Hint & Tips - Buying a House      Please click here for Hints & Tips - Selling a House

	Guarantees
	Surveys
	Contaminated Land
	Insurance
	Stamp Duty Land Tax

Guarantees

If the property already has the benefit of guarantees for damp-proofing, timber or other treatments, then we should receive copies of those guarantees from the Seller's solicitors with the Contract. We should also receive notification from them as to whether or not any defects have arisen under the terms of those guarantees and if so when, how and what remedial work (if any) was carried out as a result. Please remember, however, that the existence of a guarantee and the fact that no claim has been made under it, does not mean that the property is free from defect. The guarantee may have expired or be close to expiring. Only part of the property may be covered by it or the guarantee may cover only some risks/defects and not others. Some guarantees do not provide cover to successive purchasers of the property and sometimes when claims are made guarantees are found to be invalid or the provider of these guarantee cannot be traced.

Surveys

It is no longer the practice of Buyer's Solicitors to raise enquiries of the Seller's Solicitors as to the structural soundness of the property or the condition of its services and appliances. These are matters upon which you should satisfy yourselves by means of professional surveys, personal inspection and/or direct questioning of the Sellers. Accordingly, we very strongly recommend that you enquire specifically of the Sellers whether or not they are aware of any such matters as timber defects, structural defects, subsidence, drainage or plumbing defects, dry or wet rot, rising damp or woodworm, although that list is not exhaustive. You should never lose sight of the fact that the doctrine of 'caveat emptor' or 'let the Buyer beware' applies and that there is no obligation on the Sellers to disclose defects to you.

So far as the services are concerned (particularly things like the central heating system) you should ensure that these are all in full working order by requesting the Sellers to operate them in your presence. If you are at all concerned then you should make arrangements for appropriate tests to be carried out by a qualified heating Contractor. The same applied to the electrical system at the property, which you should have tested by a qualified electrician if you are at all dubious about its condition.

If it becomes clear, either from your own inspection and enquiries or following the results of professional surveys or tests that the property does suffer from any defects then we shall, of course, be happy to pursue these matters on your behalf with the Seller's solicitors. These checks on the physical condition of the property must, however, be carried out at an early stage since once you have signed and exchanged contracts it will be too late to back out of the transaction or seek any price reduction for defects discovered afterwards. It is essential, if you are a cash buyer or do not require a mortgage, to obtain a full Structural Survey Report.

If you are obtaining a mortgage to buy the property the lender will arrange a Valuation Report to ensure that the property 'values up' for mortgage lending purposes. Even though (in most cases) you will be asked to pay for that valuation, and you may even be shown a copy of it by the lender, you cannot legally rely on it. The valuer's legal duty of care is to the lender and does not extend to you. It is not a detailed or thorough examination of the structure, services or appliances and you will have no legal remedy against the valuer or the lender if it fails to disclose defects in the property. A valuation and survey are entirely and completely different. We, therefore, very strongly recommend that you obtain your own full independent Structural Survey report from a qualified Surveyor on which you can rely. If your Surveyor fails to notice a material defect in the property, or to bring it to your attention, you may be able to sue the Surveyor for negligence and recover damages equal to the cost of any necessary remedial work to put the defect right. The Surveyor will have professional indemnity insurance to cover any such claim. Please insist that your surveyor completes, signs and returns to you with his report a Property Observation Checklist for identifying apparent potential for contamination. See in this respect 'Contaminated Land' below.

Most Surveyors will qualify their Report and their liability to you by stating for example, that they have not inspected inaccessible parts of the property or tested all the services or appliances and will suggest that you obtain additional specialists reports from electrical, plumbing/heating, cavity wall tie, damp-proof and other experts. If you do not follow up that advice you will be unable to hold the Surveyor himself responsible for any defects which would have been revealed as a result. Some specialists reports, particularly from damp-proofing and wood treatment experts, can be obtained free of charge. We will be happy to advise you on this if you wish. These should, however, be seen as supplemental to and not a replacements for a full independent Structural Survey.

