A residential property solicitor is often concerned with ensuring that the Stamp Duty Land Tax (SDLT) is never underpaid. They also hold an equally important duty to ensure their client does not overpay on SDLT.

One of the instances in where this can happen is when a property is purchased with the benefit of an annex or several annexes.

Buyers can apply for multiple dwellings relief (MDR) where they buy more than one dwelling in a transaction and rather advantageously this relief is extended to properties with annexes. 

To qualify as an annex, there are several criteria that must be met, and these are:

1. It must have a bathroom and kitchen area and must include ‘facilities for basic domestic living needs’ as required by Fiander and Bower v HMRC (2021).
2. It must have its own front door and have some privacy from the main house.
3. It must be capable of being a separate dwelling although it can be attached to the main house but must have a lockable door between the two properties.

Should the criteria be met, the SDLT can be calculated so as to divide the total amount paid for the properties by the number of dwellings.  The SDLT is then worked out on this figure and multiplied by the number of dwellings.

Solicitors must ensure they make the correct investigations on whether there is an annex by asking the surveyor, the estate agent and the seller’s lawyers.

Please feel free to reach out to me, on the details shown below, if you have a question on this article or any property matter.

This is an often overlooked or misunderstood question, but a very important one for anyone who co-owns a property or land in the UK.

The simplest form of home ownership is sole legal owner and there is nothing to declare to the Land Registry in this scenario.  If there is more than one party purchasing a property then you will need to decide how to hold the property.  This could be by reason of a purchase, or for example, inheritance. You can hold the property either as beneficial joint tenants or tenants in common.

 

Joint Tenants

If you decide to hold the property as joint tenants, both of you will own the entire property and you will have equal rights. You will not each hold a quantified share in the property and will not be able to leave a share of the property in your Will.

If you sell the property, or for example if your relationship breaks down, it will be presumed that you both own the property equally, regardless of your respective contributions to the purchase price and associated costs such as stamp duty and fees. On the death of one co-owner, their interest in the property would automatically pass to the remaining co-owner(s) without any further action regardless of what may be stated in their Will. The surviving co-owner would then own all of the property and on their death it would form part of their estate. This is known as the “right of survivorship”.

Married couples or those in a civil partnership commonly use this method of co-ownership because the right of survivorship makes it straightforward to inherit each other’s shares in the property.

However, there may be reasons not to become joint tenants. For example, if one of you has made a larger contribution to the purchase price of the property and you would want this to be recognised if the property is sold or if you separate. A joint tenancy is also not suitable if you have a family from an earlier marriage and wish to leave your interest in the property to them, instead of passing it to the other co-owner.

 

Tenants in common

If you hold a property as tenants in common, each of you will own a specified share in the property. Your shares may be equal (in the absence of any statement to the contrary), but they do not have to be.  Alternatively, you can specify what share of the property belongs to each owner e.g. 70:30 or 80:20 by way of a separate document setting out these interests.

Any share of a property can be passed on to another person, either by Transfer or under your Will. If there is no Will at the time of your death then your share will pass in accordance with the rules of intestacy.

If you choose to hold the property as tenants in common, then you should sign a declaration of trust. A declaration of trust is a document that formally records that you hold the property as tenants in common and sets out your respective shares in the property. If you sell the property, or if you separate, the declaration of trust will be referred to, to work out your entitlement to the sale proceeds from the property.

The Declaration of Trust may also include terms such as giving you first refusal to buy out the share of the party wishing to sell.

Holding the property as tenants in common may be appropriate if you have children from previous relationships and would prefer them to inherit your interest on your death rather than your co-owner. Holding the property as tenants in common in unequal shares may be desirable if you have made unequal contributions to the purchase price of the property.

Note that Land Registry allow up to four legal owners (Proprietors) to be registered on the title so if there are five or more, then a Deed of Trust must be drawn up to name the additional Beneficiaries.

 

How to determine how you hold a property

You can find out how the property is currently held by looking at the Land Registry Office Copy Entries.  The Proprietorship Register will not state Tenants in Common or Joint Tenants but instead the wording of a Form A restriction in the title register as follows will indicate that the property is held as Tenants in Common:

‘No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.’

