenage’s boundaries by building 9,600 homes to the west and north of the town. However North Hertfordshire District Council withdrew from the planned expansion in June 2010 after the incoming Coalition Government announced the abolition of the Regional Strategies through the Localism Bill.

Subsequently, North Hertfordshire District Council began work on its own housing targets, whilst Stevenage Borough Council pressed ahead with its expansion plans.

North Hertfordshire District Council and Hertfordshire County Council submitted a joint legal challenge to quash Stevenage Borough Council’s expansion plans. The councils complained that the Secretary of State had failed to impose conditions that would deliver the requirements of the Government’s carbon dioxide and energy performance policy in the East of England Plan (i.e. that developments of more than 10 dwellings must secure 10 per cent of their energy from decentralised and renewable or low-carbon sources.)

The Court quashed the decision to grant planning permission, agreeing that (1) the conditions were not compliant with the renewable energy policies in the East of England Plan, and also that (2) the permission failed to secure the provision of temporary school accommodation that the then Secretary of State had intended.

The application will now go back to Eric Pickles, the current Secretary of State, for reconsideration. He could decide to re-open the inquiry or refuse planning permission.

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 Zero Carbon Homes standard will apply to the building of all new homes that are started after 2016. However, the Housing minister Grant Shapps has made clear that housebuilders will only have to ensure that emissions from the homes themselves (e.g. those from heating, ventilation, hot water, fixed lighting and building services), as covered by the Building Regulations, are reduced to zero; housebuilders will not be responsible, as had been suggested in the past, for emissions from household appliances used in the house  - or, as Mr Shapps said, housebuilders “should not be responsible for the amount of television the families who buy their homes watch or the number of cups of tea they make each day.”

Mr Shapps also said that in order to “deliver a realistic and effective approach to zero carbon”, the Government would:

1. Include “tough” standards for fabric energy efficiency (e.g. insulation, glazing) in any future changes to the Building Regulations;

2. Consult on the Zero Carbon Hub’s recommendations on the levels for other on-site carbon reduction levels; and

3. Work with the housebuilding industry on options for a regime for off-site measures (e.g. community energy schemes.)

Mr Shapps concluded his announcement by saying that the Government had succeeded in “nail(ing) down a definition for zero carbon homes”, whilst not “piling unfair costs on housebuilders.” 

Although there is still more work to be done on the definition of “zero carbon homes”, it is thankfully becoming clearer. Housebuilders will welcome the Government’s decision to exclude emissions from domestic appliances.

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.

In the recent Budget, the Chancellor announced that the Government was setting up a new scheme - FirstBuy - which will see the HCA and developers provide loans to eligible first-time buyers, to help them purchase a new-build home and thus get a first foot on the property ladder.

Through the scheme, the Government hopes to help more than 10,000 first-time buyers to buy a new home over the next two years. At the same time, the scheme aims to maintain capacity in the housebuilding industry.

The Prospectus outlines the criteria against which the HCA will assess offers from developers who want to take part in the scheme, including deliverability, the type of property, standards and price. Under the scheme:

1. Eligible first-time buyers will be offered an equity loan of up to 20 per cent of the purchase price. This will be funded equally by the HCA and the developer. The buyers will therefore need to provide at least 80 per cent of the purchase price;

2. The scheme is available to households earning less than £60,000 a year;

3. The maximum property price is expected to be £280,000 (or £300,000 in exceptional cases);

4. The buyer’s mortgage will be secured as a first charge on the property. The HCA and developer will take a second charge over the property;

5. The equity loan will be interest-free for the first five years. From the sixth year, an annual fee of 1.75 per cent will be payable in monthly instalments. This fee will be increased annually in line with the Retail Prices Index, plus 1 per cent; and

6. Each equity loan term is 25 years, but repayment is required on sale of the property.

Full details of the scheme are in the Prospectus.

The HCA is now inviting bids from developers who want to offer new-build properties to eligible first-time buyers. Bidders will be asked to provide anticipated start and completion dates for building schemes and the anticipated dates of unit sales. Developers who offer early build completion dates will score more highly. The Government will not support any schemes which are due to be completed after December 2012. The closing date for bids is 19 May 2011.

The HCA intends to enter into the first contracts with developers by July 2011 and expects the first homes to be available for purchase in August and September 2011.

The reforms, which were unveiled in the Localism Bill (click here for more details), are designed to give local people more of a say in the way their neighbourhoods are developed. Through local parish councils or neighbourhood forums, local people will be able to decide which types of development should be given automatic planning permission through a ‘Neighbourhood Development Order’ (NDO). If approved by a local referendum, a council will have to adopt a neighbourhood plan, providing it is line with the council’s wider ambitions for growth in the area.

Local authorities will work with community groups and parish councils in the 17 pilot neighbourhood areas to prepare draft plans and NDOs. These documents will be prepared under the current legal and policy framework, ahead of the new provisions for neighbourhood planning that will be introduced by the Localism Bill when it is enacted. (It is thought that the Bill will be enacted in late 2011 and will come into force in early 2012.)

The 17 ‘front-runners’ include both rural and urban areas. They are:

1. Birmingham City Council – Balsall Heath (Birmingham);

2. Bristol City Council – Lockleaze (Bristol);

3. London Borough of Southwark – Bermondsey;

4. London Borough of Sutton – Hackbridge;

5. North Tyneside Council – North Shields Fish Quay;

6. Wirral Borough Council – Devonshire Park;

7. Allerdale Borough Council – Cockermouth;

8. Blaby District Council – Blaby;

9. Cherwell Borough Council – Banbury;

10. Exmoor National Park Authority – Lynton;

11. Gedling Borough Council – Newstead;

12. Lewes District Council – Ringmer;

13. Northumberland County – Allendale;

14. Shropshire Council – Much Wenlock;

15. Teignbridge District Council – Dawlish;

16. West Dorset District Council – Cerne Abbas; and

17. Royal Borough of Windsor and Maidenhead – Bray.

Each of the 17 pilot areas will receive £20,000 towards developing their plan from a £1m fund.

