First time buyer status lost via marriage?

domi1989

I've tried searching online and can't seem to find definitive answer on this so I am hoping you guys can help me. 

I have been saving into a lifetime ISA account for the last few years with the aim of using this towards the purchase of a first home. However, also during the last few years I've moved in to a house with my girlfriend (which she owns) and now we have recently married. 

Essentially my question is whether I am still a first time buyer in the eyes of the LISA guidelines/law and therefore can keep my LISA bonus towards a new home or whether my marriage to a homeowner now means that I de facto own a home despite never buying one myself?

Thanks in advance

masonic

The short answer is probably not. You acquired a legal interest in land as described in the eligibility criteria through marriage. You can keep the bonus if you hold the account until age 60, or you can withdraw without making a net loss due to a temporary reduction in the withdrawal penalty due to Covid.

domi1989

Perfect. Thanks for the quick reply

ToeDipper

Gov.uk website says:

"If you’re buying a home with someone who has owned a property before they don’t count as a first-time buyer. But you can still put your own bonus towards the price of the home you’re buying together."

Link here:
https://lifetimeisa.campaign.gov.uk/#withdrawing_for_your_first_home

Note that if your wife keeps the current house when you choose to buy a new home, the new purchase will be liable for higher rate SDLT under the current rules, even if it's only in your name. 

masonic

ToeDipper said:

Gov.uk website says:

"If you’re buying a home with someone who has owned a property before they don’t count as a first-time buyer. But you can still put your own bonus towards the price of the home you’re buying together."

Link here:
https://lifetimeisa.campaign.gov.uk/#withdrawing_for_your_first_home

Note that if your wife keeps the current house when you choose to buy a new home, the new purchase will be liable for higher rate SDLT under the current rules, even if it's only in your name. 

You still have to qualify as a first time buyer though, and you do not if you have acquired a legal interest in land as described in the eligibility criteria. This is not a problem for an unmarried couple where the property is solely owned by one of the couple, or a married couple where one of the couple previously owned property prior to the marriage, or possibly even owns a BTL property or holiday home. However, when one of the couple owns the property in which the couple reside as their main residence, a marriage or civil partnership confers a legal interest in the marital home to their spouse.

ToeDipper

masonic said:
However, when one of the couple owns the property in which the couple reside as their main residence, a marriage or civil partnership confers a legal interest in the marital home to their spouse.

It would be a beneficial interest rather than a legal interest surely?

I've been looking into FTB benefits for a friend recently, hence why I mentioned the higher rate SDLT, as she had been told it wouldn't apply and it was a bit of a shock to discover it would. 

I haven't been able to find anything that says you lose the right to use your LISA bonus if you are married and your spouse is not a FTB - the closest comment I can find on this scenario refers only to "partners" and does not specify married/unmarried. If the distinction mattered then it would be easy to make it clear, but so far I haven't seen anything that does make that distinction.

More than happy to be proved wrong though! I would be very interested to see the guidance if you've got a link you could post? 

Incidentally, a similar question has been asked on MSE before, and the concensus was that the poster was still eligible for the FTB LISA bonus (although this was a couple of years ago):

https://forums.moneysavingexpert.com/discussion/5921918/lifetime-isa-is-my-first-time-buyer-status-void-now-i-am-married-to-an-homeowner

masonic

ToeDipper said:

masonic said:
However, when one of the couple owns the property in which the couple reside as their main residence, a marriage or civil partnership confers a legal interest in the marital home to their spouse.

It would be a beneficial interest rather than a legal interest surely?

By default, beneficial interests follow the proportions of legal interest, but the two can be separated using an agreement, at least in theory. Hence my use of 'probably' in my earlier post (probably the OP has not got any explicit agreement in place around legal vs beneficial interests). We may be splitting hairs here as the legislation states only 'interest', though some of the guidance documents specify 'legal interest'.

