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  • FIRST POST
    • Goldcrypto
    • By Goldcrypto 7th Aug 18, 11:50 PM
    • 104Posts
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    Goldcrypto
    Current property owner and first time buyer - help to buy conflict
    • #1
    • 7th Aug 18, 11:50 PM
    Current property owner and first time buyer - help to buy conflict 7th Aug 18 at 11:50 PM
    My brother bought his first property in his 20's in London and now in 30's. This was bought as an investment as a buy to let property. Now he has never had a property of his own as a residential to live as he preferred renting (the property investment helped him gain good capital growth over the last 10 years and the rental paid down mortgage and covered most of his rental costs for his own living) as he liked be flexible to be able to choose new properties and move around with his work that has quite a bit of international travel.

    Now the 20% loan assistance for first time buyers would not be available to (despite him not actually having a home to live as his main residency) as he would still be classed as someone owning real estate plus he would be hit by the new increased stamp duty costs for a second plus property etc - all seems unfair as those companies with 10+ do not get hit (ie big investors), while the small guy gets hit and plus some people do not like to invest their money in stock market etc, would be fairer if government allowed 1 residential as main residence and at least 1 investment buy-to-let (for those also to be able to claim first time buyer assistance and not have to pay increased stamp duty costs).

    My question (given the background): His girlfriend would qualify for the first time buyer and would want the 20% loan available for first time buyers. Now for land registry when she buys the name would have to be in her name etc but if my brother wanted to give her 50% of down payment and gift her for time been half of the mortgage payments so in x number of years there could be a legal contract she signs (at purchase) that states he has half ownership claim etc? Is there a way to structure this with a lawyer in some way?

    He would not be willing to sell the London property as growth has been too good and expects continued strong capital growth. Even if that was not the case, it is in a very hot rental location so provides great rental income.
    Last edited by Goldcrypto; 07-08-2018 at 11:53 PM.
Page 1
    • AFF8879
    • By AFF8879 8th Aug 18, 12:25 AM
    • 409 Posts
    • 1,042 Thanks
    AFF8879
    • #2
    • 8th Aug 18, 12:25 AM
    • #2
    • 8th Aug 18, 12:25 AM
    This is not the best place to ask for advice on tax avoidance. Whether or not you think it is unfair is irrelevant, though for what it is worth, your brother does not sound like the type of person FTB stamp duty relief was designed to help.

    There could very well be some legal way of getting around paying what he would otherwise owe, but for that sort of legal advice he would be charged handsomely by a lawyer! May as well just pay the additional SDLT and save himself the hassle.
    • cashbackproblems
    • By cashbackproblems 8th Aug 18, 12:32 AM
    • 1,792 Posts
    • 699 Thanks
    cashbackproblems
    • #3
    • 8th Aug 18, 12:32 AM
    • #3
    • 8th Aug 18, 12:32 AM
    can't see anyway he can use the help to buy, have his name on it and avoid the 2nd stamp duty. he could take out a loan agreement with the gf for the deposit he is providing, but the property will always be in her name with no legal right, unless they go married for 5-10Yrs plus even then she would probably keep it!

    london property market is stalling, his rental might not be as certain to rise as you may think
    • PersianCatLady
    • By PersianCatLady 8th Aug 18, 1:49 AM
    • 606 Posts
    • 592 Thanks
    PersianCatLady
    • #4
    • 8th Aug 18, 1:49 AM
    • #4
    • 8th Aug 18, 1:49 AM
    My brother bought his first property in his 20's in London and now in 30's. This was bought as an investment as a buy to let property. Now he has never had a property of his own as a residential to live as he preferred renting (the property investment helped him gain good capital growth over the last 10 years and the rental paid down mortgage and covered most of his rental costs for his own living) as he liked be flexible to be able to choose new properties and move around with his work that has quite a bit of international travel.

