There are various stages to purchasing a property before it is fully constructed, and collaboration with your solicitor is key to ensure seamless progression with the New Build Conveyancing timeline.
Prior to exchange of contracts, your solicitor negotiates on your behalf and reports to you on the legal documents for your purchase. On the date of exchange, you become legally bound by the contract, and proceed with the following stages until your New Build Property is ready to move into.
Immediately following exchange, you should diarise the timescales which are set out in your contract, to ensure you are prepared for each.
Key dates to note include:
Approximately one month before your stage payment is due, you should contact your solicitor to provide updated source of funds documents, so you may send the stage payment to them.
Solicitors are obligated to complete due diligence checks for each payment towards your purchase. You should provide the documents in plenty of time and highlight any changes in your source of funds to your solicitor as early as possible.
If you are obtaining mortgage finance, you should begin this process approximately six months before the Estimated Completion Date. Although most mortgage offers are valid for six months, some Lenders may allow up to twelve months for newbuild properties, to accommodate for potential delays.
Once construction is complete and Building Control has given their approval, the developer will give you ten working days to complete the purchase.
It is recommended to inspect the Property in person before completion, to ensure any snagging issues are raised with the Developer.
You will sign your final Lease and Plans which, dependent on the Developer’s preference, may be signed electronically or in ink. Once source of funds checks are complete, you should organise the purchase balance to your solicitor, with any stamp duty and legal fees payable.
You should note that if you do not complete within the 10 working days, the developer will charge you a daily interest at the rate set out in your contract, often 4% above the Base Rate. The developer will also have the right to terminate the contract, keep your deposit and stage payments, and sue you for damages.
Your solicitor will deal with the payment of Stamp Duty Land Tax and the registration of your lease at the Land Registry. They will also activate your New Build warranty, which remains in effect for ten years following completion. You should keep these documents safe to pass on if you come to sell the Property.
The Land Registry has extended processing timescales for new Leases, which currently average 10 to 18 months. Be assured, once your Land Registry application is submitted, it is “priority protected”. This means your application takes priority over any subsequent applications lodged against the title after yours. Nevertheless, it is not easy to expedite a new lease application as the Land Registry would have to deal with every prior application to yours.
Purchasing a New Build Property is an extensive but gratifying process. Good preparation and communication with your solicitor are vital to achieving the most successful, yet smooth conclusion.
At Quastels, we take a collaborative approach to ensure buyers are included in the process and have a positive experience throughout the stages of the New Build Conveyancing timeline.
Read MoreWith changes to crucial Inheritance Tax (IHT) reliefs due to come into effect next year, it has never been more important for landowners and business owners to take advice on their tax and succession planning.
The government has announced plans to cap the 100% rate of agricultural property relief (APR) and business property relief (BPR) at £1 million, combined, per person. For more details on how these proposed changes will work, see our previous article.
There have always been complicated issues that arise in ensuring that assets will qualify for APR or BPR. However, having confirmed that the reliefs apply, it has often been unnecessary to think too much further about IHT planning. In many cases the most tax-efficient approach has been to hold onto assets until death.
Once APR and BPR are capped, there will be a lot more to think about. From what we know so far of the government’s plans, there are going to be traps for the unwary as well as opportunities to maximise the value of the reliefs. Those with land and business interests will need to make sure they take expert advice on their IHT planning.
Since the introduction of the Transferable Nil Rate Band in 2008, it has often been appropriate to leave the whole of one’s estate to one’s spouse or civil partner. However, the government’s announcement of the changes stated that “any unused allowance will not be transferable between spouses and civil partners”.
Assuming that this position is carried forward into the coming legislation, this marks a return to the ‘use it or lose it’ principles of pre-2008. Anyone with significant relievable assets will want to make sure that their Will is structured appropriately. This could mean gifts direct to the next generation, or in some cases trusts will be a useful way to achieve your goals in a tax-efficient way.
The current rules mean that where assets qualify for full IHT relief, it usually makes sense to retain them until death, when they can pass without capital gains tax (CGT). Beneficiaries can inherit the assets with an uplift to their probate value. Since lifetime gifts of relievable assets typically do not save IHT, but either trigger an immediate CGT charge, or else result in the beneficiary taking on a held-over gain, they rarely make sense from a tax perspective.
If the government’s proposals go ahead and APR and BPR are no longer available in full, that will shift the equation. Thought should be given to whether the possible IHT saving of a lifetime gift will justify the CGT consequences.
