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.

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.

The High Court initially and now the Court of Appeal sided with Digby. There were constant references to “sole agency” in the contract, but its meaning was not straightforward. The term was not defined anywhere in the contract. There was an obligation on Digby to promptly inform GEG of all enquiries or discussions but this was to enable GET to take part in those negotiations. The contract provided that GEG would earn commission if it had negotiations concerning the property. The Estate Agents Act 1979 and the Estate Agents (Provision of Information) Regulation 1991 collectively required the agent to provide clear information to the vendor about what sole agency meant in the manner prescribed in the Regulations, but this was not done. It did not describe commission as being payable if the lead “was introduced by another agent during that period”. GEG was therefore in breach of the statutory requirements and D did not have to pay commission.

There is some parliamentary opposition to parts of this Bill and an amendment to clause 26, which would have watered downed proposals to criminalise squatting in residential property, was recently defeated in Parliament. The amendment would have meant that no offence would have been committed if a building has been empty for six months or more.

Squatting is a form of trespass which involves a person or persons occupying land or property without the consent of the owner; however, at present, squatting is not a criminal offence in England and Wales (although section 7 of the Criminal Law Act 1977 does make it is an offence for a squatter to fail to leave a residential property when required to do so by, or on behalf of, either a displaced residential occupier or other occupiers whose interest in the property is protected under the legislation.)

Under the current Bill, squatters could face one year’s imprisonment and/or £5,000 fine if found guilty of squatting in a residential property.

Unfortunately, the new offence will not criminalise squatting in commercial and other non-residential buildings, as, according to the Government’s response to a recent consultation on the issue, “there does not appear to be the same level of concern about squatting that occurs in those premises.”

The Bill (and defeat of the amendment) is to be welcomed by property owners and occupiers who have borne the cost of evicting squatters and the associated property repair and clean-up costs, which can be a lengthy and expensive process. However, it is a shame that  the criminal offence of squatting will not currently be extended to commercial property, although it is very possible that this may happen in the future.

The Bill is expected to be enacted in spring 2012, with it coming into force shortly after.

E accepted that, by a literal reading of the commission agreement, commission was not payable. Instead, he argued that the purpose of the share sale was to achieve the same result as was intended by the initially envisioned but aborted property sale, and the agreement should be read as such – that the share sale was the effective sale of the property. The High Court had initially rejected his claim.

The Court of Appeal has now agreed with the High Court’s ruling on the basis that, whatever the purchaser and L intended to achieve by the share sale agreement, it was not relevant to the construction of the commission agreement. The key to understanding the commission agreement was to look at its language, and by that interpretation, the literal meaning was clear – L did not need to pay any commission to E. Neither E nor L had considered the sale of the property by means of a share sale, so they cannot have intended the commission agreement to deal with such a situation.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, comments: “When the High Court decision came out, we helped a number of estate agents update their terms and conditions to seek to avoid the effects of the Estafnous case. The appeal court’s decision to uphold the lower court’s ruling further emphasises the need for estate agents to make sure that their terms and conditions allow them to get commission if the shares in a company owning the property are sold rather than the property itself.”

The Compulsory Purchase Association (CPA) has been lobbying the government to change the rules since 2008. The CPA’s proposals have now been adopted in an amendment to the Localism Bill which is due to become law later this year.

The main aims of the proposals are to close a loophole that allows owners to claim large amounts of money in “hope value” and to simplify the way compensation is calculated.

At present councils have to work out the value of the site being compulsorily purchased by working out how much it would have been worth when the CPO was first proposed. In some situations this could have been more than five years ago.  Under the proposed changes the valuation dates will not be linked to the when the CPO was first proposed.

The changes will also close the loophole which has seen councils paying excessive prices for sites following long legal battles.

The CPA argue that the changes will save councils time, money and possible legal claims.

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.

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.

After this date there will be a significant reduction in the annual investment allowance for qualifying expenditure which potentially could result in lost 100% up-front tax relief.

Claiming on the balance not covered by AIA at rates applicable to the general, special or short-life asset pools spreads the claim for tax relief over much longer periods.

Here is an example I’ve seen from accountants Smith & Williamson:

Using an example of a 30 June 2012 year end, the table below shows the effect of delaying expenditure until after 1 April 2012 or 6 April 2012 on the maximum amount of AIA claimable for that year.

Businesses need to consider more than just the availability of allowances when incurring expenditure, however this change in allowances is significant enough to justify very careful consideration of when to incur qualifying expenditure.

For more information, please email me on shimon.shaw@mablaw.com.

