Stamp Duty on New Build: Interesting Situation

MrLogical

More about this here:
https://forums.moneysavingexpert.com/discussion/6166489/stamp-duty-paid-by-builder/p8

It seems builders are accepting and paying what they promised there will if you have a signed contract...

rmd076

rmd076 said:

sitabbb053 said:

Hi All,

We exchanged on a property pre-covid and are due to complete in a few months. We found out today that our stamp duty has dropped by £15k!

We have in our contract an agreed fixed amount that will be paid to us as a lump sum incentive WITH REGARDS to stamp duty. That is the way it is worded. 

Do you think we will still get this full amount and that the developer will not try and claw back an amount? There is nothing in the contract about this going down if we suddenly find ourselves needing to pay less. It is a cash incentive that we agreed during negotiations. The home asking price was not negotiated down as a result. 

Thoughts? Thanks in advance.

Hi, we are in a similar situation.  We exchanged just yesterday and are due to complete before the end of July on a new build purchase delayed during the lockdown. 
The developer is covering the stamp duty and the contract states, under incentives:

'If exchange of contracts takes place by (blank) the Seller will make an allowance to the Buyer of £xxx as a maximum contribution towards Stamp Duty Land Tax. The Buyer warrants that he has disclosed the allowance to his mortgage lender'.

I have this evening asked for advice from our solicitor so awaiting their response tomorrow.
I think the wording is clear that the allowance is due as a cash incentive but unsure whether the fact it is specifically stated as a contribution towards SDLT means anything?
Will report back any advice from the solicitor and subsequently developer.

 I have today been trying to get answers but, so far, solicitor hasn't been that helpful and developer hasn't said anything yet.
Our mortgage broker, who has been helpful throughout, is saying that, in the event that the incentives are renegotiated we would need to go back to our lender for their view and potentially another mortgage offer.  I've argued back that the incentives won't be renegotiated because, in effect, they are staying the same: the developer will make a cash allowance to us on completion - it just won't now go towards SDLT - and we are still, as we have always been, within the lender's permitted ceiling on incentives.  I can't really understand why it is potentially so complex when it was has been a cash incentive all along.  He says that lenders treat stamp duty contributions differently to cash incentives??? 
Our issue is that we don't much time left to complete so need a resolution asap.
thanks

MrLogical

If you read the thread in my link above, you will see two cases where the developer has agreed to honour their agreements. You have precedent. Fight back and don’t accept anything other than what you were originally promised in cash!

se2020

I think the only reason developers/builders offer to pay stamp duty is so the houses still show as sold at full price.
If you haggle £15k off the asking price that will show up on zoopla then all the other buyers will expect to get the same sort of discounts. 

I do not know if them taking the full asking price for the house from you looks good in the books as well. Then if they pay you something for stamp duty they can claim that as a taxable business expense?

Either way, the final amount they get at the end of it all will remain the same so no reason for them to need to change anything. 
If anything I expect they will be happy to keep you as a proceeding buyer at the moment!
I'm not sure there are that many people out there who were just about to go and buy a new house but just happened to be short bu the amount of the stamp duty...

davidmcn

se2020 said:

I think the only reason developers/builders offer to pay stamp duty is so the houses still show as sold at full price.

But it would be just the same if they offered a cashback of £x (or threw in extras of a similar value) without making any reference to it equating to the amount of your stamp duty. There's nothing special about them saying it's for your stamp duty.

se2020

No not usually. 
This time might be a bit different if the actual wording of the contract says they will pay £x toward stamp duty (or all the stamp duty)
If there is now no stamp duty due they may not need to pay anything. A fair argument from them would be that you are not disadvantaged by this so the contract stands. Obviously if you have not exchanged yet you can just ask for the equivalent discount on something else.

MrLogical

se2020 said:

No not usually. 
This time might be a bit different if the actual wording of the contract says they will pay £x toward stamp duty (or all the stamp duty)
If there is now no stamp duty due they may not need to pay anything. A fair argument from them would be that you are not disadvantaged by this so the contract stands. Obviously if you have not exchanged yet you can just ask for the equivalent discount on something else.

Here’s why that is not a fair argument:
1) we were basically laughed at when we tried to negotiate on the house price because they agreed to pay us the amount that did towards stamp duty. Do you think that would have been the case if they had nothing to pay? No! We would have pushed to reduce that price massively.
2) They told us that if we were to sell our existing property within 3 years, we would be able to get a refund on our stamp duty and that would have nothing to do with them.

Do not take no for an answer!

FamilyFeud

So late last we heard from our solicitor and they were not helpful in the slightest they said go to the developer! So currently waiting from RedRow to see what is happening. I’m a bit shocked at the solicitors attitude tbh 

davidmcn

FamilyFeud said:

So late last we heard from our solicitor and they were not helpful in the slightest they said go to the developer! So currently waiting from RedRow to see what is happening. I’m a bit shocked at the solicitors attitude tbh 

Is this a solicitor the developer "recommended" to you, or one you found yourself? 

FamilyFeud

Yeah the first part and I get it, like shooting yourself in the foot