Clarke and Son News

On 26 January 2010, the FSA published a consultation paper entitled ‘Mortgage Market Review: Arrears and Approved Persons’.

In this paper, the FSA sets out a package of measures designed to strengthen its current rules on arrears handling and approved persons.  These were identified by the FSA in its October 2009 mortgage market review discussion paper (DP09/3) as priority areas that need addressing.

 The FSA proposes a number of measures to help to ensure that mortgage holders in arrears are treated fairly.  The key measures proposed clarify the FSA’s existing arrears handling rules and introduce some new provisions.  They include:

• Clarifying that firms must not apply a monthly arrears charge where a firm and its borrower have agreed an arrangement to repay the arrears. Any charge imposed should represent the cost of additional administration work.
• Clarifying that firms must not add early repayment charges (ERCs) on arrears charges and interest levied on those charges.
• Clarifying that payments by borrowers in financial difficulties must first be allocated to clearing missed monthly payments, leaving charges to be paid later.
• Requiring firms to consider all options for borrowers, with repossession always being the last resort.
• Obliging firms to record all arrears handling telephone calls and to keep all arrears records for three years.

If you have any questions about mortgage payments contact Paul Cowdery on Tel: 01256 320 555.

One of the first decisions of the new Supreme Court (which last month replaced the House of Lords as the highest court in the land) will be a disappointment to many bank customers who suffered high level of charges after they exceeded agreed overdraft limits.

The Court accepted the banks’ argument that the Birtish tradition of free ‘in credit’ banking (rare elsewhere in the world) was only possible because charges levied on those who go overdrawn.

The decision does not preclude the possibility that the Office of Fair Trading could challenge the fairness of other aspects of bank charges, but it does mean that tens of thousands of customers who had pending applications for refunds of charges will now not receive them.

For private customers who do not go overdrawn on their current accounts, the decision may well mean that free banking will continue.

Earlier this month, the banks announced a pland to phase out cheques: they already charge business customers up to 65p more for writing a cheque than paying a bill electronically.

On 21 April 2009, the Prime Minister, Gordon Brown, announced the launch of the UK Homeowners Mortgage Support Scheme (HMS), which is now available to borrowers.

The Scheme is designed to give homeowners suffering from a temporary loss of income breathing space. Eligible borrowers will be able to reduce their monthly mortgage interest payments for up to two years without being at risk of losing their home during that time.

The Lenders participating in the Scheme are: Lloyds Bank Group (which includes Halifax and Bank of Scotland), Northern Rock, the Royal Bank of Scotland (which includes NatWest and Ulster Bank), Bradford and Bingley, Cumberland Building Society, and the National Australia Bank Group (which includes Clydesdale and Yorkshire Bank).

A number of other banks, building societies and specialist lenders have also confirmed that they will offer their customers HMS as soon as possible. These are Bank of Ireland (which includes Bristol and West), GMAC, GE Money, Kensington Mortgages, the Post Office and Standard Life Bank.

Lenders offering HMS will have the security of a Government guarantee if the borrower defaults.

At the same time, four other high street lenders, Barclays (including First Plus), HSBC, Nationwide and Santander (including Abbey and Alliance and Leicester) have all confirmed today they will offer comparable arrangements to HMS to their customers, while opting not to take up the Government guarantee. Customers of these institutions experiencing a reduction in income and willing to make regular monthly payments will receive a similar level of support and be encouraged to seek independent money advice.

Borrowers who are interested in applying for Homeowners Mortgage Support, or finding out about comparable arrangements should contact their lender in their first instance to check their eligibility.

For lenders offering HMS with the Government guarantee, the borrower must:

• Have bought their home before 1st December 2008;
• Be an owner-occupier - the scheme is not open to buy-to-let or investment properties
• Have an outstanding mortgage of less than £400,000 and savings of less than £16,000.
• Have a regular household income and should be able to make a minimum contribution of 30 per cent of the total interest payment
• Have talked through other options with their lender and have been making regular payments for at least five months.
• Have sought independent money advice.

The Government will continue to work with smaller lenders to encourage them to either offer the Scheme to their customers, or put comparable arrangements in place.

For more information on Buying and Selling your Home or Re-Mortgaging, please contact Paul Cowdery on Tel: 01256 320 555

On 20 February 2009, the Government published the final agreed design of the Homeowners Mortgage Support Scheme (the scheme).

The scheme aims to help homeowners remain in their homes for longer if they suffer a loss of income and temporarily cannot afford their mortgage repayments.

The establishment of the scheme was announced in December 2008. Since then, the Government has been working with lenders, trade associations and money advice agencies to finalise the scheme. The scheme design now sets out the key elements, including eligibility criteria, risk-sharing arrangements and duration.