EPCS are only required for a building or part of a building which has walls, a roof and energy conditioned interior. The requirement for an EPC would therefore not apply to mobile homes or caravans. It would also not apply to individual rooms that are let out, for instance in a bed and breakfast.

The High Court found that SR had breached the clause requiring him not to solicit TR’s customers, and this was shown by him having taken his Outlook contact list. This justified an injunction. However, the fact that he had set up in business within five miles should not be held against him as that clause was too wide to be enforceable. Although five miles was a reasonable distance given the nature of the business, most of SR’s work for TR had not involved recurring business and was therefore not capable of creating a customer connection worth protecting. The restriction on him from setting up in business within five miles was therefore unreasonably wide in the circumstances and so it was unenforceable. TR was already well protected by the other two restrictions.

The Government is calling on interested parties to submit a response on the website, suggesting which regulations should be scrapped, merged with other regulations, simplified, or improved.

In the recent Budget Report and Plan for Growth document, the Chancellor outlined proposals to reduce the number of UK regulations in an effort to boost economic growth. (Click here for further details.) This ‘Red Tape Challenge’ is the first step.

There are 21,000 regulations in the UK, and these will be grouped into themes on the website. Every 1-3 weeks, the Government will publish the regulations that relate to a specific sector (‘themes’), with interested parties given a set amount of time to comment on them. The Government will then collate the comments and, after the theme has been closed for public comment, the relevant government departments will have three months in which to justify the continued existence of the regulations called into question. The Government will then decide which regulations should stay, which should go and which should change. All regulations that are to be repealed will be listed on the website.

NB: regulations regarding tax and national security are exempt from this project.

At the time of writing, the timetable for comment is:

7 April – Retail;

6 May – Hospitality, food and drink;

20 May – Road transportation;

2 June – Fisheries, marine enterprises and internal waterways;

16 June – Manufacturing;

23 June – Healthy living and social care;

7 July – Media and creative services;

21 July – Utilities and energy;

4 August – Rail and merchant shipping; and

18 August – Mining and quarrying.

Each of these themes will be split into topics. For example, the current theme, retail, is split into Sunday trading, hallmarking, weights and measures, and so on.

The project is also divided into six “cross-cutting themes”. Government departments must comment on these themes every four months. These are:

1. Employment law;

2. Pensions;

3. Company law;

4. Equalities;

5. Health and safety; and

6. Environment legislation.

The project is expected to run from April 2011 until April 2013.

To read the Government press release which launched the Red Tape Challenge, please click here.

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.

It is very likely that fashionistas go through the same when column inches get devoted to which shoes go with which handbags and doctors cry into their corn flakes when they read about medicine fads.  However, since I know nothing about fashion (as my wife will confirm) or health (as my Mum will confirm) it just flows over me. 

The story goes that if you purchase property in an overseas company, you can avoid stamp duty.  My comments:

1. For UK resident tax payers buying their homes, they lose out on the capital gains tax relief on the sale of their homes.  They will sell shares and pay tax on the gains.  28% CGT is a lot more bothersome than 4 or 5% stamp tax.

2. It saves stamp duty on the sale but that’s not going to help the company which is purchasing now.

3. This has the potential to make administration a nightmare and there are annual directors fees etc.

4. There can be income tax charges on the use of the property if a market rent is not paid.

5. Most UK based future purchasers won’t want to buy a company so you’ve restricted your ability to market the property in the future.  And if purchasers buy the property from the company - you’ve just wasted time and a shed load of money.

6. If you are borrowing to purchase the property, you’ll have a much harder time and the cost of finance will increase.

etc…..

So who should consider buying a property in a overseas company?

First point – don’t do this without speaking to your tax adviser (or me!).  Second this is mainly of use to wealthy overseas investors.  There is inheritance tax planning which can really benefit from a structure involving an overseas property.  But that’s not stamp tax planning.

What’s funny about the article is that tucked away at the end is a comment from a partner in KPMG with which I mostly agree ” for anyone [other than a overeas investor], it’s a ticking time-bomb”.   If they had spoken to him before writing the article, perhaps they wouldn’t have bothered.

HMRC will target 50,000 SME’s a year looking at business records going back over the last 6 years.  There is a legal obligation to keep adequate records, and failure to do so can give rise to fines of up to £3,000.  This is a change of practice from HMRC who historically have rarely imposed these penalties.

