Thousands of homebuyers could unwittingly have to pay up to £15,000 when the stamp duty holiday ends because of huge delays in the conveyancing process, a lawyer has warned.
The Chancellor’s stamp duty holiday – where house buyers are exempt from paying the property tax on the first £500,000 – is due to end on March 31 and the scheme has seen a boom in the housing market.
But Simon Nosworthy, Head of Residential Conveyancing at London law firm Osbornes Law, has warned that purchases already underway may not be finished before the deadline because of unprecedented pressures on banks, lawyers and local authorities. Those buyers completing after the deadline would be left with a stamp duty bill of up to £15,000.
His warning comes after the Law Society wrote to conveyancers at the beginning of November, asking them to ‘manage clients’ expectations’ about the chances of completing deals before the end of the stamp duty holiday.
The email said: “Many clients agreeing sales and purchases at this time of year are keen to be in their new property before Christmas. Whereas you will now be warning that this may not happen and that delays are such that they may not benefit from the SDLT concession which expires on 31 March 2021 (even though this appears to clients to be many months away).
“We strongly encourage firms to manage clients’ expectations as to timing. The transaction is not wholly within your control and there are many factors that can prevent the purchase or sale proceeding.”
Simon says: “The whole conveyancing system is struggling under the strain and that means there are significant delays in getting a house sale completed, especially when there is a chain. I expect there to be many buyers, potentially hundreds or thousands, who expect to have their deal done by March 31 next year only to have to end up paying stamp duty as they haven’t completed in time or pulling out of the transaction if they have not budgeted to pay for the duty.
“There are delays across the board when moving home at the moment, from getting mortgages approved, to local authority searches and lawyers being inundated with cases. I have seen some banks take three months to approve mortgages and many local authorities, struggling with demand for search results. Some lawyers are not taking on any more work. All of this means that people going through a house move at the moment need to realise that they may not be able to complete before the stamp duty holiday ends. The closer to the deadline the worse it is going to get.
“To put this in context, before Covid 19, the average time it took from listing a property to moving into a property was 187 days. That’s just over 6 months. So, you will appreciate the challenge for buyers and sellers at the moment.”
Simon says that the most important thing for buyers to get in place is the money to complete and make sure they have a mortgage approved. Next is to find a lawyer who has capacity to take your case and finally buyers should check how long searches are taking at their local authority.
Simon added: “If I was moving house I would want to complete well in advance of the deadline, otherwise you risk disappointment and a large bill. Unfortunately, I think a lot of people face being in this position and I would urge anybody who has not started the process already to only do so if they are willing to pay the full amount of stamp duty.”