Property Pursuit: Mastering the Art of Smart Buying in 2024

Whether you’re a first-time buyer or a seasoned investor, navigating the real estate market requires careful consideration and strategic planning.

Here are our top five property tips to help you on your pursuit for the perfect property:

1 – Financial Arrangements

Whether or not finance is needed, speak to a broker early on in a transaction and preferably before your agent agrees on the main elements of the purchase.

Raising finance once the exchange has taken place, makes for a fraught completion experience for both you and your lawyer.

 

2 – Planning the Completion Date

If you are selling a property to raise money for your purchase, ensure that the completion date of the sale is on or before the completion purchase. This may sound obvious, but it will avoid surcharged rates of SDLT (Stamp Duty Land Tax) being paid at 3% above the standard rates. These rates are paid even where your main residence is being replaced with the Revenue requiring you to claim a rebate once the additional main residence is sold.

You can also avoid the need to use your cash reserves for a deposit, as a deposit held on your sale can be used for your purchase where the property is in England and Wales.

 

3 – Surveyor’s appointment

Appoint a surveyor. They will flag items that you may not necessarily have spotted on your brief viewing, such as issues like dampness, faulty wiring, etc.

By having the Surveyor identify these issues they can help you identify the necessary costs of repair, which can ultimately be used in negotiating the asking price from the seller.

 

4 – Your Lawyer

Make and keep a relationship with a lawyer and update them on your transaction. This is particularly important where you are marketing a property sale, to ensure that deadlines, that you or your agent impose, can be met by buyers. A full sales pack with all title deeds, up-to-date searches, planning and building information can be pulled together.

Plan for exchange well in advance. Weeks of delay can be avoided if all the fact-finding has been completed in advance. Attended exchanges do still occur so be prepared. If there are any title difficulties, these can be addressed in advance.

 

5 – Your Accountant

Take tax advice. You may not be a resident in the UK, you may own other properties worldwide or hold a portfolio of investment property. Early tax advice will be required to work out CGT (Capital Gains Tax) liability on sale and IHT (Inheritance Tax) liability on death.

SDLT matters will be more complicated, where other property is held and often a detailed assessment is required to determine the SDLT rates payable by you. Where your company owns the title to the property, ATED (Annual Tax on Enveloped Dwellings) charges will be made annually and your accountant will need to claim any exemptions in your annual tax return.

Final thoughts:

You may have very specific requirements which must be conveyed to all parties. You may want to access the property you are buying between exchange and completion with architects and builders to obtain quotes or for interior designers to start planning works. The seller may even agree to you commencing limited works to help you move forward with quickly with your plans.

Where you are buying a bolt hole which is a leasehold property, a landed estate owner may own the freehold, for example the Grosvenor or Portman Estate. Do not be surprised when you are asked for onerous references to obtain the landlord’s consent, in lieu of rent or service charge deposit.

If you are buying a turnkey, consider if there are any service charges for the shared estate roads and whether building warranties for any building works are available.

Where you are buying expensive items of furniture, artwork, electrical items, to be left at the property, a full inventory of those items with costings will need to be included. Such items do not attract SDLT but they must be justifiable in their costings.

To find our more about buying or selling your property, contact us here.

Property: What’s in store for 2024

All of this may prompt a pick-me-up for deal activity in both the commercial and residential sectors. There will also be a number of regulatory changes to keep up with in 2024, but with a general election on the cards, making accurate predictions of what will happen in the sector and what the legislation will end up looking like is probably best avoided.  What we can safely do is provide a rundown of some of the more significant developments in property law expected in 2024, with the finer details to be fought over in Parliament.

Leasehold and freehold reform

The Leasehold and Freehold Reform Bill will enable leaseholders to extend leases to up to 990 years, abolish marriage value and also limit ground rent. These changes will make it cheaper and easier for leaseholders to extend leases or buy the freehold or share of the freehold.

Renters reform

The Renters Reform Bill is likely to come into law this year, and it will make significant changes to the way in which landlords let properties to tenants.  This is the one promising the abolition of so called “no fault” evictions, but the reforms have been delayed due to the lack of a framework for the courts to deal with the proposed new eviction process.

Ending of lower residential stamp duty

The increase of the residential nil-rate tax threshold from £125,000 to £250,000 will end on 31 March 2025.  This means that buyers will go back to paying the full amount of stamp duty next year.  This may result in an increase in transactions towards the end of 2024 and the beginning of 2025, before the lower rate ends.

