Stage 10: Post-completion Flashcards
what are the post-completion steps?
- discharge of seller’s mortgage
- payment of tax
- registration of new charge
- HMLR applications
re: discharge of seller’s mortgage
what procedure will be followed?
- Procedure will have been agreed on the completion information form
re: discharge of seller’s mortgage
what happens once the lender receives the mortgage money?
Once the lender has received the mortgage money, they will either:
1. Complete LR form DS1 and send to the seller’s solicitor who transmits this to the buyer’s solicitor
2. Submit e-DS1 electronic discharge through the LR portal; or
3. Use the electronic discharge system (automatically removes the charge)
With options 1 and 2, Form DS1 is not sent, but the seller’s solicitor will send confirmation to the buyer’s solicitor
re: tax
where is SDLT paid?
England
re: tax
where is LTT paid?
Wales
re: tax
when will SDLT and LTT rates be higher?
Below rates are higher if the buyer is not a UK resident/owns 2nd home
re: tax
what are the consequences of failure to pay?
Fines for non-payment of SDLT/LTT and any LR application will be rejected if it is not accompanied by the correct proof of payment
re: tax
what tax is paid in a residential transaction?
o Buyer SDLT / LTT
o Seller CGT if a gain has been made & it is not their only/main residence
re: tax
what tax is paid in a commercial transaction?
o Buyer SDLT / LTT + (possibly) VAT
o Seller corporation tax
re: tax (SDLT)
what is this payable on?
SDLT is payable on the land (inc. VAT) and fixtures (not chattels). A purchaser might try to argue some fixtures are chattels to pay less SDLT.
This must be a fair reflection otherwise this is fraud
re: tax
how is this calculated?
- Calculated like other tax i.e. property £300k. First £0 - £250k @ 0%, remaining £50 at 5% = £2.5k tax payable
re: tax (SDLT)
what are the 2024/2025 rates for first time residential buyers?
First residential time buyers - intend to occupy the home as their main residence no SDLT up to £425k o & 5% from £425 - £625k
re: tax (SDLT)
what are the 2025/2026 rates for first time residential buyers?
no SDLT up to £300k & 5% on £00k - £500k
re: tax (SDLT)
what are the 2024/2025 rates for other residential buyers?
£0 - £250k 0%
£250k - £925k 5%
£925k - £1.5m 10%
£1.5m + 12%
re: tax (SDLT)
what are the 2025/2026 rates for other residential buyers?
£0 - £125k 0%
£125k - £250k 2%
£925k - £1.5m 10%
£1.5m + 12%
re: tax (SDLT)
what are the 2024/2025 rates for commercial / mixed used property buyers?
£0 - £150k 0%
£150k - £250k 2%
£250k + 5%
re: tax (SDLT)
when and how is this paid?
- SDLT payment and Form SDLT1 (i.e. the tax return form) must be sent to HMRC within 14 days of completion.
re: tax (SDLT)
what is proof of payment?
- HMRC give form SDLT5 as proof of payment
re: tax (LTT)
what are the rates for first time residential buyers?
no relief for 1st time buyers
re: tax (LTT)
what is this payable on?
LLT is payable on the total i.e. inc. VAT
re: tax (LTT)
what are the rates for residential buyers?
£0 - £225k 0%
£225k - £400k 6%
£400k - £750k 7.5%
£750k - £1.5m 10%
£1.5m + 12%
re: tax (LTT)
what are the rates for commercial / mixed use property?
£0 - £225k 0%
£225k - £250k 1%
£250k - £1m 5%
£1m + 6%
re: tax (LTT)
when and how is this to be paid?
- LTT payment and Land Transaction Return Form must be sent to WRA within 30 days of completion
re: tax (LTT)
what is proof of payment?
- WRA will return a WRA certificate as proof of payment
re: tax (CGT)
how is the gain calculated?
- Sale price – expenditure (inc. initial purchase price) = gain
re: tax (CGT)
is relief available?
Yes, private residence relief
re: tax (CGT)
when is private residence relief available?
