Clarke and Son News

Update from the Chief Economist at RBS (5 July 2010)

Mortgage approvals for house purchase in May dipped marginally compared with April while house prices were flat m/m in June according to Nationwide. This despite the cost of borrowing on new mortgages falling to an all time low, at least for those with some equity. The average market rate for a two-year fixed-rate mortgage with a 25% deposit fell to just 3.78% in May. Monetary policy may now be ‘pushing on a string’, at least in the housing market.  In other words, the impact of lower interest rates may have been exhausted.  Figures from the bank of England also pointed to a slowdown in the supply of credit for buying houses due to concerns about lower availability of wholesale funding, on which bank lending depends.

If you would like information on Buying or selling your home or Re-mortgaging, please contact Jenny Axe on Tel: 01256 320 555.

The following are predicitions of how the Emergency Budget on 22nd June 2010 could affect you and your business:

Rise in tax-free allowance - the Government has indicated that they intend to raise the personal tax-free allowance which currently stands at £6,475 to £10,000 over the lifetime of this Parliament. It is likely that in the first instance the allowance will rise between £700 - £1,000.

National Insurance Rise - A 1% rise in National Insurance Contributions is likely to kick in next April.

VAT Rise - There is speculation of an increase in VAT.

Corporation Tax - it has been announced that the headline rate of corporation tax will be reduced however there has, at present, been no indication as to the rate it may be reduced to.

Pensions - The Coalition Government has agreed to restore the link between the basic state pension and earnings. There is a likelihood that further pension reliefs will be taken away from high income earners, perhaps lowering the proposed threshold for tapering of higher rate relief which is set at £150,000 of income. The Government could go further and implement other reforms such as increasing the state retirement age for men and women.

Inheritance Tax (IHT) - there is unlikely to be any change to the current IHT threshold of £325,000.  However, there may be changes to some restrictions to IHT including the rules for non-domiciled individuals.

Capital Gains Tax (CGT) increase - the actual rate is yet to be determined but it is thought that there will be an increase in order to bring CGT in line with income tax, indicating it could go up (from 18%) to approximately 40%, leading to owners of second homes, share portfolios and other investments facing substantially higher CGT bills. It is predicted that this increase will begin at the start of April 2011. The increase is to be on non-business activities only, however there has been some discussion as to what is classed as ‘business’ and ‘non-business’.  The Emergency Budget may also introduce changes to Private Residence Relief which enables people to sell their only or main residence free of CGT.

For more information on any of these issues, please email Nia Wharry or Tel: 01256 320 555.

In a recent case from Croatia, the European Court of Human Rights (ECtHR) ruled that the applicant’s Article 8 rights under the European Convention on Human Rights had been breached by the failure of administrative authorities to prevent excessive noise from a bar located in the same house.

The applicant lived in a house where several of the other floors were used by a bar open from 7am to midnight every day. She had repeatedly complained to the Sanitary Inspectorate about the excessive noise and several independent measurements had confirmed that the noise experienced by the applicant was excessive.

The applicant alleged that her Article 8 rights had been violated and that the authorities had breached her right to respect for her home. The ECtHR held that, although there was not an explicit right under the Convention to a quiet environment, authorities may still be required to adopt measures to protect a person’s private life even where the issue in question is between individuals.

The ECtHR likened the case to a Spanish case which concerned excessive noise from a nightcub. As in that case, here, the applicant had been subjected to excessive noise fro a prolonged period of time and the Croatian administrative authorities should have taken measures to protect her. Therefore, the applicant’s Article 8 rights had been breached and Croatia had failed to discharge its obligation to protect them.

Comment: this case confirms that local authorities do have a positive obligation to protect an individual’s Article 8 rights, especially in cases of prolonged noise nuisance. The ECtHR was also critical of the time it had taken for the applicant’s claim to be resolved as this had meant that she had been denied and effective remedy and been subjected to the excessive noise from the bar for nearly eight years.

For more information on Residential Landlord & Tennant issues, please contact Paul Cowdery on Tel: 01256 320 555.

Land Registry, the government agency responsible for registering land in England and Wales, is actively encouraging the voluntary registration of unregistered land, as the proportion of he national land area remaining unregistered rapidly diminishes (currently down to just over 25 per cent).

