The Law Society has issued a statement asking its members to warn not only their clients but estate agents too if there is a possibility that transactions for ‘additional homes’, which are affected by the stamp duty land tax (SDLT) increase, are not going to complete by 31 March.
In a recent memo, the Law Society explains that the 31 March deadline is putting pressure on conveyancing solicitors (as well as lenders, mortgages brokers and others) who are extremely busy trying to complete transactions before the additional SDLT becomes payable.
The memo highlights the fact that an additional 3% tax will not be welcomed by any purchasers buying additional property, especially if they believe that the transaction should have been completed before the 31 March.
There may also be cases where the buyers do not want to purchase at all if the transaction is subject to an additional 3% SDLT.
The Law Society cautions members accordingly:
“You should warn your client that if completion is fixed for a date on or before March 31 but completion takes place after March 31 then, provided the transaction is subject to the new SDLT provisions, the additional SDLT will be payable. The reasons for a delayed completion will not be material and will include the seller’s default.”
When acting for a buyer the Law Society suggests its members make time of the essence for completion to take place on or before 31 March 2016 and/or add a clause to the contract obliging the seller, when completion is delayed due to the seller’s default, to pay the additional SDLT - probably by way of the buyer deducting the additional SDLT payable from the balance due on completion.
And when acting for a seller, the Society suggests that its members should consider taking instructions on the type of clause referred to above.
Taking into account the wider picture, the memo says:
“You should explain to your clients that there are aspects of the transaction which are to some extent beyond your control, for example, if you are still waiting for a mortgage offer or search results, or if the transaction is leasehold and you are still awaiting information from managing agents and landlords, or if you are not certain that those on the other side of the transaction - or indeed further along the chain - will be in a position to deal when requested and that you are therefore unable to give warranties as to timings.”
The details of how the additional SDLT will operate will not be made clear until the budget on 16 March.
The Law Society asks its members to make clients aware that uncertainties will exist until this time.
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