We have contact with a number of independent professionally qualified chartered Surveyors who will be able to carry out a full Structural Survey on your behalf. Please do not hesitate to contact us if you require advice as to which Surveyor to instruct or the likely cost of so doing.

Contaminated Land

1. The Problem.

Please note the possibility that the property you intend to buy (including on a long leasehold basis) has been built on contaminated land, of which there is estimated to be more than half a million acres in the UK. This is a particular risk when purchasing a 'second-hand' home constructed on or near a former industrial site, sometimes referred to as 'brown land'. Apart from the intrinsic health risks, home owners may find themselves legally liable for substantial clean up costs (for example top soil replacement or chemical treatment) if the original polluter and original builder/developer cannot be traced or have ceased to exist.

Whilst Local Authorities are now obliged (with effect from Summer 1999) to begin the creation of a local register of contaminated land, the results of which will in due course be disclosed in Local Searches, it will be another ten to fifteen years before all contaminated land has been identified and registered as such. Buildings insurance is unlikely to cover environmental clean up costs because the pollution/contamination will have long preceded the policy's inception and, the NHBC Buildmark ten year scheme (if the builder was a member and cover has not lapsed) only covers the cost of environmental cleaning up of land (or if this is uneconomical the home owner being bought out) on policies issued after 1^st April, 1999.

On purchase of homes on brand new housing developments you may have the limited protection of NHBC Buildmark cover but this last for only ten years and the property may not be identified as contaminated before cover expires. We therefore raise environmental enquiries of the developer on your behalf before exchange of Contracts. These cover the site's history and previous usage (so far as the developer is aware), whether an environmental survey has been undertaken and whether (and if so what) decontamination work has been undertaken.

The purchase of 'second-hand' properties (and new properties when the developer cannot answer or is unclear in replies to environmental enquiries) is more problematic. The Property Information Form provided by the Seller does not contain information about actual or potential contamination and, the Seller may be unaware of it in any event. Raising environmental Enquiries before Contract is unlikely to illicit an informed or accurate reply.

2. Solutions.

The risk of environmental contamination to the property you are purchasing and potential clean up costs which you may incur are potentially serious. There are three solutions namely:-

(a) To carry out a desk top environmental survey in order to ascertain and if appropriate identify the risk.

(b) To insure against the cost of remediation works and resultant reduction in the market value of the property.

(c) To do nothing, i.e. neither to search nor to insure.

We will now address each of these options as follows:-

(d) The search option.

We can make on your behalf a desk top environmental search against the property. The search report will provide details of the environmental setting and previous land use, incorporates current and historic ordnance survey mapping and contains environmental data from numerous statutory and non-statutory sources including the environment agency, British geographical survey and the local planning department. Whilst a 'desk top' search result is likely to identify problem sites, a clear result (ie a ‘Passed’ certificate from a specialist environmental surveyor appended to the report) is not a guarantee that a property is free from contamination. Only a comprehensive expert analysis of the site (including the taking of soil samples) the cost of which will be very substantial can provide a definitive result. Please note that we are not experts in advising upon whether a property is or may be contaminated this being outside our responsibility and retainer. We will however refer you to a specialist environmental consultant if you wish to instruct one.

The insurance option.

You can take out a specialist contaminated land insurance policy which for the duration of the policy cover, will give you complete peace of mind. If you do not wish to adopt the search option above and the property you are buying does not have the benefit of a post-April 1999 HSBC Policy (see above) we would strongly recommend this solution. We can arrange a comprehensive policy designed to protect home owners and their mortgagees/lenders against a potential liability for the remediation cost of any contaminants found on your land. The cover is easy to arrange, cheap and includes all costs and expenses incurred in order to comply with any remediation required by the Local Authority (whether or not a Remediation Notice has been served) plus any shortfall in the market value of your home as a result of remediation works.

Please note that in the first instance the policy will only cover you for ten years from the date the policy is taken out or, your mortgage Lender for the term of the mortgage if longer. We are informed by the brokers for the policy, that cover may be extended for an additional period during the ten year term on payment of an additional premium if the insurers will accept the risk. It is however important to note that the benefit of the insurance cover does not run with the property after you have sold or transferred it so as to benefit a person who buys a property from you or other successor in title.