The pilot areas will not be able to put their draft plans and NDOs into effect until the relevant provisions on neighbourhood planning in the Localism Bill come into force.

1. Assistance for first-time buyers

The Government announced that it will provide £250m to support first-time buyers in purchasing new-build properties. The FirstBuy programme will assist over 10,000 households by providing equity loans of 20 per cent of the cost of relevant properties. These loans will be jointly funded by the Government and housebuilders. The purchaser will have to provide a 5 per cent deposit.

2. Reform of the rules governing bulk purchases of residential property

The Government will use the Finance Bill 2011 to introduce legislation that provides stamp duty land tax (SDLT) relief for residential property purchasers who acquire interests in more than one dwelling from the same seller. This means SDLT charges will be based on the average value of the multiple properties, rather than the value of each individual home. A minimum SDLT rate of 1 per cent will apply.

The Government hopes that this relief will encourage investment in residential property and promote the supply of private rented housing.

3. Withdrawal of disadvantaged area relief

The Government has announced that SDLT and stamp duty relief for land transactions in disadvantaged areas will be abolished after 2012. The final date for abolition will be decided following consultation.

4. First-time buyer SDLT relief

The Government will announce the outcome of its review of first-time buyer SDLT relief in autumn 2011. Currently, first-time buyers can claim a relief from SDLT if the amount they paid for the residential property does not exceed £250,000.

5. Extension of the Support for Mortgage Interest scheme

The Government will extend the Support for Mortgage Interest (SMI) scheme until January 2013. SMI is currently available after 13 weeks at 100 per cent of eligible mortgage interest on mortgages of up to £200,000. This benefit was due to end in January 2012.

If you have any queries about the SDLT changes, particularly those made to bulk house purchasing (which will be welcomed by the property industry), please contact my colleague Shimon Shaw, who specialises in this area, at shimon.shaw@mablaw.com.

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.

The three-stage hierarchy in the definition of “zero carbon homes” comprises the following: energy efficiency, carbon compliance and allowable solutions. This Report deals with carbon compliance (i.e. the minimum level of on-site renewable energy generation or directly linked heat networks.)

The Report, which confirms the findings and recommendations of the Zero Carbon Hub’s December 2010 interim report, states the following:

1. Technical issues: The Government’s proposal to reduce carbon emissions for new homes from 2016 by 70 per cent against 2006 standards will not be achievable for many types of dwelling. This is because the main technology for on-site low or zero-carbon electricity generation – solar photovoltaic panels – is not suitable or sufficient for all sites;

2. Commercial issues: Housebuilders will have to meet the additional costs of compliance, and savings will have to be made through reductions in (1) land prices, (2) local authorities’ planning requirements, and (3) regulatory burdens. There are also the problems of new home purchasers being unwilling or unable to pay more for the property, and whether housing development schemes will remain commercially viable; and

3. Other issues: The Report stated the following:

a) It should not be necessary for each individual dwelling on a housing development site to achieve the carbon compliance limit, so long as the aggregate limit is achieved by the development as a whole. This will help to provide more flexibility;

b) The carbon compliance limit should apply to built performance (post-construction) and not designed performance;

c) The Government should take into account the weather assumptions it uses for carbon compliance. This is because regional weather patterns make a significant difference to actual carbon emissions from otherwise identical homes. At present a standard national weather assumption is used to demonstrate compliance; and

d) In the light of the Government’s commitment to ‘localism’, there should be no local power to set a different limit for carbon compliance or to make other related stipulations. However, the Report also provides proposals in the event that the Government decides to allow local powers.

NB: These recommendations do not relate to non-domestic property.

Conclusion

The Report highlights that the housebuilding industry must change significantly in order to achieve the carbon compliance standards. This will inevitably have an impact on all aspects of the housebuilding process, including planning, design, construction and energy products.

The Zero Carbon Hub has called on the DCLG to give a prompt response to its recommendations for carbon compliance, so that the housebuilding industry has sufficient time to prepare to meet the 2016 target for zero-carbon new homes in England.

The think tank Centre for Cities’ Cities Outlook 2011 study (which can be accessed here) identifies those cities that are bouncing back strongest from the recession, and those that are likely to continue to struggle for some time, by evaluating their performance on employment, population growth, skills and incomes.

The good news for Milton Keynes is that it is considered one of the top five cities in the UK for growth in 2011 based on, for example, unemployment figures and prospects for growth.

Matthew Arnold and Baldwin has always known that Milton Keynes was a good place to live and do business. It’s good to hear others agreeing.

The PMA 1991, which came into force on 4 April 1993, makes it an offence for estate agents, auctioneers or property developers in the course of their business to make false or misleading statements about a property offered for sale. The Property Misdescriptions (Specified Matters) Order 1992, made under the PMA 1991, lists the 33 specified matters about which false or misleading statements must not be made (these include location or address; aspect, view or outlook; measurements and sizes; physical or structural changes; fixtures and fittings; and treatments, processes, repairs or improvements.)

BIS believes that the protection given to house buyers by the PMA largely overlaps with the protection given by the Consumer Protection from Unfair Trading Regulations 2008 (CPR 2008). The CPR 2008 implemented in the UK the EU Unfair Commercial Practices Directive and prohibits all traders from engaging in unfair commercial (mainly marketing and selling) practices against consumers, and set out the rules that determine when commercial practices are unfair.

BIS feels that this duplication places an unnecessary regulatory burden on businesses without giving any additional protection to consumers, and, consequently, has recommended that the PMA 1991 should now be repealed.