Andy Woodgate, Register Development Manager based at Land Registry’s Weymouth Office explains:

“Land Registry is keen to extol the benefits of a registered title, and is working with landowners and professionals to asist them through the registration process, be that with one-off applications or a programme of voluntary registration for multiple landholdings.  In the majority of cases, the registration process is very straightforward.”

More and more property owners are choosing to register their land on a voluntary basis becuase of he benefits it brings. They know how important it is to protect their most valuable asset.

Registration of land provides:

• Greater security and peace of mind, helping to keep property affairs in order
• Straightfoward proof of ownership, provided in an easy-to-read document with an illustrative plan
• Better protection against claims of adverse possession

Registration fees are based on the current market value of the lan and the fee is reduced by up to 25% if you choose to register your land voluntarily.

Charles Marchant White, Partner, Clarke & Son LLP says:

“The Land Registry is seeking to pursue its objective to secure the registration of all property in the UK.

Many titles are still unregistered. This is a perfectly good title and there is no need to apply for registration. However from the point of view of security and for ease and convenience when selling or re-mortgaging, there are advantages to registration.

Once registration has taken place then a record of the title is maintained by the Land Registry. The bundle of title deeds currently representing your title will be replaced by a simple register. Any documents affecting the title would be referred to in the title and copies would also be held by the Land Registry.”

For further information on Land Registry issues, please contact Charles Marchant-White on Tel: 01256 320 555.

The Consumer Code came into force on 1st April 2010. It sets mandatory requirements that all Home Builders must meet in their marketing and selling of Homes and their after-sales customer service.

Home builders are defined as builders or developers of a new or newly converted home for sale to the public and who is registered with a Home Warranty Body that has agreed to support and enforce the Code, such as the NHBC.

The purpose of the Code is to ensure that the fair treatment of home buyers by setting out minimum service levels and giving access to a speedy and low cost dispute resolution service if problems are encountered.

The Home Warranty Bodies have agreed to require all their registered builders to adopt and comply with the Code as a condition of their registration. Nothing in the Code affects Home Buyers’ existing legal rights.

The Code applies to all private home buyers who reserve to buy a new or newly converted home on or after 1st April 2010 and which has been built by a Home Builder under the insurance protection of one of the Home Warranty Bodies.

In brief, to comply with the code the Home Builder must :

• Display the Code and give it freely to any customer who requires it and to all home buyers that reserve a home and make all customers aware of where to find further guidance.
• Have suitable systems and procedures in place to comply with the Code including the training of relevant staff.
• Provide clear and truthful sales and advertising material and detailed pre-purchase information, including regulations regarding reservation agreements.
• Provide contact information and detail how queries will be dealt with.
• Provide advice about health and safety procedures for visiting or living on a site under construction.
• Advise customers to appoint professional legal advisers and not to restrict any choice of legal representative.
• Comply with stringent requirements regarding the terms and contractual obligations in the Sale Contract and advise of rights to terminate the Contract.
• Provide the home buyer throughout of realistic timescales for construction and completion.
• Inform home buyers of how deposits and other pre-payments are protected and will be dealt with.
• Provide an accessible after-sales service.
• Detail complaint handling and dispute resolution arrangements and co-operate with appropriate professionals regarding dispute resolution.

In the event of a breach of the Code, which has not dealt with satisfactorily by the Home Builder or the Home warranty Body, a home buyer can refer the dispute to the Independent Dispute Resolution Scheme for adjudication.

Should you require any further details on this issue, please contact Charles Marchant-White on Tel: 01256 320 555.

Under the new legislation introduced in the 2010 budget, first-time buyers’ purchase of a property is exempt from Stamp Duty Land Tax where ALL of the following conditions are met:

1. The property is a residential property, i.e. a house or flat, whether freehold or leasehold.  If leasehold with at least 21 years of the lease term to run.
2. The purchase price does not exceed £250,000.
3. The purchaser (or each of them if there is more than one) must be an individual and not a company, business partnership or trustees. There are limited exceptions to this and if applicable we can discuss this with you.
4. The purchaser (or each of them if there is more than one) is a first-time buyer who intends to occupy the property as their only or main residence.
5. The land transaction is not a “linked transaction” (except, for example, where the linked transactions relate to house and land forming the garden or grounds to the house).
6. Completion of your transaction takes place on or after 25th March 2010 and before 25th March 2012.

