Selling 2 houses to buy 1 - stamp duty implications ?

rjenk74

hello gang

myself an my partner own our own  houses and are selling to buy one together, however they won't be sold at the same time as mine is sold already, my partners needs some work before we advertise and we need to move quickly as agreed with the seller

I can buy the new house alone with a mixture of cash and mortgage then we will pay off a substantial amount of the left over mortgage when my partners house sells.

So i feel there are two options:

1. We put both our names on the mortgage/deeds straight away BUT she signs an occupier's consent form AND be very clear no deposit monies will be from her it will all be funded from the sale of my house and savings and I will pay all the mortgage - once her house is sold she will pay a chunk of the mortgage then all done
2. The purchase is all done in my name alone, then when her house is sold she will be added to the mortgage and pay a chunk off at the same time

my mortgage lender is fine with either (same admin fees and mortgage can be overpaid with no ERC) so same cost/outcome either way.
NOTE:- there are no plans for use to live together right at the start, I will move in first then my partner will come fully when her house is sold - am sure some moving of furniture in between.


My question is what stamp duty liabilities will I have with each options? i 'think' its as follows:

1. both names together means we not only are we liable for stamp duty for the new house but will also have to pay the elevated stamp duty due to my partner having a second home - once that is sold we can claim that back
2. If she come later once she has sold her house she is actually liable for stamp duty on the new house based on her equity share, so for example if the house is worth £400k and we share 50/50 then she is liable for stamp duty against £200k  - seems unfair as I will have paid it for the full amount already but shouldn't matter as the first £250k is free so i believe she will pay nothing


apologies for the waffle but any advice if this is correct or not or there are other things i should consider

any help much appreciated

regards

housebuyer143

You are only liable for the additional stamp duty if you acquire another home. If you sell your main residence to purchase another then it doesn't matter if you have 40 properties you don't need to pay the additional stamp duty. 

If your partner goes in on it with you before she sells hers it's likely to be payable, but if you sell your house and buy the new one at the same time it's just the basic rate of stamp duty payable. 

SDLT_Geek

rjenk74 said:

hello gang

myself an my partner
Not married or civil partners?
own our own  houses and are selling to buy one together,
You are buying in England, so the relevant stamp duty is stamp duty land tax (SDLT)?

however they won't be sold at the same time as mine is sold already, my partners needs some work before we advertise and we need to move quickly as agreed with the seller

I can buy the new house alone with a mixture of cash and mortgage then we will pay off a substantial amount of the left over mortgage when my partners house sells.

So i feel there are two options:

1. We put both our names on the mortgage/deeds straight away BUT she signs an occupier's consent form AND be very clear no deposit monies will be from her it will all be funded from the sale of my house and savings and I will pay all the mortgage
So you are clear that the beneficial ownership of the new house will be entirely yours at this stage?  SDLT follows the beneficial ownership.
 - once her house is sold she will pay a chunk of the mortgage then all done
So at that stage she is buying a share from you.
2. The purchase is all done in my name alone, then when her house is sold she will be added to the mortgage and pay a chunk off at the same time
Not only "in your name", but more importantly with you again as sole beneficial owner, with her buying a share off you once she has the money.

my mortgage lender is fine with either (same admin fees and mortgage can be overpaid with no ERC) so same cost/outcome either way.
NOTE:- there are no plans for use to live together right at the start, I will move in first then my partner will come fully when her house is sold - am sure some moving of furniture in between.
If your partner had been acquiring a beneficial share at the beginning then these plans could have caused complications as to whether the 3% surcharge would be recoverable on her sale.  This would depend on how firm her intention was to live in the new house, when the immediate plan is to stay in her existing one.

My question is what stamp duty liabilities will I have with each options? i 'think' its as follows:

1. both names together means we not only are we liable for stamp duty for the new house but will also have to pay the elevated stamp duty due to my partner having a second home - once that is sold we can claim that back
Only if "both names" means that she has a beneficial share at the start.  What you suggest above is that she has no share at the time of the purchase.
2. If she come later once she has sold her house she is actually liable for stamp duty on the new house based on her equity share, so for example if the house is worth £400k and we share 50/50 then she is liable for stamp duty against £200k  - seems unfair as I will have paid it for the full amount already but shouldn't matter as the first £250k is free so i believe she will pay nothing
Yes, if she later buys a share, then that is an acquisition for SDLT, though it sounds as if it will be for less than the threshold if she has no other property interests.

apologies for the waffle but any advice if this is correct or not or there are other things i should consider

any help much appreciated

regards

Comments are made in bold above.

rjenk74

thanks for the prompt replies guys, really appreciated.

it feels to me going with option 2 is the 'cleaner' option as very defined line, though only issue with that is if they change the thresholds again she could be liable for some stamp duty! always a risk i guess

thanks

rjenk74

Hi all

sorry I read again last night and have some more questions about the bit when you talk about a beneficial share of the property? I also thinks I may have confused things with the occupiers consent form, as I have since read that the use of that form is only if she moves in WITHOUT being on the mortgage or deeds and that wont happen.

(I have also found out my solicitor would charge us £500 + dis to add my partner later which was surprisingly high so option 1 is now 'back in the game' :-) )

Back to the beneficial element. To be clear I will have to pay for the house first off as my partner will have no cash until she sell hers so once I move in first, she will then start to move across in dribs and drabs with a final big push either before or when her house sale happens. So if I add her name to the mortgage and the land registry straight away with the intention she will be living in her house to start but move across before or until hers is sold, does that then mean she has a beneficial share thus we pay the extra stamp duty and claim it back later? 

whilst this is extra cost at the time (£20k as opposed to £7.5k) if we can claim it back later then thats ok

also to confirm we are not married

thanks

SDLT_Geek

rjenk74 said:

Hi all

sorry I read again last night and have some more questions about the bit when you talk about a beneficial share of the property? I also thinks I may have confused things with the occupiers consent form, as I have since read that the use of that form is only if she moves in WITHOUT being on the mortgage or deeds and that wont happen.

(I have also found out my solicitor would charge us £500 + dis to add my partner later which was surprisingly high so option 1 is now 'back in the game' :-) )
I would have expected the fee to be higher, given that she would be buying a share from you and it seems you might need quite a complex declaration of trust to allow for the fact that she will be paying sums in stages rather than in one go.

Back to the beneficial element. To be clear I will have to pay for the house first off as my partner will have no cash until she sell hers so once I move in first
This suggests that at the outset you will be the sole beneficial owner and so the only "purchaser" in terms of SDLT.  It would complicate things to have her name on the title.  You might need to register this with the Trust Registration Service.
, she will then start to move across in dribs and drabs with a final big push either before or when her house sale happens.
It sounds as if you would need a declaration of trust to allow for her to have a share reflecting her payments.  This could end up as quite complicated.
So if I add her name to the mortgage and the land registry straight away with the intention she will be living in her house to start but move across before or until hers is sold, does that then mean she has a beneficial share thus we pay the extra stamp duty and claim it back later? 
This would depend on the terms of the declaration of trust you draw up, but if she starts with making no contribution then I would expect her to have no share.

whilst this is extra cost at the time (£20k as opposed to £7.5k) if we can claim it back later then thats ok

also to confirm we are not married

thanks

See comments in bold above.