If the wording is not present, then this would suggest the proprietors own the property as Joint Tenants.

 

How to change the ownership

Circumstances can change, and you may want to change how you hold your property.  Land Registry will not charge a fee for removing a restriction but they charge £20 for entering a restriction onto the title. 

If you decide to hold the property as joint tenants but then wish to split your interests, you can “sever” the joint tenancy and turn it into a tenancy in common at any time.  Either party can sever the joint tenancy without the other’s agreement or the joint tenancy may be severed automatically in several situations, including where one party becomes bankrupt.  This may also be required for example if your relationship breaks down.  A Notice of Severance can be served by one owner on the other followed by an application to Land Registry to enter a restriction using their Form RX1. 

Conversely, if you marry, you may wish to change from being tenants in common to joint tenants and an application made to Land Registry to withdraw or cancel the restriction using their Forms RX3 or RX4.

It is also possible following the death of one joint tenant to retrospectively sever the joint tenancy via a “Deed of Variation” to redirect the deceased joint owner’s share to someone other than the surviving joint tenant.

 

Seek Advice

Make sure that you advise your Solicitor before completion as to how you wish to hold the property.  Sherrards Solicitors will provide you with a “Joint Tenancy Form” to complete at the outset of the transaction.  You should take proper legal advice on your options based on your personal financial situation.  You should also ensure your Will is up to date.  Sherrards Solicitors Private Client Department are able to provide advise accordingly.

The Help to Buy scheme was introduced in 2013 to provide equity loans towards the cost of buying a new-build home, and helped over 500,000 first-time buyers buy a property. Although it has helped many, the Government has no plans to extend the scheme and time is running out for those in the middle of transactions and building.

Conveyancers, solicitors, estate agents and homebuilders dealing with Help to Buy matters need to add these dates to their calendars: 17^th and 31^st March 2023, and here’s why:

Friday 17^th March 2023

Homebuilders must have finished building homes, using Help to Buy, on or before 17^th March so that they are ready to be lived in. This is called Practical Completion, and it is when your home is built and has received a new-home warranty. After this date, the property will not be able to use Help to Buy.

Friday 31^st  March 2023

The Help to Buy scheme ends on this date. Home buyers need to have legally completed their purchase using the Help to Buy: Equity Loan by this date.

Funding for Help to Buy is unavailable after 31^st March 2023 under any circumstances so purchasers that legally complete after this date will not qualify for a Help to Buy: Equity Loan.

If you are currently having a house built, or are in the middle of trying to complete your conveyancing, now is the time to check with your home builder, conveyancer and estate agent that these dates will be met so you still qualify for the scheme.

For more information regarding Help to Buy closing, please follow this link to go to The Government’s website.

Sherrards’ Real Estate Litigation and Residential teams worked together to help our client to get vacant possession.

Vacant possession means the property must be empty on the day you complete your purchase or sale of it. 

The £5million property in Kensington had been sold subject to contract, however, there was a tenant in the property who was refusing to leave which was jeopardising the sale.

Proceedings were issued in the High Court.

The team worked hand in hand with our Residential Real Estate department in order to provide vacant possession and a successful outcome for our client and the sale of their property.

Essentially, Deeds are the trail of legal documents that prove or record the ownership of a property.  Since 1990, on the sale of a property, it has been mandatory to register the ownership at Land Registry. When Land Registry complete the registration process, they provide an Official Copy of the Registry and an Official Copy of the Title Plan together known as the Official Copies of Title. These were historically on paper but are now mostly digital and these are what are considered to be the “Deeds”.  However, there are additional documents that make up the “Deeds Pack” or “Title Deeds” that will be required when you come to sell the property.  The Deeds Pack will vary depending on the type of property.

For Freehold properties, the Land Registry Official Copies of Title are usually the only relevant documents to retain and these are electronic so can be readily obtained from Land Registry.

Leasehold properties will require the addition of the original signed and dated Lease to be retained as Deeds, although an Official Copy of the Lease is also held digitally by Land Registry alongside the Register and Plan. There may also be further documents to add to the Deeds such as an original Share Certificate or an original Membership Certificate, if relevant.  For new build Leasehold Properties, you should also retain your 10-year NHBC Certificate (or equivalent such as LABC or Premier Guarantee) along with the Building Regulations Completion Certificate.

