This week we have a guest blog from Director of Quittance Legal Services, Chris Salmon. Chris gives his expert opinion on what you can do to have the best chance of completing before the stump duty holiday ends.
Recent research estimates that 325,000 property owners, with sales agreed between September 2020 and January 2021, may fail to complete before the stamp duty holiday ends on 31st March 2021. Search delays, mortgage accessibility, and conveyancing backlogs are all contributing to sales taking around 5 months to complete. This article offers insights into what buyers and sellers can do to prevent avoidable delays and give their transaction the best chance of completing before the stamp duty holiday ends.
Stamp duty holiday
To help mitigate COVID-19’s effect on the property market, the government abolished Stamp Duty Land Tax (SDLT) on residential properties sold for under £500,000. As from 8th July 2020, buyers of properties that complete before March 2021 in England and Northern Ireland pay no stamp duty. Promising to save the average homebuyer around £2,000, the measure has contributed to an upsurge in the number of property sales being agreed.
Ensuing delays
Even under normal conditions, the conveyancing process takes around 3 months. Increased transaction volumes and the challenges of operating through lockdowns, mean property service providers are buckling under the workload. Backlogs at local authorities are particularly severe. Most authorities have at least doubled their turnaround times. Some authorities are quoting 40-50 days to return a local authority search – others are only processing searches that are deemed to be urgent.
Conveyancing solicitor firms are struggling to balance ever-increasing file loads with the constraints of home working. Firms that were already running digital files have fared better – but most are still reliant on paper files which are challenging to manage with solicitors working from home. Many firms still have support staff on furlough as they focus on the significant financial business challenges. Lenders, surveyors and removals firms are also reporting severe delays.
Consequently, property transactions are taking much longer to complete. Unless the stamp duty holiday is extended (no word on that yet), anyone agreeing on a sale after September 2020 may not complete before the deadline. Worse still, delays could lead to chains collapsing – especially if missing the stamp duty holiday makes it financially untenable for a buyer to complete the purchase.
Is there anything I can do to speed up the transaction?
Even under normal conditions, the conveyancing process can be fraught with delays. Many of these delays are potentially avoidable if buyers and sellers take a few proactive measures:
Advice for sellers
Instruct a solicitor as soon as you market your property. Instructing a conveyancing solicitor as soon as you put your home on the market is a smart move. The formalities of setting you up as a client and clearing you under money laundering regulations shouldn’t, but can, take weeks. Until you are formally set up as a client, a solicitor cannot carry out any legal work on your sale. Delaying could leave your sale stuck in the starting blocks for a fortnight after you accept an offer. If you have yet to identify a solicitor, ask your agent for a recommendation. Your interests are aligned, so your agent is likely to suggest a firm with a track record in getting deals through. If you had a good experience with the solicitor you used to buy the property, consider using them for the sale. Most firms act on a no move no fee basis, so there really is no reason to procrastinate.
Complete the property forms
With your solicitor on board, you will need to complete a set of property information forms about your home and how you have used it. These forms include the TA6 Property information form, the TA10 Fittings and contents form, and the TA7 Leasehold information form. The forms are extensive, require you to source associated documents and could require a bit of back and forth between you and your solicitor. Only once your solicitor has received the completed forms, can the initial contract pack go out to the buyer’s solicitor. The buyer’s solicitor essentially twiddles their thumbs until these contract papers are received.
If you have instructed your solicitor before you find a buyer, the forms and draft contract could, theoretically, be sent out to the buyer’s solicitor the day after you accept your offer. Your solicitor will still need the ‘Sales Memo’ from your agent, detailing the property and agreed price. Make sure your agent has your solicitor’s email address so the agent can send the memo out by email on the day of offer. CC both your agent and solicitor on all communication from this point forwards.
Now would be a good time to locate any documents referred to in the forms e.g Electrical Installation Certificates. Ask your solicitor if you will need to provide any further documents in the future and find or source these in advance. If you haven’t had confirmation from your solicitor that they have sent out the contract pack to the buyer’s solicitor, chase for confirmation. Don’t just assume everything is underway because you’ve completed the forms.
Stategise
Once your solicitor has the completed forms, ask whether they can foresee any potential issues. Together you can decide on the best strategy to adopt in answering the buyer’s enquiries, addressing concerns and identifying suitable indemnity insurance policies or other solutions in advance.
Apply for managing agent information
If you are selling a leasehold property, you will need to supply the buyer’s solicitor with a ‘managing agent information pack’. This package of documents contains information about the freehold, service charges, ground rent, proposed works, disputes and anything else relating to the lease.
Chris Salmon, Director of Quittance.co.uk said, “You will need to apply to your managing agent or landlord for the pack. Sourcing this information is a common cause of delay and can take weeks or months at the best of times. With managing agents facing severe backlogs, sourcing this information could seriously affect your chances of completing a leasehold sale before March.”
Advice for buyers
Get your finances sorted. Identify your preferred lender, choose a mortgage product and get a mortgage ‘Agreement in Principle’ (AIP). Once you have found a property get onto your lender ASAP and ask your solicitor to do the same.
Start the legal process
Although a buyer’s solicitor cannot do as much in advance of an offer as a seller’s solicitor, they can still get you set up as a client. If you have chosen a lender, make sure your prospective solicitor is on your lender’s approved solicitor panel. If the solicitor is not on the panel, you could face delays as the solicitor would need to subcontract part of the legal work out to a solicitor who is on the panel.
Set timescale expectations
Communicate your preferred time frame at the same time as making an offer. If the seller is working to a completely different timescale you may as well know up front. You can then either negotiate, make your offer conditional or find another property.
Local authority searches are significantly delayed at present. If you are obtaining a mortgage, make sure you ask your solicitor to apply for searches immediately. You may have to pay for these upfront but delaying could be an expensive mistake. If you are a cash buyer you could proceed without searches. Your solicitor will give you the pros and cons but proceeding without searches will give you a speed advantage.
Surveyors are also inundated. You should waste no time in booking your survey once you have an offer accepted. Ask your lender when they think they will carry out the mortgage valuation and whether their surveyor can complete the survey or homebuyers report at the same time, as this may be faster.
Conclusion
The Chancellor is under pressure to extend, but there have been no indications that an extension to the stamp duty holiday is on the cards. The longer your sale or purchase takes, the greater the chance of it falling through due to changing circumstances anywhere in the chain.
Don’t be afraid to communicate regularly with your solicitor. Busy conveyancing solicitors will respond to the loudest clients first, but that doesn’t mean you need to pester them every day.
You should focus on chasing for confirmation at the key stages, (e.g. Has the contract pack been sent? Have the searches been returned?). You can also follow up with an email or call every week or so to check things are progressing.
Visit https://www.quittance.co.uk/?msID=12a649ba-21db-4950-9a27-4fc2f98bceb1 to find out more.