Lifetime ISA - deposit on exchange

Mover2021

Hi all,

I’m a FTB and my deposit was saved using a Lifetime ISA. The money is now with the conveyancer, but now that we are ready to exchange, they have said that money from a Lifetime ISA cannot be used as a deposit on exchange, and that they can only send it to the seller’s solicitor upon completion(!). They have not mentioned this before during the last 6 months that we’ve been in the process, and I have not seen this claim anywhere when applying for the LISA, or completing the paperwork in order for the conveyancer to apply to withdraw the money.

The chain will not agree to exchange and completion on the same day, and I feel really stuck! Does anybody know if this is correct - has anyone used money from a Lifetime ISA as a deposit upon exchange?

Thanks all. 

eskbanker

Sounds like your conveyancer is confused between LISA and Help To Buy ISA - the latter does restrict bonus access to completion not exchange, but there is no such constraint with LISA.

Difficult to prove that something doesn't exist but there is no such limitation mentioned in the official guidance at https://www.gov.uk/guidance/lifetime-isa-withdrawals-for-a-first-time-residential-purchase, and the MSE article is clear:

https://www.moneysavingexpert.com/savings/lifetime-isas/#01295935223

All your savings, including the bonus, will be available to use at exchange. 

Yet don't be too hasty – the property purchase needs to complete within 90 days of you sending savings from the LISA to your solicitor

A tricky situation when you're putting yourself in the hands of an 'expert' but ask the conveyancer for details of where they're sourcing that 'rule' from....

Mover2021

Thank you @eskbanker I agree, and believe they are applying the HTB ISA rules. 

I’ve asked them to highlight where the rules say that funds cannot be used as deposit upon exchange as you suggest, and will see what I get back! I’m now wondering if it’s an internal rule they apply as a firm, but in that case I’d have expected them to be very clear about that upfront, as we wouldn’t have instructed them! 

Thanks for your reply, really appreciate it. 

masonic

Yes, it is well known that this restriction was dropped when Lifetime ISAs were launched because it had proven problematic for HTB ISAs.

Mover2021

Thanks @masonic After a lot of back and forth and me providing LISA guidance, they confirmed that it is an internal rule that they apply at their firm (not using LISA funds as deposit upon exchange), rather than any official guidance. 

Extremely annoying that they didn’t make that clear upfront, as we would never have used them!

eskbanker

Mover2021 said:

Thanks @masonic After a lot of back and forth and me providing LISA guidance, they confirmed that it is an internal rule that they apply at their firm (not using LISA funds as deposit upon exchange), rather than any official guidance. 

Extremely annoying that they didn’t make that clear upfront, as we would never have used them!

If they hadn't even made you aware of their divergence from published scheme rules at the time of withdrawing your LISA funds, then I think you have a legitimate case to ask them to fund the exchange settlement themselves (temporarily, to be repaid later) and/or raise a formal complaint....

Mover2021

Thanks @eskbanker, they point blank refused to cover any cost temporarily. We have now agreed to exchange and complete on the same day as a workaround, but I do plan on making a formal complaint (for all the good it will do!). 

grumiofoundation

Mover2021 said:

Thanks @masonic After a lot of back and forth and me providing LISA guidance, they confirmed that it is an internal rule that they apply at their firm (not using LISA funds as deposit upon exchange), rather than any official guidance. 

Extremely annoying that they didn’t make that clear upfront, as we would never have used them!

That seems bizarre. If they are going to have non-standard ways of dealing with the LISA I think they certainly should have told you at the outset. 

I would certainly be submitting a complaint to them (if you continue to use them after completion). 

Are you able to exchange without the money from Lifetime ISA? (as in provide 10% exchange deposit)

How long a gap between exchange and completion will there be? Because your solicitor needs to request the LISA money in advance of completion. Link below from moneybox (procedure may vary between providers) how far though the steps are you?

https://www.moneyboxapp.com/how-the-lifetime-isa-withdrawal-process-works/#:~:text=Once your LISA funds have,further 90 days if needed.

To be honest in your situation  I would be considering moving solicitor (obviously depends on your exact situation) - I would certainly be concerned about their ability to get the LISA money in time for completion as they seem to have no idea what they are doing. I wonder if their internal policies would change if you looked to leave?
Edit - missread earlier post so above is not applicable!

masonic

Mover2021 said:

Thanks @masonic After a lot of back and forth and me providing LISA guidance, they confirmed that it is an internal rule that they apply at their firm (not using LISA funds as deposit upon exchange), rather than any official guidance. 

Extremely annoying that they didn’t make that clear upfront, as we would never have used them!

Have they pointed you to the written rule within the terms you agreed? Or is it one of those "internal rules" they make up on the fly to do as they please?

Either way, I'd definitely be pursuing a complaint if they don't ensure you are put back into the position you would have been in if they adhered to the official scheme rules and legislation.

masonic

grumiofoundation said:

To be honest in your situation  I would be considering moving solicitor (obviously depends on your exact situation) - I would certainly be concerned about their ability to get the LISA money in time for completion as they seem to have no idea what they are doing. I wonder if their internal policies would change if you looked to leave?

"The money is now with the conveyancer". This is the only reason I didn't suggest changing conveyancer, as it would involve returning it and submitting a new withdrawal request, which could take even more time.

Mover2021

Thanks @grumiofoundation we certainly would consider going elsewhere, but for the fact that we’re so near the end and have been waiting for 6 months and just want to get it done! 

We’re lucky that the chain have agreed exchange and completion on the same day next week, or we’d have been stuffed!