Everything you need to know about Stamp Duty Changes

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Wednesday 22nd November saw the presentation of the Autumn Budget and with it came changes to Stamp Duty Land Tax for first time buyers.

WHAT IS STAMP DUTY LAND TAX (SDLT)?

Stamp Duty Land Tax (SDLT) is a tax which is payable if you buy any property  in England, Wales or Northern Ireland. SDLT is calculated against the value of the property and the rate that you pay depends on your personal circumstances.

HOW IS STAMP DUTY CHANGING?

Before the changes came into effect first-time buyers paid stamp duty at varying rates on any purchases of residential property above £125,000.00.

The Treasury has now stated that this threshold will be raised to £300,000.00 effective immediately. It is estimated that this increase will mean 80% of first time buyers will now pay no stamp duty. The Treasury estimates that the changes will help over one million first-time buyers get onto the housing ladder over the next five years.

Any purchases between £300,000.00 and £500,000.00 will also be liable for a reduction in SDLT under the reforms.

Any purchases above £500,000.00 will receive no discount to SDLT.

AM I A ‘FIRST TIME BUYER’?

For the purposes of this discount a first-time buyer is defined as someone who has ‘never owned freehold or leasehold property before and who is purchasing their only or main residence.’ 

If you have ever owned any residential property before anywhere in the world then unfortunately you will not qualify.

In a joint purchase, all purchasers would need to fall within the above definition of ‘first-time buyer’ to qualify for the reduced rates.

WHAT WILL I SAVE?

If you are buying a property that costs more than £125,000 and up to £500,000 you will save money.

Under the previous rules 2% SDLT was payable on every pound above a property value of £125,000 , up to £250,000, while a 5% rate currently applies on the band between £250,000 and £925,000.

For example; under the old rules a first-time buyer purchasing a property for £200,000.00 would be liable for £1,500.00 in SDLT. However, under the new rules, no tax will be payable on this transaction.

Similarly, a first-time buyer purchasing a property for £300,000 would have been liable for  £5,000.00 in SDLT. However, under the new rules, no SDLT will be payable on this transaction.

A £10,000 tax bill on a £400,000 property is being reduced to £5,000 and a £15,000 charge on a £500,000 home goes down to £10,000.

If a first-time buyer purchases a property that costs between £300,000.00 and £500,000.00 then the first £300,000.00 is free from SDLT and the amount between £300,000.00 and £500,000.00 will be taxable at 5%. For example; a purchase at £400,000.00 would have previously attracted a SDLT bill of £10,000.00, this has now been reduced to £5,000.00.

Unfortunately, there has been no change is the SDLT regime for purchases over £500,000.00 and these purchases will still attract SDLT at the previous rates.

Stamp Duty changes for first-time buyers
Property price Stamp Duty before budget Stamp Duty now
>£125,000 (England and NI) £0 £0
£200,000 (England, Wales, NI) £1,500 £0
£300,000 £5,000 £0
£400,000 £10,000 £5,000
£500,000 £15,000 £10,000
Above £500,000 no change

WANT TO KNOW MORE

If you are thinking of purchasing a property and if you want to know more about the SDLT changes then please call a member of our experienced Conveyancing Team who will happily discuss the transaction and your eligibility with you.

https://fmc-solicitors.com/what-we-do/property/

Simon Saunders LLB

FM&C Solicitors

11A Hill Street

Saffron Walden

Essex

CB10 1EH

Simon.saunders@fmc-solicitors.com

+44 (0) 1799 526 849 / 077026

Buying a Property in Joint Names – Things to Consider

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When buying a property with another person, one of the most significant considerations for you should be how do you wish to own the property together?

There are two ways in which a couple can jointly own a property; as Joint Tenants or as Tenants in Common. Joint Tenants each own the whole property, this means that if one were to die, then the whole property passes automatically to the survivor.

Tenants in Common on the other hand, own a defined share. This can be in equal measure, so each owns 50% of the property, or it can be in unequal measure to reflect, for example, unequal contributions (and supported by a Declaration of Trust.) Unlike with Joint Tenants, when one owner dies, their share does not pass automatically to the survivor but instead is distributed according to their will (or rules of intestacy if no will is made.)
Why does it matter how you own the property and what considerations should be made?