    Now the 20% loan assistance for first time buyers would not be available to (despite him not actually having a home to live as his main residency) as he would still be classed as someone owning real estate plus he would be hit by the new increased stamp duty costs for a second plus property etc - all seems unfair as those companies with 10+ do not get hit (ie big investors), while the small guy gets hit and plus some people do not like to invest their money in stock market etc, would be fairer if government allowed 1 residential as main residence and at least 1 investment buy-to-let (for those also to be able to claim first time buyer assistance and not have to pay increased stamp duty costs).

    My question (given the background): His girlfriend would qualify for the first time buyer and would want the 20% loan available for first time buyers. Now for land registry when she buys the name would have to be in her name etc but if my brother wanted to give her 50% of down payment and gift her for time been half of the mortgage payments so in x number of years there could be a legal contract she signs (at purchase) that states he has half ownership claim etc? Is there a way to structure this with a lawyer in some way?

    He would not be willing to sell the London property as growth has been too good and expects continued strong capital growth. Even if that was not the case, it is in a very hot rental location so provides great rental income.
    Originally posted by Goldcrypto
    Is this a joke??
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 2:17 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    • #5
    • 8th Aug 18, 2:17 AM
    • #5
    • 8th Aug 18, 2:17 AM
    This is not the best place to ask for advice on tax avoidance. Whether or not you think it is unfair is irrelevant, though for what it is worth, your brother does not sound like the type of person FTB stamp duty relief was designed to help.

    There could very well be some legal way of getting around paying what he would otherwise owe, but for that sort of legal advice he would be charged handsomely by a lawyer! May as well just pay the additional SDLT and save himself the hassle.
    Originally posted by AFF8879
    This is not just a question based on legal tax advice to reduce stamp duty. That is just one element in the process as she wants to take advantage of her 20% first time buyer government assistance loan that each first time buyer can potentially get. If he bought himself few years ago there were no second property additional SDLT - that is irrelevant here just an observation. Also irrelevant who it is aimed at but who is eligible to apply.

    He has the funds to give the deposit and help with 50-50 mortgage contribution so would be looking for a split at some stage of the property. ie half ownership at some stage. Obviously she becomes the initial owner on the land registry from the start.

    By not doing the 20% additional first time buyer assistance she looses potential options in the properties she can purchase - quite substantial. Hence, the reason for applying for it!

    My question is really aimed at successful property investors here that must have had similar scenarios. So I would like to hear from them.

    can't see anyway he can use the help to buy, have his name on it and avoid the 2nd stamp duty. he could take out a loan agreement with the gf for the deposit he is providing, but the property will always be in her name with no legal right, unless they go married for 5-10Yrs plus even then she would probably keep it!

    london property market is stalling, his rental might not be as certain to rise as you may think
    Originally posted by cashbackproblems
    He is not looking to have his name on the purchase as he is not a first time buyer so would not qualify. There are options if he sold his first property and then he would not pay additional SDLT plus options for assistance on purchase. That is not an option he wants to do!

    There is no guarantee of marriage down the line or whatever so needs to be looked at purely as an investment option that has some legal structure so at some stage he has opportunity to own half.

    He has no concern if London rental stalled for 5 years+ ! The rental is already 4 times the mortgage. We would have to see rental rates fall approx 75% in London for him still to break even on mortgage. He would still then benefit from continued capital growth. This is a long term investment (he is only early 30's) so he would be silly to liquidate. Many hotspot locations in London rent immediately as the demand is so strong. Given London's population growth, add lack of housing and still need to build substantially more properties, then I see little chance of him ever having issues renting. Historically, London real estate cap growth and rental growth has always grown over 10-20 years. Any London real estate consultancy would not bet against that.
    Last edited by Goldcrypto; 08-08-2018 at 2:37 AM.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 2:18 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    • #6
    • 8th Aug 18, 2:18 AM
    • #6
    • 8th Aug 18, 2:18 AM
    Is this a joke??
    Originally posted by PersianCatLady
    Sorry, how so?
    • PersianCatLady
    • By PersianCatLady 8th Aug 18, 3:46 AM
    • 606 Posts
    • 592 Thanks
    PersianCatLady
    • #7
    • 8th Aug 18, 3:46 AM
    • #7
    • 8th Aug 18, 3:46 AM
    Sorry, how so?
    Originally posted by Goldcrypto
    Read your own OP again and see just how funny it is that you think that your brother is so hard done by because he cannot get the benefits of being a first time buyer because he already owns a property.