The closing date for responses to the consultation is 5 April 2011. Once the consultation has closed, the Government will consider all the responses received and then decide whether the PMA 1991 will be repealed.

We have all seen an increase in parents helping their children with their deposits and this is typically raised from savings or releasing monies from their own property. But how would parents feel if they were able to help their children by taking out an unsecured loan to cover the deposit their children need?

Well Barratt believes that its scheme does offer the answer to the age old problem of saving enough for that first home deposit. The initiative is said to be offering loans of up to £50,000 over a 12-year fixed period and will allow parents to take out unsecured borrowing to cover the deposit for their children. The thought behind the scheme allows the first-time buyer to obtain an 80 per cent mortgage, pay a 5 per cent deposit, and the remaining 15 per cent is covered by the loan taken out by the parents.  

So is this an option for you and your parents? It is reported that this will be an unsecured loan with a fixed rate of 5.4 per cent, with the flexibility of being able to make overpayments and fee-free early redemption. Would there be parents out there willing to do this for their children, particularly if they have more than one child wanting to make that step onto the housing ladder?    

Barratt is reported as saying the scheme is ideal for parents who have sufficient income to service a loan but no available capital, or people who have capital which is tied-up which they do not want to access in the short term. We all know that there is enormous demand for properties from those people who are first-time buyers still living at home or renting. 

Barratt has teamed up with Hitachi Capital to offer the scheme and they have stated that the increase in the deposit amount now required by first-time buyers has had an affect on the market, and the innovative Barratt loan gives parents an option to support their children getting their foot on the ladder.

So over to you – is this something that can help you as a first-time buyer? Or, more to the point, is this something you would be willing to do as a parent?

The lower rate of corporation tax has a threshold of £300,000.  If you have two associated companies the threshold for each is reduced to £150,000.  If you have three, then the threshold reduces to £100,000 for each.  The same will apply to the upper threshold (£1.5m).

The case below shows how this rule can apply in quite unexpected ways.

Executive Benefit Services (UK) Limited v HMRC [2010] UKFTT 550 (TC).

The taxpayer company and its associated company had completely distinct businesses.  However, a shareholder of one was found to control both companies since he had become a loan creditor of the associated company for purely commercial reasons.  Essentially by virtue of lending the other company money (combines with a minority shareholding) he became entitled to the “greater part” of the company’s assets “available for distribution to participators”.

The First-tier Tribunal held that the associated company test applied irrespective of any tax avoidance motive in structuring a company’s financing and shareholdings. 

Conclusion

This is a good reminder of some of the mischief which can be caused by the associated companies rules. 

The facts here are clear that there was no tax avoidance motive, in fact the shareholder in question was clearly trying to help out his son (who was the owner of the second company).  The loan was interest-free with no fixed repayment date and with no other entitlements, such as voting control or a share of a distribution of profits in the event of a winding-up.  Despite all this, the tribunal held that the companies were associated and reduced the rate of tax for both companies accordingly.

This case is going to be of particular interest in these times when (as happened here) lenders are holding back the flow of credit and children are turning to the bank of Mum and Dad.  When Mum and Dad are themselves in business, they need to look very carefully at the position of both companies.

For more information please contact James Odds or Shimon Shaw on 01923 20 20 20.

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.

Just when all family solicitors thought nothing could be further from the truth, along comes a decision from the Court of Appeal to make it even less likely and the law even more difficult to predict.   

In the case of Jones v Kernott, the Court looked at this issue yet again. In this particular case, Ms Jones and Mr Kernott had met and gone on to purchase a house together in their joint names. As with most other couples venturing into the world of home ownership, they saw no reason to discuss what would happen in the event of their separation, preferring not to consider this as an option. That being said, to be fair to them at the time, they would probably have agreed that the net sale proceeds should be divided equally. As with so many of these cases, it was not until some time later that one of them decided this was no longer fair or reasonable.  

They separated. Mr Kernott moved out and bought another property. When they separated, it still seemed reasonable to both of them that they should share equally in the net sale proceeds. However, Mr Kernott stopped contributing towards the mortgage, presumably concentrating on paying for his new property – again a perfectly obvious thing to do. Meanwhile, Ms Jones continued to make the payments on the mortgage and the endowment, and paid all other bills without any assistance form Mr Kernott. It seems that this was when her view changed and she felt that she should be entitled to more. However, she did nothing about it until Mr Kernott, some 12 years later, decided to try and recover his half share. Ms Jones issued proceedings, seeking a declaration that she was the sole beneficial owner of the property and entitled to the full net sale proceeds.  

The first and second courts agreed with her, albeit not entirely. Nevertheless they awarded her a 90 per cent interest in the property. The Judges based their decision on the fact that clearly their intentions – that all important word in considering division of property between unmarried couples – had changed and that the court could infer this from the very fact that Ms Jones had taken on responsibility for the mortgage without financial assistance from Mr Kernott. Having decided that there was a change in the parties’ intentions, they then went on to decide the appropriate shares bearing in mind what was “fair and just.”    

However the Court of Appeal overturned the decision and ordered that the parties should be entitled to the property equally. The Court of Appeal was of the view that the court in such applications was not there to re-write the law and could not therefore infer an intention. Had there been a change of intention? Nothing had been discussed. Whilst Ms Jones may have changed her intention, there was nothing to suggest she had ever communicated this to, or agreed it with, Mr Kernott. He was carrying on, blindly assuming that he was still an equal owner as he had been in the past. Indeed it might be said that had he known his lack of attention to dealing with this was eating into his share of the property, he would have acted earlier to realise it – maybe that would not have been in the best interests of Ms Jones, who was of course continuing to occupy the property with the children of their relationship.

The upshot was, however, that the Court of Appeal held that there had been no change in the common intention and that, as a result, they must still own the property in equal shares. In light of the fact that Ms Jones had brought up the children without any financial assistance, not only towards the mortgage and endowment but also in the form of child support, will make this decision seem to most of us grossly unfair, but it just highlights that the courts cannot simply do what may be considered morally right, but must follow the law.