Doing nothing.

This is a very risky option and would be entirely contrary to our advice. If you neither commission an environmental desk top survey nor obtain adequate environmental insurance cover and it later transpires that the property is contaminated (whether or not the cost of putting this right falls upon you) and a search would either have put you on notice of this or, insurance would have covered the risk, the cost of complying with any remediation work or drop in value in your property will be your responsibility and no-one else's.

Buildings Insurance

It is your responsibility (unless you are quite sure this has been arranged for you by your mortgage lender) to arrange buildings insurance cover from exchange of Contracts. That cover should be for the full reinstatement value of the property if it is wholly destroyed and may well exceed, given the cost of demolition and rebuilding, the actual purchase price. Again, we will be happy to give you advice on this on this point if you require it.

We recommend that you re-inspect the property immediately before Contracts are exchanged to ensure it is in the same condition as when you first inspected it. If any damage has occurred you must make arrangements with the Sellers for repairs to be carried out as your insurance will only provide cover from the date the policy goes on risk.

Stamp Duty Land Tax

Background

“Stamp Duty” has existed since 1694 as a government tax on certain legal documents, including transfers of land. In the past, rates of duty were low (usually one percent) and the legislation for levying this relatively simple tax, collected via the legal profession using a single sheet form, mostly took care of itself – the 1891 Stamp Act survived the 20th century with only minor amendments.

The SDLT compliance procedure is much more onerous and complex than the old one. The Finance Act 2003 replaced Stamp Duty with SDLT on 1st December 2003. It is a tax on transactions, not documents which are no longer ‘stamped’.