Overtly raising taxes at the moment is political death.  So HM Treasury have to look elsewhere for money.  This seems to be a case of rummaging down the back of the sofa for those extra bits of revenue.  However, for most SMEs – £3,000 is not small change.  Businesses need to ensure that they keep all relevant documentation in addition to their accounts, such as till rolls, cheque stubs, paying-in-slips, cash receipts, etc.

If you want to speak to a solicitor or accountant about your obligations please contact us.

We also offer a business healthcheck  service, which includes a review of your business documentation and compliance.  If you are interested in this please contact our corporate team.

The exemption had meant that businesses in England with an empty property with a rateable value below £18,000 did not have to pay business rates. The government intends to lower the threshold from £18,000 to £2,600. Also, the government does not intend to re-introduce a 50% relief, and small firms will not be able to claim Small Business Rate Relief on the property.

The FSB have written to local government minister, Bob Neill, to protest that the changes could potentially put some small firms out of business. If the cuts cannot be avoided, the FSB claims, it would be better to provide per cent relief or at least to allow a business to claim Small Business Rate Relief on their empty property.

The press release can be viewed here.

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.

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

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

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

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

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

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

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

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

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

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

Mark Hoban said:

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

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

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

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

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

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

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.

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.

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.

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).

This latest case dealt with:

1)      the effect of notices warning that there is “No Public Right of Way”

2)      whether registration of a new green depends on proving that users come from a specific locality

3)      whether the residents of other localities can gain any rights after a new green is registered

 The Facts:

Warneford Meadow in Oxford had been used by local people for recreational purposes for more than 20 years. There were 2 well defined paths crossing the meadow. In 1989 the landowner erected 2 signs reading “No Public Right of Way” and sited these so that they appeared to refer to the paths. In 2006 a resident applied to register Warneford Meadow as a new green after the landowner decided to develop the land. The land was subsequently registered as a green by the local council. The landowner’s application for Judicial Review of the decision was dismissed by the High Court.

The High Court’s Decision:

The High Court reaffirmed the decision in the Redcar case and the requirements to register land as a new green.

In dealing with the 3 issues mentioned above the High Court decided:

1. The landowner was aware that locals used the meadow for recreation and that there were well used paths. The landowner was unaware that rights could be acquired under the commons legislation.  The landowner erected the 2 signs in order to prevent the public acquiring rights over the informal paths. The landowner argued that the effect of the signs was to make contentious any recreational use of the meadow and not just the paths. The High Court held that the objective effect of the signs only made contentious the use of the paths and not the meadow as a whole.
2. The meadow was registered as a new green on the basis that a significant number of users came from a particular neighbourhood, although users did not predominately come from that neighbourhood. In this case the relevant legislation was the Commons Registration Act 1965 as amended by The Countryside and Rights of Way Act 2000. The amended legislation made it easier to register new greens by requiring use by “a significant number of the inhabitants of any locality or of any neighbourhood within a locality”. It had previously been decided that prior to amendment the 1965 Act had required the users to come predominantly from the locality. The landowner argued that the “predominance” test still applied after the legislation was amended. The High Court disagreed. All that is required is that use was by a significant number of the inhabitants of any locality.
3. Counsel for both parties agreed that registration of land as a new green confers recreational rights only upon the inhabitants of a specific locality. Counsel seemed to rely on the Regulations promulgated in 2008 which provide for the model entry in the register to specify the locality. The Judge accepted this as correct in law.

 In Summary:

1. Landowners are aware of the risk that rights may be acquired by prescription but are still blissfully unaware of the rights that may be acquired under the legislation relating to new greens. Landowners and developers should make sure that any signs that are erected extend to the recreational use of the land as a whole and not just to footpaths.

2. The decision carries forward to the current legislation in relation to new greens. The “predominance” test does not apply and as such it is easier to register new greens.

3. It is difficult to read Section 15 of the Commons Act 2006 as allowing further localities to be registered as having rights. It seems that where a green is used by a significant number of inhabitants of several localities, registration of a new green  in favour of one locality will make it impossible for the inhabitants of other localities to establish legal rights of recreation over the same green. In principle this does not seem right.

 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.

Section 15 of the Commons Act 2006 (CA 2006) provides that anyone can apply to register land as a town or village green where: 

• a significant number of local inhabitants have indulged as of right in lawful sports and pastimes on the land for a period of at least 20 years”; and
• the use of the land for that purpose (or the use as of right) ceased before 6 April 2007. (Time limits apply and the use may also be continuing but for the purposes of this update this will be ignored)

The Facts:

The common in question was owned by the council and was used as a golf course. The local inhabitants (including Mr Lewis) used the common for recreational purposes such as dog walking and parents playing with their children. The local inhabitants did not use the common if golf was in play and left if asked to do so by the golfers.

