Issue with conveyancer and use of LISA

Alexd94

Hi, looking for advice on an issue that has come up in the last few days. 

We are in the process of buying a house. Both first time buyers. We are using one LISA which has 2/3 of the deposit money in it, with 1/3 left in a separate savings account. 

Our conveyancers has stated that:
"while the Lifetime ISA funds can be used for your house purchase, they cannot be used to fund the deposit for exchange of contract. This is because if the sale were to fall through we would be legally required to return all of your LISA funds to the provider. In the event of a sale falling through, the seller may be entitled to keep your deposit funds meaning we would not be able to return them to the LISA provider. To avoid this eventuality, we do not use LISA funds for the deposit. This is done for your protection.

We therefore ask the Sellers Solicitors to exchange on a nil deposit or alternatively we will use funds not coming from the ISA as your deposit (even if this is less than 10%). If an exchange is agreed with a nil deposit, we will only proceed with exchange and completion on the same day."

We have clarified with them and it appears this is a new policy for them which has started since we have become clients so this wasn't in our terms of engagement.

Our issues/questions are:

We would not have gone with this conveyancer if we knew about this new policy at the start. They have sprung this on us and haven't given us any option to use the LISA money as part of the exchange deposit, is this something we could overturn?

They have continously lied in emails saying that LISA deposit cannot be used for exchange of contract, when they can but this is a new internal policy they have introduced. Can we use this as a way to ensure we can use the LISA for exchange? 

They did not talk to us about this issue or the options they would be giving to the sellers solicitor prior to sending the options to the sellers solicitor. We feel that they are not giving us the chance to give our view or take our instruction on how to proceed, do we have a right to enforce our instructions?

We are against an exchange and completion on the same day as we weren't looking to complete until mid October, but want to have exchanged in September so that we can hand in our notice for our tenancy when the contracts have been exchanged. Is there any advice on what to do if the only option we're given is to exchange and complete on the same day? 

Has anyone changed conveyancers mid way through a house purchase, how difficult is this? 

Any other advice? 

alibean121

Sorry this has happened to you! As you seem to already know, government guidance is very clear that a LISA is acceptable as an exchange deposit. I’d be fuming if my solicitor tried this.

I don’t really have advice on swapping solicitor but think you shouldn’t fixate on saving your months rent. Probably the costs of the rent is comparable to the costs of new solicitors. Have you tried speaking to them on the phone to explain your strong preference?

Alexd94

We've not spoken to them on the phone yet - trying to calm down before I do talk to them.
We've had multiple emails back and forth where we have stated our preference, but they don't even acknowledge it. 

Pow11890

We had the same issue as we had x2 Lisa majority deposits. We asked our solicitor to ask our developer if they’d be happy exchange on our £500 deposit. They agreed after lots of back & forth. It seemed to be the better solution given the fact we were tied up and if they wanted our sale, that was a caveat they’d need to meet & work with us on! 

Pow11890

Just remember the solicitor should want to work with you to favour you! Is it time to change solicitors? Maybe pay the bill up & move over to a better conveyancer 

Waller97

Alexd94 said:

Hi, looking for advice on an issue that has come up in the last few days. 

We are in the process of buying a house. Both first time buyers. We are using one LISA which has 2/3 of the deposit money in it, with 1/3 left in a separate savings account. 

Our conveyancers has stated that:
"while the Lifetime ISA funds can be used for your house purchase, they cannot be used to fund the deposit for exchange of contract. This is because if the sale were to fall through we would be legally required to return all of your LISA funds to the provider. In the event of a sale falling through, the seller may be entitled to keep your deposit funds meaning we would not be able to return them to the LISA provider. To avoid this eventuality, we do not use LISA funds for the deposit. This is done for your protection.

We therefore ask the Sellers Solicitors to exchange on a nil deposit or alternatively we will use funds not coming from the ISA as your deposit (even if this is less than 10%). If an exchange is agreed with a nil deposit, we will only proceed with exchange and completion on the same day."

We have clarified with them and it appears this is a new policy for them which has started since we have become clients so this wasn't in our terms of engagement.

Our issues/questions are:

We would not have gone with this conveyancer if we knew about this new policy at the start. They have sprung this on us and haven't given us any option to use the LISA money as part of the exchange deposit, is this something we could overturn?

They have continously lied in emails saying that LISA deposit cannot be used for exchange of contract, when they can but this is a new internal policy they have introduced. Can we use this as a way to ensure we can use the LISA for exchange? 

They did not talk to us about this issue or the options they would be giving to the sellers solicitor prior to sending the options to the sellers solicitor. We feel that they are not giving us the chance to give our view or take our instruction on how to proceed, do we have a right to enforce our instructions?

We are against an exchange and completion on the same day as we weren't looking to complete until mid October, but want to have exchanged in September so that we can hand in our notice for our tenancy when the contracts have been exchanged. Is there any advice on what to do if the only option we're given is to exchange and complete on the same day? 

Has anyone changed conveyancers mid way through a house purchase, how difficult is this? 

Any other advice? 