This remains a very difficult area of law to predict and this in itself makes it expensive litigation. If you have any questions concerning this area of law, please do not hesitate to email me at amanda.melton@mablaw.com.

A buyer was contracted to purchase an underlease of a flat off-plan from a developer. The contract was conditional upon the grant to the developer of a headlease by the longstop date of 1 June 2008. In the event that the headlease was not granted by the longstop date, either party could rescind the contract. The conditional clause did not make provision for the developer to advise the buyer if the condition had been fulfilled. As a result of the credit crunch, the value of the property dropped and the buyer could no longer obtain a mortgage for the amount required to complete the purchase. The buyer advised the developer of their situation but had not realised that the headlease had not been granted and so could have exercised their right to rescind the agreement. The seller agreed to reduce the purchase price. The headlease was eventually granted on 4 September 2008. The buyer purported to rescind the agreement on 29 September 2008 because the headlease had not been granted by the longstop date.

Decision

The Court of Appeal held that the agreement was conditional on the grant of the headlease, although time was not of the essence, and as such the agreement could become unconditional if the headlease were granted after the longstop date. The right of rescission could only be exercised before the agreement had become unconditional and therefore the right to rescind existed only until the headlease had been granted and did not continue beyond that point.

The Court of Appeal stated that the buyer knew that they could rescind after the longstop date, provided no headlease had been granted, and could have taken steps to establish if the headlease had been granted by checking with the Land Registry. The Court of Appeal went on to say that if the right to rescind continued after the grant of the headlease, then the right would have to exist in favour of both parties, as it could be unfavourable to either party, depending on the market conditions.    

Comment

Both developers and buyers should check that they understand the terms of any conditional clause and longstop dates in their agreements and that such clauses are drafted as tightly as required. A buyer would also wish to ensure that any similar clause includes an obligation on the developer to advise the seller whether the condition has been satisfied or not.

The new ‘Community Right to Build’ initiative is part of the Government’s ‘Big Society’ idea of allowing more decisions to be made by local people, and stems from the fact that many people are forced to leave their villages because they cannot afford to purchase a house there.

Under the plans, villages would be allowed to create local housing trusts and hold a referendum to decide if house building should be permitted. Housing minister Grant Shapps has suggested that this would only involve small developments of fewer than 20 homes and that “overwhelming” support from local communities would be needed before any new building could take place.

However, the new proposals, which will be part of the forthcoming Decentralisation and Localism Bill, have been criticised by the Campaign to Protect Rural England (CPRE), as they could lead to building on green belt land. CPRE argues that there should be proper scrutiny of house building by democratically-elected councillors rather than a simple public referendum.

This announcement follows the Government’s recent decision to scrap Regional Strategies and their centrally-imposed building targets – another step by the Government to transfer centrally-held powers to local communities.

When purchasing a property through the New Build HomeBuy scheme, you will be assessed to ensure that you meet the required criteria. The criteria can vary from housing association to housing association and can be found on their individual websites. However, as the scheme is aimed at those who cannot afford to buy a property outright, you should consider that priority would normally be given to those with priority housing needs.

Although you cannot immediately purchase the property outright under this scheme, you will still have the rights and responsibilities of a full owner-occupier. You can buy further shares in the property at a later date, until you own it outright. You will enter into a shared ownership lease which sets out your rights and obligations, and your legal advisor can explain the terms of this to you prior to exchange of contracts, should there be any points you do not understand.

As you will only be purchasing a share of the property, you will be required to pay rent to the housing association on the share that remains in their ownership. In order to purchase your share, you are likely to require a mortgage and you would need to arrange this with a bank or building society who lend on New Build HomeBuy/shared ownership properties. You should be aware that not all lenders provide mortgages on properties sold under this scheme.

You can sell your home at any time, but you must tell the housing association in writing. The housing association has the right to buy the property back from you or to find you a buyer for it; if you own 100 per cent of your home, you can sell it yourself. However, the housing association has the right to buy the home from you for up to 21 years after you fully own it.

If you have any questions on this subject, then please do not hesitate to contact me direct at helen.chaproniere@mablaw.com

Under the proposals, a person purchasing a house in the lowest energy efficiency bands (probably bands F and G) would have to pay an extra 0.5 per cent levy on top of their stamp duty bill. However, if the new owner upgraded the property to at least a band E within a year, the owner would be refunded the 0.5 per cent (and perhaps also receive a ‘bonus’ payment, as the Government looks to encourage homeowners to make their homes more energy efficient so that it meets its greenhouse gas emissions reduction targets.)

If the Government proceeds with these proposals, it is possible that they could be introduced in just two years’ time as part of the Government’s “Green Deal”, which includes measures to financially help homeowners make their properties more energy efficient.

It is thought that the Government was also considering banning owners of energy inefficient homes from putting them up for sale until they had been made more efficient; however, this idea was rejected as it could “trap” poorer families who couldn’t afford to make the improvements.

If these proposals are accepted, they could have a serious effect on the housing market. Any stamp duty penalties would put pressure on homeowners to upgrade their homes before putting them up for sale, as they would be less attractive to buyers. However, if homeowners can’t afford to make the changes, it may deter them from putting their homes up for sale. Also, purchasers, particularly first-time buyers who may have financially stretched themselves, may be reluctant to buy energy inefficient homes as they may be unable to afford to make the required upgrades in order to get their 0.5 per cent levy refunded.

We shall see what happens…

So what is shared equity? You purchase a property and own 100% of it, but you obtain a mortgage for a certain percentage of the equity (e.g. 75%) and the developer and/or Government holds a charge (mortgage) over the remaining share (e.g. 25%); depending on the scheme, you may or may not pay rent on that 25% share. In simple terms, although you own the property outright, your main lender holds a legal charge over the property and, in addition, the developer and/or Government will secure a second charge over the property to secure the repayment of their share when you sell or decide to pay the equity loan off.

