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.

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.

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.

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.)

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.

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.

Or unless you are me.

So on to the news:

1.         DV3 v HMRC

This was the tax planning case I’ve referred to in previous posts.  The taxpayer appealed against HMRC’s assessment that stamp duty land tax (SDLT) planning (involving the sale to a purchaser followed by a subsale into a partnership) failed.

The decision was highly technical and involved an in-depth analysis of the SDLT subsale rules. 

The taxpayer won in the tribunal.  It seems likely that HMRC will, however, appeal.

2.         Shariah compliant SDLT scheme blocked

In the budget, HMRC have changed the rules for subsales and alternative property finance relief to block an increasingly popular method for avoiding SDLT.

3.         5% rate

The rate of SDLT for residential property purchases OVER £1m with an effective date on or after 6 April will increase to 5%.  Following on from the above 2 points, this is likely to lead to an increase in SDLT planning.

4.         Bulk purchases

As from Royal Assent of the Finance Act 2011 a new relief will be introduced for purchases for multiple residential properties.  The terms are not yet finalised, but in essence where you are purchasing several plots or properties you would take the total price and divide by the number of properties to find the mean.  The rate of tax will be based on the mean price.

Since opportunities for abuse abound, there will probably be some restrictions imposed.

5.         First time buyers

HMRC will review how this relief is working and report on it in the Autumn.

If any of these changes affect you or if you would like to contact someone about stamp duty, please drop me a line.

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

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

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

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

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

But here is some good news.

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

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

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

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

And the winner was…..the taxpayer.

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

The 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.

EDMOs were introduced in 2006 by the previous Government in an attempt to reduce the number of unoccupied homes in the UK, and they allow local authorities to take over properties (and seize furniture, fixtures and fittings) that have been empty for as little as six months.

There are currently two types of EDMO – (1) an interim EDMO which gives a local authority one year to help the homeowner get the property back into use; and (2) a final EDMO (this occurs when no agreement has been reached between the local authority and homeowner; a final EDMO can last up to seven years.)

Under EDMOs, local authorities have the right to, amongst other things, seize properties after six months if:

1. They have been left vacant following the death of the occupant or owner. (Homes of the deceased can be confiscated for up to seven years, even if inheritance issues have not been finalised), or

2. The unoccupied home is on the property market, but the local authority believes the asking price is “unrealistic.”

The Government has now said that it will do the following:

1. Limit EDMOs to empty properties that have become targets for vandalism, squatters and other forms of anti-social behaviour;  

2. Only allow an EDMO to be obtained if a property has been empty for at least two years; and

3. Give property owners at least three months’ notice before issuing an EDMO.

This move, which is subject to consultation, will be welcomed by private homeowners, particularly those who regularly spend a lot of time away from their homes, as it will reduce the possibility of their properties being seized by local authorities. The news will also benefit bereaved families, who, during a traumatic time, may be unable to decide whether to occupy, sell or rent out their loved one’s home.

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

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

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

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.

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.

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

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

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

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

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.

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 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).

As a purchaser, you will of course expect to see such a Special Condition and as a vendor, you will usually be happy to provide it.

The situation does change slightly when the seller is a mortgagee in possession.  Most mortgagees we act for do agree to provide vacant possession but I have some concerns about this.

I have previously, with consent of my client, refused to guarantee that vacant possession will be provided on completion.  On occasion, I have also seen contracts that state the seller will give vacant possession but can make no guarantees that the property will be vacant or words to that effect.

There is a reason for this.  The property remains unoccupied whilst it is in possession of the mortgagee and although the selling agents are required to make regular inspections, once contracts are exchanged, the agents may lose interest as they know it is a “done deal” and they will be paid their commission. 

My concern is the fact that between exchange and completion, anyone could break into the property, be it squatters or the mortgagors and whilst my expertise in litigation is limited, I know it takes time to evict said squatters/mortgagors.  The client will then be in breach of contract if unable to evict them before the completion date.

Thankfully, I have yet to face this problem personally and it is only a small risk but it only takes one such occurrence for a mortgagee to change its policy.

Failure to provide a guarantee of vacant possession is not something most purchasers would readily accept but there is a way around this.  The best solution is to exchange and complete on the same day and the buyer can of course inspect the property immediately before exchange and completion take place to ensure it is vacant.

 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.

“Restriction:  No disposition of the registered estate is to be registered without a certificate signed by the applicant for registration or his conveyancer that written notice of the disposition was given to ABC Limited being the person with the benefit of an interim charging order on the beneficial interest of Mr Joe Bloggs made by the Newport County Court on 13^th January 2010 (Court ref 7XY1234)”.