What a coincidence that I came to this site looking for advice and you posted yesterday. We have just had the exact thing happen we are due to exchange and complete anytime now and just had email from solicitor saying what you have also been told. I’ve emailed back asking for clarification, we tried to purchase a house in March and it fell through but our solicitor (same one) took LISA deposit back then and never raised this issue so im assuming it’s a new rule that has been brought in. Our seller wants property gone ASAP so I think he would be happy with exchange and complete on same day but we shall wait and see what he says. Not sure what to do about solicitor as im not impressed with this situation and wasn’t raised in the terms of engagement. 

RogerBareford

Alexd94 said:

Hi, looking for advice on an issue that has come up in the last few days. 

We are in the process of buying a house. Both first time buyers. We are using one LISA which has 2/3 of the deposit money in it, with 1/3 left in a separate savings account. 

Our conveyancers has stated that:
"while the Lifetime ISA funds can be used for your house purchase, they cannot be used to fund the deposit for exchange of contract. This is because if the sale were to fall through we would be legally required to return all of your LISA funds to the provider. In the event of a sale falling through, the seller may be entitled to keep your deposit funds meaning we would not be able to return them to the LISA provider. To avoid this eventuality, we do not use LISA funds for the deposit. This is done for your protection.

We therefore ask the Sellers Solicitors to exchange on a nil deposit or alternatively we will use funds not coming from the ISA as your deposit (even if this is less than 10%). If an exchange is agreed with a nil deposit, we will only proceed with exchange and completion on the same day."

We have clarified with them and it appears this is a new policy for them which has started since we have become clients so this wasn't in our terms of engagement.

Our issues/questions are:

We would not have gone with this conveyancer if we knew about this new policy at the start. They have sprung this on us and haven't given us any option to use the LISA money as part of the exchange deposit, is this something we could overturn?

They have continously lied in emails saying that LISA deposit cannot be used for exchange of contract, when they can but this is a new internal policy they have introduced. Can we use this as a way to ensure we can use the LISA for exchange? 

They did not talk to us about this issue or the options they would be giving to the sellers solicitor prior to sending the options to the sellers solicitor. We feel that they are not giving us the chance to give our view or take our instruction on how to proceed, do we have a right to enforce our instructions?

We are against an exchange and completion on the same day as we weren't looking to complete until mid October, but want to have exchanged in September so that we can hand in our notice for our tenancy when the contracts have been exchanged. Is there any advice on what to do if the only option we're given is to exchange and complete on the same day? 

Has anyone changed conveyancers mid way through a house purchase, how difficult is this? 

Any other advice? 

I don't understand what the issue is?

I can understand that you don't want to exchange and complete on the same day. But they have offered an alternative where they say they will "use the funds not coming from the ISA as your deposit" i.e. they will use the 1/3 that you have in a savings account even though this is less than 10% needed and you will be able to exchange whenever everyone is ready.

They said that exchanging and completing on the same day is when you have a nil deposit but you have 1/3 deposit that they can use so it shouldn't be an issue. So tell them you want to go with this option.

se2020

As above, if they will accept less than 10% deposit then use the other source of funds.
This also gives you an advantage as the 2/3 in the LISA will probably earn more interest than the 1/3 elsewhere for the time between exchange and completion. 

Alexd94

We're hoping we can do the lower deposit option, but it will be up to the seller to decide and we're not sure how the conveyancer has communicated the issue with them.
We're viewing the house again this week with the vendor there, so may raise it directly so they don't think that we're messing them around. 

Alexd94

Waller97 said:

What a coincidence that I came to this site looking for advice and you posted yesterday. We have just had the exact thing happen we are due to exchange and complete anytime now and just had email from solicitor saying what you have also been told. I’ve emailed back asking for clarification, we tried to purchase a house in March and it fell through but our solicitor (same one) took LISA deposit back then and never raised this issue so im assuming it’s a new rule that has been brought in. Our seller wants property gone ASAP so I think he would be happy with exchange and complete on same day but we shall wait and see what he says. Not sure what to do about solicitor as im not impressed with this situation and wasn’t raised in the terms of engagement. 

Sounds like we've got the same conveyancer! Glad I'm not making a fuss over nothing and that someone else is finding this to be a frustrating issue. Hope you get yours sorted. 

RogerBareford

Alexd94 said:

We're hoping we can do the lower deposit option, but it will be up to the seller to decide and we're not sure how the conveyancer has communicated the issue with them.
We're viewing the house again this week with the vendor there, so may raise it directly so they don't think that we're messing them around. 

I think your worrying over nothing because their really isn't much of an "issue" here like you think. Accepting a smaller than 10% deposit is pretty common.

A good example is in a lot of chains when people are using equity in the house as their "deposit" they don't have a 10% exhange deposit. So if there is a first time buyer at the bottom for example and they give 10% of their house price as a deposit and that get's passed up the chain but works out as less than 10% of the more expensive houses up the chain.

A lot of houses in the past have been bought with 5% desposits.

The old Help to Buy Isa couldn't be used as an exchange deposit at all so there was many cases where less than 10% was accepted.

It happens so often and in so many circumstances not related to LISA's that it's not an unusual thing to ask for any not something people would generally not accept.