- October 16, 2020
- By Sarah Clarke
- 0 comments
Residential Conveyancing FAQs: Continuation
Hello and thank you for taking the time to watch these short videos on Residential Conveyancing. My name is Sarah Clarke and I am a lawyer in our property department, specialising in Residential Property transactions.
Today we are going to discuss the variety of residential transactions we deal with here at Anthony Gold and hope to answer some frequently asked questions.
Who is entitled to purchase a property under the Right to Buy scheme and what are the restrictions?
- The Right to Buy scheme is available to Council Tenants who have lived in their Council owned property as their main or only residence for a minimum of three years.
- The scheme allows Council Tenants to purchase their properties at a discounted price. The maximum discount offered is £84,200 across England, except for London which offers a maximum discount of £112,300.
- If you qualify for the Right to Buy, you need to make an application to your Council, who then either accept or decline your application within 4 weeks.
- If the application is accepted, the Council will carry out a valuation of the property and provide you with an offer. The offer will be the market value less the discount you are entitled to. Once the offer has been made you have 12 weeks to accept.
- On acceptance of the offer, you will also appoint your lawyer to deal with the transaction. This is when we become involved, and the process for purchasing a property is followed, as outlined by my colleague Nickiesha. However, no amendments to any documents can be made and there is no exchange of contracts on a Right to Buy purchase.
- Please be aware that once you have purchased a property through the Right to Buy scheme there certain are restrictions to comply with when you come to sell the property. If you sell within 5 years of ownership, you are required to repay some, or all the discount, back to the Council. The amount payable decreases by 20% every year of ownership and after 5 years of ownership you will not have to repay any of the discount if you decide to sell.
- If you sell the property within 10 years, the Council have the right of first refusal. This means you must inform the Council of your intention to sell and offer to sell the property back to them. The Council then have 8 weeks to decide whether they wish to buy back the property or decline the offer. If they accept, they must pay the market value for the property; the discount you paid is not taken into consideration as long as you are selling between 5 and 10 years of ownership. If they do not accept the offer, they will confirm this in writing, and you are then free to agree a sale with another party.
Selling your ex-Council property and Compulsory Purchase Orders
- Situations may arise where you have purchased your property from the Council and have no intention to sell the property, but the Council wish to buy back the property. This usually occurs when the Council wish to redevelop the area or estate the property is located within. This is known as a Compulsory Purchase and if not agreed, the Council can obtain an order from the Court forcing the sale of the property.
- When selling a property under a Compulsory Purchase, the Council must purchase the property for the market value and are required to cover all legal costs and third-party costs relating to the sale of the property. As you are in a situation where you have not chosen to sell the property, you are not required to pay any reasonable or foreseeable costs relating to the sale.
- Also, as you are likely to have to purchase another property, which is not by choice but through the circumstances and decisions of the Council, the Council again are to cover legal fees and third-party costs which directly relate to the purchase. For example, they are to cover the cost of any surveys or searches carried out on the new property, Land Registry fees and part or all the Stamp Duty Land Tax payable.
- The usual procedures and steps are following when selling and buying property under these circumstances, which have been outlined by my colleague Nickiesha.
- Please note the Council will only cover costs and legal fees for your sale and purchase if they have approached you and asked to buy the property as they are to compensate for the inconvenience caused.
Shared ownership – what is it?
- Shared ownership is usually offered on properties owned by Housing Associations and allows those whose are unable to buy property outright to still get on the property ladder.
- You will purchase an agreed share of the property and the remaining share is owned by the Housing Association; you will pay rent to the Housing Association for the part they own. For example, you if you were to purchase 25% of a property valued at £400,000, you would pay £100,000 for the share. You would own this share and could take a mortgage to aid the purchase, and then pay rent on the remaining 75%.
- Over time you may then decide to increase your share in the property as you may be able to secure a larger mortgage or have more in savings. This is known as staircasing and is to be agreed with the Housing Association.
- You can increase your share as much as you want to at any time, and our team at Anthony Gold can assist you with the legal work relating to this. However, please be aware the amount you pay for the share is based on the market value at the time you are purchasing, not the value when you purchased the first share. For example, following my last example, if you now wished to increase your share in the property from 25% to 50%, but the property is now valued at £450,000, you are to pay £112,500 for the 25% share. You then own 50% of the property and continue to pay rent on the remaining 50% owned by the Housing Association. You can continue to staircase until you own 100% of the property.
- When purchasing a shared ownership property, the legal procedure is the same as a standard purchase, as outlined by my colleague Nickiesha. However, there is a lot of confusion over Stamp Duty Land Tax payable for shared ownership properties.
- When paying Stamp Duty Land Tax on a shared ownership property there are two options; you either pay the tax in full when you purchase the first share and the tax is calculated on the value of the property as a whole at that time. Then no further tax is payable even when additional shares are purchased. So, going back to our first example, when purchasing the 25% the Stamp Duty Land Tax payable is calculated on the market value of £400,000. Then when purchasing the additional shares, no further stamp duty land tax is paid.
- The second option is paying Stamp Duty Land Tax on the price of the first share you purchase, so the £100,000 if we refer to the example, then not paying any further tax until you own over 80% of the property. Calculating the stamp duty land tax if you choose to opt to pay in stages is dependent on the total amount you have paid for the property, and the amount you are paying for the share that has taken you over 80%. We would be happy to provide further advice on Shared Ownership and the Stamp Duty Land Tax payable on request as we do appreciate that at first glance it can be quite confusing.
- Finally, at Anthony Gold, we also act on transactions that involve other government schemes which aim to help people get on the property ladder, such as Help to Buy equity loans and Help to Buy ISAs. Please see the links below this video which will take you to my blogs which provide further information about both schemes. Thank you.
*Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*
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