The wording of the Restriction seems to suggest that by serving notice, a seller will satisfy the terms of the Restriction and a purchaser will be registered as the new owner.

However, there is more to it that this. ABC Limited obtained an interim charging order against Mr Bloggs.

Therefore, even though they do not have a legal interest in the land, they do have an equitable or beneficial interes, i.e. an interest in the proceeds of sale and they must be repaid when the property is sold by the owners.  This is on the assumption that ABC obtained a final charging order of course.

The seller and his solicitors will be hold the sale funds as Trustees and will be responsible for repaying the charging order in full.

Simply serving notice and thinking that the solicitor’s job is done may well lead to a negligence claim.

I know some mortgagees are willing to sell with Limited title guarantee but had I ever been instructed by a lender who wanted to do so, I would advise firmly against it.

The main reason for this is that one of the implied covenants by a seller when transferring a property with Limited title guarantee is that the seller covenants that with the buyer as follows :  “the transferor has not charged or incumbered the property by a charge or incumbrance which still exists, that he has not granted any third party rights which still subsist and that he is not aware that anyone else has done so since the last disposition for value”.

The words I  have highlighted provide the fundamental difficulty.  Most of the mortgagees we act for have hundreds if not thousands of employees.  It is not possible or practical for a mortgagee to give this categorical assurance. For example, had the borrower written to the lender to inform them that he had granted a right of way to his neighbour to cross his land for some reason, this would constitute notice.

It is not unheard of for mortgagees to even agree to such a right and then lose the correspondence confirming this agreement.  If for some reason the neighbour had yet to register the right, the mortgagee would breach the above covenant by not disclosing this fact.  It is also not unheard of that one department within a bank may have notice of something and not disclose it to another department.

This is just a basic example and there are also other implied covenants when transferring with Limited title guarantee that I would not feel comfortable for a lender client to give.  However, this implied covenant is the most obvious reason why I believe that a mortgagee should sell  with “no title guarantee” which is quite standard.

Most solicitors acting for a buyer may not be happy to accept this but when meeting resistance they should be asked to consider the following:-

(a)      the CML handbook does not make it a condition that Full or Limited title guarantee must be provided by a seller. It only requires that the borrower charges the property to them with Full title guarantee; and

(b)      the statutory protection of purchasers from mortgagees afforded by the Law of Property Act 1925.  The implied covenants of Limited title guarantee do not offer substantially more protection than the statutory provisions.

Accordingly I can see no reason why a mortgagee should sell with anything other than “no title guarantee”.

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.

When a lender uses this word, it means that they do not want to hold any “unnecessary” documentation following their charge being registered at the Land Registry.  The solicitor acting for the purchaser/borrower/lender therefore usually sends any such documents to the borrower/purchaser.

Such documents  can include, but are not limited to, leases, NHBC or equivalent guarantees, planning permissions and building regulation certificates.

Whilst one can understand that lenders do not wish to pay for the storage space for these documents, these documents may well be required if the lender takes possession of the property and wishes to sell it.

Although most planning documents can be obtained from the local authority and duplicate NHBC certificates can also be obtained, this is at a cost and had the lender kept the documentation in the first place, that cost could have been avoided.  It also takes time to obtain copies and for every day a sale is delayed, further interest accrues and  the lender’s potential loss increases.

There is also the added problem that if the property was registered with NHBC or Zurich, it may have been registered or described by way of the plot address which the solicitor may not know.  The solicitor will usually only have the postal address of the property.

Furthermore, in some cases of new build properties, lenders rely on a professional consultant’s certificate as opposed to a conventional guarantee. In that case there is no central organisation where copies can be obtained, nor will it be easy to track down and identify the professional that gave the certificate.

As a solicitor acting for a lender, I often find myself writing to the solicitor who completed the mortgage advance for my client, asking them for copies of such certificates.  This takes time and again costs my client money, thereby increasing the amount of the potential loss

Leases may also be difficult to obtain in certain cases.  In a number of cases I have had, the Land Registry has failed to retain a copy of the lease.  I have had to obtain a copy from the landlord if he is traceable and contactable. 

These problems can be avoided if the lender insists on receiving some basic, but important documentation on completion of the mortgage advance.

In my view dematerialisation is a false economy.

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.

The information required in a HIP for new build homes is very similar to that required for older homes. However, you will need to ensure that you consider whether the property is being sold off-plan and then take this into account with the information contained in the HIP. For example, with properties sold off-plan you will be unable to obtain an Energy Performance Certificate (EPC), as these can only be produced on properties that are available for inspection. Therefore, you will need to provide a Predicted Energy Assessment (PEA). The PEA will be based upon the specifications for the property and should be upgraded to an EPC once the property is build complete and it has still not been sold.