ToeDipper said:

I haven't been able to find anything that says you lose the right to use your LISA bonus if you are married and your spouse is not a FTB - the closest comment I can find on this scenario refers only to "partners" and does not specify married/unmarried. If the distinction mattered then it would be easy to make it clear, but so far I haven't seen anything that does make that distinction.

More than happy to be proved wrong though! I would be very interested to see the guidance if you've got a link you could post? 

Incidentally, a similar question has been asked on MSE before, and the concensus was that the poster was still eligible for the FTB LISA bonus (although this was a couple of years ago):

https://forums.moneysavingexpert.com/discussion/5921918/lifetime-isa-is-my-first-time-buyer-status-void-now-i-am-married-to-an-homeowner

The consensus on MSE seems to have swung the other way. For example see these two more recent threads:

https://forums.moneysavingexpert.com/discussion/comment/76832489/#Comment_76832489

https://forums.moneysavingexpert.com/discussion/6079603/life-time-isa

For what it's worth, back in 2018 I was of the same opinion as Alex as I had not really considered the marital rights angle. I don't know if Alex has also changed his view, but he has not expressed any disagreement when responding to the thread in which eskbanker puts the view forward (first link).

Incidentally, one of these threads makes reference to this Guardian article which is in relation to the HTB ISA, but ostensibly subject to the same rules. The opinion in the article is considered to not have taken into account the significance of marriage either, but it is the comments that are of interest, and there is wide ranging debate there about whether a spouse automatically has an interest in the property or not. It was some compelling arguments therein, which I did a bit of research around to reach my conclusion that a spouse probably does, but there is no definitive answer to this question, and the best anyone can express is an opinion or likelihood.

There is plenty of case law around divorce proceedings, but the counter-argument is that the interest is created by the court as a result of those proceedings and did not exist prior - I find that a little hard to swallow personally, but you might not. It is usually framed that the court decides that one party has acquired an interest in the value of the property and makes an order to reflect that.

The only reliable sources of information I have been able to find on the issue suggest that expert legal advice should be sought. If you happen to find anything convincing/definitive to the contrary, please do share.

ToeDipper

masonic said:

The only reliable sources of information I have been able to find on the issue suggest that expert legal advice should be sought. If you happen to find anything convincing/definitive to the contrary, please do share.

Nothing except the gov.uk guidance already linked! I assumed the word "partner" was deliberately vague to cover all types of partner, including spouses, but it seems clear this is open to interpretation 

It also wouldn't be the first time that the gov.uk site has given incorrect information, so formal advice would definitely seem the best route here! 

lotti_bosman

It would be interesting to know if anybody out there in MSE World has actually been through this process as spouses and can say definitively whether spouses are applicable in this case. I also have a vested interest in the answer to this quandary.

masonic

lotti_bosman said:

It would be interesting to know if anybody out there in MSE World has actually been through this process as spouses and can say definitively whether spouses are applicable in this case. I also have a vested interest in the answer to this quandary.

The trouble is that no checks are performed at the time of purchase, so those making a declaration that they don't have an interest in property leave themselves open to the possibility of being pulled up on it some months or years later by HMRC. But what would be useful is feedback from anyone who has asked HMRC or a solicitor and specifically asked if they could be considered to have an interest in property through their marital rights. That would be a useful guide, but to cover yourself it would always be best to obtain something yourself in writing.

Alexland

masonic said:
For what it's worth, back in 2018 I was of the same opinion as Alex as I had not really considered the marital rights angle. I don't know if Alex has also changed his view..

Sorry I haven't been able to give the forums much time recently so am very behind in my reading. My previous view was based on the specific declaration PDF in the link "I do not own, and have never owned..." so provided the existing property was purchased before the marriage it would be considered non-matrimonial assets so unlike matrimonial assets acquired during the marriage would not be considered jointly owned during the marriage but might be included in a divorce settlement. Non matrimonial assets might be excluded from a divorce settlement in which case the partner never had any ownership of them. As such my view is unchanged and I agree with the Guardian articles.
Alex