Stamp Duty holiday: has time already run out?

With only 9 weeks to go before the sun sets on the Chancellor’s Stamp Duty holiday, and with little or no prospect of an extension, has time already run out for many still hoping to beat the 31^st March deadline?

How much can homebuyers save?

The Stamp Duty threshold has been increased temporarily from £125,000 to £500,000. For house purchases up to £500,000, this offers a maximum saving of £15,000, depending on the price of the property. More expensive properties will only be taxed on their value above £500,000. The saving for the average homebuyer is said to have been around £4,500, a significant incentive for many, and a major reason for the housing market’s buoyancy in recent months.

Has time run out?

With the average time for a conveyancing transaction in England being around 12 weeks, that in itself indicates that it will already be too late for most people hoping to beat the deadline. The situation is not helped by the fact that solicitors are overwhelmed with work, many to the extent that they have not been able to accept new conveyancing instructions for some time. In addition, most local authorities currently have large backlogs of conveyancing searches, the results of which are essential for a conveyancing transaction to proceed.

How might it still be achieved?

For a few people, however, there may still be hope, but it all hinges on the interpretation of the law.

The determination of when a liability to Stamp Duty arises is the “effective date” of the land transaction. Generally, the effective date is the day the purchase price is paid, title legally transfers to the buyer and the keys are handed over, ie completion day. But where a contract for a land transaction is “substantially performed” before formal completion, the contract itself is treated as if it were the transaction provided for in the contract. So, if there is substantial performance on or before 31^st March 2021, the purchaser benefits from the Stamp Duty saving.

What does “substantial performance” mean?

Broadly, substantial performance is defined as the point at which:

• “any payment of rent is made”. This could be achieved by exchanging contracts before the holiday deadline, entering into a rental agreement with the seller, paying rent on exchange, with completion occurring later.
• “payment of most of the consideration other than rent is made”. This is not an option for anyone needing a mortgage. But if you are a cash buyer and the seller is unable to move out, if you can pay the purchase monies before the holiday deadline, the seller can remain in occupation until completion.
• “the purchaser is entitled to possession of the subject matter of the transaction”. This is similar to the first point above, but where the buyer enters into a licence to occupy on exchange of contracts, exchange taking place before the holiday deadline.

Caution

While in some cases it might still be possible to substantially perform a property purchase before the 31^st March deadline, legal advice should be taken before attempting to rely on these measures.