A new home is defined in the Home Information Pack (No. 2) Regulations 2007 as a home that is being designed or constructed, or a home that has been constructed but that has never been occupied. This definition does not include converted properties.

What a new home HIP must contain

 A new home HIP must contain the following:

1. An index;
2. A Property Information Questionnaire (specific to the plot);
3. An EPC or PEA;
4. A Code for Sustainable Homes certificate or interim certificate;
5. A sale statement;
6. Evidence of the title;
7. A copy of the proposed lease (if selling a leasehold property); and
8. Searches – local search and standard water search.

Developers are unable to begin the marketing of a property until all of the required elements of the HIP have been requested and paid for (or at least a commitment to pay for them has been made.) You must also have the basic HIP information available before marketing a property. The basic information required for marketing are the index, Property Information Questionnaire, EPC/PEA, sustainability certificate, sale statement and evidence of title. Once this information has been complied, the HIP is ready to market, albeit not a complete HIP. You then have 28 days in which to ensure that the completed HIP is available.

When is a new home HIP required?

If you sell the plots on a development individually, they will each require a HIP. However, if you are selling completed dwellings to another developer then you will not normally require a HIP, as you have not offered the property for sale on the open market. You will, however, still require an EPC for each plot sold as a completed dwelling.

Sales to a registered social landlord are also generally exempt but the regulations on this are far from straightforward.

Should you sell a portfolio of properties, these are generally exempt from HIP requirements under regulation 30 of the Home Information Pack (No. 2) Regulations 2007. For example, if you sell two or more properties to an investor under a single or multiple contracts, and indicate within the terms of the sale that you would not have accepted their offer on the properties in isolation and make this clear when marketing, then no HIPs are required for the subject properties. There is also no HIP requirement for mixed-sales under these Regulations.

Only homes marketed to the public require a HIP, even if the home is offered on a shared-ownership or shared-equity basis.

Code for Sustainable Homes

From 1^st May 2008, where the local authority has received a building notice, initial notice or full plans application the new homes involved must have a Code rating. The Code uses nine categories for measuring the sustainability of a new home. However, assessing a property against the Code is not compulsory, but you must ensure that the HIP either contains a nil-rated certificate if the home has not been assessed, or if the home has been assessed against the Code then a rating must be included.

Availability of the HIP

Any potential buyers are entitled to a copy of the HIP or any part thereof if they request the same. You have 14 days from the request in which to provide them with the information, and you should make no charge for providing the information to them unless they request the same in paper form. You can then make a reasonable charge for copying and postage.

Whilst you are marketing the property continuously there are no requirements for you to update any of the information contained within the HIP, except that you must replace the PEA with an EPC should the property be completed prior to sale.

The legislation surrounding HIPs can be very complex and this article simply scratches the surface. If you have any questions regarding the legislation relating to a particular development or new home then please do not hesitate to contact me on helen.chaproniere@mablaw.co.uk and I will be happy to help and advise.

Annual Percentage Rate (APR)

This is the rate that represents the cost of borrowing, as opposed to the interest rate. The APR, for example, will include certain charges in addition to the interest rate; this allows you to make comparisons between different forms of borrowing.

Completion Date

The date that you pay for the property and can move into it. The completion date is agreed at the time of exchange of contracts (if the property is structurally finished). I will telephone you on the day of completion to confirm you can collect your keys from the site office or estate agents, once the seller’s solicitors have received the purchase price monies from me.

Contract

This is the legal document that I ask you to sign and which confirms your details, your seller’s details and the property details, including the price. Your seller will sign a copy of the same document and I have to hold a signed contract on your file before I can exchange contracts for you.

Deposit

The usual deposit amount is 10% of the purchase price. This much is not always available, depending on the level of funding (mortgage) you are obtaining. You should let me know as early as possible what deposit you have available, so that I can check with the seller’s solicitors if less than 10% will be accepted (in the case of a FTBI – see below – no deposit may be required). I must hold the deposit monies in cleared funds in order to exchange contracts for you.

Exchange of Contracts

Once I hold your signed contract and cleared deposit, I can exchange contracts for you, from which point you (and the seller) are legally bound to proceed with the purchase. This involves me speaking to your seller’s solicitors on the telephone to formalise the terms of the contract and the completion date. I will always take your instructions before I exchange contracts to ensure you are happy with the completion date and happy to proceed.

Financial advisers

These are people who provide advice on a range of financial products. If they only advise on mortgage products, they are often called mortgage brokers.