Other general documents to keep with the Deeds include any indemnity policy or Declaration of Trust. 

In preparing for the sale of a property, the Deeds Pack will be required alongside documents such as the Energy Performance Certificate, Electric and Gas Safety Certificates, FENSA certificates, building regulations and planning permissions for any alterations, party wall notices, listed building documents, guarantees/warranties for a new boiler/new roof/damp proofing, water bill, service charge and ground rent statements, mortgage details etc, so it may be advisable to retain these documents and keep them up to date as and when they expire.  Having these documents to hand will save delays when it comes to selling your property.

It is also worth noting that if you have a mortgage then your Title Deeds may be kept by the Lender, although this is increasingly rare for UK Banks, but not so for overseas Lenders.

To find out more, email law@sherrards.com 

To find out more about your property questions, click here to read another article in the series. 

If you let property through Airbnb, you could be facing a legal minefield. Its rapid growth which provides an online platform for individuals to rent their homes or spare rooms short-term, has caused a stir across the world. But the law has not kept up with the technology, leading to a range of hazards for those who let through the platform.

It has become such an issue that frequent use of Airbnb can effect private property, according to new-build developers. Their reaction has been to try to restrict such short-term letting when leasing new apartment blocks.

Leasehold risks

Some cities have tried to regulate the Airbnb model. Authorities in New York, Berlin, Barcelona and San Francisco, to name a few, have started requiring permits for such business.

In London, landlords need permission to use a property as temporary sleeping accommodation for fewer than 90 days a year, under the Deregulation Act 2015. Local authorises can fine landlords for breaches, under the Town and Country Planning Act 1990.

In the UK, the risks increase for leasehold property, although there are also local considerations for freehold property. Most leases restrict sub-letting part or all of the property.

They will also usually restrict the property to be used only as a private residence occupied by a single family, and prohibit using the property as a business. It is rare to see a flat lease without these restrictions.

Furthermore, leases will contain covenants regarding any use of the property that causes a nuisance and annoyance, and a covenant to comply with all building insurance policies.

The case of Nemocova v Fairfield Rents Limited 2016 ruled that in granting a series of short-term Airbnb lettings, the leaseholder breached the covenant to use the property as a private residence.

A tenant who breaches the lease terms risks a claim for damages and or forfeiture proceedings, which require them to remedy the breach and pay monetary compensation.

They may also be breaching the insurance policy and their mortgage terms.

Assured tenancy danger zone

Where a tenant has an assured tenancy or an assured shorthold tenancy and seeks to sub-let on Airbnb, they face several legal dangers. They may be breaching the letting terms, and if the property is social housing, they could be criminally liable.

The legal occupation of such short-term rentals are on a licence basis and not as a tenancy agreement so security of tenure is less of an issue. This therefore has the beneficial effect that a licence to rent out the property as a house in multiple occupation is not required under the Housing Act 2004 and the sub-tenants’ right to rent does not need to be considered under the Immigration Act 2014 and due to the licence nature of the tenancy, the deposit protection requirements will not apply under the Housing Act 2004.

However, regulations require that gas safety certificates, smoke and carbon monoxide alarm, and energy performance certificates will need to be obtained.

This area has become a particular minefield and until the law catches up with technology, it will continue to present a range of legal hazards for those involved.

To find out more, please contact Caroline Vernon. 

Have you lived in your home for a number of years and are now thinking of downsizing to a smaller or more manageable property? Although the process has not changed, it is always sensible to be one step ahead of a buyer’s lawyer, particularly if you’d like a quick and stress-free move.

Instructing a lawyer is the first port of call and it is always good to do so in advance of the property being marketed with an estate agent.  This will allow time to iron out any issues and pre-empt all those questions that a prudent buyer’s lawyer will raise.