Building safety

The Building Safety Act 2022 brought in several measures intended to make buildings and residents safer, in light of the Grenfell tragedy.  In October, a number of measures were brought into law, which now relate to all projects, not just high-risk buildings.  The regime is complex and specialist advice should be sought when building or re-developing property.

Biodiversity net gain

Intended to ensure that development has a measurably positive impact, or “net gain” on biodiversity, developers must deliver a BNG of 10%. This means a development will result in a better quality natural habitat than there was before development. New BNG rules came into force for most new developments from January 2024. Draft regulations and government guidance were published at the beginning of December.          

To find out more, contact Chris Piggott of get in touch with law@sherrards.com. 

Updates to the Building Safety Act 2022

The Building Safety Act 2022 delivered changes to ensure residential buildings are constructed more safely and continue to be maintained.  The Act also provides protective measures by ensuring that leaseholders are not automatically made to pay for historical safety defects meaning freeholders will not legally be able to charge leaseholders for any costs in circumstances where a building requires cladding to be removed or remediated.  These are buildings over five storeys or eleven metres tall.  Aside from cladding, there will be protection from costs associated with other defects such as emergency measures (waking watches).

From 1 October 2023, all new higher-risk buildings will be required to be registered with the Building Safety Regulator once a completion certificate has been issued. Until registration takes place, the properties cannot be occupied. Higher-risk buildings in England are classified as buildings that have at least two residential units and are either a height of least 18m in height or seven storeys.  Failure to register is an offence and can lead to a fine, imprisonment or both.

The regulations are a welcome guidance in the construction and property sectors and increase the severity of failing to comply with the core requirements.

To find out more or see if this affects you, contact Asha Ngai

Farewell Help to Buy

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: 17th and 31st March 2023, and here’s why:

Friday 17th March 2023

Homebuilders must have finished building homes, using Help to Buy, on or before 17th 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 31st  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 31st 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.

Leasehold Reform (Ground Rent) Act and what it means for you

In an attempt to make the leasehold system fairer, Royal assent was granted for the Leasehold Reform (Ground Rent) Act 2022 on 8th February 2022.

On the 23rd June 2022 Government Guidance published the following:

The Act will make home ownership fairer and more transparent for millions of future leaseholders. The reputation of the leasehold system has been damaged by unfair practices that have seen some leaseholders contractually obligated to pay onerous and escalating ground rents, with no clear service in return. The Act will prevent this from happening in future, tackling significant ambiguity and unfairness for future leaseholders.

For the Act to apply, and the lease to be defined as a “regulated lease”, certain criteria must be satisfied. The lease must:

  1. Be a long lease (more than 21 years) of a single dwelling
  2. Be granted for a premium (purchase price)
  3. Be granted on or after the commencement date, which in most cases is regarded as the 30th June 2022 (the date the Act was brought into force)
  4. Not be considered as an “excepted lease”

If the above is satisfied the landlord must not require a leaseholder to make a payment of prohibited rent (which includes ground rents) nor can the landlord charge an administration fee for collecting rents.

As far as the Act is concerned a permitted rent is a peppercorn rent which has been defined by the Act for the first time as “an annual rent of one peppercorn”.

As well as the Act reducing ground rents to a peppercorn it also protects leaseholders against landlords charging an administrative fee for collecting peppercorn ground rents so as to ensure leasehold properties are more affordable and further to reduce the incentive to charge a leaseholder an actual peppercorn ground rent.

So what does this mean for leaseholders/future leaseholders/you?

The Act does not currently apply to existing leases however, should there be a surrender and re-grant of a lease which extends the term or adds additional property to the demise, there is a possibility the Act may apply subject to the qualifying criterial being met.

There are however, certain leases to which the Act does not apply. These include:

  • Business leases
  • Statutory Lease extensions
  • Community Housing Leases
  • Home Finance Plan Leases
  • Retirement homes up until 1st April 2023 after which it is proposed the Act will apply

Should Landlords fail to comply with the Act, they could face penalties from £500 to £30,000.

 

Achieving vacant possession for our client.

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.

Michael Lewis and his 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.

Buying Real Estate in the UK

The first stage for an investor or owner occupier will be ascertaining the area to invest in and ultimately locating the property to purchase.

When viewing properties in the UK, you should be aware of the legal way in which you are able to hold a property.  You will either obtain the freehold of the property, which includes the whole of the building and will allow you the freedom (subject to any landed estate retaining restrictions over the property and any local council requirements) to make alterations and improvements as you so wish.

