From time to time during the conveyancing process, title defects may come to light, or…
East Kent is seeing a surge in buy-to-let and second home purchases as people rush to complete before 31 March 2016.
From 1 April a 3% stamp duty land tax (SDLT) surcharge will apply to purchases of additional residential properties.
In its consultation the Government was unclear about what interests in residential property owned by a purchaser will count for the purposes of the surcharge and details are expected in a finance bill immediately following the budget on 16 March.
Richard Durrant, Partner at Conveyancing Association member firm, Boys & Maughan Solicitors, said: “The number of second home purchases that we are dealing with across the county has risen steeply in the last couple of months.
“The SDLT bill for a £275,000 property will rocket from £3,750 to £12,000 forcing some clients to instruct us thatthey do not want to proceed if there is a risk of completion taking place beyond 1 April.”
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“It has now become too late to realistically hope to start and complete a property transaction before the new SDLT rates are introduced.
“Existing buyers and sellers are pressing to complete before 31 March. We have been warning clients of the risks, particularly for those who are involved in chains, if anything were to go wrong and delay completion. Whilst it is in theory possible to pursue the defaulting party, actually getting the SDLT payment from them may either be time consuming or prove to be a very expensive exercise.”
After 1 April buyers who own another property will need to ask themselves, ‘Is the house I am buying a replacement for my old main residence which is being sold?’ Broadly if the answer is ‘yes’, the normal rates of SDLT apply but if the answer is ‘no’, three per cent is added to the current SDLT rates.
“We are unlikely to be able to choose our ‘main home’,” says Richard. “Tests could include where we spend most of our time, are registered to vote, and give as our postal address.”
In the case of joint buyers, if any of them owns another property and is not replacing their main residence, three per cent applies to the entire price.
According to Richard this could prove unfair: “A joint purchase may be made for reasons that have a clear social value and not a bid to set up a buy-to-let business. There are many circumstances where parents want to support their adult children in buying a home, for example.”
The changes are complex and Boys &Maughan advises anybody who thinks they may be affected to contact their solicitor for advice.