Potential issues that may arise include:

• If the land has not already been compulsory registered, then it may continue to be unregistered at the Land Registry. You will need to dig out your original title deeds for an application to be made. As most land is now registered, it may be worth asking your lawyer to register it at the Land Registry for ease of dealing with it moving forward.
• Where the property is registered, you should check with your lawyer for any entries on the title. If there are satisfied mortgages which have long since been redeemed, then you will need to contact the lender to ask them to notify the Land Registry or provide a form of discharge for your lawyer to send to the Land Registry on your behalf.
• Where you have carried out works to the property, you will need to produce various warranties and guarantees if they are still in date, along with building control completion certificates for new windows and planning permissions obtained at the time. Often duplicate information can be obtained from the council and duplicate FENSA certificates for new windows. However, you may want to draw your lawyer’s attention to these items so appropriate investigation can be made.
• Where the property is leasehold, you should pull together your ground rent and service charge payments, minutes of previous meetings with the management companies and contact details as to where the management pack can be obtained.
• Where there are rent charges demanded or where the property lies upon a freehold management estate, then enquiries will need to be raised and evidence of payments obtained in the form of receipts.
• There may be requirements for statutory declarations to be made as to use of the property or indeed parcels of land which are not in your ownership. It is sensible to draft these in advance or obtain indemnity insurance quotes for a prospective buyer.

Armed with the above, a full disclosure can be made to the buyer’s lawyer at the outset with no hidden difficulties arising at a later date to cause a buyer to withdraw. We are facing a particularly difficult market at present so anything you can do to improve your chances of a successful sale are well worth the effort.

To find out more, please contact Caroline Vernon. 

On 1 June 2019 the Tenant Fees Act 2019 came into force banning letting fees in England. Tenancy renewals, reference and administration fees will be prohibited under this law and are now to be covered by the Landlord on all tenancies created on or after 1 June 2019 in the private rented sector.

The Act also prohibits any need for the tenant to enter into a contract with a third party for the provision of services (with the exception of utilities or communication services), for insurance or to make a loan to any person in connection with the tenancy.

The aim of the Government is to make a fairer market place and prevent unfair practices of landlords and letting agents.

Any payment made by the tenant must be a “permitted payment” contained within Schedule 1 of the Tenant Fees Act 2019.  The following payments are permitted under the TFA 2019:

• Rent;
• A refundable tenancy deposit or holding deposit;
• Payments to change a tenancy;
• Payments associated with early termination of a tenancy;
• Payments in respect of utilities, communication services, TV licence and council tax;
• Default fees.

Any payments required by the landlord, letting agent or licensor, other than those listed above, will constitute a prohibited payment under the TFA 2019, and include:

• Viewing fees;
• Fees for professional cleaning;
• Credit check fees;
• Tenancy set up fees;
• Requiring payments to third parties, the entering into a contract of insurance or the provision of a service from a third party;
• Requiring the making of a loan to a person in connection with the tenancy agreement.

The Act also introduces a cap for tenancy deposits. If the annual rent is less than £50,000.00, only 5 weeks rent can be collected and where the annual rent is over £50,000.00, only 6 weeks rent can be collected.

A reminder that Assured Shorthold Tenancies include those rents that are less than £100,000 per annum and are to an individual and also includes student tenancies, licences but not long leases.

Essentially, this means payments such as credit checking fees, inventory fees and professional cleaning services are now not permitted to be re-charged to the tenant.

Trading Standards will enforce the Act together with local councils and the sanctions for non-compliance is a fine of up to £5,000.00 and criminal sanctions may be imposed.  Landlords will also be prohibited from serving a valid section 21 notice under the Housing Act 1988 to obtain vacant possession of a property whilst there are breaches of the Tenant Fees Act 2019.

All residential landlords must make sure precedents are up to date and compliant with the new letting laws.

To find out more, please contact Caroline Vernon. 

As part of the due diligence process, your lawyer will investigate the title to the property held with the Land Registry, where registered, when the property is either being sold or leased.  This will include looking at physical alterations that have been carried out to the property and checking those against records held with the Local Council’s Planning Authority and Building Control Department. An indemnity policy maybe needed.

A buyer or prospective tenant under a lease would need to establish whether the seller is legally able to transfer the property and that all necessary consents have been obtained.

Where there are defects that would adversely affect the buyer’s interest then they will need to be resolved and possibly disclosed to the Lender before releasing security.

