Should he 'risk' opening a Santander Home Saver?

silvermum

Anyone know how strict Santander are for the opening rules around this account?
https://www.santander.co.uk/landing/savings/first-home-saver
It seems essentially a standard 2 year savings account designed to accumulate a deposit for a first home.

A young family member (mid 20s) previously inherited a share of a property, which was rented out, then sold. But at no point did he ever live in the property, and his name was not on the deeds.
As a result he has never been able to apply for a LISA as the rules for those are quite clear that you must never have had any interest in UK property, and given the fact that there is a government tax rebate, this would be potentially fraudulent. He also lives in London and felt he was unlikely to buy a property for less than £450k.

However this Santander account has no government bonus element. Given he already banks with Santander he feels this would be an easy account for him to save into every month.
Just wondering how much of a risk it would be to open one and claim confusion over the definition of a 'first home' if any questions are raised later?

Ed-1

https://forums.moneysavingexpert.com/discussion/6685437/should-he-risk-opening-a-santander-home-saver

If he was not named on the title deeds then he held no legal interest in UK property, even if he held a beneficial interest. So there is nothing stopping him from using a LISA to purchase a first home (if he's under 40 there would be nothing stopping him opening a LISA even if he was not a first-time buyer as you can also withdraw from it penalty-free once you reach age 60).

Read Santander's terms for their savings account but I would be very surprised if he wasn't eligible to open it. Whether he should is a different matter as 4% AER interest can easily be beaten elsewhere.

silvermum

"If he was not named on the title deeds then he held no legal interest in UK property, even if he held a beneficial interest."
This is interesting, as he has asked the question and seems to think he is disqualified from opening a LISA? I know he had to pay some capital gains tax when it was sold.
The £450k limit remains a problem anyway though.

Yes, Santander's rate isn't the best, but I think it's just that he feels he's more likely to skim off savings into it from his bank account if it's all in one place. I suspect it wouldn't be the same amount every month, so can't set up a regular standing order/ transfer.

Ed-1

https://forums.moneysavingexpert.com/discussion/comment/82156909#Comment_82156909

These are the LISA regulations: https://www.legislation.gov.uk/uksi/2017/466/contents/made

Paragraph 24 defines who is eligible to apply for a LISA.

https://www.legislation.gov.uk/uksi/2017/466/regulation/24/made

Paragraph 7 of the Schedule (paragraph 31) define

“first-time buyer” means an account investor who is not, and never has been, a
residential property owner;

and further defines

“residential property owner” means an individual who owns as sole or joint owner an
interest in residential property (including a legal interest in land acquired under the
terms of a regulated home purchase plan or a shared ownership arrangement) which
is—
(a) in England or Wales—
(i) freehold;
(ii) leasehold, where the lease was originally granted for a term certain exceeding
21 years; or
(iii) commonhold;

“residential property” means a legal interest in land which comprises a building that is
used or suitable for use as a dwelling, or is in the process of being constructed or
adapted for such use

https://www.legislation.gov.uk/uksi/2017/466/regulation/31/made

masonic

The term "legal interest" is used in paragraph 6 to require that "The purchase must be of a legal interest in land situated in the United Kingdom…"

Whereas for the definition of “first-time buyer” in paragraph 7, "residential property owner" is defined as "an individual who owns as sole or joint owner an interest in residential property…".

So the purchase made with the LISA must be for a legal interest, but any prior residential property ownership need only be an interest, so I think the OP is correct about the family member's eligibility.

Ed-1

https://forums.moneysavingexpert.com/discussion/comment/82159669#Comment_82159669

But the definition of “residential property” is embedded in the definition of “residential property owner” so the latter can be read as:

an individual who owns as sole or joint owner an interest in [a legal interest in land which comprises a building that is used or suitable for use as a dwelling, or is in the process of being constructed or adapted for such use]...

A similar situation is where you have a beneficial interest through inheriting a property. However you are still a first-time buyer until the property is legally transferred into your name.

https://www.theguardian.com/money/2019/apr/22/if-i-inherit-my-mums-house-will-i-be-able-to-use-my-lifetime-isa

"HMT says you can still be classed as a first-time buyer if you inherit a property but ownership of it is never formally transferred into your name – for example the property is sold after the death of its owner and the cash proceeds are passed to you rather than the title of the property. HMT also makes it clear that being the beneficiary of property in the will of someone who is still living (like your mother), doesn’t stop you from being a first-time buyer for lifetime Isa purposes. So you should be OK if you buy a house before your mother dies and/or your brother inherit your mother’s house but it is sold rather than being put in your names at the Land Registry."

masonic

As you say, substituting the definition of "residential property" directly into "residential property owner" yields:
​"An individual who owns as sole or joint owner an interest in [a legal interest in land which comprises a building...]"

The underlying asset is a "legal interest in land". The rights over that asset can be split into legal title and beneficial title. The use of "interest" rather than "legal interest" tells us both must be considered.

However, you are right that if the property was sold within the estate, the OP's relative is still a FTB as he had neither. I had discounted that possibility because there was mention of him personally paying capital gains tax when the property was sold.

poseidon1

Looking at past history of the inherited property, it's clear from OP's past post that she held her share and that of her sons as beneficial tenants in common, with her sons' shares on bare trusts until age 18. The bare trusts were apparently registered with HMRC.

https://forums.moneysavingexpert.com/discussion/6430463/buying-out-family-members-share-of-a-house-formerly-held-in-trust-logistics

Throughout the period of joint ownership with their mother they benefited from shares of rental income on a look through basis , right up until the oldest child sold their share to release monies for their own home purchase and from all accounts personally paid CGT on the sale.

Since HMRC view bare trusts of this nature as wholly transparent and the beneficiary is legally as well as beneficially entitled from age 18 onwards, I cannot see such a beneficiary meeting the definition of a first time buyer for LISA purposes. They certainly do not meet the criteria for the associated FTB stamp duty relief.

https://www.ukpropertyaccountants.co.uk/who-doesnot-qualify-first-time-buyer-from-sdlt-relief/

https://landtaxadvice.co.uk/hmrc/sdltm09815

Turning to the Santander account, if Santander follows HMRC definition of a FTB then it would appear OPs son does not qualify. However does it even matter?

Its clear that 4 % variable savings rate ( or better) can be obtained from a wide variety of alternative banks and building societies as a quick look at MSE's league table bears out. Therefore in this regard the new Santander account for FTBs appears to be a gimmick that does not really bear close scrutiny. Better savings rates with less restricted terms are available elsewhere.