© The Financial Times Ltd 2016
FT and 'Financial Times' are trademarks of The Financial Times Ltd.
The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice.
July 30, 2014 7:42 pm
1. Sealed bidding
I’m trying to buy a house in central London but it’s difficult because of the competition for good property. The selling agents tell me that a number of sealed bids have been put in on my preferred house and that I must put in a “best and final” offer. What should this contain? Prime central London property transactions are currently affected by a shortage of good property and a number of buyers competing to purchase each good quality home. By asking for “best and final” offers, the seller is essentially looking to prospective buyers to signal their intent more quickly.
Can I do anything to encourage the seller to accept my bid? With your offer you should provide sufficient information to show that you have finance available both for the deposit and completion monies; that the purchase is not dependant on your having to sell your own home; and that you have instructed lawyers in anticipation of the purchase proceedings. This information, together with an expression of your liking for the property and your wish to make it your family home, should provide the buyer with sufficient comfort that you are a genuine buyer in a position to proceed quickly.
Should I seek professional help with the process? Many buyers in your position attain the services of a property buying agent to help them identify suitable properties at an early stage and to demonstrate that they are committed to the buying process.
2. New managing agents
About 18 months ago our landlord employed new managing agents. Service charges have since more than doubled, but there has been no appreciable improvement in services or major works to the building. The managing agents have not supplied any detail. Can I insist on an explanation or challenge the level of service charge? The services that the landlord must provide and the cost of service charges will be set out in your lease. Most well drawn leases will place the landlord under an obligation to maintain the structure of the building and to decorate, clean and repair common parts.
What are my options for taking action? If the stated services are not being carried out the landlord may be in breach of the terms of his lease. Look carefully at the wording to see what the landlord is obliged to do and whether he is in default. You can apply to the First-Tier Tribunal (Property Chamber) to challenge service charges that you believe are excessive. Tenants can also ask for a summary of costs incurred by the landlord which he is seeking to recover through service charge demands. This is the starting point for you and a joint letter from yourself and other lessees before an application to the First-Tier Tribunal (Property Chamber) is recommended.
Can all of the tenants take joint action? Residents have the right to apply to manage their own buildings. Depending on the number of flats and length of leases, the majority of residents may be in a position to purchase the freehold from the landlord under enfranchisement legislation.
3. Failed completion
I exchanged contracts to buy a flat with a completion date delayed for six months, but the sellers have said that they cannot find somewhere to move to and have decided that they don’t wish to complete the sale. Are they obliged to complete? Most contracts for the sale of residential property incorporate the Standard Conditions of Sale. These deal with many aspects of a property transaction, including the unusual situation where completion fails to take place on the appointed day.
What do the Conditions of Sale stipulate? Once contracts have been entered into, the buyer and seller are legally bound to complete the transaction on the contractual completion date and by the time specified in the contract. The Standard Conditions say that if you are the party ready and able to complete, you can give notice to the party who is in default. Completion must then take place within 10 working days.
What can I do if they fail to move out on the completion date? Once the 10-day period has elapsed, you can immediately take action and your options are either to ‘rescind’ the contract or to take Court action. Rescinding means bringing the contract to an end, in which case the seller would have to return the deposit to you and you retain the right to claim damages. Court action to enforce the contract and require the property to be sold to you is called an ‘action for specific performance’.
What else should I consider? You should immediately tell your lawyer of the seller’s proposal and how you wish to respond. The seller’s lawyer will, no doubt, advise his client of the risks that they are taking if they fail to complete and default on their obligations to you.
4. Tax relief on house and barn
I own a house with a large garden and a large barn. Having recently retired, I want to convert the barn into our home and then sell the main house and most of the garden. Will we have to pay tax on the sale of our current house? The basic rule is that principal private residence relief (‘PPR’) exempts you from capital gains tax on the sale of your ‘main’ residence. On the sale of a house, PPR permits relief on the capital gain of the property in proportion to the length of time you occupied it as your main residence. If you have more than one house, your ‘main’ residence can be determined by making an election, or failing that, as a question of fact. Where a house has been your main residence at any time, the relief applies for the last 18 months of your ownership regardless, to allow for a period of overlap between properties.
What are the risks of being found liable for tax on the land? If the land is sold with the house then land up to half a hectare is automatically included in the PPR. If the land is in excess of this, but is required for ‘the reasonable enjoyment of the dwelling house’ the relief will still apply. If this is not the case, then you will pay capital gains tax in proportion to the gain in value of the land. Land in excess of half a hectare is unlikely to qualify for PPR if you do not sell it with the house.
What happens if we later sell the converted barn? Having sold the main house, if you live in the converted barn and it is your main residence, then any subsequent sale should be covered by PPR, subject to the comments above. However, HMRC may argue that PPR did not apply until you moved into the barn and therefore the proportion of the gain attributable to your period of ownership before then will be taxable.
Henry Stuart is a partner in Withers’ property team
This article has been subject to a correction
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.