The Government is now working with lenders to agree the final scheme documentation. It plans to make the scheme available to householders in April 2009, and will publish further details of the scheme when they are available.

If you would like help on any legal aspect of re-mortgaging or on buying or selling your home, please contact Paul Cowdery on Tel: 01256 320 555.

On 3 February 2009, Andrew Dismore MP introduced the Home Repossession (Protection) Bill (HRP Bill) as a Private Members’ Bill. The HRP Bill seeks to amend the Law of Property 1925 to require lenders to first obtain a court order for possession before they can sell a defaulting borrower’s home. The HRP Bill will also give the courts the power, in appropriate circumstances, to delay the sale and to give the borrower more time to repay the arrears.

The HRP Bill was presented in response to the decision in Horsham Properties Group Ltd v Clark & Anor [2008] EWHC 2327 (Ch), which confirmed that a lender can sell a defaulting borrower’s home without a court order.

Following the Horsham case, the Council of Mortgage Lenders (CML) published a voluntary statement confirming that CML members will obtain a court order before seeking to sell, or appointing a receiver to sell, an occupied residential property when the borrower is in default.

Mr Dismore described it as

“shocking that … such a basic legal protection for home owners is not already part of our law”.

Mr Dismore told the House of Commons that this is a problem which is both immediate and urgent.The second reading of the HRP Bill will take place on 26 June 2009.

If you would like advice on any aspect of buying or selling your home, please contact Paul Cowdery or Tel: 01256 320 555

With  lenders trying every device to maximise their income, it is worth thinking about your banking facilities and what the future might hold.

Existing Loans and Overdrafts

The renegotiation of loans and overdrafts has been getting more difficult for some time, with lenders seeking increased margins, additional security and reductions in their exposure. One common gambit is to propose that the interest on a loan or overdraft facility should be based on a margin over LIBOR (the London Inter-Bank Offered Rate), rather than bank base rate. LIBOR is quoted for overnight rates, 3 month rates and 12 month rates. All of these rates have one thing in common: they are traditionally well above base rate, a fact that lenders may fail to highlight.  

Future Loans and Overdrafts

It is not uncommon for a verbal agreement regarding the ability to draw down additional funds to be countermanded, so it is unwise to rely on anything which is not formally contracted in writing. In addition, if the lender becomes insolvent, all bets could be off regarding extensions of loans or facilities. 

Other Facilities

The same logic applies to revolving facilities, such as stocking loans and factoring arrangements. The big downside here is that the reduction or withdrawal of funding may be sudden, leaving the business little time to make alternative arrangements – an outcome which may be catastrophic. It makes sense to review the terms of any revolving finance as a matter of urgency and to consider the possibility that access to it may be cut.  As a general rule, it is also now more risky to breach a banking covenant, as this may provide the lender with an excuse to review your agreement with it, to your disadvantage. Contact Paul Cowdery on Tel: 01256 320 555 for assistance in all maters to do with the negotiation of funding and finance contracts.

Basingstoke solicitors, Clarke & Son LLP are once again participating in the annual Will Aid scheme which enables clients to make a Will at a much reduced fee while also contributing to charity.

Will Aid is an annual Will-making campaign run collaboratively by leading charities made possible through the nationwide support of the legal profession. Since 1988 nearly £7million has been donated through Will Aid. This money has left its mark in tackling the injustices of poverty and deprivation.

For a suggested donation of £75 for a single Will, £110 for a pair of Wills or £40 for a codicil to an existing Will, potential Clarke & Son clients will be contributing to 9 National and International charities.

Roy Young, Head of  the Clarke & Son Wills & Probate department, comments on the scheme, “I’m sure everyone knows that making a Will is a simple yet important way to protect the future of your loved ones.  Remember that if your estate, including your home, is worth more than £125,000 then the money will not automatically go to your spouse, and if you are not married your partner may get nothing. This scheme is an excellent way of encouraging people to make a Will, and while doing so they can also contribute to well-deserving causes.”

Clients wishing to participate in the scheme must make an appointment with Roy during November.

For more information on the Will Aid scheme contact Roy Young from the Wills & Probate department at Clarke & Son LLP or telephone 01256 320 555.

Clarke & Son LLP is participating in a campaign with Cancer Research UK to offer people over 55 the opportunity to get a FREE Will and leave a legacy to charity.

The Cancer Research ‘UK Free Will Services’ has been set up to provide easy public access to independent legal advice for will writing while also making it easier for those already thinking about leaving a legacy to charity in general or to Cancer Research UK specifically, to do so.

Roy Young, Clarke & Son says, “The Cancer Research UK scheme is an ideal opportunity for those over 55 who haven’t yet made a Will - and really should think about doing so – to benefit from both a free Will and also to give something back to charity if they so wish. At Clarke & Son, we are delighted to be able to support this excellent scheme as it enables us to give our expertise in aid of the charity.”

