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.

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

On the 23^rd 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 30^th 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 1^st 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.

 

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.

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.

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. 

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. 

Here are our top five tips to help you:

1.Finance arrangements

Whether or not finance is needed, speak to a broker early on in a transaction and preferably before your agent agrees the main elements of the purchase.  Raising finance once 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 of the purchase. This may sound obvious but it will avoid surcharged rates of SDLT 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. He or she will flag items that you may not necessarily have spotted on your brief viewing and may even give some bargaining power and leverage on the price.

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 for 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 in advance.

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 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 your 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 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 a rent or service charge deposit.

If you are buying a turn key, 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.

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”.

The long awaited restriction on letting agents fees is one step closer with the recent introduction of draft legislation to ban the requirement for tenants to pay fees or other charges on top of rent and payments for services from third parties. The proposals could also limit the amount of tenancy deposits held by a landlord in a relevant scheme.

The level of fees that tenants pay to letting agents has long been an area of concern, due to the lack of regulation in the market. Following a consultation process, the Government has sought to address the concerns with the introduction of the draft Tenant Fees Bill 2017 (TFB 2017).  In addition, the Government is now in consultation about making it mandatory for letting and managing agents who handle client money to be members of financial protection schemes for clients.

The TFB 2017 seeks to prevent landlords and their agents (on the grant, extension and termination of tenancies) from charging fees or other payments on top of the rent, with the exception of a capped refundable security deposit (at no more than six weeks’ rent). It also requires that refundable holdings deposits are capped at no more than one week’s rent. The restrictions will only apply to those tenancies that are completed after the legislation has come into force and it do not seek to control those fees in long leases, social housing tenancies or holiday lets. In addition, the Government proposes to extend the legislation so that there are restrictions on the fees charged by landlords and any payments to third parties.

The legislation will be enforced by already stretched local authorities (Trading Standards). A rogue landlord or letting agent risks a penalty of £5,000, with further penalties of up to £30,000 or criminal liability where there are subsequent breaches within 5 years. Any prohibited payment, plus interest, will be required to be repaid to the tenant where there are deemed breaches.

The TFB 2017 also seeks to amend the Consumer Rights Act 2015 (CRA 2015) so that letting agents must clearly display on property portals any letting fees to the consumer and identify which redress scheme they are a member of, and whether they have client money protection.  This is a welcome move to legislate the online space, to match the requirements of agents’ websites and offices.

A better and fairer market place will exist once all lettings agents are regulated, aligning their practices with the same quality standards as those of other professions, such as solicitors.  This is a long overdue piece of legislation and will not come too soon for those who wish to see a more regulated lettings market.

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

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.