Buyer’s failure to pay deposit entitles the seller to terminate the contract

In Samarenko v Dawn Hill House [2011] EWCA Civ 1445 the sale contract provided for the deposit to be paid on a date several weeks after exchange took place. It was held that the failure to make timely payment of an agreed deposit amounted to a repudiatory breach of contract entitling the seller to terminate the contract. This provides comfort to the seller who agrees to payment of the deposit after exchange.  

Squatting in residential property to be made a criminal offence

As consulted on over summer 2011, squatting in residential property is to be made a criminal offence.  There is no date as to when the proposal will be brought before Parliament to enact the new offence but useful to know it is in the pipeline.

Click here for the full response to the consultation.

The end of First Time Buyers’ SDLT Relief

First-time buyers of residential property can apply for SDLT relief if they have not previous owned property or land in the UK or elsewhere; the consideration is £250,000 or less; and they intend to live in the property and use it as their only or main home.

First time buyers’ relief was introduced for a limited period that comes to an end on 24 March 2012.  There are no transitional provisions relating to the ending of the relief and it will not be available in respect of any transactions where the effective date falls on or after 25 March 2012, even if contracts were exchanged before this date.  

Council Tax liability in respect of repossessed residential properties

We await the outcome of a consultation on Government proposals to make lenders liable to pay Council Tax on unoccupied repossessed properties.

At present where a residential property is taken into possession by a mortgagee, the mortgagee is not liable to pay Council Tax in respect of that unoccupied property by virtue of the provisions of The Council Tax (Exempt Dwellings Order) 1992. The exemption relating to unoccupied properties which have been repossessed is the Class “L” exemption, which exempts  “an unoccupied dwelling where a mortgagee is in possession under the mortgage” from Council Tax liability.

On 31 October 2011 The Department for Communities and Local Government (“the DCLG”) launched a consultation with regard to proposals to give local authorities in England greater discretion over the reliefs and exemptions from Council Tax available in respect of empty properties. The consultation applies only to Council Tax in England, as administration of Council Tax in Wales is the responsibility of the Welsh Assembly. The government’s stated aim is to ensure that the overall level of Council Tax is kept down, and reducing/limiting exemptions from Council Tax liability is seen as a potential way of assisting in managing pressures on local authorities with regard to Council Tax.

Under the current hierarchy of liability for payment of Council Tax (as defined within Section 6 of the Local Government Act 1992) residents are first liable for Council Tax, and where there is no resident, liability falls on the owner.

The government proposes to amend Council Tax legislation so that a mortgagee in possession would be included within the hierarchy of liability, ranking higher than “owner” but lower than “resident of any description”. The consultation period ended on 29 December 2011, and if the proposed change was made, a mortgagee in possession would become liable for Council Tax whilst a repossessed property remained unoccupied. Following repossession of a property, a local authority would then be able to serve Council Tax demands directly upon a mortgagee in possession for payment.

As the Class “L” exemption provides that mortgagees in possession are not liable for payment of Council Tax, the majority of lenders’ mortgage conditions are unlikely to make express references to payment of Council Tax. Many lenders’ mortgage conditions will impose an obligation upon borrowers to pay “rents, taxes outgoings and impositions” in respect of the property, and to indemnify the mortgagee in the event of any failure by the borrower to make such payments. In the event that a mortgagee does become liable for payment of Council Tax, it should be possible for the mortgagee to add the costs of any such payment to the defaulting borrower’s mortgage account. However with many properties being sold at a shortfall to the mortgagee, an effect of the proposed change would be to increase the shortfalls suffered by a mortgagee in possession.

Following the conclusion of the consultation process, details of the responses from interested parties and the government’s proposals are awaited.

Flood insurance

June 2013 will see the expiry of the agreement between ABI members and the government. There are concerns that will lead to risk based pricing on renewals post June 2012, which would in turn lead to an increase in premiums and may have an effect on value.  Defra has published a report with its recommendations as to how to ensure flood insurance remains available and affordable.  

NewBuy Guarantee Scheme

On 1 February 2012, Housing Minister, Grant Shapps, unveiled a range of measures to help first time buyers get on the housing ladder. This adds flesh to the bones of the housing strategy published in November 2011. The NewBuy Guarantee scheme, which aims to assist buyers who have a deposit of at least 5%, will be available from March. Guidance for home buyers, builders and mortgage lenders has been published.

For further information from the Communities and Local Government site, click here.

New Buildmark system

The NHBC has announced that a new online Buildmark system is being developed with an expected go-live date in April this year. This should make it much easier to check whether a property is covered prior to exchange. It will also assist following completion when the acceptance form can be completed online, triggering the issue of the insurance certificate.