Off plan purchase delays – Advice on stamp duty/mortgage

by Readers Question

10:15 AM, 19th January 2016
About 3 years ago

Off plan purchase delays – Advice on stamp duty/mortgage

Make Text Bigger
Off plan purchase delays – Advice on stamp duty/mortgage

Due to events outside of our control we exchanged on an off-plan new build apartment on 1st December 2015.delays

Our Developer has now delayed to a new estimated completion date of May/start of June 2016. I called HMRC and they said we must pay the additional stamp duty.

Our BTL interest-only mortgage was also booked 1st December 2015 and is valid for 6 months (partly why we exchanged around this time). There is a good chance our mortgage offer would have expired by then.

Any advice relating to either issue?

Would it be in our interest to reapply for a new mortgage, in say March? (Obviously we would lose the booking fee). We signed a reservation agreement agreeing to the purchase price in July 2015. The property is located in London and surely the property’s value and/or the expected rental income would have increased? We got 60% LTV but would prefer higher.

Many thanks

James

 



Comments

Neil Patterson

10:18 AM, 19th January 2016
About 3 years ago

Hi James,

The good news on the mortgage front is that you are only borrowing 60% LTV so I would not expect too many problems. However I would speak to the lender now and see what advice they can give you and if they could extend another month or if they will require you to apply for a new mortgage product.

The extra stamp duty I am afraid looks like it is going to be an additional cost.

Gilly

11:49 AM, 19th January 2016
About 3 years ago

Not my area of expertise, but I thought that the exchange date was the one to use for Tax purposes not the completion date? Maybe it doesn't apply to stamp duty, but I know it does for tax.

Rob Crawford

13:41 PM, 19th January 2016
About 3 years ago

The HMRC guidelines states, "at the end of the day of the transaction" and that suggests to me as the day of Completion. In terms of the mortgage, be careful as many purchasers are trying to beat the 1st April stamp duty date and as such they have been inundated with mortgage requests. If I were you I would be in discussion with the developer for them to make good any costs attributed to their delay.

james briscoe

14:18 PM, 19th January 2016
About 3 years ago

*Please delete my reply above*

It's very frustrating as it's been caused by the Developer delaying twice and not by fault of our own. Also I've read that if you had exchanged before the release of the Autumn Statement (25th Nov.), that you could have avoided the additional stamp duty, even if Completion occurred after April 2016. It was actually our intention to exchange earlier than this date but delays were caused by our bank (they lost some of our paperwork for 1 month and it was impossible to speak to anyone who could actually help!), and our lawyers forgot to ask my co-applicant for an ID questionnaire (along with things going missing in the post!).

Ultimately, these risks are something which an amateur landlord must learn about eventually I suppose. For the record, should the Autumn Statement be considered sufficient notice, I think it's highly unfair on non-professional landlords.

I would like to know whether if the property receives a higher valuation, would the bank allow us to borrow more (have a higher LTV), assuming our personal circumstances have remained the same? If so, we would apply for a new mortgage around March 2016 (hope this leaves sufficient time), otherwise I will speak to my bank and see if there's some flexibility with the booking expiration date.

Arun Damodaran

14:40 PM, 19th January 2016
About 3 years ago

Hi James,
Looks like you were unfortunate to miss the exchange date by a week or so. If you had exchanged prior to 25th Nov, it wouldnt have mattered if you completed post 1st April as your exchange would have happened in the stipulated window. Cant see a way out of paying the additional stamp duty IMHO. Lenders do allow extension of a mortgage offer if completion doesnt happen in the 6 month period, but this would be something you may have to take up with them.
Regards
Arun


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Want to avoid empty properties over Christmas?

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More