How does the stamp duty holiday work?
In Spring 2020, lockdown brought the UK property market to a standstill. As restrictions were loosened, there was concern that the market would not rebound. On 8th July, the Chancellor Rishi Sunak announced a ‘stamp duty holiday’ designed to kickstart property sales and purchases.
The holiday raised the stamp duty land tax (SDLT) threshold for buyers from £125k to £500k. As a result, 9 in 10 homebuyers would pay little to no stamp duty on their purchase, saving an average of £4,500.
Why are there delays?
Chris Salmon, Director of conveyancing solicitor panel Quittance Legal Services said, “The holiday appears to have worked. The market surged during the Summer, as a result of pent-up demand from buyers who had been holding off during Brexit, pent-up demand from homemovers whose plans were stalled by the pandemic, and new buyers eager to take advantage of the holiday and move out of the city”.
Although the delays were anticipated by property commentators, many of the reasons for delays have been difficult to mitigate or avoid. The major causes of delays include:
- Mortgage accessibility - Financial uncertainty regarding both the impact of the UK leaving the EU and the global pandemic has led to many lenders changing or tightening rules at short notice.
- Surveys - The number of qualified surveyors has been declining for years, and the sudden demand for mortgage surveys and homebuyer reports has meant many transactions are stalled while waiting for a gap in a surveyors’ calendar.
- Searches - COVID-secure guidelines have meant that many local authority staff are working from home, or only able to attend their offices in small numbers. This has led to local authority and other searches taking much longer to process.
- Conveyancing backlogs - COVID guidelines and homeworking are also affecting how efficiently conveyancers can work. Support staff have been furloughed. Restricted access to mail and file systems has caused delays while new processes are implemented.
Maybe. There’s been no official word of an extension, but the unstable market conditions that prompted the Chancellor to announce a stamp duty holiday in the first place remain.
There is concern that demand will drop in early 2021, when it becomes likely that new transactions will not complete before the March 31st deadline for stamp duty relief. If there are early signs of a slowdown, the holiday may be extended. There may also be a short extension to accommodate the severe delays seen in some local authorities, but this is unlikely.
The goal of an extension may be to keep the market going until the rollout of the recently-announced COVID vaccines can help a return to ‘normal’. That said, Chancellor Sunak may be reluctant to extend the scheme now that vaccines do offer a light at the end of the tunnel.
There is no guarantee there will be an extension. Buyers and sellers should focus now on doing everything they can to avoid and mitigate delays and ensure they complete comfortably before the deadline.
How can I speed up my purchase?
Buyers are often hamstrung by processes beyond their control, or the control of their solicitor. The ordering of property searches, and especially local authority searches, is seeing major delays, and mortgage lenders are also struggling to balance an increase in demand with tighter lending rules and furloughed staff.
That said, there are steps that buyers can take to give their transaction the best chance of completing before the deadline:
- Instruct a solicitor ASAP - Technically, you can find a solicitor and complete the initial paperwork like ID checks even before you make an offer. This alone could shave days off your transaction.
- Get the mortgage sorted - Get a mortgage agreement in principle (AIP) as early as you can. Although AIPs are often time-limited, it will make the finance side of the process faster when you do make an offer.
- Respond quickly to correspondence - Don’t let emails sit unanswered for days. This is a factor that you are in complete control of. If you can respond to questions from your solicitor and return forms promptly, you will keep up the momentum on your purchase. Don’t let your solicitor think you have ‘gone quiet’.
- Be willing to compromise - If the survey finds a minor issue with the property requiring repair, you could ask the seller for a discount, or to carry out the repairs themselves. This approach may be the right one if the repairs are urgent and you are already stretched financially. Be aware, however, that a negotiation can cost time, and may add weeks to the sale if the seller decides to shop around for quotes.
There is more that a seller can do to speed up a transaction than a buyer, particularly in the early stages:
- Instruct a solicitor when you market the property - A lot of legal work can be done on the sale side even before you find a buyer. This approach can shave weeks off the conveyancing process.
- Complete the property forms ASAP - The TA6, TA7 and TA10 forms can take a while to finish, and may require you to find documents and source answers from elsewhere. Tackle these forms as soon as you can.
- Gather paperwork - The property information forms require a range of supporting documents, from electrical completion certificates to NHBC guarantees.
- Get the managing agents pack - If you are selling a leasehold property, sourcing the managing agents pack, is the most significant cause of delay.
- Be willing to pay - If you have missing documents, the buyer’s solicitor may recommend that the buyer gets indemnity insurance. This insurance is usually inexpensive, but as the seller, you could offer to pay for it. This approach will also keep the sale moving forward, and won’t give the buyer reason to be anxious.
Conveyancing solicitors are likely to be very busy at the moment, with staff absences and social distancing rules making it harder to process the backlog. You want to stay ‘front of mind’ when the solicitor is deciding which files to prioritise, but that doesn’t mean you should be pestering them with multiple calls and emails a day.
Make sure you know where you are in the conveyancing process and, if there is a delay, what the cause is. If the delay is something you can assist with, like chasing the estate agent to send out the sales memorandum, then act. If the delay is caused by another sale in the chain, don’t stress about it.
Whatever stage of the process you are at, a regular weekly email or call also will help ensure your solicitor prioritises your file, without you seeming like a pushy, ‘problem client’.
Even in the best of times, there is a lot about the conveyancing process that is beyond the control of a buyer or seller. The March 31st deadline for stamp duty relief has created yet another reason to stress, but there is still time to take action and do everything that is in your control to keep your sale or purchase moving forward.
Author: Chris Salmon, Operations Director of Quittance Legal Services. Please speak to our agents for solicitor referrals.
Property shown - https://www.gth.net/property/rps_gth-wil200019s/ta4/somerset/sampford-brett/house/6-bedrooms