So what is shared ownership? You purchase only a share in the property (e.g. 75%) and the local authority, developer or housing association retains the remaining share (e.g. 25%) and you pay rent on that share. In simple terms, you have a share in the property, which is usually purchased with the assistance of a mortgage, but you do not own the property outright. You can purchase further shares in the property later (up to 100%) and this is called ”staircasing”. This increases your share of the property and reduces the share retained by the local authority/developer or housing association, which  would also reduce your rent payments.

If you are still puzzled, please contact me at sarah.wilkins@mablaw.co.uk and let me help you understand the options open to you.

In its coalition agreement, published on 20 May, the Government stated its intention to give councils more powers to stop this practice – and it has wasted no time in putting this policy into action.

In a statement made on 9 June, Decentralisation Minister Greg Clark said that, with immediate effect, Annex B of Planning Policy Statement 3 (PPS3) will be amended so that private residential gardens are no longer classified as ‘previously developed land’ (i.e. brownfield land). This will make it easier for councils to reject planning applications for new dwellings on garden land, where local people object. The reclassification of gardens will not affect people who wanted to build extensions on their homes.

Mr Clark also announced the immediate removal of minimum housing density targets, meaning that councils will be able to decide what level of housing density is appropriate for their area.

This change in policy could have adverse consequences that the Government will not have intended. Many old houses have reached their “sell by date” and the land should be re-processed in a more modern, efficient manner. Many elderly people find large gardens too large a burden, and help fund their retirement by selling some of it for development. People will still want to live in the South East, but if land within a community cannot be released for development then there will be added pressure on the green belt. It is not simply a matter of house building being swapped onto derelict industrial land; firstly, there isn’t much of that in the South East and, secondly, land is needed to create employment opportunities as well, not just housing.

One other important aspect is that house building is one of the most important industries in the country. Apart from those directly employed, this could have adverse consequences on the High Street in the sale of fixtures and fittings and furnishings. A lack of new housing will put up the price of second-hand housing. The main concerns of neighbours will generally be overlooking and inappropriate development. There may well have been other ways of achieving the same end but without such far reaching consequences. I expect the Government will be criticised for implementing a far-reaching proposal without proper consultation with those most affected.

In this case, K appealed against earlier decisions regarding a declaration as to the share of the beneficial interest in a property he co-owned with J. J and K had bought the property in 1985 with a deposit provided by J and a mortgage, the repayments of which were shared. The property was in joint names. In 1993, K moved out and J remained in the house with their two children and made all the mortgage repayments during that time. K subsequently purchased another property. Approximately 12 years after their separation K sought the payment of his half share. J issued proceedings under the Trusts of Land and Appointment of Trustees Act 1996 and sought a declaration that she owned the entire beneficial interest in the property. A declaration was made that the beneficial interest was split 90 per cent to 10 per cent in favour of J and that decision was upheld on appeal.

The Court of Appeal held:

1. The conveyance into joint names created joint beneficial interests. The parties agreed that when they separated they had equal interests. There had to be something to displace those interests and the passage of time was insufficient to do so, even though K had acquired alternative accommodation and J had paid all the outgoings since K had left. K was entitled to a 50 per cent interest in the property and the decision that the interest was split 90 per cent to 10 per cent in favour of J was wrong.
2. There was nothing to displace the presumption of equality. There was a total lack of evidence about the parties’ intentions. If K and J had truly intended that K’s beneficial interest should reduce post-separation, they should have acted accordingly and adjusted their beneficial interests.
3. The burden of proof was on the party seeking to show a common intention that the beneficial interests should be different to the legal interests.

This case followed the landmark decision in  Stack v Dowden (2007) UK HL 17 in which an unmarried couple lived for many years in property purchased jointly. No express declaration was made as to how the beneficial interests in the property were held. The House of Lords held that they were entitled to joint and equal shares in the property unless a clear contrary intention was shown otherwise.  The case established the following principles for determining the beneficial interests:

•  a conveyance into joint names will result in a legal and beneficial joint tenancy, unless the contrary is shown;
• the burden of proof is on the owner seeking to show that they intended to hold their beneficial interests as tenants in common;
• the court must ascertain the parties’ shared intentions in the context of the whole course of their conduct relating to the property. Some of the factors to be considered include:

• any advice or discussions at the time of the transfer, that would indicate their intentions at that time; 
• the reasons why they purchased the house jointly; 
• the purpose for which the house was acquired; 
• the nature of the parties’ relationship; 
• whether the couple had children for whom they both had responsibility to provide a home; 
• how the purchase was financed, both initially and subsequently; 
• how the parties arranged their finances, for example, whether their accounts were held separately, together or a combination of both; and 
• how the couple discharged their outgoings on the house and other household expenses.

These cases show that it is imperative to consider how the beneficial interests should be held when purchasing property jointly, especially where the buyers are unmarried. The burden on the party seeking to rebut the presumption of joint beneficial interests is a heavy one and the court will not substitute what it considers to be a “fair” solution in the absence of any evidence as to the parties common intention. Any decision by the parties should be documented by way of a declaration of trust to avoid any uncertainty.