Firstly, you may wish to consider financial contributions. Let’s say that one of you has a lump sum from a previous sale of a property in your sole name. You would be making a significantly greater financial contribution than the other party. If you simply own as Joint Tenants, then you each have as much legal interest in the property as the other. Should you later split up, you would of course expect your share to be taken into account when dividing sale proceeds.

Secondly, families are becoming more and more fragmented with second marriages increasingly common. If you have children from a previous relationship whose inheritance you wish to protect, how you own your property is crucial. If you own as Joint Tenants and are the first owner to die, then the whole property passes to the surviving owner. As time passes and they move on, how can you guarantee that they honour your wishes?

Both of these scenarios are perfect examples of when ownership as Tenants in Common would be appropriate. You can further protect your interest by way of entering into a Declaration of Trust. A Declaration of Trust is a legal document drawn up to clearly set out respective shares of co-owners. Let’s go back to our first example where one party was contributing a greater lump at the outset. For arguments sake, imagine they contributed £100,000 towards a £300,000 purchase. A Declaration of trust could be drawn up that gives the first owner, on a sale, the first £100,000, then half of the proceeds thereafter.

In our second example where you have an owner wishing to protect the interests of children from a previous relationship, but perhaps, the contributions are pretty much equal. It would be appropriate for them to own as tenants in common in equal shares.

You may think that after many years of co-ownership, everything reverts to fifty-fifty in any event. Case law has shown that trusts that might usually arise in these circumstances simply do not apply where a Declaration of Trust exists.*

One more consideration would be the advantage of holding a property as Tenants in Common where debt is concerned. If creditors are seeking to seize assets, in a property owned as Joint Tenants a creditor can seize the whole property. If the property is owned as Tenants in Common, a creditor in a bankruptcy scenario can only seize the share of the bankrupt party.

When you next purchase a property with a co-owner, think carefully before ticking “Joint Owners” and speak to your Solicitor if in doubt. At FMC we can prepare a simple Declaration of Trust for £300 plus VAT. That’s a small price to pay to protect yours and your family’s financial interest and peace of mind.

If you would like to obtain a quote for your property sale or purchase, please click on the following link: https://fmc-solicitors.com/what-we-do/property/

*Stack v Dowden 2007; Pankhania v Chandegra 2012

Moving House – Your questions answered

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Moving house is not renowned for being a stress-free process. At Fairhurst Menuhin we want our clients to have peace of mind in knowing that a professional firm of solicitors is dealing with their property transaction.

There are many questions you may be asking and believe us when we say we’ve heard them all before. We’ve therefore answered your top questions:

Does moving day have to be a Friday?

Many people believe completion of a property transaction has to take place on a Friday – this is a myth. People may choose to complete on a Friday so that they have the weekend to unpack and settle into their new property. However, you can complete your property transaction at any point during the week.

When can I pick up the keys?

Completion of a property transaction has to take place before 2pm on the agreed completion date. This is a contractual term within every property contract. In some cases time of completion is amended within the contract to ensure completion takes place earlier. Once completion has taken place, your estate agents will be instructed to release the keys.

How long until I can move into my new house?

On average a property transaction can take anywhere between 12 to 16 weeks. The length of a property transaction is dependent on the length of the chain, mortgage requirements and the number of enquiries raised by the purchaser’s solicitors. If enquiries cannot be answered by the seller, negotiations may be required to resolve any issues.

When am I committed to purchasing the property?

Once contracts have been exchanged, you are then committed to purchasing the property. We may ask you to sign the contract before we exchange. However, you are not committing yourself to purchasing the property by signing the contract.

Can I rely on my mortgage provider’s valuation report?

You cannot rely on the valuation provided by your lender. Whilst your lender will insist on preparing their own valuation report, is very basic and does not reveal much about the property itself.  A homebuyers survey may reveal anything from small issues to full blown structural problems. It is therefore worth obtaining a survey to ensure you have a full understanding of the property.

Do I need to order searches?

What if, following the purchase of your dream home, you find that there is subsidence, a flood risk, a maintenance charge for the private driveway or that planning permission wasn’t obtained for the conservatory?  You need to be aware of any potential issues and the only way you can do this is by obtaining searches. The standard searches we would always advise clients to obtain are an Environmental Search, a Chancel Repair Search, a Water & Drainage Search and a Local Authority Search.

