LISA bonus - mitigating 25% bonus charge when house purchase process is inefficient

Corgster1

Hello,

Newbie here seeking some advice of what to do if the expected first time buyer house completion process hasn't followed the intended path to enable the use of the LISA.

Background:

My son opened his stocks and shares LISA six years ago with the sole intention of using it for his first home purchase. 

His completion was due Friday last week. He had liaised with his Conveyancing solicitor since the sale was agreed in principle in October 2024 and he'd duly completed the "source of funds" document listing the LISA as one source of funds for completion.

Regrettably, between himself and the solicitor, there was failure to advise the LISA provider to release the LISA funds in time to have them available on completion date. All parties should have been on top of this, with the conveyancer specifically needing to complete and provide a Conveyancer Declaration form to the LISA provider to prove the LISA was being used for a first time property purchase.

As it happened, my son was able to complete because he had other savings (destined for furniture, TV, home improvements etc.) and used those, leaving him with no surplus money at all to move into his new home anytime soon. He didn't think there was any alternative left to him on Friday, and had a curt response from the solicitor absolving themselves from any liability if the completion did not happen on time.

On requesting assistance from the Conveyancer and the LISA providers today in order to release the LISA funds he's been told that he must pay back the 25% bonus because it is not being used for the house completion -  that having happened last Friday.

So two things here. Firstly, does anyone have any advice or know of any process to follow that might mitigate the loss of the 25% LISA bonus when there is clear evidence that all along it was to be used for a first time home purchase?

Secondly, is it me or is there not a duty of care from a Conveyancer to a first time buyer (who might be unaware or overawed by the whole experience) advising them well ahead of time that if LISA funds were to be used for completion then forms needed to be requested from the LISA provider and then duly completed and returned to the provider? Seems very unfair and unjust that my son now has to suffer so heavily for a genuine error when a conveyancer is paid to help / assist. What should we do hete to try and get recourse?

Many thanks

masonic

If you believe the conveyancer was negligent in not processing the declaration in a reasonable timeframe to meet the completion deadline, then your son should make a formal complaint and seek redress for the penalty from the conveyancer's professional liability insurance. The conveyancer has an obligation to act with reasonable skill and care. There is a summary of what each party should do during this process here: https://www.gov.uk/guidance/conveyancers-first-time-residential-purchase-with-a-lifetime-isa

On what date did he complete the investor declaration that is needed to kick off this process?

Corgster1

Thanks for your comment.

The challenge is my son wasn’t familiar with the process to draw down on the LISA ahead of completion date, therefore the issue arose only at the 11th hour and therefore too late to meet completion deadline, hence alternative steps weee taken to not fail on completion. In making sure that no one down the chain was to be adversely impacted he has now ended up at a financial loss. I can’t believe that LIsA provider and solicitor are not being helpful in communicating to HRmC that this was genuine error.

He freely admits that he should have checked as he had done to make sure all other monies were ready available but he missed this item. But surely the solicitor is there to advise and guide, and knowing LiSA proceeds were a source of funds in this case should have a checklist in place well head of deadline to ask client to trigger the declaration forms being sent and completed.

Thank you for your comment and the link.

Corgster1

masonic

Whether or not it is a genuine error, the penalty must be paid if he now wishes to go through with the withdrawal, and there is nothing to be communicated to HMRC that will change that. As you say, both parties ought to have had some knowledge that it would take time to release the funds from the LISA. Typically such a process would have been kicked off a month or so before completion. The conveyancer can be pursued for redress for their part in the error through a formal complaint process. They may not accept full liability, but ought to provide at least partial compensation for the loss.