The following policy agreements will be of interest to the property industry:

• Home Information Packs (HIPs) are to be suspended, but Energy Performance Certificates will be retained. Legislation will be required to completely abolish HIPs;
• Decision-making powers on housing and planning will be given to local councils, including new powers to stop ‘garden grabbing’ by developers;
• Home energy improvements will be paid for through savings made from lower energy bills;
• Reform the planning system to give local people the ability to determine the shape of the places in which they live. This will be based on the principles set out in the Conservative Party publication Open Source Planning;
• Abolish the Infrastructure Planning Commission and replace it with a democratically accountable system that provides a fast-track process for major infrastructure projects; 
• Plans to establish a high-speed rail network will continue, but plans for a third runway at Heathrow will be cancelled. No additional runways will be built at Gatwick and Stansted airports; 
• Maintain the Green Belt, Sites of Special Scientific Interest (SSSIs) and other environmental protections, and create a new designation to protect green areas of particular importance to local communities; 
• Introduce new measures to bring empty homes into use;
• Promote shared-ownership schemes and help social tenants and others to own or part-own their home; 
• Promote ‘Home on the Farm’ schemes that encourage farmers to convert their buildings into affordable housing; 
• Create new trusts that will make it simpler for communities to provide homes for local people; 
• Require continuous improvements to the energy efficiency of new housing; 
• Provide incentives for local authorities to deliver sustainable development, including for new homes and businesses; 
• Review the effectiveness of the raising of the stamp duty threshold for first-time buyers; and
• Bring forward the national planning statement so that it can be ratified by Parliament. The statement will enable new nuclear construction. The Liberal Democrats, who are opposed to any new nuclear construction, will abstain from voting on the issue.

These policies are part of the Government’s legislative programme for the next five years, and further detail about how they will be implemented will be published in due course.

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.

Similarities are notable between the Conservative and Liberal Democrat manifestos, which can be used to interpret what impact this Government is likely to have on Property.

The first similarity was clearly the plan to abolish Home Information Packs before a property could be sold. The Liberal Democrats did however wish to retain the Energy Performance Certificate element of the packs. As of today (21 May), this plan has been implemented following the announcement by the Government for their immediate suspension. This would seem to be a sensible move by the Government; many had predicted this move and could therefore have had the effect of sellers withholding their properties from the market, hoping to save the cost of the Home Information Pack. This move will certainly be welcomed by residential developers and sellers alike, and hopefully bring back some spontaneity to the market.

A second point on which both parties are agreed is for a more localised planning policy. The Conservatives want to see a new “open source” policy, with local people being able to specify what type of development they want. The Liberal Democrats want local authorities to determine how and what type of developments are carried out. These proposals are in line with a clear intention to scrap the previous Government’s housebuilding targets, which many commentators state to be unrealistic based on current levels of construction. Whether a more local planning policy will help developers in obtaining planning for developments remains to be seen. One move which developers may not be so keen on is a Conservative proposal to force developers to pay a tariff to local authorities as compensation for the loss of amenities and costs of additional infrastructure.

The Conservatives proposal to permanently scrap Stamp Duty Land Tax for first-time buyers on properties priced under £250,000 may help the lower end of the market. Whilst this is likely to be welcome news, its effectiveness could be watered down by the scaling down of schemes such as Homebuy Direct, which has been suggested by the Liberal Democrats. This scheme has been of assistance to a number of developers and purchasers alike during challenging times.

There has also been much news on plans to increase the rate of Capital Gains Tax, currently at 18 per cent, and thought to be likely to increase to at least 40 per cent. This is not just likely to hit property investors and people investing in property to fund their retirement, but potentially also people who had lost confidence in pensions and may not have made separate provisions. However, if this has the effect of putting off potential buy-to-let investors from entering the market, then this could see an upturn in rental incomes as demand outstrips supply for rental properties.

Clearly, some uncertainty remains as we wait to see whether any such plans are watered down following consultation and the parliamentary process.  

The investigation found that there were 25 High Court cases in 2009, compared to only one case in the previous five years. Claims were brought against valuers for many reasons, including:

• negligently overvaluing commercial premises that dropped in value because tenants became insolvent during the recession;
• negligently overvaluing residential property development sites which dropped in value because of falling house prices and a big increase in similar new build properties built during the housing boom;
• negligently underestimating the cost of putting a development project on hold; and
• negligently valuing a property that was subject to a fraud.

Banks and building societies have launched legal action against surveyors, claiming that they had overvalued properties that they had repossessed and been forced to sell for much lower sums. However, surveyors have hit back at these claims, stating that many of these properties had securitised loans against them and that lenders, rather than valuers, were to blame for the upward pressure on prices.

The intention of the Code is to give buyers more protection when acquiring a new flat or house, or a newly-converted flat or house, from the time the property is marketed to them to, and including, the after-sales service they receive when they have purchased the property.

Builders and developers that are selling new flats/houses, and are registered with one of the home warranty providers that are participating in the Code, must comply with the Code (participators are currently NHBC, Premier Guarantee and LABC New Home Warranty.) If one of these builders or developers breaches the Code, the home warranty providers can (1) remove them from the relevant register, or (2) exclude them from all registers run by other participating home warranty providers. This could mean that excluded builders or developers would have to obtain home warranty insurance cover from another provider in order to satisfy buyers.

Developers are now required to give an “Anticipated Completion Date” and a period after that date when the buyer can choose to rescind the contract (a maximum of 6 months for a freehold property and 12 months for a leasehold property) in the contract itself, amongst other requirements imposed in the Code. Developers will need to amend their standard contracts to comply and we have been able to assist several of our developer clients with this task. 

If you have any concerns, or would like some assistance, please get in touch with one of the New Homes Team at Matthew Arnold & Baldwin.

The intention of the Code is to give buyers more protection when acquiring a new flat or house, or a newly-converted flat or house, from the time the property is marketed to them to, and including, the after-sales service they receive when they have purchased the property.

Builders and developers that are selling new flats/houses, and are registered with one of the home warranty providers that are participating in the Code, must comply with the Code (participators are currently NHBC, Premier Guarantee and LABC New Home Warranty.) If one of these builders or developers breaches the Code, the home warranty providers can (1) remove them from the relevant register, or (2) exclude them from all registers run by other participating home warranty providers. This could mean that excluded builders or developers would have to obtain home warranty insurance cover from another provider in order to satisfy buyers.