Private residence relief (PRR) available (i.e. no GGT payable) if:
o It is the individual’s house and their main/only residence
o They have occupied the house throughout their ownership not inc the last 9m
o Not available on any part of the house used exclusively for business
re: tax (CGT)
what can PRR be applied to?
- PRR applies to home and 0.5 hectares of land (land exceeding 0.5 hectares may attract a charge on the gain unless they can prove to HMRC the land is necessary for reasonable enjoyment)
- If they have more than 1 property, they can choose which one attracts PRR
re: tax (CGT)
can trustees use PRR?
- Available to trustees if B occupies the property as their main residence
re: registration of a new charge
when is this relevant?
- If the buyer client is a company and has got a mortgage
re: registration of a new charge
what is the deadline?
the charge must be registered by the lender’s solicitor at CH within 21 days of completion
re: registration of a new charge
what must the client do?
- If the buyer client is a company and has got a mortgage, this must be registered by the lender’s solicitor at CH within 21 days of completion
re: registration of a new charge
can the deadline be extended?
o This is a strict deadline only extendable by court order
re: registration of a new charge
what happens if the charge is not registered?
- If the charge is not registered, the charge is void. This means they lose priority over other creditors and become an unsecured creditor.
- NB: the debt is still owed an payable, but the lender loses security
re: HMLR applications
when are these applications made?
Only made once the other post-completion steps have been taken, but within the priority period
re: HMLR applications
what is important to remember about forms AP1 and FR1?
- Forms AP1 and FR1 where the property value is more than £5k require the application to give details of the solicitor (or party if they are unrepresented)
re: HMLR applications (reg land)
what forms are to be submitted?
- Form AP1
- Certified copy of transfer (not original)
- fee
- SDLT/LTT certificate
- DS1 (if used)
- Form DI
- copy of the mortgage deed (if applicable) (other mortgage documents if they are a company)
re: HMLR applications (reg land)
when is form AP1 used?
o Register the buyer(s) as a proprietor(s)
o Register the lender as a proprietor (only needed if there is a mortgage in order to register the charge)
o Discharge the seller’s mortgage (this is only necessary if Form DS1 was used by the seller’s solicitor)
re: HMLR applications (reg land)
what documents must be submitted with AP1?
- Certified copy of transfer (not original)
- fee
- SDLT/LTT certificate
- DS1 (if used)
- Form DI
- copy of the mortgage deed (if applicable), + if they are a company:
Certified copy of the certificate of registration issued by CH; and
Written confirmation that the copy of the mortgage deed is the same as the one filed at CH and to which the certificate of registration relates
re: HMLR applications (reg land)
what does form D1 do?
this discloses any overriding interests that burden the title. This transfers them to a registered interest and so it will no longer be overriding. The purpose is to improve transparency
re: HMLR applications (reg land)
when must these applications be made?
within the 30 day priority period
re: HMLR applications (unreg land)
when must the application for 1st reg be sent?
- Application for first registration must be made within 2 months of completion
re: HMLR applications (unreg land)
what documents must be sent to HMLR?
FR1 (1st registration application),
AP1,
DI,
DL (2x)
fee
If there is a mortgage, the same documents as described under reg. land
re: HMLR applications (unreg land)
what is the purpose of Form DL? what are the requirements?
Form DL lists the documents enclosed with the application the Registrar will use to allocate class of title.
The documents must be numbered and in chronological order.
Conveyancers can submit certified copies, anyone else must submit the original deed
re: HMLR applications (unreg land)
what documents are enclosed with Form DL?
o All documents supplied by the seller’s solicitor that formed evidence of title
o All the buyer’s pre-contract searches and enquiries and their replies
o The contract
o Requisition on title with their replies
o All pre-completion search certificates
o The transfer deed
o Seller’s mortgage (duly receipted)
o SDLT/LTT certificate
re: HMLR applications (unreg land)
what happens once registration is complete?
- Once registration is complete, HMLR will send an official copy to the buyer’s solicitor (this is called the Title Information Document (TID)). This is not a formal document of title, but is evidence they are now the registered owner (and the lender with a charge against the property)
re: HMLR applications (unreg land)
what should the solicitor do once they have received the TID?
- The solicitor will need to check this is correct and keep it safe (they should check with the lender in case they want to keep it)
