Traps & Pitfalls

Stamp Duty changes from 1st April 2016

New stamp duty rules come into force on 1st April 2016. 

If you are buying a property to let duty is payable on the whole of the purchase money in layered percentages.  For the first £125,000.00 you pay 3% duty on the whole of that amount.  If you are paying more than that sum you pay 5% duty on the amount between £125,000.00 and £250,000.00 with incremental increases up to £1,500,000.00.

If you are buying a new property and on completion you have two or more properties but are replacing your main residence which is being sold the transaction is not subject to the higher rates.

If on completion you own two or more properties but your previous main residence has not yet been sold the transaction is subject to the higher rates but a refund is available if the previous main residence is sold within eighteen months e.g. the duty on a purchase at £275,000.00 is presently £3,750.00 but the new duty from 1st April wil be £12,000.00.

If you are buying a new main residence and on completion you own two or more properties and no sale of an existing residence is involved you pay duty at the higher rates.

The new rules do not apply to purchases under £40,000.

When you discuss your purchase with us we will give you a more detailed outline of these rules.                  

Estate Agents referral fees

It has always been the case that Estate Agents recommend to buyers or sellers, a firm of Solicitors or Conveyancers.  That is fine, but the practice is now becoming widespread for Estate Agents to ask soliciitors and conveyancers for a 'referral fee' for the introduction..  The Agents are now commonly selling the introduction to law firms for a fee which can be as high as £350.00 per case.  These referral fees are generally added to the Solicitor or Conveyancer's legal fee:  the client can end up paying  for the introduction!

If you decide to accept an introduction by an  Estate Agent you should always ask the Agent if they will receive a referral fee for that introduction  The fee can increase your expenses, quite substantially, in some cases.

We do not pay referral fees.  If a professional advisor recommends us, it will not be in exchange for a payment.  We do not pay referral fees.  Remember, referral fees usually end up coming out of your pocket.

Auctions

The property market has been somewhat slow as a result of the recession and this has given rise to the popularity of auction sales.

The attraction of an auction for a seller is that a buyer can be found more quickly than through a traditional sale but this is offset by the seller often having to accept less for the property.   For a prospective buyer  there are many bargains to be had, and provided the finance is available, properties can be obtained at an attractive price.

The traditional method of selling is that an offer is accepted, and the buyer then asks his conveyancer to obtain a Contract, investigate the legal title, carry out the various searches and enquiries. The buyer  will arrange a survey and if necessary mortgage finance.  Only at that point will a buyer pay a deposit and sign a Contract to commit  to the purchase. The buyer knows what he is buying.

An auction sale works differently.  At a traditional auction the legal documents will be made available to prospective buyers beforehand, and at the fall of the hammer the winning bidder will be asked to sign a Contract and pay a non-returnable deposit to make a legal commitment to buy the property. The buyer knows what he is buying.

Many properties though are now sold on "auction conditions" before they actually reach the auction, or at an auction on a  'conditional sale'  basis.  These types of auctions require a buyer to pay an immediate deposit (usually 10%) or a 'buyers premium',  neither of which are returnable.

The problem with a conditional auction is that the buyer makes the legal commitment, or parts with a substantial amount of money before he sees the legal title, or is able to carryout the usual searches and enquiries. The buyer does not know what he is buying!  This can give rise to problems which can catch out the unwary or inexperienced purchaser.

Examples of difficulties, we have seen, after buyers have made legal and/or financial commitments are:-

1.   An auction buyer purchased a property with adjacent land intending to convert the premises to offices with car park.  Subsequent investigation revealed that the seller did not own the adjacent land which would have to be purchased from a third party.  Moreover, the Highways Authority would not allow vehicluar access to or from the public highway, which meant that planning permission could not be obtained for the proposed use.       

2.   An auction buyer bought a leasehold flat.  Subsequent investigation revealed that there was only a short term left on the Lease, which would not be accepted by a mortgage lender and  therefore was unsaleable.  To make matters worse, the freeholder could not be traced, and it was  not possible to obtain a Lease extension, to create a good and marketable legal title.

These problems leave auction buyers in difficult situations.  With prior knowledge of the legal title before signing or paying a deposit, buyers can withdraw from the deal.  However auction buyers are faced with losing any deposit or payments made in advance, or accepting the property with the problems,  Doing so, can give rise to substantial additional expense in resolving the difficulties, thus removing any benefit of the good auction price.

Any buyer considering a conditional auction purchase invoving an advance payment, should be aware that  they  are making a blind commitment  and any money deposited in advance is at risk.

Such is our experience,  we would advise against this type of purchase unless you can afford to lose your deposit if faced with major problems.

 

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