When should I insure the property?

We would always advise clients to make arrangements for building insurance from the date contracts are exchanged. If you are obtaining a mortgage it will actually be a requirement of the lender that insurance is in place from exchange of contracts.

If you would like to obtain a quote for your property sale or purchase, please click on the following link: https://fmc-solicitors.com/what-we-do/property/

 

Don’t Get Burned by Solar Panels!

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If you purchase solar panels there are usually no issues when you come to sell your property, provided you have all the necessary supplier guarantees and building regulation certificates and, you have purchased the solar panels outright. Full steam ahead for you and your conveyancing solicitor!

However, many solar panels are marketed on a ‘free’ model. Essentially, the supplier agrees to install the solar panels free of charge in return for a lease over the roof space of your property. In return,  the  property owner get free electricity. Sounds like  a win-win situation for the supplier, the owner and the environment doesn’t it? Well, not quite…..

The generosity of the supplier largely springs from the financial  benefit they receive from payments from  the ‘Feed in Tariff Scheme’ introduced in 2010. Usually these leases are for a 25 year period and  crucially contain a buy out clause to terminate the lease. The cost to the property owner to buy out  of  the  lease is usually £15,000 – £25,000, depending on the size of the roof and the length of the remaining term of the lease.

If you enter into such a lease, this causes a potential problem when you want to sell your house during the life time of the lease. Unless you are able to ‘buy out’ of the lease, it encumbers the property and any successor in title to the property, thus any mortgage lender is unlikely to lend to a potential buyer. Clearly, this will have an impact on the marketability of your property and may cause a stumbling block for seller or buyer alike.

The advantages of low energy bills and the benefits of renewable energy are immeasurable. But, to ensure you don’t get burned by your own solar panels, why not consult a solicitor before entering into any solar panel agreement. Or, if you already have an agreement with a solar panel supplier, why not consult a solicitor before you put your house on the market for advice on the lease. This needn’t be expensive and can avoid costly and stressful pitfalls and delays when you have found your buyer and are ready to move.

If you need more advice regarding agreements relating to your property or, if you are selling or buying a property with solar panels and require advice or re-assurance, please do not hesitate to contact Kerry Wigg at kerry.wigg@fmc-solicitors.com or call her on 01787 827 583.

Lease Troubles

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Little does the eager, starry eyed entrepreneur know that perhaps the greatest risk he or she is taking is not the uncertain income stream, the investment in tools, machinery, websites, logos, advertising and inventory, nor is it the one staff member taken on the receive clients, or sort flowers, or take calls, or help grow the business. The greatest risk is that fairly wordy piece of paper he was rushed to sign by a pushy estate agent, it said something about a lease on the front page. Not to worry though, after all, everybody needs a lease right?

Well yes, but there are leases and leases. This particular entrepreneur unfortunately did not do so well, the service she was offering was not what people wanted, or the flowers he was selling were not the taste of the locals, the economy crashed two months after he moved into his new shop, or the supplier she had relied on pulled out. For whatever reason, businesses sometimes fail. Time to sell off the inventory in the back and close shop. Not so fast though, that piece of paper you signed actually forces you to pay the rent for the next four years, and stops you from sub-letting the shop, and requires you to fix the windows, and the door and even the roof! As if watching your own business fail was not punishment enough, you now are facing severe financial stress because of a lease.

 

If you are considering starting a business and looking for suitable premises come talk to us. We can help you make sure that you are limiting your exposure to risk and focusing on building a thriving business.

Aaron Menuhin works in the Commercial Conveyancing department and is contactable at the Haverhill Office 01440 761 200 or by email at aaron.menuhin@fmc-solicitors.com

Beware of bogus solicitors

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This year has seen an increase in ‘scams’ relating to bogus law firms. Conveyancing, the legal process of buying or selling a property, is an area that has been particularly targeted.

The increased use of technology and increased use of online conveyancing services is enabling criminals to perpetrate fraud in a way that was not previously possible. Posing as legitimate law firms, they have succeeded in deceiving both solicitors and the public to obtain large sums of money.

The role of the Solicitors Regulation Authority

The Law Society’s webpage ‘Find a Solicitor’ has been considered a trusted source when checking the legitimacy of a firm. However, this webpage cannot guarantee a conclusive substantiation or verification that a firm is legitimate, as bogus law firms have been placed onto this list.