	It is your obligation in law to notify ‘liability to tax’ by submission of a Land Transaction Return form (‘LTR’) within thirty days of completion even though, in practice, we will do this on your behalf because your mortgage lender will insist upon it. The reason for this is that HM Land Registry will not register your purchase of the property and any charge in favour of a lender unless or until the Inland Revenue provide to us and, we in return provide to the Land Registry, a ‘Land Transaction Return Certificate’ issued by the Revenue confirming receipt of the LTR and payment of tax. The application for registration must be made within the priority of the searches obtained before completion in order to protect your interest in the property and the priority of a lender’s charge.
	You will incur penalties with the Inland Revenue if the LTR is returned late. There is a fixed penalty for delay in submitting the LTR of £100.00 if only a day late, rising subsequently to £200.00 plus a tax related penalty. These penalties apply for failure to lodge the LTR on time even if no tax is payable. The only transactions where an LTR is not required and which can be self-certified to the Land Registry are exempt transactions such as a gift of property from one person to another, although even in that case, if the property is subject to a mortgage, an LTR will be required and SDLT may be payable.
	To ensure that the LTR is completed properly and submitted on time we will go through this form with you (which is a self-assessment form comprising more than seventy sections) either when we see you immediately prior to exchange of Contracts or, at the latest, when we meet to have you execute the lender’s Mortgage Deed and execute the Transfer before completion. Where completion of the LTR is straight forward we have no present intention of charging for the extra work above and beyond the conveyancing quotation given at the outset. It should however be noted that in complex cases and/or where supplementary forms of the LTR are required we reserve the right to make an additional charge for dealing with them based on the hourly rate set out in the Client Agreement.
	If, as will generally be the case, we complete the LTR form(s) on your behalf it must be emphasised that this will be in reliance on the information you provide to us and that you have ultimately responsibility for the accuracy of the information. You are warned that if the LTR is not completed properly (e.g. information required from you is missing) this could delay acceptance of the LTR and the incurrence of the late return penalty already mentioned.
	It is your responsibility (which cannot be delegated to us other than under a specific Power of Attorney) to sign the LTR as the taxpayer and your obligation to pay the tax due. Where there is more than one purchaser (e.g. husband and wife, two cohabitees or a business partnership) the liability to pay the tax is joint and several even if in reality the funds for the purchase are provided by only one party.
	The LTR requires us as your solicitors to give our details as your ‘Tax Agent’. Tax Agent is a term common to other taxes and tax forms. The fact that we as your solicitors are your Tax Agents does not create an agent/principal relationship under the law of agency and therefore there is no corresponding liability on us unless we colluded with you in defrauding the Inland Revenue. For the purpose of SDLT the Tax Agent is a person who is advising the client with whom the Revenue may correspond about the taxpayer’s tax affairs. By using the LTR which includes this firm’s details as agent, you the client are in effect consenting to the Inland Revenue communicating with us and thereby enable the Revenue to comply with data protection requirements. If by any chance (and notwithstanding our insertion of ourselves as your Tax Agents in the LTR) the Land Transaction Return Certificate is sent to you direct in error, you should deliver or post it to us immediately so as not to delay registration at HM Land Registry.
	SDLT operates on a ‘process now check later’ basis. This means that you may be liable to pay any shortfall from the self-assessed amount after an Inland Revenue enquiry. It is also conceivable that on occasion SDLT may be accidentally overpaid. In either case we will inform you immediately of the position.
	Beware the fact that the Inland Revenue will on a regular basis be conducting tax enquiries to check whether LTR forms have been accurately and honestly completed and the correct amount of tax paid. The enquiry window will usually be for a period of nine months from the filing date. Leaving aside civil penalties for any tax paid short, penalties and interest, do not overlook the fact that it is a new criminal offence to evade SDLT punishable by up to seven years imprisonment. Whilst in practice such enquiries will be dealt with by ourselves, it is important that you are forewarned at this early stage that any costs incurred in connection with responding to the enquiry will be over and above those incurred in dealing with the transaction and will be charged for at the hourly rate set out in our Client Agreement with you. This will be the case even if, at the end of the enquiry, no additional tax is payable and you are wholly vindicated.
	Inland Revenue enquiries into possible evasion of SDLT are most likely to occur where the purchase price of the property stated in the Transfer is close to a tax threshold especially where Buyer and Seller have agreed a significant or apparently excessive value for moveable chattels (furniture, carpets, curtains and non-built in domestic appliances etc.) which themselves are not liable to SDLT but which have been purchased separately or in addition to the property itself. Fixtures and fittings are not chattels and form part of the taxable purchase price of the property. Any over-valuation of the price of chattels is a fraud on the Inland Revenue which may render both the solicitor (as accessory) and you the client open to criminal proceedings. That is not a risk we are prepared to contemplate and we will accordingly need to be satisfied that any chattel values are honest and accurate. A further consequence of an over-valuation is that the contract for the sale and purchase of the property would be unenforceable by court action since it could be construed by the court as being a contract to default the Inland Revenue, such contracts being unenforceable on the grounds of public policy.
	The Inland Revenue will reject all LTR forms which do not contain the national insurance number or numbers of the purchaser or purchasers. You must accordingly provide us with your national insurance number (or numbers) at the outset of the transaction. If you are in employment your national insurance number will be shown on your pay slip. If you are self-employed and cannot recall your national insurance number or have lost your national insurance card please obtain this information from your accountant.
	Certain Council wards in England and Wales have been designated by the Inland Revenue as ‘disadvantaged areas’ for stamp duty and subsequently SDLT purposes. If the domestic property you are purchasing is in one of those areas then no tax will be payable unless the purchase price exceeds £150,000.00, although you will still have to complete an LTR form. To find out at an early stage whether the property you are buying is in a disadvantaged area and therefore not liable to tax you should obtain its precise post code from either the Seller or the Seller’s agents. Having done so you should visit the Inland Revenue website (www.inlandrevenue.gov.uk/so) which will interactively tell you, when the post code is entered, whether the property qualifies for relief. The following Council wards are the current ‘disadvantaged areas’ within Kirklees Metropolitan Council: Deighton - Thornhill - Dewsbury East - Dewsbury West - Crosland Moor - Newsome - Batley West - Batley East.
	Because a tax enquiry could be raised for anything up to six years after your purchase of a property, we will retain your file for at least that period and ordinarily will make no charge for doing so.