SDLT 3% Surcharge because of old flat

Azonic84

Hi there

I purchased a flat with an ex-partner in Brentwood, Essex in January 2007. After the relationship broke down I agreed to move out and leave the property to my ex who agreed to continue mortgage payments, allow the property to build some equity and deal with the secured loan against the premisses. Over the 14 years I have worked hard to improve my financial situation and credit rating that was left in tatters after the experience with my ex. I signed up to Experian to monitor my credit score and related mortgage on the old property that eventually dropped off my record after 7 years of not being associated with my ex or the property, I assumed everything had been done to separate us financially and my association with the old property. In my early twenties I had a very limited understanding of the house buying process and how it would eventually bite me for not following the proper legal process.

 

I have recently reserved a property in Cambridge that is due to complete in September of this year. Barclays have approved my mortgage offer with current partner and we are looking to exchange in the coming weeks with a £48,000 deposit. However, I recently found out about a new credit score tracker called ClearScore and to my shock found that my name is still on the mortgage for the old property now with Kensington Mortgages after they acquired the books of the original provider GE Money. Upon checking land registry my name is still on the Deeds for the property.

 

 

• Kensington Mortgages are refusing to allow ex-partner to re-mortgage the flat by herself. First issue being that Kensington Mortgages have been told by ex that she has tenants in the property without the correct mortgage in place, she has since changed her story, telling them that a friend is living in the property. Secondly there are also questions around her affordability to take the mortgage up on her own and reluctance to seek help from a family member as a guarantor. Equity Transfer and removal of my name from the deeds has also been refused by the mortgage company on this basis.

 

• I will be charged an additional 3% stamp duty on the purchase of my new property. However as the flat has not been my main residence for 13 years there is a question around my eligibility for the refund of the surcharge. Having to pay a stamp duty bill of £26K - £28K is achievable but also extremely disappointing given the situation.

 

• I am currently associated with a property that is being rented without the correct buy to let mortgage applied to it. This has all been undertaken without my knowledge. I am being told the current tenants have now been given their notice to leave which is now 6 months due to government changes during Covid. I am extremely uncomfortable about this current situation. I also question the notice period being given if this is even enforceable as I believe it is unlikely the proper tenants agreement paperwork is in place.

 

 

I have asked my ex to put the property on the market immediately and to give the current tenant notice on June 1st when I believe notice requirements drop to 4 months. Hoping things go smoothly the flat should be sold before our completion date. However I am looking for advice on avoiding the 3% surcharge or at the very list being able to claim back one we have completed. I have read the tax manual around OMR (Only or Main Residence) the old property is the only one I have ever bought and owned however I have not lived their at any point in the last 3 years so believe this will rule out my ability to claim relief. Please can you offer some advice?

moneysavinghero

Do you don't mention at any point whether your ex paid you any money to buy out your share of the property - did this ever happen? If not then you already own a property and upon purchasing the new one you will own 2 properties and so perfectly rightly you will be due to pay the 3% extra.

If you sell your other property within 3 years of purchasing the new one then you would be able to reclaim the 3%.

moneysavinghero

As for the tenancy, proper paperwork does not need to be in place. If they have handed over money to rent the property then a legal tenancy will have been formed. They are therefore required to be given the 6 months notice. No getting around it unfortunately.

AdrianC

You are a joint owner of a flat with a residential mortgage. I presume you are also a joint borrower.

You are now buying another property, and the flat is not being sold - yes, +3% on the purchase SDLT.

You believe your joint-owner/joint-borrower is letting the flat without CtL from the lender. They cannot get a BtL mortgage in their own name for the property, and have given the tenants notice. Is the intention to sell once you both have vacant possession again?

As well as the mortgage and landlord-responsibility issues, there are potential income tax implications for you, as well. This mess needs sorting asap. The SDLT could be the least of your problems.

Slithery

moneysavinghero said:

If you sell your other property within 3 years of purchasing the new one then you would be able to reclaim the 3%.

As it hasn't been their main residence in the last 3 years then it's not possible to reclaim.

AdrianC

BTW, you say £26-28k of SDLT...

If that's just the +3% additional property surcharge, then you're talking about buying a ~£900k property...?
With £48k equity and a ~95% LtV mortgage...?

...and monthly repayments of about £4k...? Still, you must be looking at about £200k salary, so...

SDLT_Geek

If OP still owns a share in the Brentwood flat when OP’s purchase completes, the extra 3% SDLT will apply to the purchase.  It will not be recoverable, even if the flat is sold within three years.