A first-time buyer is a person who has not previously:

• Made a “relevant acquisition of a major interest in land” consisting of or including residential property or acquired an equivalent interest in non-UK land. A relevant acquisition includes inherited property.
• Been the person for whom a financial institution made a relevant acquisition of a major interest in land as part of an alternative property finance scheme (under sections 71A, 72, 72A or 73 of Finance Act 2003) or would have been such a person had those provisions applied to a non-UK acquisition.

Further provisions deal with the possiblitily of claiming a new relief in connection with Alternative Property Finance Schemes, where a market value election is made for shared ownership leases and the discounted sale price under the right to buy schemes.

While the relief is only available for the purchase of residential property (not commercial or mixed-use), to qualify as a first-time buyer the claimant must not have previously acquired a mixed-use or residential interest in any property worldwide.

Acquisitions made jointly with family, friends, spouses or partners (where one of them has previously owned a major interest in residential propety - or inherited such an interest - within or outside the UK) disqualify the purchaser from claiming the relief even if they would otherwise satisfy all the conditions for claiming when purchasing alone.

If you require further information on Stamp Duty Land Tax, please contact Debbie Bowey on Tel: 01256 320 555.

Here is a summary of how the recent budget could affect you as an individual or business:

Inheritance Tax (IHT)

• The IHT nil rate band (the amount that can be given away on death without incurring Inheritance Tax - subject to lifetime gifts)  of £325,000 has been frozen for the next four years (i.e. 6 April 2010 - 5 April 2015)
• For chargeable events above the nil rate band IHT is charged at 40% on death, 20% on lifetime transfers

For further information on Inhertance Tax, please contact Nia Wharry.

Stamp Duty Land Tax (SDLT)

• The Threshold for first time buyers is to rise to £250,000 (applies where effective date falls on or after 25 March 2010 and before 25 March 2012).
• Introduction of an additional 5% rate of SDLT for residential properties £1 million plus. This rate does not apply until 5 April 2011.

All other SDLT rates and thresholds remain unchanged. For more information on Stamp Duty for residential properties, contact Jenny Axe.

Income Tax

• Introduction of an additional rate of 50% on income in excess of £150,000
• Gradual removal of personal allowances above £100,000 at the rate of £1 of personal allowance for every £2 of income
• Rates for basic (20%) and higher (40%) are to remain the same

 Capital Gain Tax (CGT)

• The annual exempt amount for tax year 2010-11 has been set at £10,000
• Entrepreneurs’ relief - doubled from £1 million to £2 million - i.e. 10% CGT paid on the sale of a business or shares in a personal company on or after 6 April 2010

If you have any queries on Business Rates or how the budget will affect your business, contact Peter Turner.

Other Taxes

• Fuel duty increase - to be phased at 1p in April, 1p in October and the remainder in January 2011
• National Insurance contributions to rise by 1% in April 2011. However, the threshold for NI payments is to rise so that nobody earning less than £20,000 will face extra charges.
• No change to VAT
• Business rates to be cut from October for one year
• Annual investment allowance for small firms - doubled to £100,000
• Duty on cider is to increase by 10% from 29 March and duty on wine, beer and spirits by 2% from 29 March

Savings - ISAs

• The annual amount individuals can contribute is to rise in line with RPI
• If there is a fall in the RPI then the amount will remain as for the previous tax year

Other Points of Interest:

Families:

• Provision of income tax relief for payments to special guardians/carers looking after children placed under a residence order.  The exemption applies to qualifying carers and qualifying payments made on or after April 2010
• Parents of one and two year old children are to recieve an increase of £4 per week in child tax credits from 2012
• Pensioners’ higher winter fuel payments to remain for another year

If you would like to discuss Parental Responsibility issues, please contact Bhupendra Sankhla.