Potential clients who wish to make a Will should contact Roy Young as soon as possible as this is a time limited offer. The firm has been allocated a limited number of coupons from the charity on a first come, first served basis. Once they run out, the offer may no longer be available, so if you’re interested, please respond quickly.

For further information, either e-mail Roy Young direct or telephone Clarke & Son on 01256 320 555.

The Financial Order of Foresters has been fined £55,000 for misleading adverts by the Financial Services Authority (FSA). 

Television adverts and marketing literature which ran between January 2004 and June 2005 failed to point out the risks and drawbacks of two specific policies one of which claimed to be a funeral plan when it was in fact a life insurance policy.

Whilst the penalty would have been higher had the Society not co-operated, Director of Enforcement Margaret Cole stated that. "Ensuring that financial promotions are clear, fair and not misleading is a responsibility firms should not take lightly and other firms should take heed."

The FSA were particularly worried as elderly people were targeted by some of the material.  This is the first time that a friendly society has been fined for such offences.

Income Tax Rates
The personal income tax threshold rises in line with inflation from £4,745 to £5,035, with higher-rate tax coming in at a taxable income of £33,300 – up from £32,400 in 2005/06.

Capital Gains Tax (CGT)
There were no changes to CGT rates. Investors (including trustees) who ‘bed and breakfast’ shares to use their annual allowance for CGT or to create a tax loss will find that such transactions are ineffective with immediate effect. With the FTSE index having risen substantially this year, the Chancellor is effectively increasing his future CGT yield.

Motoring
Vehicle Excise Duty (the tax disk) is being reduced for the two lowest bands of vehicles (by up to £35) and increased by £25 for the highest band, with the two middle bands unchanged. The bands are based on how much pollution a vehicle creates. The very ‘greenest’ vehicles will be exempt from tax altogether. Set against this, the increase in fuel duty (postponed from September because of the spiralling cost of fuel) is being reintroduced, adding 1.5p per litre to petrol, but again deferred until September. The benefit in kind charge for the lowest band car is also being reduced by the introduction, from 2008/09, of a new 10 per cent rate for company cars with CO? emissions of 120g/km or less.

Venture Capital Trusts (VCTs)
Although the amount which can be contributed to a VCT is doubled to £400,000 from 6 April, the tax relief is to be limited to 30 per cent. The time such shares have to be held to be CGT free is lengthened to 5 years (from 3) and the size of the ‘gross asset value’ for a company which can obtain VCT status is reduced from £8m to £7m. These changes apply to VCT shares issued after 5 April 2006.

Anti-Avoidance
As well as new measures to prevent avoidance of tax and national insurance through the use of financial instruments such as share options, the Chancellor has hit hard at the abuse of charitable donations, by restricting the benefits which charities can provide to companies which donate to them, restricting charitable tax relief where the charity uses donations for non-charitable purposes and preventing abuses whereby a donation is made and then withdrawn when tax relief has been obtained.

Pensions
Measures designed to prevent abuses which allow the use of pensions to pass on assets free of IHT are being introduced.

Trusts – Chancellor Declares War
The Chancellor has declared war on the use of tax advantaged Accumulation and Maintenance (A&M) and Interest in Possession (IIP) trusts by making them subject, with immediate effect, to an ‘entry’ tax charge of 20 per cent on lifetime transfers that exceed the Inheritance Tax threshold. By deeming them to be ‘relevant property’ trusts, the 6 per cent ‘periodic’ charge and the ‘exit’ charge when trust assets vest will also apply, except where specific conditions are met. The main exceptions will be trusts arising on death where the beneficiary receives the assets at age eighteen or trusts which are created for the benefit of a disabled person.  Existing A&M and IIP trusts which provide that the assets in trust will go to a beneficiary absolutely at 18 – or where the terms on which they are held are modified before 6 April 2008 to provide this – will continue to have the current exemptions. Where they do not, the trust assets will become relevant property from 6 April 2008 and the periodic and exit charges will apply.

Property Taxes

The threshold for Stamp Duty Land Tax (SDLT) has been increased from £120,000 to £125,000 for residential properties. The threshold for the higher rate of duty has been frozen at £250,000, a move which will be unpopular with all residential property owners.  Click here to access this useful tool which will help you to callculate your SDLT quickly

Inheritance Tax (IHT)
Recent polls indicating that a large majority of the public think that IHT is inherently unfair may account for the decision to raise the IHT threshold to £285,000 immediately, with further increases to £300,000 in 2007/08, £312,000 in 2008/09 and £325,000 in 2009/10.

The budget summarised in 50 words