The BBC’s programme ‘Moneybox’ has highlighted a case where a homebuyer lost £735,000 to the criminals who had managed to register themselves on Find a Solicitor.

David Robinson, a solicitor representing these fraud victims, said that “It is unacceptable, in my view, that either a solicitor or a member of the public cannot phone up or email or write to the SRA and get reliable confirmation that X or Y is or is not a solicitor, since it is the SRA who set the criteria and requirements for getting onto the Law Society website.”

This raises the issue of how you can reliably check the credentials of a law firm and ensure that your money is safe.

How do you know that it’s safe to transfer your funds?

There are  tell-tale signs that a firm is bogus. For instance, if the only point of contact is an email account or telephone number and there is no registered firm or a physical address, you should be concerned.

In today’s internet world, the more remote you are from the professional ‘advice giver’, the greater the risk. The risk involved in providing your ID and financial details online to unverified firms is great, especially where your home and large sums of money are involved.

There is enough that can go wrong when buying a house at the best of times, so to ensure that your funds are secure, it is always better to use your local solicitor and meet them in person. This helps to confirm their identity and legitimacy, providing you with peace of mind.

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Alessandra Sulzer is a member of the Conveyancing team at FM&C Solicitors and may be contacted on +44 (0)1799 526 849 or +44 (0)7462 404 147.

Email: conveyancing@fmc-solicitors.com

For a Ha’penny’s Worth o’Tar

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Should I do my conveyancing online?

This morning I ordered my food shopping, booked a holiday and read the news online. I even considered purchasing a husband online. Yes, it is possible to rent a husband online. It’s an amazing thing; your husband can cook, clean – who thought a husband could do either of those! Anyway, this is not the point I’m trying to make. Managing your life online is cheap, efficient, and easy.

The same applies to online conveyancing. Many are choosing to undertake the legal side of buying or selling a property from behind a computer screen. In my rockets and aliens pyjamas, I can instruct an online conveyancer to take on the process in a cost-effective and hassle-free manner.

But are there risks? As with an internet husband, the saying ‘what you get is what you pay for’ applies to online conveyancing.

Moving home is, for most, the largest financial investment they will ever make. Conveyancing quotes and fees can be misleading. There are often hidden extras in the small print and the lack of local expertise can lead to greater costs and wasted time in the long run, when additional issues arise.

Short term savings vs. long term gains

Searches are carried out to discover additional information about a property that often isn’t obvious. This part of the process is crucial. Searches identify where planning permission may be granted for a future development affecting the worth of your property, including chancel rights, the quality of the ground on which your house is built, or details of common drains.

These various strands of investigation can bring to light different issues as well as problems common to an area that can affect each property differently. Online conveyancing companies do not guarantee the same conveyancer throughout the process and therefore cannot provide as efficient and locally knowledgeable service as a Saffron Walden- or Haverhill-based solicitor.

But what if all searches undertaken come up clear and you reach completion?

Consider what could happen if in a worst case scenario you discover major legal defects after completion, or even ten or fifteen years later. Sometimes the crucial information is not what is immediately apparent in the documents before you, but what you wouldn’t have the legal knowledge to identify yourself and is therefore concealed. This highlights the need for a qualified local solicitor to undertake the legal side of buying or selling a home.

“A good quality local solicitor who is familiar with the area and has a depth of knowledge is often better than solicitors out of town. In addition cheaper online options can often be a false economy and can cause delays and issues in the conveyance process.” Bruce King, Cheffins Estate Agents.

So, going back to cheap. While it is unwise to pay too much, it is worse to pay too little. When spending £100,000 on a property, is it truly worthwhile to save £100 by going online?

While it is not immediately apparent, your local solicitor can ensure a faster, more efficient and friendly process to guarantee your peace of mind. While the internet means I rarely need to venture out into the cold, there are occasions where I am tempted out of my woolly rockets and aliens pyjamas to visit my local friendly solicitor.

2 Hailey Badger - FMC Portfolio 2013 (1 of 13)

Hailey Badger is a member of the Conveyancing team and may be contacted on +44 (0)1799 526 849 or +44 (0)7900 492 547.

Email: hailey.badger@fmc-solicitors.com