Stamp Duty exemption for UK home buyers

The COVID-19 pandemic has turned many industries upside down by virtually shutting off their customer base, and the Government has resorted to a variety of extreme measures in order to limit the damage that the businesses in these industries suffer. Of all these measures, one of the biggest is the Stamp Duty holiday, which could exempt home buyers from tens of thousands of pounds in costs. So how does the holiday work, who does it affect, and how can we help? Let’s take a look.

What is the Stamp Duty holiday?

Chancellor Rishi Sunak implemented the Stamp Duty holiday to revive the flagging housing market, as the residential property market clamped up in response to the economic situation. The measures mean that Stamp Duty only has to be paid on properties worth more than £500,000, rather than the £300,000 limit under the old rules. This measure actually doesn’t mean much for first time home buyers, because the average new house only costs £208,000, but to professional landlords and investors, it can mean a huge boost to their profits.

What are the potential savings?

For property dealers who regularly transact in homes worth more than £500,000 the old SDLT regime would have seen them pay in excess of £30,000 in Stamp Duty alone, paying 3% on the first £125,000, 5% on the next £125,000 and 8% on the last £250,000. Now, as a result of these changes they will only pay the minimum rate of 3% on the sale, so a £500,000 property will only cost them £15,000 in tax. Clearly it’s well worth considering investing during this holiday, which ends in March 2021, due to the level of potential savings.

How can we help?

If you’re an existing landlord or investor hoping to capitalise on the holiday, or you’re a new starter looking to dip your toes in the water, it pays to get expert advice in these unprecedented times. While this is a potentially golden opportunity to make a life-changing investment, the difficult economy also makes it a serious risk, and to go about it without the best help could have serious consequences. Thanks to our years of conveyancing experience, and our down to earth and no-nonsense advice, we can help you make the best investment with your money and to ensure you make the most out of the SDLT holiday. If you’ve got your eye on a property, and you’d like to make your move during this time, get in touch with us on (0)20 8349 5501.

Government extends eviction ban in England and Wales

The ban on evictions in England and Wales, originally introduced in March, will now be extended for a further two months.

The Government’s latest extension to the eviction moratorium means that landlords will be unable to commence a claim in the Courts for possession before 23 August 2020.

The move, intended to protect tenants facing financial difficulties as a result of the pandemic, does not excuse tenants from paying rent and any missed payments will, in most cases, result in the accrual of rent arrears unless agreed otherwise.

How these arrears are repaid is down to the discussions and agreements between individual tenants and landlords. Once the moratorium ends, if arrears continue to be unpaid, then landlords will be able to take action to repossess their property via eviction proceedings.

The Government has said that tenants and landlords should maintain a dialogue and consider all options including flexible payment plans which take into account a tenant’s circumstances.

The Government is also working on new arrangements, including legislation, which will ensure the Courts are better equipped to address the need for appropriate protection of all parties, including those shielding from coronavirus. 

These arrangements should ensure that judges have the necessary information to make just decisions and protect the most vulnerable, according to the Government. 

House moves and viewings can begin again in England

The Government has issued new guidance for England that will allow house moves and viewings to begin again from 13 May 2020.

Under the previous Government guidance, buyers and renters had been asked to delay moving home and estate agents had been asked not to conduct viewings while the “stay at home” advice was in place.

However, under the Government’s new updated lockdown regulations, viewings and moves will be allowed as long as social distancing guidelines are observed.

The rule change allows potential homebuyers and renters to visit homes, while anyone who has already bought a home but delayed their move, will be allowed to move in.

It is thought that more than 373,000 property sales have been frozen due to the crisis and it is now hoped that many of these can go ahead.

The Government confirmed that those waiting patiently to move can do so as long as it is carried out safely within the current rules.

Click here to read the official Government guidance

The new regulations are not mirrored in the property markets in Wales, Scotland and Northern Ireland, which remain shut for now.

Those looking to buy or sell homes in England should seek legal advice from a licensed conveyancing solicitor before doing so. To find out how our team of specialist solicitors can help you with your move.