Developers are now required to give an “Anticipated Completion Date” and a period after that date when the buyer can choose to rescind the contract (a maximum of 6 months for a freehold property and 12 months for a leasehold property) in the contract itself, amongst other requirements imposed in the Code. Developers will need to amend their standard contracts to comply and we have been able to assist several of our developer clients with this task. 

If you have any concerns, or would like some assistance, please get in touch with one of the New Homes Team at Matthew Arnold & Baldwin.

HIPs were introduced in England and Wales in 2007, with the aim of speeding up the home selling process by requiring sellers to provide a lot of the conveyancing information when their properties are first put up for sale.

We at Matthew Arnold and Baldwin believe that the suspension of HIPs will lead to a more efficient and less expensive property transaction experience for both buyers, sellers and developers, which is something we would always support. HIPs often duplicated expenses and led to a great deal of uncertainty. Although sellers will still be required to commission an Energy Performance Certificate, this will not delay the marketing process, as it will not need to be completed prior to marketing. This is likely to mean that more properties will be placed on the market, as there will be no cost or time barrier to prevent marketing. We will, of course, continue to assist both private sellers and developers in the area in all property matters.

To read further comment by Richard on the suspension of HIPs, please click here (taken from the Watford Observer website).

The Court ruled that Natasha Rashid must pay Ballymore the £279,200 balance due on the flat she agreed to buy, plus interest and legal costs. Ms Rashid had put down a £69,800 deposit on the luxury flat, agreeing to pay the remainder of the purchase price once the flat was completed. The Court also said that if Ms Rashid fails to comply with the order by the end of April, Ballymore will be able to resell the property and seek a court order for damages against her.

This ruling highlights the growing number of claims being brought by housebuilders and developers against purchasers who renege on their contracts. A recent investigation by the property journal Estates Gazette found that between August 2008 and December 2009, nearly 300 claims were lodged against buy-to-let investors who had not completed on off-plan purchase contracts. These findings came to the fore when, in December 2009, the High Court backed housebuilder Prestige Homes South West in its attempt to obtain payments from an investor over two failed completions in its Zero 4 scheme in Plymouth, awarding it damages of £133,000.

There is no doubt that these two recent rulings are good news for developers and housebuilders, who have invested a lot of time and money in their developments and rightly expect purchasers to honour their contracts. However, off-plan buyers have become victims of the decline in the property market, with many of the properties they put deposits down on now worth much less than when they agreed to purchase them. Buyers have been unable to obtain mortgages once the value of their properties fell and buy-to-let investors have been unable to sell their properties on at a higher price than they paid.

It is an unfortunate situation for all concerned, and, although similar disputes are being settled out of court, more court cases should be expected.

 Labour

• Build up to 10,000 new council homes a year by 2014/15;
• Maintain the HomeBuy Direct scheme;
• Maintain the stamp duty threshold at £125,000, but (1) abolish it for people in home ownership schemes, and (2) scrap it for two years for first-time buyers on homes worth up to £250,000;
• Ensure that all new homes will be zero carbon by 2016;
• Maintain Home Information Packs;
• Maintain the standard interest rate on the Support for Mortgage Interest Scheme at 6.08 per cent until December 2010;
• Give more powers to local authorities to manage the developments of houses in multiple occupation (HMOs), particularly where HMOs affect the composition of local communities;
• Crack down on social housing tenants who fraudulently sub-let their properties;
• Develop a new form of affordable housing for families on modest incomes who don’t qualify for social housing (e.g. allow them to rent an affordable home at below market rates while they build up an equity stake);
• Give tenants who rent from a private landlord the right to a written tenancy agreement;
• Establish a new National Landlord Register.

Conservatives

• Scrap national and regional housebuilding targets, but reward those local authorities who build more homes by allowing them to keep more of the proceeds from council tax and business rates;
• Create Local Housing Trusts to develop homes for local people (if there is strong community backing for this);
• Expand the self-build sector, particularly in rural areas – local authorities will have to set up a register of families who want to join a self-build scheme and then assess how much land needs to be put aside for a self-build community to be set up.
• Allow neighbourhoods to stop the practice of ‘garden grabbing’;
• Permanently scrap stamp duty for first-time buyers on homes up to £250,000;
• Abolish Home Information Packs;
• Give social tenants with five years good behaviour a 10 per cent equity stake in their properties;
• Pilot a new ‘right to move’ scheme and introduce a nationwide social home swap programme, so social tenants can transfer their tenancy to another home in any part of the country;
• Introduce a new ‘open source’ planning system, so that local people can specify what kind of development they want to see in their area;
• Force developers to pay a tariff to local authorities as compensation for the loss of any amenities and costs of additional infrastructure;
• Abolish the power of planning inspectors to rewrite local plans;
• Amend the ‘Use Classes Order’, so that people can use buildings for any purpose allowed in the local plan;
• Limit appeals against local planning decisions to cases that involve abuse of process or failure to apply the local plan.

Liberal Democrats

• Scrap regional housebuilding targets and allow local authorities to determine how many and what type of homes are needed in their area;
• Bring 250,000 empty homes back into use by offering grants and cheap loans to their owners to renovate them – grants if the home is for social housing, loans if the home is for private use;
• Build tens of thousands of affordable houses to rent;
• Ensure council houses sold under the ‘Right to Buy’ scheme are replaced;
• Allow local authorities to keep 100 per cent of the capital receipts from ‘Right to Buy’ sales;
• Create a new ‘Safe Start’ mortgage that protect buyers from negative equity;
• “Scale back” Homebuy Direct schemes;
• Offer “green loans” for people to invest in home energy efficiency and micro-renewables;
• Scrap Home Information Packs, but retain energy performance certificates;
• Create a third-party right of appeal in cases where planning decisions go against locally agreed plans;
• Stop major new housing developments in major flood risk areas;
• Promote schemes for affordable homes, such as equity mortgages and ‘Home on the Farm’ which encourage farmers to convert existing buildings into affordable housing;
• introduce a new planning ‘use class’ for second homes, so that communities and local authorities can control the number of homes given over to holidaymakers.