Financial Services Authority (FSA)

The Financial Services Authority is the UK’s financial watchdog set up by the Government to regulate financial services in the UK and protect your rights.

HomeBuy and First Time Buyer Initiative (FTBI)

Government-funded schemes which offer people assistance in owning their own home.

HomeBuy Agent

HomeBuy Agents are appointed housing associations or housing corporations, who are providing a “one-stop-shop” and point of contact for affordable housing options in a given area in England and will handle the entire application process for many FTBIs .

Homebuyer’s survey

A surveyor’s report carried out on the property you intend to buy, which typically includes a property valuation.

Housing associations

Housing Trusts, Housing Societies and Registered Social Landlords who provide their local community with high quality and affordable homes in areas of greatest need.

Housing Corporation

The Housing Corporation is funded by the Government and provides the money or grants for affordable housing.

Interest-only mortgage

An interest-only mortgage is a type of mortgage where the monthly payments consist only of interest and do not include any capital repayments. The capital is normally repaid by other means at the end of the mortgage term.

Key workers

Those working in the public sector in health, education or community safety – such as teachers, nurses and police officers – in areas where high house prices are affecting recruitment and retention of key workers.

Legal Charge Document

A legal charge is the document which enables the mortgage lender to collect mortgage repayments (and repossess the property in certain circumstances such as non-payment.) Sometimes referred to as a Mortgage Deed, the document is signed by you and sent to the land registry at the time of registration of your purchase to secure the mortgage or mortgages you have on the property.

Mortgage offer

The formal paperwork which sets out the terms upon which the lender will grant a mortgage.

Mortgage Term

Length of the repayment period of the mortgage offered to you in years.

Registered Social Landlord (RSL)

This is the technical name for social landlords who are registered with the Housing Corporation.

Repayment mortgage

A type of mortgage where the monthly payments consist of interest and capital. If payments are maintained, then the mortgage is repaid by the end of the mortgage term.

Valuation

An assessment of the current market value of a property, carried out for the benefit of the mortgage lender.

One of the key proposals is to consider the “linked transactions” rules for residential property. These are the rules which say that if you buy 10 properties for, say, £120k each, you’ll pay the rate of tax based on £1.2m (i.e. 4%). Without this rule, this example would result in zero tax. The worry is that it would, in theory, be easy to split up a property in lots of little bits all under the tax threshold. It seems to me that they are going to struggle to introduce changes without opening up the rules for abuse. As it is, the rules are vague and poorly drafted, any changes will no doubt give rise to additional confusion.  That said, investors will welcome the changes.

The idea in the consultation is that institutional investors, who buy portfolios should not suffer as a result, and for them the linked transactions rule would be disapplied.  This would, of course, be a welcome development, although I doubt it will impact too much on the UK property market as a whole.

The consultation also touches on the role of REITs in the residential property investment market. So far pretty little, other than for the largest commerical property investment companies. The impact on residential property is negligible, and this consulation is looking at whether this can or should be addressed.

The consultation is open until 28 April, and if you would like to have a look at it, it is available on the HM Treasury website.

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

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

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

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

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

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

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

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

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

The court held that when the second defendant transferred her property to the first defendant, she was suffering from a disability due to her psychiatric condition. A contract made by a person who lacks capacity makes it voidable, but not void. Even though she was suffering from a disability, the onus was on her to establish that the other party knew of the incapacity at the time, or knew of such facts and circumstances that he must taken to have known of the incapacity.

Although the second defendant was unable to recollect the facts surrounding the property transaction, the court found that her incapacity should have been apparent and therefore the conveyance of the second defendant’s property was a voidable transaction giving rise to an equity in her favour.

The next major issue was whether the second defendant was in actual occupation of the property when the legal charge was registered. If she was, then the claimant’s charge would take subject to her equity in accordance with the Land Registration Act 2002. Even though she was living in a care home because she was suffering from mental health issues and was prevented from living in her home by the Mental Health Act, her furniture remained there, arrangements had been made by those responsible for her finances to pay the regular bills, she intended to return there and she still considered it her home. The court decided that she still occupied the house even though she was resident elsewhere, for the time being. As such, her equity had priority over the claimant’s charge.

Accordingly, where a party sells a property under a disability, that agreement will be voidable, giving rise to an equity. That equity will be binding on a bank if that party is held to have been in actual occupation when the charge is registered, even if that party is not in residence as long as they intend to return to their home and continue to be responsible for bills, etc, relating to the property.

Link Lending Limited v Noreen Hussein and Susan Bustard by her litigation friend 24 September 2009