    Honestly, I haven't had such a good laugh in ages

    Thanks for that!!
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 4:27 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    • #8
    • 8th Aug 18, 4:27 AM
    • #8
    • 8th Aug 18, 4:27 AM
    Read your own OP again and see just how funny it is that you think that your brother is so hard done by because he cannot get the benefits of being a first time buyer because he already owns a property.

    Honestly, I haven't had such a good laugh in ages

    Thanks for that!!
    Originally posted by PersianCatLady
    Glad you enjoyed, but are you a real estate lawyer or successful real estate investor that has input to the actual question?

    Regarding my views, they are irrelevant as the current legislation is in place - these do change so will see what happens in the future. Also, my view on this issue about property investment and implications for SDLT and help to buy are not solely focused on him but should apply to every UK citizen. I personally feel they should have the opportunity (if they are in the position to do so) to be able to get assistance on first residence property and not have additional SDLT on second property purchase (as an investment). Not everyone wants to invest the majority in the stock market with main investments etc. Maybe you think it would be fair if he (or similar people) had a few million and had 10+ properties then he could set up a company for the properties and not have to pay additional SDLT and have access to superior lending options? The government seems to be squeezing the small investor and giving advantage to the big players. Personally, I do not think it is fair for the average hard working British Joe just trying to progress.

    Regardless of peoples current political views on UK real estate policies, I'm here looking for actual technical answers to address the question only. So lets not digress.
    Last edited by Goldcrypto; 08-08-2018 at 4:40 AM.
    • Pixie5740
    • By Pixie5740 8th Aug 18, 4:42 AM
    • 13,361 Posts
    • 19,233 Thanks
    Pixie5740
    • #9
    • 8th Aug 18, 4:42 AM
    • #9
    • 8th Aug 18, 4:42 AM
    Which HTB scheme are you referring to? Help to Buy Equity Loan or a Help to Buy ISA/Lifetime ISA because you and your brother seem confused about both.

    The Help to Buy Equity Loan isn't just for first time buyers. Anyone can take advantage of the scheme providing you they don't own any other properties which is why your brother is excluded from using it.

    The Help to Buy ISA/LISA bonus is available to any FTB and they still qualify for the bonus even if they jointly purchase a property with a non FTB.

    You also seem to be confused about what "gift" means. Your brother can't simultaneously gift money to his girlfriend and claim a beneficial interest in the property. It's one or the other. The girlfriend will have a very hard if not impossible time finding a mortgage lender willing to grant a mortgage using a deposit gifted from someone who will live in the property but not be named on the mortgage, or a borrowed deposit, especially if it HTB EL she wants to use, and good luck finding a solicitor who will draw up a Deed of Trust under the proposed terms because it would probably involve mortgage fraud and almost certainly tax evasion (not avoidance which is perfectly legal).

    It boils down to your brother not being able to have his cake and eat it.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 5:33 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    Which HTB scheme are you referring to? Help to Buy Equity Loan or a Help to Buy ISA/Lifetime ISA because you and your brother seem confused about both.

    The Help to Buy Equity Loan isn't just for first time buyers. Anyone can take advantage of the scheme providing you they don't own any other properties which is why your brother is excluded from using it.

    The Help to Buy ISA/LISA bonus is available to any FTB and they still qualify for the bonus even if they jointly purchase a property with a non FTB.

    You also seem to be confused about what "gift" means. Your brother can't simultaneously gift money to his girlfriend and claim a beneficial interest in the property. It's one or the other. The girlfriend will have a very hard if not impossible time finding a mortgage lender willing to grant a mortgage using a deposit gifted from someone who will live in the property but not be named on the mortgage, or a borrowed deposit, especially if it HTB EL she wants to use, and good luck finding a solicitor who will draw up a Deed of Trust under the proposed terms because it would probably involve mortgage fraud and almost certainly tax evasion (not avoidance which is perfectly legal).