Comment

The Home Information Packs (HIPs) have not been particularly popular with sellers, estate agents, developers or conveyancers, and there is a general feeling that they have not actually achieved what they were introduced to do, which was to speed up the process of buying and selling properties, although the HIP industry comments that they believe it has. The Conservatives say that they will abolish them, but the shadow housing minister Grant Shapps has not said what he will replace them with. The Liberal Democrats are saying that they will abolish them but retain the Energy Performance Certificates (EPCs). There is obviously concern in the HIP industry as to how this will affect them and they are urging the new government to adapt not scrap HIPs. Thousands of people trained to be Energy Assessors and the HIP industry employs a lot of people.

Apparently sellers are also delaying putting their properties on the market until after the election to see what actually happens. However, whichever party or parties do take over, the decision will not be an instant one, so are sellers going to carry on waiting indefinitely? I am sure we all want to see an upturn rather than a stall in the housing market.

The Labour government’s first-time buyer relief on properties up to £250,000 for two years is good news for first-time buyers, but is difficult for conveyancers to “police”. Clients could tell us that they are first-time buyers when they have actually owned a property previously anywhere in the world, and we have no way of checking and have to rely on their honesty. The Conservatives say that they will permanently scrap this for first-time buyers, which will presumably not encourage first-time buyers to get on the property ladder as soon as possible, thereby assisting the market to pick up after the recent slump.

The HomeBuy Direct schemes have been extremely popular in the recession, which Labour want to encourage, but the Liberal Democrats want to “scale back”, although they have other schemes in mind.

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.

This change at first glance seems very straightforward. Those people who want to purchase a property worth an least £1m will have to pay 5 per cent stamp duty instead of the current 4 per cent, meaning that stamp duty tax bills for such purchases will increase by a minimum of £10,000. This rise will particularly hit purchasers in the south-east, where property is more expensive.

This change, though, is not as clear-cut for off-plan buyers. Off-plan buyers, as opposed to other purchasers, quite often buy a property a year in advance, meaning they could potentially fall into the 5 per cent tax bracket. For example, if a buyer agrees to purchase a new-build property valued at £1m, which has not yet been completed, they may be liable for the 5 per cent tax (instead of the current 4 per cent) if the sale is not completed before 6 April 2011.

At the time of writing, the Chancellor has not announced any new provisions which will protect off-plan buyers from such a scenario. However, in the past, provisions have been put in place to ensure that contracts entered into before a Budget were taxed at existing rates, so we will wait and see if the Chancellor will clarify the situation in the coming weeks.

There are potential ways of avoiding such a future liability, which I will be happy to discuss with any clients who find themselves faced with this position.

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.

STAMP DUTY LAND TAX: expensive properties
To pay for the SDLT “holiday” for first time buyers, there will be a new SDLT rate of 5% for purchasers of residential property where the consideration is over £1m. This will take effect for transactions after 6 April 2011.

STAMP DUTY LAND TAX: first time buyers
There will be a “holiday” for first time purchasers of major interests in land if the consideration is less than £250,000. This includes a freehold or leasehold interest in residential property in the UK (except a lease with less than 21 years to run when granted or purchased).

It will not affect tax charged on the rent under leases, but will benefit any premium paid under a lease.

The effective date of the purchase must be on or after 25 March 2010 and before 25 March 2012. The effective date of a transaction is normally completion but can also be when the purchaser pays more than 90% of the purchase price or takes occupation of the property.

This measure will only benefit purchasers of properties who intend to occupy the property as their only or main residence. It does not include non-residential or mixed use properties. Where there are multiple purchasers, then they must all be first time buyers. Someone who has inherited property will not be a first time buyer. It is unclear whether a beneficiary under a trust with a proprietary interest in land would be considered a first time purchaser.

If a financial institution under a shariah compliant finance transaction (known as alternative finance) purchases a property as part of an arrangement then the purchaser will also not be considered a first time buyer. Conversely, purchasers who would otherwise be first time buyers will not lose the relief by virtue of entering into a shariah compliant transaction.

The purchase must not be a linked transaction (i.e. where more than one interest in land is acquired by the same purchaser from the same vendor – or by persons connected to them). This would not catch the purchase of a separate interest associated with the main property – e.g. a garage lease. It is slightly unclear as to what the position would be if the total price paid for all linked transactions is under £250,000.

Purchasers of shared ownership properties will need to ensure that the market value election has been made. The relief is not available if taxed as a lease. Normal shared ownership rules apply on staircasing.

There are lots of opportunities for confusion here so if in doubt, speak to our residential property team.

STAMP DUTY LAND TAX: anti-avoidance
There will be new anti-avoidance measures introduced from budget day to counter SDLT tax mitigation schemes exploiting the partnership rules in schedule 15 Finance Act 2003.

There will be transitional rules which protect existing arrangements where one of the “scheme transactions” has taken place prior to the budget.

Other matters
• Banking – Lloyds and RBS have agreed that they will lend £105 billion to homebuyers and business over the next 12 months.
• Capital gains tax – Entrepreneurs’ relief is to be extended so that from 6 April 2010 the lifetime limit is increased from £1m to £2m.
• Capital allowances – the annual investment allowance provides businesses with an amount of capital expenditure which benefits from 100% allowances in the first year of investment (rather than writing down allowances over time). This has been increased to £100,000 for the next tax year.
• Small businesses occupying properties with rateable values up to £12,000 will pay no business rates for one year from October 2010.