Frequently Asked Residential Property Questions during the COVID-19 crisis

The UK residential property sector has been adversely affected by the ongoing coronavirus pandemic and landlords and tenants may wonder where they stand.

To assist tenants and landlords, the Government has introduced several temporary changes to legislation and issued a lot of guidance that attempts to cover a number of scenarios.

However, many tenants and landlords are still likely to have queries, which is why our experienced team have put together a list of questions and answers to help you navigate the obligations and rights of all parties.

Can a person be evicted for not paying rent?

New rules have been introduced by the Government that freeze repossession proceedings and evictions to ensure that tenants struggling to cover their rent are protected.

These changes have been active since 27 March 2020 and will last for 90 days.

The measure covers all private and social renters, as well as those with mortgages who face repossession by a lender.

To clarify the rules the Government has released additional guidance which confirms that:

  • There is a current backstop for the relevant direction so that it ceases to have any effect on 30 October 2020.
  • The delay imposed on possession proceedings does not apply to claims against trespassers.
  • Parties can make applications for case management directions, where both parties agree on them.

The delay does not prevent the issuing of claims and only prevents the progress of them via the courts.

Am I permitted to serve an eviction notice still?

Since 26 March 2020, temporary laws have required landlords to give renters three months’ notice if they intend to seek possession.

Notice periods have been extended accordingly, which will affect the date when court proceedings can be issued.

This protection covers most tenants in the private and social rented sectors in England and Wales including tenancies under the Rent Act 1977, the Housing Act 1985, the Housing Act 1996 and the Housing Act 1988.

The provisions may be changed and the progress of proceedings may still be frozen for a longer period, subject to further amendment by the Government.

Are tenants legal required to still pay rent?

Government guidance tells tenants that they should continue to pay rent and abide by all other terms of their tenancy agreement during this period, where possible.

This means that rent levels set in a tenancy agreement remain legally due and so any unpaid rent will be accrued as arrears and require repayment.

Tenants have been provided with a strong package of financial support by the Government to ensure that they can continue to meet their housing costs. Where they can pay the rent as normal, they should do.

Tenants that are unable to pay rent must contact their landlord at the earliest opportunity to discuss the repayment of rent or alternative arrangements.

The moratorium on evictions does not allow for tenants to stop paying rent and they should be aware that landlords can take legal action in future to recover rent, including the repossession of the property.

My tenant is in arrears, what can I do? 

Landlord and tenants have been asked, where possible, to agree on a plan where tenants are struggling to pay their rent.

Options available to tenants and landlords include:

  • A temporary agreement not to seek possession action;
  • A reduction in rent; and/or
  • An agreement to repay arrears at a later date.

Where both parties agree to repay arrears, either via a one of payment or the spreading of arrears over the life of the lease, a landlord and tenant must agree to a plan in writing. All parties must abide by this arrangement and tenants must contact their landlord immediately if they are unable to do so.

Is there any additional support for buy-to-let landlords who rely on rental income to pay a mortgage? 

Lenders have extended the offer of a three-month mortgage holiday to buy-to-let mortgage holders. If you cannot make mortgage payment due to a reduction in income then you should speak to your lender or mortgage broker to arrange a payment holiday that meets your requirements.

Can I let an empty property and allow tenants to move in?

Movement into new properties should be avoided unless already underway and cannot be delayed, according to the Ministry of Housing, Communities and Local Government (MHCLG).

Its guidance says a contract must have been agreed prior to the Government’s COVID-19 restriction measures, and be unable to be delayed, for a person to move in.

This makes it much more difficult to market a property at this time. If a tenant is required to move in, then they should limit the number of people involved to prevent the spread of the virus.

The social distancing restrictions also make viewings and identity verification much tougher.

Can I conduct check-ins and check-outs? How does this affect the return of deposits? 

Where a lease is due to end and you are required to conduct checks, these should involve as few people as possible. You will also need to consider the deposit. The Tenancy Deposit Scheme has published specific guidance on performing check-outs during the coronavirus pandemic, which can be found here.

Are property inspections still permitted? 

