A conveyancing expert, Johnny Drysdale of Keystone Law acts for private clients on their Prime Central London sales and purchases. In our conversation, he discusses what to expect when enlisting a conveyancing expert for the purchase, sale or mortgage of high-value residential property. Johnny also shares his insights on how the events of 2020 have impacted the property market for UK and overseas buyers, and what we can expect in 2021.
1. Once a buyer’s offer is accepted, the sales agent will circulate a memorandum of sale to each party’s solicitor with details of the agreed sale. The memorandum of sale will usually contain the party’s agreed timetable to exchange of contracts.
2. The seller’s solicitor will then circulate the sales pack to the buyer’s solicitor. The sales pack contains the title information, draft contract and seller’s replies to the standard form property enquiry forms. It may also include management information, where the property being sold is leasehold.
3. The buyer’s solicitor’s due diligence will involve reviewing the sales pack and raising additional enquiries of the seller in relation to any potential issues or gaps in the information provided.
4. The solicitors will then negotiate the contract and transfer deed.
5. On exchange, the contract is entered into, the buyer pays across a 10% deposit to the seller’s solicitor to hold and a date for completion is agreed between the parties.
6. Completion is when the balance of the purchase price is paid across and the keys are released to the buyer.
Insurance is commonly used now to insure all types of risk. This negates the need for long drawn out contract negotiation. Also, the increasing use of electronic signing in recent years has really liberated the process of signing the transaction documents – for example, the Land Registry is now accepting deeds (which must be witnessed) signed electronically.
Pent-up demand has been building in the property market since the 2016 Brexit referendum. With Boris’ sizeable majority in 2019, a lot of this demand was unleashed with the Boris Bounce. This uplift, however, was swiftly curtailed by a dramatic national lockdown in early 2020 due to coronavirus. Conveyancers, agents, valuers, surveyors were left twiddling their thumbs for 12 weeks. To inject some life back into the market post-lockdown, Rishi Sunak introduced his Stamp Duty holiday, lifting the threshold at which Stamp Duty Land Tax (SDLT) becomes payable for those without additional properties to £500,000. This has certainly been the catalyst for people piling back into the market – I haven’t seen such a groundswell of activity for several years.
There are several factors which could stop the current bull market in the housing market dead in its tracks, particularly for those looking to buy Prime Central London properties in the £5 million bracket or above.
Firstly, there is the Brexit transition period deadline of 31st December 2020. It is increasingly looking like there will be No Deal. I expect no trade deal with the EU to weigh on confidence in the market somewhat. For example, no one quite knows how favourable the UK will remain to overseas buyers who have sustained a surge in house prices in recent years – changes announced to SDLT by the Chancellor aimed at targeting overseas buyers possibly indicates a hardening of approach.
From 1st April 2021, overseas buyers will face a 2% surcharge on their SDLT bill for buying property in the UK. To put this in context, those buying a £5 million property, who already own one or more properties in the UK or elsewhere in the world, will be liable for £748,750 in SDLT. Those buying at the £10 million price point will be liable for £1,445,000 in SDLT.
The sums going to the Chancellor do appear eye-watering at first, but will they put off overseas buyers who have, for the last two decades or more, seen the UK, and particularly the London property market, as a safe place to invest and live? I don’t think so. Despite the impact of the coronavirus on London’s arts and entertainment scene, London is still the pre-eminent global city for the global elite to have a home.
One piece of advice for those who have lived in the UK for several years is to look into becoming British citizens. I have several French clients who are already in the process of applying for citizenship. If you are an overseas national looking to buy property in London post-April 2021, having a British passport could significantly reduce your SDLT bill.
Those who like to structure their property purchases in the UK through overseas companies, for confidentiality or tax reasons, should note that the Government has announced their intention to introduce a register of beneficial owners of overseas companies and other legal entities owning UK property in 2021.
The implications are that the overseas purchasing entity will not be able to buy, sell, charge or grant a long lease of property in the UK unless they are registered in the new register, to be managed by Companies House. The register will record details of the beneficial ownership of the company, which, in its simplest terms, will mean those who directly or indirectly hold more than 25% of the shares or voting rights in the company. Whilst overseas trusts are not caught, they are due to be subject to similar requirements to register beneficial ownership of the trust on the UK trust register, coming into force in 2021, under the EU’s Fifth Money Laundering Directive, which will open up the register to public inspection.
Buying through overseas structures has been losing its appeal for some time brought about by the Annual Tax on Enveloped Dwellings and changes to Inheritance Tax. The introduction of these new registers will mean the advantages of structuring through an overseas entity will diminish further. The aim of the Government is to improve transparency and minimise burdens on legitimate commercial activity – whether they are striking the right balance is yet to be seen.
I expect first time buyers to be the busiest in the market in the next six months or so as they look to take advantage of the lifting of the SDLT threshold which ends on 31st March 2021. I am already seeing this free up those further up the ladder who may have been sitting tight waiting for the right opportunity to move.
There will continue to be a drive for more space as people realise working from home could be a semi-permanent fixture. This will mean flats and houses with home-working potential and outside space will command a premium.