    It boils down to your brother not being able to have his cake and eat it.
    Originally posted by Pixie5740
    Yes, there is no confusion, I should have stated to be clear is the Help to Buy Equity Loan (that never existed when my brother bought his first property after working many extra overtime hours to save quickly). They have their own individual ISA's that they invest in funds/ETF's etc so nothing to do with the Help to Buy ISA.

    The word 'gift' is probably the wrong term of wording I wanted to use. Simply she has the savings and approval of the mortgage amount she would need for the down payment and the ability to cover the mortgage herself. So all in her own name on land registry and no need for my brother in the process. So all under the current legal fame work. They certainly have no intention to make a mistake around that.

    However, the simple fact is 1. She wants to be a property owner for her main residence but equally would prefer not putting so much equity in and reducing her mortgage amount at 50% (given brothers contribution) so she could have this capital just as a reserve and top up her max contribution to her ISA for next few years - giving her more liquidity. 2. My brother wants to buy into property for his residence.

    Two solutions I was thinking about after do some reading. A) They just buy the property together (forget the 20% assistance for her) as he could take some equity release out by remortgaging his London property then they could just end up with a different equity ownership (say 60% him and 40% her or whatever) They have plenty of time so could just sit until making a good offer and off set the SDLT by a reduced property price (the market they are looking into moving is stagnant, so I believe they can make good offers anyway). B) She buys herself as sole owner with 20% HTB Loan and she pays her own mortgage etc. However, then possibility later on of selling 50% ownership of property to him? Ie they would then need to pay the additional SDLT as he would be joining the title and I guess have to pay off the HTB Loan? Could this be done? Are there any conditions for early repayment of HTB loan etc?
    Last edited by Goldcrypto; 08-08-2018 at 5:42 AM.
    • Pixie5740
    • By Pixie5740 8th Aug 18, 5:46 AM
    • 13,361 Posts
    • 19,233 Thanks
    Pixie5740
    Yes, there is no confusion, I should have stated to be clear is the Help to Buy Equity Loan (that never existed when my brother bought his first property after working many, extra, overtime work hours to save quickly). They have have their own individual ISA's that they invest in funds/ETF's etc so nothing to do with the Help to Buy ISA.
    Originally posted by Goldcrypto
    If you think HTB EL is exclusively for FTB then you are confused about the scheme. Is it a new build property they specifically want to buy?

    The word 'gift' is probably the wrong term of wording I wanted to use. Simply she has the savings and approval of the mortgage amount she would need for the down payment and the ability to cover the mortgage herself. So all in her own name on land registry and no need for my brother in the process. So all under the current legal fame work. They certainly have no intention to make a mistake around that.

    However, the simple fact is 1. She wants to be a property owner for her main residence but equally would prefer not putting so much equity in and reducing her mortgage amount at 50% (given brothers contribution) so she could have this capital just as a reserve and top up her max contribution to her ISA for next few years - giving her more liquidity. 2. My brother wants to buy into property for his residence.
    Originally posted by Goldcrypto
    There are different types of property ownership. Legal ownership and beneficial ownership. What is being proposed is that she is the sole legal owner whilst they are both joint beneficial owners.

    Two solutions I was thinking about after do some reading. A) They just buy the property together (forget the 20% assistance for her) as he could take some equity release out by remortgaging his London property then they could just end up with a different equity ownership (say 60% him and 40% her or whatever) They have plenty of time so could just sit until making a good offer and off set the SDLT by a reduced property price (the market they are looking into moving is stagnant, so I believe they can make good offers anyway).
    Originally posted by Goldcrypto
    It sounds like option A involves jointly buying the property as tenants in common without using HTB EL and sucking up the higher rate of SDLT which is definitely a viable option.