However, there are other factors to take into account, including whether you can afford to gift assets, bearing in mind that retaining any use of gifted property, or the income it generates, can result in a reservation of benefit and so prevent any IHT savings. If you’re passing on your business or a rental asset, you need to consider whether you have other sources of income to fund your retirement.
While trusts may not in reality be the easy IHT saving trick they are often portrayed as, they still have an important role in IHT planning.
For one thing, trusts can help boost how much can be passed on tax free. As well as their own nil rate band, trusts will now also have their own £1 million allowance for 100% APR/BPR (albeit one that will be shared with other trusts created by the same settlor(s) since 30 October 2024). This means that, if set up correctly, a trust will be able to hold up to £1,650,000 without incurring an IHT liability.
Aside from this, trust IHT is still easier to plan for than IHT on death. Under the new rules, the charge will arise on a known date every 10 years at a rate of up to 6% (and in effect up to 3% for APR/BPR property, under the new rules), rather than at a rate of up to 40% whenever the owner dies. Trustees can plan the trust’s and the underlying business’ finances to ensure that the funds necessary to pay the tax will be available at the appropriate date. Importantly, in most cases, the gain on assets settled onto trust should also benefit from hold-over relief. This will have the effect of deferring the realisation of the gain and, ultimately, aiding with the liquidity position for the business.
A Conditional Exemption (CE) from IHT is provided for certain assets, including:
Where assets are assessed to qualify for CE, the exemption will only be granted on the basis of an undertaking given by the beneficiary to HMRC to preserve the asset and to make it available for public access. When CE has been granted, it is also possible to claim CE on a trust fund set aside for the maintenance of the property.
Where it has been possible to obtain 100% APR or BPR on an estate, there has been no need to consider conditional exemption. However, with larger estates no longer able to qualify for 100% relief, CE will likely become more attractive in many cases.
If the government’s proposed changes go ahead in their current form, planning is going to become even more complex. Expert advice has never been more necessary. After all, when it comes to tax and succession, a failure to plan is a plan to fail.
Quastels’ Private Wealth and Tax team is able to provide specialist advice on these topics and more. The team has been joined this year by Jack Burroughs TEP, Senior Associate, who was previously the Private Client and Tax Adviser at the CLA (the Country Land and Business Association) where he assisted some of the country’s largest estates with their tax and succession planning. The team are able to provide land and business owners with expert advice, tailored to their particular circumstances and the commercial realities of their business.
To discuss your requirements and find out how we can help you, please get in touch.
Read MoreOn 21 November 2024, Matthew Pennycook MP (the Minister for Housing and Planning) confirmed the Government would imminently introduce new regulations to abolish the two-year ownership rule for i) a leaseholder of a flat to extend their lease; and ii) a leaseholder of a house to extend their lease or purchase the freehold.
It has now been confirmed that these changes will be implemented this Friday, 31 January 2025.
Up until now, it has been regular practice for sellers of long leasehold properties to apply for a statutory lease extension (in accordance with the Leasehold Reform, Housing and Urban Development Act 1993) and immediately assign the benefit of the claim to the buyer upon completion. This procedure provided a framework for buyers to legitimately circumvent the two-year ownership rule before they could bring their own claim. As of this Friday, these steps will no longer be required.
Buyers will now be able to make a statutory claim for a new lease as soon as they become the registered proprietor of the leasehold title at HM Land Registry. This point is noteworthy given HM Land Registry continues to experience a significant backlog of applications, resulting in an extended ‘registration gap’ – the period between completion and subsequent registration of the transaction at HM Land Registry.
Accordingly, buyers will be prevented from exercising these rights immediately upon completion and not until registration of the legal title has been effected at HM Land Registry. This may result in some buyers not wishing to wait, in which case they will have to follow the current practice of the seller giving notice of the claim with the benefit being assigned to them upon completion.
Subject to potential delays resulting from the ‘registration gap’, these changes should empower leaseholders to enfranchise at their own convenience and without the potential pressure of having to undertake the exercise at the point of acquisition.
Whilst the removal of the two-year ownership requirement will be welcomed by both buyers and sellers of leasehold properties, other proposed legislative changes introduced by the Leasehold and Freehold Reform Act 2024 are yet to be implemented. For example, buyers will still be faced with uncertainty as to whether a claim should be pursued under current valuation rules or to await implementation of the new provisions. We await further developments with interest.
To discuss any of the points raised in this article, please contact Daniel Blake or fill in the form below.
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