The alternative way of holding a property by way of leasehold interest, either a new lease will be granted to you (usually on a new build property) or assigned over to you from the existing owner.  The terms of leases are usually 99 years, 125 years or 999 years and the balance of the term will be transferred to you.  This will mean that although you have a long-term interest in the property, you do have a landlord who owns the freehold building.  You will be subject to service charges and ground rents, paid to the landlord and it is imperative that your advisor provides you with such details of not only current expenditure but planned future expenditure.  These are additional charges that should be borne in mind, particularly when viewing an up market and exclusive development with shared facilities such as a gymnasium or swimming pool.  You also need to investigate whether the building is properly managed.

If you are purchasing a leasehold property, when you view the property you need to look out for any improvement works required to the building as a whole, as you will be responsible via your service charges to contribute towards the cost of these items.  If the internal elements of the property require internal upgrading, then depending on the terms of the lease, landlord’s consent may be required.  In addition, the alteration works will require consent from the local council.

Tax advice should be obtained at the outset, to consider the most tax efficient purchasing vehicle due to the additional SDLT and ATED charges in place.  Consideration of personal tax structures and whether the individual is to be based offshore will be required.

It is prudent to consider any requirements in respect of timings and when a seller will require you to commit to a contract and then legally complete.  It is increasingly the norm for exchange to be required quickly and a non-refundable deposit payable to ensure exclusivity, with completion to take place soon thereafter.  This may impact on financing arrangements and the speed of which funds can be transferred and lending facilities put in place.

What is clear is the greater the value of the asset, the greater the need for sound real estate and tax advice.  Please do contact us so that we can assist you with your needs in the UK residential market.

To find out more, click here to speak to Residential Property Partner Caroline Vernon.

Property questions: How to combat property fraud

Unsurprisingly, properties are also at risk when they are tenanted, and where there are no mortgages registered. Add to this the general rise in identity theft and owner occupiers should be extra vigilant and look for ways to protect themselves and their property.

There are several simple tools available to combat fraud:

  1. Address for Service

    Did you know you can add up to three addresses for service on the property register? 

    At least one of these must be a postal address, in the UK or Internationally. The other two addresses can be either a DX address, a UK or overseas postal address or an email address. By having more than one address for service, you limit the chances of any important correspondence from the Land Registry being intercepted.

    How to add additional addresses on to the property register?

    Click on this link to see more www.gov.uk/government/publications/updating-registered-owners-contact-address.  Form reference COG1.

  2. Property Alert Service

    A free service offered by Land Registry is the Property Alert Service. You can register up to ten properties. Email alerts will be sent to you when certain activity occurs on your monitored properties. Setting up an account takes as little as 5 minutes and requires a few simple steps:

    • Your name
    • Your contact details
    • Your contact address
    • Setting a password
    • Activating the account with the link sent to your provided email address

    It is very quick and easy to set up alerts and can take as little as five minutes!  All Land Registry requires to create an account is your name, contact address, email address and password.  An email is then sent to you containing a link to activate the account. 

    For further information see https://propertyalert.landregistry.gov.uk/.

  3. Restriction 

    You can add a restriction to the title of your property. There is no fee for this service if the restriction is placed at the time of the purchase, otherwise it is an additional £20.00. 

    By adding the restriction, additional responsibilities will be placed on the Solicitor acting on a sale as the title will contain the following clause – “No disposition of the registered estate by the proprietor of the registered estate is to be registered without a certificate signed by a Conveyancer that the Conveyancer is satisfied that the person who executed the document submitted for registration as disponor is the same person as the proprietor.” 

    For helpful information, follow: https://www.gov.uk/government/publications/restriction-by-owner-not-living-at-property-request-registration-rq

    To find our more, click here to speak with Gill Talbot.

    To answer more of your property questions, click here for the second article in the series. 

Property Questions: What are deeds?

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, click here to speak to Gill Talbot

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

Sherrards Residential Real Estate team complete £5.4m London purchase

The team advised on a statutory lease extension request, with retrospective licence for alterations as well as other leasehold complexities. They also dealt with a third-party lender’s solicitors which was all dealt with and exchanged in a narrow timeframe for our client.

Mr and Mrs K said “A Great Move. The residential team worked very effectively to unwind a difficult set of circumstances to complete a tricky house purchase”.