By law, landlords must ensure their property is in a fit state of repair, which is why they are required to perform inspections. These inspections may not be possible under the current Government guidance, particularly where a person is self-isolating or shielding because they or a loved one is vulnerable.

Where a tenant informs you that they are self-isolating it may be advisable to cancel any planned inspections and rearrange them for a suitable time in the future.

Where you can perform an inspection, this should be arranged or conducted while a person is out of the home. If you cannot avoid an inspection, make sure you take all necessary precautions and follow Government guidance. You should make sure any changes to your normal inspection schedule is clearly documented.

What if I need to perform repairs?

Tenants have a number of implied rights to certain important repairs. However, it may not be possible to undertake repairs at this time.

Under these circumstances, you must document the reason you cannot carry out the repair to ensure that you have evidence.

Essential works, such as work on water supplies, sanitation and the supply of electricity and heating must be addressed.

In these cases, landlords, their representatives and tradespeople must follow Government guidance on social distancing while undertaking repairs.

Do I still have to meet tenants in person to perform a right to rent check?

Landlords are required by law to conduct a right to rent check that involves meeting the adult occupiers of their property in person before the tenancy is signed. During this meeting, they must check that all adult occupiers have a right to rent in England.

The Government has temporarily amended the right to rent rules so that landlords can:

  • Ask the tenant to submit a scanned copy or a photo of their original documents electronically.
  • Video call the tenant and ask them to hold up the original documents while the landlord checks them against the digital copy sent to them.
  • Record the date the check was made and mark it as “an adjusted check has been undertaken on [date] due to COVID-19”

Checks performed in this way will have to be followed up by later check in-person to ensure they are compliant.

Can I still undertake gas safety checks? 

It is a legal requirement for a rented property to have an up to date gas safety certificate. The Government has confirmed that gas safety inspections can go on as they are essential works, as long as social distancing guidance is followed.

Gas Safe has published guidance on how safety inspections can be done, which can be found here.

New electrical safety certificates were due to be introduced, are these still required? 

Landlords will still have to have a qualified person inspect their property and provide an electrical installation report before 1 July 2020 for any new tenancies.

If this isn’t possible, landlords are advised to keep records of their attempts to arrange inspections and any obstructions that prevented one from being undertaken.

My energy performance certificate (EPC) is about to expire, should I renew it? 

It is only a legal requirement to obtain a valid EPC when a property is being marketed and a new tenancy begins.

Where no new tenancy is due to begin, landlords are allowed to let an EPC lapse until the property is ready to be re-occupied.

Got more questions?

We understand that you may have questions that are specific to your own requirements and challenges. Our team of residential property experts are standing by to offer support and advice.

 

Forfeiture of lease – Protection for tenants (COVID-19)

In order to protect tenants the UK Government changed a well-known Landlord and Tenant law.

The easiest way for a landlord to get rent out of their tenant who hasn’t paid is to “change the locks at the property”.  This is officially known as forfeiture for non-payment of rent. This is a pure real estate right – it doesn’t apply to other commercial contracts. It is generally effective as no business owner wants staff to turn up to their office on Monday more to find the locks have been changed. Even more so for customers of a retail store!

In light of the coronavirus the Government changed the law so that landlords are prevented from changing the locks and forfeiting until the end of June. That is in recognition of the fact that shops are shut and office workers are being told to work from home (WFH).

So Landlords can’t forfeit for now (note this is not a rent holiday – just a delay in landlords enforcing payment).

Whilst this sounds like good news to tenants the UK Government has NOT changed another law which landlords can use – winding up.

A landlord can “wind up” a company if it does not pay an undisputed debt. Rent is an undisputed debt.

Landlords can just apply to court to do this but most may serve a statutory demand to be safe (it buys them some protection). You would get a statutory demand to the company’s registered office.

If that sounds contradictory; it is – and many of my clients agree. It is a shame that the UK Government hasn’t called a moratorium (ie a stop) on UK company involuntary insolvency but it hasn’t.

So what should you do?

