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.

Robert Davis, the Deputy Leader of Westminster City Council, has written a letter to the Decentralisation Minister, Greg Clark, calling on the Government to allow local authorities to charge for listed buildings applications. Seven other local authorities from across the UK are signatories to the letter.

The eight local authorities (which have the largest number of listed buildings in the UK) are concerned that the Government’s proposals will exclude the charging of fees for listed building and conservation area consents – areas which they argue require a lot of expertise and take the most time to handle due to their complexity. Faced with having to make significant savings over the next few years, the local authorities have warned that unless they are able to recover their costs from handling such complex planning applications, they may have to make cuts to the historic building maintenance services.

Westminster City Council has claimed that their campaign has won the backing of many leading figures in the property industry, and that developers have said they are willing to pay more money to ensure their developments are not jeopardised by cuts to the planning service and skills shortages.

1. Confirmation of the introduction of the Decentralisation and Localism Bill, which will set out significant new freedoms, powers and responsibilities for local councils and communities, and will include reforms to the planning system. The Bill, which is expected to be published in November, was originally announced in May’s Queen’s Speech and it will devolve greater powers to local councils and give local communities control over housing and planning decisions;

2. Further investment in housing supply. This investment will be introduced alongside a major reform of the social housing system;

3. The provision of £4.5bn to invest in the creation of 150,000 new affordable homes over the next four years; and

4. The introduction of a New Homes Bonus, commencing in April 2011. This aims to encourage and reward local authorities who support housing growth in their areas. The bonus will be the equivalent of matching the additional council tax from every new home for each of the next six years. Details of this scheme are expected to be laid out in a consultation paper at the end of November 2010.

The consultation on the New Homes Bonus is eagerly awaited. The Government announced its intention to introduce this scheme back in August 2010, but housebuilders, unhappy at the decision to abolish the Regional Strategies, have been forced to wait for more details about it. It seems that this wait is nearly over.

This case revolves around a landlord’s liability for council tax where the property is a House in Multiple Occupation (HMO), and demonstrates that councils are now more than ever keen to recover unpaid council tax.

The Local Government Finance Act 1992 provides that council tax is payable by either the resident or the owner of a property. The associated 1992 Regulations provide that an owner is liable where the property is an HMO. The Regulations provide that a property is an HMO where either of the following apply:

1. It is a dwelling which was originally constructed or subsequently adapted for occupation by persons who do not constitute a single household;

2. It is a dwelling which is inhabited by a person who, or by two or more persons each of whom either:

(a) is a tenant of, or has a licence to occupy, part only of the dwelling; or

(b) has a licence to occupy, but is not liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the dwelling as a whole.

In this case, the landlord owned a detached bungalow with a conservatory attached to the rear, which the landlord had let on a series of six annual furnished shorthold tenancies for the period 21 October 1999 until 31 December 2007 as follows:

 ●        The landlord granted the first three tenancies to four tenants, A, B, C and D.

 ●        These tenants surrendered the last tenancy on 1 January 2002 at which point the landlord granted the subsequent assured shorthold tenancies to only A, B and C. The last of these three tenancies expired on 31 December 2007. However, the landlord allowed the three tenants to hold over until 1 February 2008.

 ●        Although D was no longer a tenant, he remained in the property following 1 January 2002 until October 2005. Although unclear from the facts, he was either a sub-tenant or licensee of the three tenants. His interest extended to the whole of the property and any payment he made was treated as a contribution towards the rent paid by the three tenants.

●        Each tenancy demised the whole of the property to the tenants, including the conservatory. However, with the tenant’s ageement the landlord stored the furniture that came with the property in the conservatory.

●        Each tenant paid their “share” of the rent direct to the landlord. However, the formal tenancy agreements provided for a single rent per month for the property of £1,200 for which each joint tenant was jointly and severally liable.

The local authority had treated the property as being let to the tenants under a single tenancy that covered the entire property, so that the tenants were liable for council tax and had billed the tenants for council tax. However, there was some council tax outstanding on the tenant’s vacating the property, and the local authority decided to pursue the landlord for it on the basis that the property had been a HMO since 1 April 2002, claiming that:

●        The three tenants had occupied part only of the property because the conservatory had not been used.

●        D occupied part of the property and had not been liable (whether alone or jointly with other persons) to pay rent or a licence fee in respect of the whole property.

The landlord appealed to the Valuation Tribunal, which also held that the property was an HMO thereby making the landlord liable for the council tax because:

●        The individual rent that each tenant had paid to the landlord had given rise to “multiple occupation”.

●        The tenants had not occupied the whole of the property because the furniture that had been stored in the conservatory had prevented them from so doing.

Decision:

The High Court decided that the property was not an HMO and the landlord was not liable to pay the council tax.

The High Court held that the Valuation Tribunal had misunderstood the law. The local authority had failed to satisfy the definition of an HMO as required by the 1992 Regulations:

●        The local authority had failed to satisfy test 2(a) in that the property, including the conservatory, had been occupied by the three tenants who, by the unvaried terms of their tenancy, had been entitled to occupy the whole of the property including the conservatory:

- The tenants had remained tenants of the conservatory, even if factually they had been unable to use or gain access to it.

- The only items of furniture stored in the conservatory were items for which the tenants had paid rent. The tenants were entitled at any stage to enter the conservatory should they wish and could have removed the furniture from the conservatory so long as they had stored or used the furniture elsewhere.

●        The local authority had failed to satisfy test 2(b) in that the three tenants had been liable to pay rent in respect of the property as a whole, notwithstanding that each had paid a separate cheque to the landlord for part of the rent. This was simply a convenient arrangement and did not diminish or affect their overall liability for the rent in respect of the property as a whole.

Comment:

The test for establishing whether a property is an HMO for council tax purposes is different to the one used for the licensing of HMOs under the Housing Act 2004.  Landlords wishing to ensure that they are not exposed to council tax liability should put all tenants on a single agreement and not reserve any part of the property for themselves.

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

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

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

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

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

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

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

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

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

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.

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.

 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.

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.

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.

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.

Staircasing – what does it involve? If you are not sure whether you are financially able to staircase and purchase further shares in your property, it may be worth checking out the market in your local area to get an idea of the likely prices of property and obtain a valuation. You will need to contact your Housing Association to arrange for this up-to-date valuation and this will be something you will have to pay for. Once you have this valuation you can then decide what further percentage you wish to purchase. Your individual Lease may stipulate the amount you can staircase in any one stage and the Housing Association should be able to confirm this for you.

If you have the funds available from savings or an inheritance, for instance, you will be in a position to proceed immediately, and you would need to instruct me as your solicitor to deal with the legal paperwork on your behalf. Another option open to you would be to contact your existing mortgage company and arrange for a further advance. Your last option would be to obtain a new mortgage from a new lender, borrowing enough money to purchase the further share and to pay off the existing mortgage. You may wish to speak to an independent financial adviser or mortgage broker in relation to your current mortgage product and what new products could be available for you.

Once you have decided the way forward, you will need to instruct me to proceed with the transaction, which must take place within three months of the date of the valuation. You will need to consider the stamp duty implications of staircasing and this will depend on the percentage share you are purchasing and how you paid stamp duty on your original purchase of the property. I will be able to give you further information depending on your individual circumstances. Once the staircasing has been completed, your lease will be noted accordingly, so on the sale of the property there is a record of the extra share or shares purchased.