How can I avoid delays before the stamp duty holiday ends?
Since the introduction of the post-lockdown Stamp Duty holiday, the number of homes being sold has reached record highs. The resulting delays in the conveyancing process mean that, even where a sale has been agreed, there is a risk that many transactions may not complete before the holiday ends on 31 March 2021.
So what, if anything, can buyers and sellers do to maximise their chances of completing before the deadline?
How does the stamp duty holiday work?
According to the Halifax House Price Index, house prices fell for four consecutive months as a result of the initial lockdown. To help stimulate a property market recovery, the Chancellor introduced a Stamp Duty Land Tax (SDLT) rate cut for properties purchased for £500,000 or less.
To qualify for the stamp duty relief, a purchase must complete before 31 March 2021. After March, stamp duty rates are set to return to their previous levels.
Will there be an extension?
The combination of pent-up demand and the rate cut has seen the market rally. There are now an estimated 325,000 transactions in the pipeline.
Organisations including NAEA, Propertymark and the Law Society are predicting chaos in the lead up to the deadline. Buyers of qualifying properties that miss the deadline will face a SDLT bill of up to £15,000 - enough to make many transactions no longer viable.
Despite mounting pressure, the Chancellor has remained tight-lipped about the possibility of an extension.
Without an extension, expect a lot of last-minute renegotiation as buyers and sellers try to hold deals together. Inevitably, many deals will collapse.
Backlogs and delays
Once an offer has been accepted, the conveyancing process involves the coordination of buyers, sellers, agents, surveyors, solicitors, lenders and local authorities. The complexity of coordinating these parties significantly increases if a chain of multiple property transactions is involved.
Director of Quittance Legal Services, Chris Salmon, said, “Even a chain-free conveyancing transaction has many moving parts. With the constraints of COVID, the majority of the parties involved are operating at reduced capacity. Delays are inevitable.”
Short-staffed local authorities are buckling under the strain of so many enquiries, and official searches are taking as long as two months to process.
Some lenders are taking up to eight weeks from the mortgage application to get a decision out to the prospective borrower.
Some solicitors are now quoting new purchases at the pre-holiday SDLT rate as they do not anticipate completing before the deadline. Unable to cope with current workloads, some firms are even turning new business away.
It is taking an estimated 5 months to complete a purchase. To complete before the end of March 2021, buyers and sellers that have recently agreed a sale face an uphill battle.
This does not mean that your sale or purchase will definitely take 5 months to complete. There is much you can do to stack the deck in your favour (particularly early on in the process) and increase the likelihood of completing before the deadline.
Steps to take if you are selling a property
Get the legal process underway
Even before COVID, it could take weeks for a solicitor to get the initial contract pack out to the buyer’s solicitor.
This pack contains the draft contract, completed property forms, title deeds and property details. Until the buyer’s solicitor receives the contract pack, they cannot make any progress at all on the purchase side of the transaction.
Your aim should be to get the pack out a couple of days (at most) after you accept an offer. To do this, you should instruct a solicitor as soon as your property is on the market.
The initial formalities (such as agreeing to your solicitor’s terms and verifying your identity) can be completed in advance, so they don't delay matters when you find a buyer.
Many solicitors work on a ‘no move, no fee’ basis, so there is no financial benefit in waiting until you find a buyer before starting the legal process.
Complete the property forms
With your solicitor on board, you will need to complete a number of lengthy forms including the TA6 Property information form, the TA10 Fittings and contents form, and the TA7 Leasehold information form (if you are selling a leasehold property).
These forms are detailed, take time to complete and require you to locate other documents such as electrical completion certificates or new home warranties. Sellers typically sit on these forms for a couple of weeks before completing and returning them. Completing these forms before you find a buyer means the solicitor can get the initial contract pack sent out without delay once you do accept an offer.
Also, your solicitor will rely on the forms to get a complete picture of your sale proposition. Any potential hurdles identified in the forms can be planned for before they are raised by the other side.
Apply for the leasehold management pack
If you are selling a flat, you will need to apply to the freeholder or managing agent for a ‘leasehold management pack’. This pack will contain important information about the management of the leasehold, including historical service charge and ground rent accounts, details of planned future works, and other information about the leasehold.
The conveyancing process will effectively stall while this information is awaited. It typically takes 6-8 weeks to obtain the pack, but with current backlogs, it may take significantly longer.
As a leaseholder, make sure you instruct a solicitor who is proficient in leasehold transactions and ask them to apply for the pack as soon as possible. There will usually be a charge for this pack, but this cost pales when compared with the cost of delays.
Steps to take if you are buying a property
Instruct a solicitor
If you are actively looking for a property, it is still a good idea to instruct a solicitor while you are house hunting. The initial formalities, like ID verification, can be completed in advance of finding a property. If the seller's solicitor manages to get the contract pack out to you quickly, your solicitor can then move quickly on to the enquiry phase.
Lenders are overwhelmed at present. Choosing a lender and mortgage product in advance will save time. Contact the lender and ask for a Decision in Principle (DIP). With a DIP you will be vetted as a borrower and the amount you can borrow will be confirmed. A DIP is also a favourable signal to the seller when you make an offer, showing that you are a serious, organised buyer.
The right choice
In time-pressured market conditions, a seller may accept a slightly lower offer from a buyer with a DIP over a higher offer from a (possibly) less-organised buyer.
Choosing the right buyer could also make a significant difference to how long a sale will take. If you are lucky enough to have multiple offers, the highest offer may not always be the best one.
An offer from a chain-free cash purchaser is the best case scenario. Many of the common delays, such as searches, can be circumvented entirely. It may be worth weighing up a higher offer against the benefits of a buyer who can complete more quickly.
If you are buying, make sure the estate agent understands your position; tell them whether you are chain-free, are a cash buyer, or have a DIP and solicitor in place. If you plan to make a lower offer, give the agent as much information as you can that will support your ‘pitch’ to the seller.
Be proactive and raise any issues
If you think there might be any complications with your sale, raise them with your solicitor as early as possible. You may, for example, have an unofficial roof terrace or a missing electrical completion certificate.
The conveyancing process is designed to unearth issues like these, so don't bury your head. Tell your solicitor about any concerns you have and he will be able to advise and plan for the best course of action before it can derail your sale.
Delays during the conveyancing process are nothing new. Many of the typical delays are foreseeable and could be averted with proactive communication. In the current situation, if it feels like your file has been overlooked, that may sometimes be the case. Proactive communication can help to keep your transaction moving forwards.
Steps you can take to improve inter-party communication include:
Asking all parties to communicate by email.
CC’ing all relevant parties in on any correspondence.
Using read receipts.
Asking recipients to confirm by email that they have read and actioned any points.
If you still feel like progress is not being made, pIck up the phone and ask for an update. Don’t worry that you might be perceived as pushy - ‘top of mind’ will mean you stay top of the solicitor’s file pile.