Property lawyer predicts chaos for April's Stamp Duty rise

7 March 2011 | By Natalie Thomas

Stephenson says: “There’s one very real difference this time around which few have realised at first pass; the relevant date for assessing the rate of Stamp Duty is at the point of completion, whereas in the past it has been at the point of exchange of contracts.”

He says there will be an almighty rush to get contracts completed before April 6, and he expects some will not realise yet that it’s the completion date that is relevant.

He adds: “Further, lenders and the banking system generally will be put under immense pressure in those last few days up to April 5  to transfer funds before the cut off , with the potential for all manner of knock on issues if they fail.”

Stephenson says as buyers try to push the sale of properties through faster, many are considering entering into agreements that see the sale of the property complete before April 6 but not necessarily see the new owners move into their new home.

He adds: “I’ve heard of many who are looking at completing before the magic date, but who are then happy to sign a tenancy agreement so that the sellers have time to find a new home - and don’t have to move out so fast,”

“In principle, this is simple to effect legally and is superficially very attractive, but it comes with a big warning because many mortgage offers require that vacant possession is given at the date of completion, which is when the buyer’s mortgage kicks in. Breach of the mortgage terms could result in the lender calling in the loan or as a price for not doing so insisting converting it to a buy to let mortgage at a much higher interest rate.”

He warns that for those with such plans, it’s wise to consult with the lender and get permission to rent back the property for a short period of time to avoid the risk of such serious penalties.

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