Lifetime ISA Partial Withdrawal for exchange of contract deposit on new builds

JamieH1992

Most housebuilders in England require a 5-10% deposit (or similar) one month after reserving a new build property in order to exchange contracts. You can partially withdraw from a Lifetime ISA towards this deposit, but only if the period between exchange of contracts date and completion date is less than 180 days (it's 90 days but can be extended a further 90 days by a solicitor).  This time limit is stipulated within the terms and conditions for Skipton Building Society, and i believe is the same for most other Lifetime ISAs. The period between the exchange of contracts date and the completion date can often be more than 180 days (in my case it is planned to be 210 days) especially if there are delays due to weather etc.  Do you lose the government bonus after the 180 days is up if this is the case, or is there something that can be done?  I do not understand the reason for the time limit if it can be over 180 days in the case of new builds that haven't started to be built yet. 

eskbanker

The 180 (90+60+30) day limit is part of the scheme rules so no LISA provider can override those, i.e. it's the same for all rather than most.

https://www.gov.uk/guidance/lifetime-isas-for-isa-managers#withdrawals-for-first-time-residential-purchase explains the consequences of not completing within 180 days of withdrawal of funds ('you' being the ISA provider in this context):

Failed first time residential purchase

If the house purchase fails or does not complete within 90 days or 150 days or 180 days (if the relevant extensions have been applied for) after the withdrawal from a LISA the investor’s conveyancer must:

• inform you that the purchase has not been completed

• return the whole amount withdrawn in full to you, or provide an explanation for any shortfall in the amount repaid

• confirm the investor’s name and address and the LISA account number from which the withdrawal was made

• notify you of their unique professional body registration number

The amount returned to you must be immediately repaid into the LISA account.

If the amount returned to you is less than the amount withdrawn any shortfall must be treated as a withdrawal and a withdrawal charge must be applied.

So your best bet will be to negotiate something with the builder or your conveyancer that allows all LISA withdrawals to be within 180 days of completion, as there isn't any room for manoeuvre with the LISA provider.... 

JamieH1992

Thanks Eskbanker.  This is what i thought.  Luckily i have been able to get funds from elsewhere to fund this initial part of the deposit, to avoid this risk.  If i had negotiated a delay with the housebuilder, i would still be at risk once i pay the 5% if the housebuilder then delayed for any reason (they can only give an estimated completion date).  I still don't understand the reasoning for the time limit, because if a house build is delayed due to weather for example, and it goes over 180 days, it's not ethical to charge the 25% withdrawal fee.