The council agreed that a developer could develop the land for mixed residential and leisure use for which the developer subsequently acquired planning permission. In 2007, Mr Lewis applied to register the common as a town and village green under section 15 of the CA 2006.

The lower Courts decided that the use by the local inhabitants had not been as of right since they deferred their use when golfers were playing golf. The council could not be expected to believe that the local inhabitants thought they were exercising a public right. This lack of belief amounted to permission on the council’s part, which meant that the use was not as of right. As such the land could not be registered as village green.

The Supreme Court’s Decision:

The deference demonstrated by the local inhabitants was a “perfectly natural behaviour”. The local inhabitants had been courteous and sensible when using the common. A reasonably alert owner should have recognised that the use was an assertion of a right, which would lead to an established right unless the owner took action to stop it. Any deference was merely an acceptance that, where two or more rights co-exist over the same land, there may be occasions when they cannot, practically, both be enjoyed at the same time.

If any use of the land was without force, secrecy or permission then it would be as of right for the purposes of Section 15 of the Commons Act 2006.

The critical question, in each case, is the quality of user:

• was the land used by a significant number of local inhabitants?
• were they enjoying lawful recreational activities?
• were they doing so openly and in such a way that a person entitled to do so, would do?

If the use had been for at least 20 years, to such an extent and in such a manner that it would reasonably be regarded as being an assertion of a public right, the council would have acquiesced in the use unless they could show that the use had not been without force, secrecy or permission.

In Summary:

Developers should seek assurances when buying land that it has not been used for purposes that may support a claim for registration as a green. In reality, the seller may have owned the land for a short period of time and be unaware of any such use prior to their period of ownership. However to limit the risk of an application for registration putting a proposed development in jeopardy, it is imperative that a developer and its advisers consider this case and the surrounding legislation regarding town and village greens.

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

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

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

Landlords – review rental levels register your deposits without delay.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

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

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

Update

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

Whenever a tenant pays rent to a landlord that is non-resident, or to a letting agent who then pays the rent to a non-resident landlord, the non-resident landlords scheme comes into play.

Essentially, the tenant or letting agent needs to deduct tax before paying rent to the landlord and account to HMRC for this. The landlord will still need to complete a tax return which might result in more tax or a refund. It is possible for landlords to register to receive rent gross of tax. This applies to all landlords, including individuals, companies, partnerships or trusts.

On 10 March, HMRC have published the first of their “Information Bulletins” for non-resident landlords, designed to provide information about changes in HMRC practice and some FAQs: http://www.hmrc.gov.uk/cnr/nrl-bulletin1.pdf

If you need help in registering for the non-resident landlords scheme or in understanding how this applies to you, please feel free to contact me.

If one spouse or partner has a higher income than the other, this presents an opportunity for tax planning by diverting more of that rental income to the spouse with a lower rate of tax. This balancing exercise can give rise to significant savings opportunities with careful tax planning. This will be of particular importance come 6 April with the introduction of the 50% rate of tax, but is also relevant for those whose income is taxed at 40%.

If you would like some advice on how best to achieve this, please contact Shimon Shaw or James Odds.

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.

The new leases must be used for all shared ownership leases granted on or after 6 April 2010 for homes built with funding from the HCA (unless an earlier contract requires the use of a different form of lease). The new leases replace the model leases published in September 2009, which should be used until 5 April 2010.

The HCA believes the lease will not only simplify and speed up the home buying process but, at a time of financial caution, will assure existing lenders of shared ownership mortgages. As economic conditions improve, the revised lease should help to encourage new lenders into the shared ownership market.

The lease has been developed in conjunction with the Departrment for Communities and Local Government, the Council for Mortgage Lenders, the National Housing Federation and a number of leading mortgage lenders and providers of affordable housing. The new leases have been amended to:

• Extend the level of protection given to mortgagees of shared ownership properties;
• Update the layout and language of the leases;
• Clarify the provisions relating to alienation, rent review, making good damage to common parts and frustration in the event of damage or destruction.

The lease can be adapted by housing providers and lenders to suit individual situations, but there are fundamental clauses that must be included in any new lease. The fundamental clauses cover alienation, mortgagee protection, ‘staircasing’ provisions, protected area ‘staircasing’ provisions (where appropriate), rent review, service charge provisions (where appropriate) and right of first refusal. The landlord must also give the leaseholder a document entitled “Key Information for Shared Owners”, which sets out the main terms of the lease.

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.

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

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

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

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

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

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

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

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