    B) She buys herself as sole owner with 20% HTB Loan and she pays her own mortgage etc. However, then possibility later on of selling 50% ownership of property to him? Ie they would then need to pay the additional SDLT as he would be joinging the title and I guess have to pay off the HTB Loan? Could this be done? Are there any conditions for early repayment of HTB loan etc?
    Originally posted by Goldcrypto
    Yes the HTB EL would have to be paid off and he would still attract the higher rate of SDLT assuming the goverment hasn't changed the legislation again at that point.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 5:56 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    If you think HTB EL is exclusively for FTB then you are confused about the scheme. Is it a new build property they specifically want to buy?
    I meant to imply a new property owner - not necessarily 'first' time but not owning any other properties at time of the purchase. She would be flexible at looking at whatever properties and threshold (up to max value - looking to get most they can spend outside of London) is applied to the HTB EL to qualify for it - if she went that route.

    Yes the HTB EL would have to be paid off and he would still attract the higher rate of SDLT assuming the goverment hasn't changed the legislation again at that point.
    Thanks. Are you aware of any restrictions to that or requirements to time needed to be owned before she could sell 50% ownership to him?
    • Pixie5740
    • By Pixie5740 8th Aug 18, 6:02 AM
    • 13,361 Posts
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    Pixie5740
    I meant to imply a new property owner - not necessarily 'first' time but not owning any other properties at time of the purchase. She would be flexible at looking at whatever properties and threshold (up to max value - looking to get most they can spend outside of London) is applied to the HTB EL to qualify for it - if she went that route.
    Originally posted by Goldcrypto
    ???

    You do that HTB EL is only for purchasing new build properties don't you?



    Thanks. Are you aware of any restrictions to that or requirements to time needed to be owned before she could sell 50% ownership to him?
    Originally posted by Goldcrypto
    She could in theory sell half the property to him the very next day but it's likely she would face early repayment charges by redeeming the mortgage so soon. The equity loan would need to be repaid immediately and the higher rate of SDLT would still apply so it all seems a bit pointless really.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 6:23 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    You do that HTB EL is only for purchasing new build properties don't you?
    Indeed. New build as from Gov site:

    'Equity loans are available to first time buyers as well as homeowners looking to move. The home you want to buy must be newly built with a price tag of up to £600,000.

    You won't be able to sublet this home or enter a part exchange deal on your old home. You must not own any other property at the time you buy your new home with a Help to Buy: Equity Loan
    .'


    She could in theory sell half the property to him the very next day but it's likely she would face early repayment charges by redeeming the mortgage so soon. The equity loan would need to be repaid immediately and the higher rate of SDLT would still apply so it all seems a bit pointless really.
    Ok, so no restriction early repayment on the HTB EL. If she went that route he would not be ready anyway currently to buy her out 60% or so immediately. They could look to see what mortgage options are available for early repayment or options for becoming joint mortgage (later date for remortgage) etc. It would be later on so they could still benefit from now, if they chose that option, if they see a property they want .
    Last edited by Goldcrypto; 08-08-2018 at 6:52 AM.
    • Doozergirl
    • By Doozergirl 8th Aug 18, 6:59 AM
    • 26,118 Posts
    • 70,540 Thanks
    Doozergirl
    My main client is worth the sort of money you only see on a Monopoly board. Do you know what he does?

    He pays the additional SDLT.

    The SDLT on a £5 million property bought by a company is nearly £700,000. There is no relief, but perhaps there should be some because - well, it's not fair, is it? That one person pays that much into the public purse in one go? And then has to pay Corporation Tax on the sale. Life is so unfair when you're generating significant sums of money for the economy and not stripping the public purse.

