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Author: Subject: Any solicitors in the house? Buying a flat advice
PSpirine

posted on 1/12/16 at 07:05 PM Reply With Quote
Any solicitors in the house? Buying a flat advice

Just want to sanity check something, and I'm sure people on here have the collective knowledge to answer!


My parents live in Cyprus and have a flat that they are in the process of selling with the intention to move over to UK as their main residence. (still have a holiday home in sunny Cyprus, don't worry!! )

While the sale is on-going, I'm helping them out by purchasing the flat here (cash purchase, no mortgage), and they'll pay me back once their flat in Cyprus sells.


Simplistically, to avoid me buying the flat in my own name with associated 2nd residence stamp duty (I have a house here and have no intention of living in the flat), and then paying more legal fees to transfer to them once theirs sells, I wanted to just buy the flat in their name. They shouldn't have to pay stamp duty as far as I understand.

Is it straight-forward to just purchase the flat in their name? Do I need to put a charge on it or anything else other than paying the solicitors, but just making the paperwork and register in their name?


If above is impossible, I'll just buy it in my own name, and then sell it to them in a x months time when their flat sells, but trying to avoid the unnecessary 2nd residence SDLT....

Thanks all!

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russbost

posted on 1/12/16 at 07:31 PM Reply With Quote
I'm not a solicitor, but have been involved in many house purchases, some quite recently. Pretty sure most solicitors would scream "don't do it", but much depends on the relationship you have with them, how much you all trust one another & how easily the flat will sell in Cyprus. For instance if it doesn't sell, what happens then?

If you buy it in their name & it is to be their main residence then there would be no additional stamp duty, only the standard 2% on everything over £125,000. They will still need to provide adequate ID to the solicitor & solicitor will also want to know where the money is coming from due to money laundering regs, they will also need to personally sign some of the documents &, I think for the actual transfer deed that will have to be done in person, over here at the solicitors, but don't quote me on that

If you buy in your own name I would imagine the solicitor should be able to register a charge on the property in your name which stops it from being sold without you agreeing that the debt has been discharged, but obviously if there was a problem with selling the property in Cyprus, or funds fall short, you still own a property, or part thereof if they cleared some of the debt, that you don't want or have a use for. However, you will get into the second home ownership charge of 3%, & don't forget that that 3% is on top of "normal" stamp duty, not instead of. I recently bought a house to rent out for £180k, the stamp duty bill was over £6k - Ouch!

I think you need to talk directly with the solicitor who would be handling the purchase in case they can see an easier way around this, but I doubt it - we were in a similar situation within family & still had to go through all the usual red tape & legal gobblydegook





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ravingfool

posted on 1/12/16 at 07:35 PM Reply With Quote
There's nothing stopping them from buying the place in their own name with your funds.

Complications are instructing the solicitors remotely and what to do between you to protect your funds.

3 choices:
1. Do nothing, rely upon your parents word (probably fine but gets very complicated if either of them pegs it or you all fall out in the mean-time).

2. Draw up a loan agreement confirming details or the arrangement.

3. Agree a formal mortgage and register it against the property on purchase to prevent any funny business.

This is not legal advice! Speak to your solicitor.

Buying in your own name is going to leave you liable for the extra sdlt.

(Eta: I often act for international clients. Not necessarily a problem but extra hoops. You're also likely to be advised to seek independent representation although that's not necessarily required)

[Edited on 1/12/16 by ravingfool]

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Bluemoon

posted on 1/12/16 at 07:53 PM Reply With Quote
I think SDLT will apply for them, as the house in Cyprus is counted...

This particular TAX is quite nasty we have just been stung with 20K on our new house, this is all because we own one of our parents houses (think small 2 bed retirement bungalow), and we never lived in it but just want our parents housed. Nothing at all we can do about it (this was caused by an unexpected job change so we could not transfer owner ship of the parents dwelling with out HMRC still wanting us to pay SDLT)..

Dan

[Edited on 1/12/16 by Bluemoon]

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PSpirine

posted on 1/12/16 at 08:06 PM Reply With Quote
Thanks for feedback guys, I'll give a solicitor a call tomorrow (half of them are useless at dealing with anyhting non-standard is the problem!) and ask about the faff involved with me just transferring them some money and they buy it before paying me back (appreciating the risks in case of fall-outs etc.).

Regarding SDLT, my understanding is it shouldn't apply even given the holiday house in Cyprus as this flat will be their main residence replacing the flat in Cyprus. Might need to be a "refund" thing though, where it's paid and then reclaimed once flat is sold...

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MDR1987

posted on 1/12/16 at 08:41 PM Reply With Quote
***subject to further details as necessary***

As a property solicitor if you buy in your sole name, and keep existing residence (essentially buying a 2nd home) then the surcharged SDLT applies.

if your parents buy they will also pay surcharge SDLT , but can reclaim within 3 years (note HMRC don't refund as quick as they collect!!!) once Cyprus sold. Provided no other lending you can secure first legal charge to cover monies borrowed on fairly standard terms, register the charge at the land registry.

One thing you might be caught by is the changes in legislation to lending if you intend on charging interest (most family arrangements don't but you never know!)

email me if you have any further comments/queries

Just FYI - this additional SDLT element is a complete minefield, its what happens when the government introduce a change in legislation with one weeks notice! the number of scenarios such as yours are only going to increase. Don't get me started on houses with annexes.......

Matt

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ravingfool

posted on 2/12/16 at 10:58 AM Reply With Quote
quote:
Originally posted by PSpirine
Thanks for feedback guys, I'll give a solicitor a call tomorrow (half of them are useless at dealing with anyhting non-standard is the problem!) and ask about the faff involved with me just transferring them some money and they buy it before paying me back (appreciating the risks in case of fall-outs etc.).

Regarding SDLT, my understanding is it shouldn't apply even given the holiday house in Cyprus as this flat will be their main residence replacing the flat in Cyprus. Might need to be a "refund" thing though, where it's paid and then reclaimed once flat is sold...


As MDR says; it will apply but you can claim back as they're selling their main residence afterwards.


I'd like to think that most of us are pretty good at non-standard transactions actually!

If you pay peanuts though, you get monkeys in front of screens and they won't necessarily know the right questions to ask nevermind how to advise you correctly.

Find a local solicitor rather than a national conveyancing firm and then you'll be able to tell them what's happening and for them it'll be approximately as easy as falling off a log. They may however, charge you for making everything work because you have to pay for that expertise and actually doing the work.

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MDR1987

posted on 2/12/16 at 12:14 PM Reply With Quote
A phrase I would like to use with my clients a lot more than I do!!! Peanuts = Monkeys
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