Stamp Duty Changes
Lisa Gibbs, partner and conveyancing manager at Simpson Millar Solicitors LLP in Manchester, provides guidance for estate, letting and managing agents on the imminent changes to stamp duty.
Property agents across the UK may already be experiencing the effects of the government’s move to introduce a 3% stamp duty on buy to let properties in the UK
. As of 1 April 2016, this new stamp duty will apply to holiday homes, buy-to-let investments, or other second property. Depending on where a property is located, the impact of this change is quite significant for investors. For example, a higher-priced property of £230,000 will attract stamp duty of £6,900 from April 2016, which will have a substantial impact on an investor’s return. Estate agents should also bear this in mind when assisting their clients.
To avoid the changes, full completion must take place before April – i.e. purchase monies and keys must change hands; merely the exchange of contracts is insufficient. The only exception is that, where contracts were exchanged before 26 November 2015 and completion takes place as of 1 April 2016, the existing stamp duty provisions apply. As a result, most conveyancers have seen a rise in the number of buy-to-let instructions since the start of 2016, as investors seek to avoid the higher stamp duty cost by completing transactions before April. While some potential landlords will now be thinking twice about whether to invest in such properties, estate agents will, however, have an important role in transactions already in the pipeline and will need to work closely with the various parties to ensure that everything is on track to complete by the deadline.
Every property transaction involves substantial documentation, and agents should be particularly keen to ensure that this is turned around by the relevant parties as soon as possible. Agents should also proactively chase for responses to any outstanding action or query
The transaction time for any given property sale/purchase depends on its facts and circumstances, such as whether or not a mortgage is required, and whether or not the transaction is part of a chain. Generally, however, a freehold purchase takes around eight to ten weeks from the issue of contracts, and a leasehold between ten to 12 weeks. At the time of writing, there are roughly eight weeks until the introduction of the stamp duty changes, so any investor transaction must commence very soon if it is to complete before April
If a buyer has yet to agree an offer, they will need to take steps very quickly; there may still be enough time to agree and complete a freehold purchase, provided that it is not in a chain of transactions and that prompt action is taken by all parties. It will be difficult to secure and complete a leasehold purchase before April, due to the additional documentation and parties, such as the landlord and managing agent.If a seller is still looking to sell to an investor by the deadline, they should request any leasehold information packs at the outset, to ensure that they can promptly provide them to any potential buyer. They should also complete and return their protocol documentation, such as the fixtures and fittings and property information forms, as soon as requested by their conveyancing solicitors.