    Please. Your 'brother' is no better than a benefit cheat. He's benefitted from the price rises that the measures were introduced to curb and to help genuine FTBs get a hand. That is enough.
    Last edited by Doozergirl; 08-08-2018 at 7:04 AM.
    Everything that is supposed to be in heaven is already here on earth.
    • csgohan4
    • By csgohan4 8th Aug 18, 7:03 AM
    • 5,282 Posts
    • 3,382 Thanks
    csgohan4
    I hope your brother protects his share as if they split or divorce he might lose it
    Last edited by csgohan4; 08-08-2018 at 9:10 AM.
    "It is prudent when shopping for something important, not to limit yourself to Pound land/Estate Agents"
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 8:39 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    My main client is worth the sort of money you only see on a Monopoly board. Do you know what he does?

    He pays the additional SDLT.

    The SDLT on a £5 million property bought by a company is nearly £700,000. There is no relief, but perhaps there should be some because - well, it's not fair, is it? That one person pays that much into the public purse in one go? And then has to pay Corporation Tax on the sale. Life is so unfair when you're generating significant sums of money for the economy and not stripping the public purse.

    Please. Your 'brother' is no better than a benefit cheat. He's benefitted from the price rises that the measures were introduced to curb and to help genuine FTBs get a hand. That is enough.
    Originally posted by Doozergirl
    Here we go. What has this got to do with actually answering the question? Just a waffle of your 2 cents worth on UK real estate economics and policies.

    Regarding views, although this is pointless as we work with the current policies in operation, you honestly think it is fair multi millionaire Landlords who buy properties through a company that holds at least 15 homes will be able to avoid the extra stamp duty charge? While average Joe's just looking to work hard and have one property investment along with their residential are attacked. We all know how many £Billion and multi £million corporations use clever accounting to off set their corporation tax. Starbucks only paid a fraction in 5 years. So please get of your high horse. That does not wash with me.

    If you equate people working hard to invest as a 'benefit cheat' then you are clearly delusional or misguided. More British people should be investing and making their money work for them instead of complaining and crying envy. You think investing in good real estate projects is a simple process with no research into the property, active management of the property, renovation etc? Oh no, lets just ignore all that hard work!

    Do you know anything about real estate economics? How would him buying 1 property, that he wanted to be part of the London property investment growth over the last decade, while renting himself (paying other landlords as he needs to live somewhere) either in UK or US or HongKong (depending where he is living) significantly affect the market? Or should he have invested in SP500 index then you would be blaming him for the current high priced valuations of Apple, Amazon, Facebook etc? Those greedy investors trying to invest for their future / retirements etc and pushing prices up!

    If you understood the London property market you would know the rise is mainly due to overseas property investors - Singapore, HongKong, China, Middle East, Russia, US etc. A tiny percentage of people own many thousands each. I know a colleague from Singapore (came to UK to do his MBA) now has a family here and bought up 8 properties already.

    https://www.theguardian.com/society/2017/jun/13/foreign-investors-snapping-up-london-homes-suitable-for-first-time-buyers

    The real issue is the greedy government not doing enough to protect UK investors against overseas investors. They are getting paid so why should they care?

    So all irrelevant points not related to the question. Does not help provide a solution to my original question.
    Last edited by Goldcrypto; 08-08-2018 at 8:46 AM.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 8:44 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    I hope your brother protects his share as if they split or divorce you might lose it
    Originally posted by csgohan4
    They are not married yet and too early to presume that.

    He would not be doing anything outside of a legal framework that he actually has ownership on title deeds. Solution currently is to wait and joint purchase or buy his share at a later date from her. As such would be treated as a joint investment opportunity and irrelevant to the relationship status for the time been.
    • coley54321
    • By coley54321 8th Aug 18, 8:56 AM
    • 34 Posts
    • 11 Thanks
    coley54321
    The "I have a friend who" ruse. Your brother is YOU.
    • Goldcrypto
    • By Goldcrypto 8th Aug 18, 9:03 AM
    • 104 Posts
    • 22 Thanks
    Goldcrypto
    The "I have a friend who" ruse. Your brother is YOU.
    Originally posted by coley54321
    I wish he was. I only bought into London market within last 3 years. So I am in at the top of the market and face, no doubt, a nasty steady rise in interest rates to hit me.
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