I recommend talking to your landlord first – they are expecting the call I assure you. Ask for a rent free. Or maybe half rent for 3 months to take you over the worst period. Failing that trying for monthly rents for the next 12 months – or until the end of the lease.

It is a negotiation done in good faith – you have some law on your side but not all law.

Whatever you “agree” though make sure you email an agreement and get them to confirm.

If you need further assistance you can always call us on 020 8349 5504 or send an email and we will do our best to help.

COVID-19 Top 5 tips for Commercial Tenants

The current lockdown restrictions will have caused problems commercial tenants across all sectors. Our Retail specialist, Robert Rosenberg gives his top 5 tips for commercial tenants:

1. Really this should be one, two and three – TALK to your landlord. Landlords should not be scary but they are scared of this. We all are. They have families too.  You need to “share the pain” with landlords. We recommend picking up the phone and start with small talk. Then tell them how you are having to make cuts but that your staff and customers are so important to keep going.  Then ask them for their help. Start back asking for 3 months’ rent free. This is clearly the best.

2. If you can’t get rent free ask for monthly rents.  If you pay quarterly it is a huge drain on cash flow – if you can pay monthly that is clearly fairer.

3. Ask for a discount off the rent – say 50% for a couple of months.

4. In normal times (if you can remember them) a landlord can change the locks on you if you don’t pay the rent.  Not at the moment – the UK Government has put a stop to that until the end of June.

5. Ask for a lower service charge – if no one is around to tend to the building then the service charge should be lower.

If you need further assistance you can always call us on 020 8349 5504 or send an email and we will do our best to help.

Mortgage lenders limit new lending amid coronavirus measures

Several of the UK’s largest mortgage lenders have restricted the number of products they are offering to those with larger deposits.

Nationwide has said that it will now only offer mortgages to people with deposits of 25 per cent or more, Santander and Skipton have taken similar measures.

Others, including Barclays, Halifax, Virgin Money and The Family Building Society are requiring deposits of 40 per cent.

The move has been prompted by difficulties in carrying out surveys – which can be critical in assessing riskier loans – as well as reduced staff numbers and increased enquiries from existing customers wanting to remortgage or take advantage of the industry-wide offer of a three-month payment holiday.

Robert Rosenberg, Partner in our Property, said: “This is not surprising news. We are entering a time when the housing market will be rocky.  It will be rocky as those who have already exchanged desperately try to complete over the next 4 weeks – a usually stressful time, made even more stressful. Behind this group, is a queue of people almost ready to exchange. Most of them will have been told not to exchange as the risk of moving problems is too great – including significant mortgage delays and the closure of many removal firms following the Government’s lockdown measures.

On the future of the UK property market, Michael Stock, Head of the Property team, said “Whilst lenders are being prudent, it highly unlikely to have any impact on the mortgage and property market unless until there can be unconditional exchanges of contracts. For the foreseeable future, property solicitors will have to consider with their clients, whether to insert pretty unworkable and unsatisfactory contingency provisions, to cover a variation or termination of a contract, if the outbreak is still prevalent at a proposed completion date. In view of the uncertainty that these type of clauses create, the invariable legal advice is for anyone looking to borrow is to to wait, which unfortunately, will result in current mortgage offers expiring and not being renewed by lenders.”

Also, it is and will continue to be extremely difficult to obtain any mortgage offer, given the uncertainty about a borrower’s future earnings. Even in those extremely rare cases where earnings are secure, valuers currently unable to inspect a property to provide the lender with a valuation (unless a lender is prepared to accept a “ desktop “ valuation ), resulting in the mortgage and property market in limbo.

Accordingly , unless and until freedom of movement returns, with people being able to get back to work physically, this is extremely unlikely to change. However, I anticipate that, even when that happens, prudent lenders might still wish to “wait and see” (at least 3-6 months ) if there is improvement in the employment and property markets and, if there is, they may then decide to revert to 75 per cent loan to value mortgage offers.”

Crucially, the move does not affect existing mortgage offers and so should not have an impact on transactions where all parties in the chain have already secured their mortgage offer.