A defect is a matter that negatively affects the property and some examples are as follows: –

• Where insufficient Planning Permission or Building Regulation Consent has been obtained and a lack of Final Building Control Completion Certificate issued on completion of works. This can include lack of Conservation Area Consent or lack of Listed Building Consent.
• Title documents not being available which may contain covenants and easements affecting the property of which are now unknown, and the Land Registry just does not hold copies.
• Easement or rights benefiting the property which are not contained within the title, for example, rights of way, rights to use utilities or rights to enter on to third party land for a right of way or access to utilities which a seller has had the benefit of but cannot document legally. Armed with a sworn Statutory Declaration indemnity insurance may be obtained in the absence of an approach to the Land Registry for an adverse possession claim or prescriptive right of way.
• A title covenant which will be breached preventing a specified use or development being carried out.
• The title indemnity policy is only available in respect of a title defect to protect the owner of the property from loss which might arise from the defect, for example, a reduction in value of the property or paying compensation for damages. The policy does not remedy the title defect it just provides financial compensation in the event the defect causes actual loss subject to the limit of the indemnity stated on the policy.  The amount is usually the value of the property in question, the mortgage being obtained or the gross development value of that site.  The policies are usually always stated as successors in title policies and therefore future owners, lenders, licensees or tenants will have the benefit of such policies without the need of notification to the insurer.
• When obtaining an indemnity insurance quote, the insurer may raise certain items that need to be satisfied and add to the policy certain conditions, for example to provide planning documentation, enquire with the Council as to objections during the planning process, swear a Statutory Declaration to confirm use of the right of way or not to make any alterations to the property for at least a twelve month period.

An indemnity policy is a very good way of allowing us to move forward with a simple purchase of matters without such there would be invariable many stalemate positions where one party could not proceed.

To find out more, please contact Caroline Vernon. 

Although this legislation was brought in on 1 February 2016, landlords need to be reminded that they must check the immigration status of their tenants or licencees.

Landlords must check under the Immigration Act (sections 20-37 and Schedule 3) the status of prospective tenants and other authorised occupiers before a residential tenancy is entered into, “right to rent” checks.

Landlords must also make sure that someone’s right to occupy the residential premises does not lapse due to a change in their immigration status (i.e. they have a “time-limited” right to rent), which is an even more onerous obligation. In that situation, the check must be made both within 28 days of the tenancy being entered into and before the time-limited right to rent expires or once 12 months has passed, whichever is later. Failure to comply with the legislation could lead to a civil penalty of up to £3,000. There are exclusions including certain student accommodation and long leases (where a right of occupation for a term of seven years or more is granted).

A person may not occupy residential property in the UK if they are not a “relevant national” which is a British citizen, a national of an EEA state or Switzerland or they do not have a “right to rent” in relation to the property –i.e. if they require leave to enter or remain in the UK and do not have it, or they have leave, but it is subject to conditions that prevent them from occupying the residential premises.

The legislation also applies where a residential tenancy grants a right for other individuals to occupy along with the named tenant, i.e. family members who are disqualified as a result of their immigration status. However, in that situation, there is a contravention only if reasonable enquiries were not made of the tenant before entering into the tenancy as to the relevant occupiers, or reasonable enquiries were so made and it was, or should have been, apparent from the enquiries that the adult in the question was likely to be a relevant occupier.

The Act applies not only to the landlord who entered into the residential tenancy, but also potentially to the person who is the landlord under the tenancy at the time of the contravention i.e. the successive owner. So where a landlord transfers its interest subject to a residential tenancy, the new landlord will become the ‘responsible landlord’ for any contraventions of the requirements. If the tenant has the right to rent at the time the residential tenancy was granted by the original landlord, but subsequently lost that right and follow-up checks were not conducted, it will be the landlord at the time the breach is identified who will be the ‘responsible landlord’ for the purpose of a penalty. The new landlord must therefore confirm with the old landlord that the document checks have been undertaken and retain evidence to demonstrate this. The new landlord must also take careful note of whether and when follow-up checks must be undertaken in order to maintain a statutory excuse. Enquiries must be made on the purchase of a residential property subject to tenants.

Landlords must exercise vigilance on this issue before residential tenancies are entered into, but should also carry out follow-up checks where the occupier has a time-limited right to rent.

To find out more, please contact Caroline Vernon.