Employment

• The length of time over 65s have to work in order to qualify for tax credits is to be reduced
• Youth employment guarantee scheme is to be extended to March 2012 (guaranteeing anyone under 24 will get a job or training once they have been unemployed for six months).

For employment issues, please contact Thomas Hunt.

Business Support

• State owned banks are to provide £105 billion of loans
• Time to pay scheme - allowing firms to agree extra timetables for settling tax bills to be extended for whole of next parliament
• New growth capital fund worth £500 million to help fast-growing SMEs

For advice on business matters, please contact Peter Turner.

The Economy & Government Finance:

• Predicton that growth for 2010 would be between 1% and 1.5%
• The prediction for 2011 is a growth rate of between 3% and 3.5%
• Government borrowing will be £167 billion this year, £163 billion in 2011, £131 billion in 2011/2012, £110 billion in 2013/14 and £74 billion in 2014/15

For more information on any of these issues, please contact Clarke & Son on Tel: 01256 320 555.

The Department for Communities and Local Government (DCLG) has issued a consultation on Making better use of energy perfomance certificates and data. The consultation proposals include:

• Extending and managing access to energy performance certificate (EPC) data.
• Requiring EPCs for houses in multiple occupation, when rooms are rented out.
• Requiring EPCs for short-term holiday lets.
• Requiring property adverts to show the EPC rating.
• Extending the use of display energy certificates to commercial buildings.
• Requiring the lodgement of air conditioning reports.
• Clarifying when an EPC is required on the sale or letting of buildings.

The theme of “improving awareness” of energy efficiency runs through the consultation.  The DCLG hopes to show building owners, for example through measures such as the new EPC online tool, how making energy efficiency improvements will save the owner money in the longer term.  At the same time, the consultation proposes allowing wider access to energy efficiency data, which will enable the Government to identify areas that need to be improved if the UK is to achieve its emissions reduction targets.

The proposed changes apply to England and Wales. The Consultation closes on 25 May 2010. 

For more information on EPCs, contact Paul Cowdery on Tel: 01256 320 555.

In Fidler V Secretary of State for Communities and Local Government [2010] EWHC 143 (Admin), a landowner built a house without obtaining planning permission and concealed it behind bales of straw covered with tarpaulin.  After four years, the landowner removed the straw bales and the tarpaulin to reveal the house.  Within a year of the bales being removed, the local planning authority issued an enforcement notice requiring the landowner to demolish the house.

The landowner claimed that the property was immune from planning enforcement action because more than four years had passed since the building operations were substantially completed.

The High Court held that the erection and removal of the bales and tarpaulin were not building operations in their own right.  However, the landowner had always intended to remove the bales and tarpaulin so, as a matter of fact and degree, their removal was part of the building operations when the totality of the operations as originally contemplated and intended was considered. The property was not immune from planning enforcement action.

At first glance, the decision that taking down a wall of straw bales amounts to building operations appears to be surprising. However, it is a good illustration of the holistic approach take by the House of Lords in Sage v Secretary of State for the Environment, Transport and the Regions [2003] UKHL 22 and makes it clear that the meaning of “building operations” for the purposes of section 171B of the Town and Country Planning Act 1990 (TCPA 1990) is wider than the definition set out in section 55 of the TCPA 1990.

For advice and assistance relating to developments please contact Charles Marchant-White or Chris Lockley on Tel: 01256 320 555.

Zurich Insurance plc has confirmed that Zurich Building Guarantee has decided to withdraw from the new home warranty and building control markets. It will honour its existing commitments to its customers, but is closed to new business.

Zurich has confirmed that its decision took effect from 30 September 2009, but the decision has not been widely publicised by Zurich or widely reported. This is an important development in the market for new home warranty products, as Zurich were one of the main providers of those products.

If you are a residential property developer, you will no longer be able to obtain the Zurich Building Guarantee for new sites.  If you are purchasing a new residential property, or a property which has been converted, where a Zurich Building Guarantee is on offer, Zurich has confirmed that it will issue policies and certificates in the normal way, as sites and properties already registered with it are commenced and completed.

For further information on Moving Home, Mortgage and Property Services, contact Paul Cowdery on Tel: 01256 320 555.