Broker Conveyancing has warned that the increases to stamp duty land tax for buy-to-let and second home purchasing, announced by George Osborne in last week’s Autumn Statement, could cause conveyancing ‘mayhem’ next year.
The conveyancing distributor argues that the fact purchases will need to be completed on or before 31 March 2016 in order not to have to pay the greater stamp duty amounts means there will be an incredible amount of pressure placed on conveyancing firms to meet this deadline over the next four months.
Those purchasing second homes, including buy-to-let investment properties, will have to pay 3% extra in stamp duty land tax from the 1 April 2016.
Broker Conveyancing is warning the conveyancing sector’s resources may have difficulty coping with the demands placed upon them, especially as the end of March next year coincides with the Easter break – traditionally a very busy time for the housing market as many purchasers seek to complete in order to move in during the Easter holidays.
It believes conveyancing firms may begin to charge additional premiums on buy-to-let purchases in order to both deal with the extra pressure placed upon their business models and to discourage an over-exposure to buy-to-let business.
This, it says, is because any buy-to-let purchases which do not complete on or before the 31 March face the prospect of falling through – a decision which would represent bad news, particularly for those firms on the Broker Conveyancing panel, who all offer ‘no completion, no fee’.
Broker Conveyancing also anticipates a significant slowdown after the 1st April which would mean further resource and business issues for conveyancing firms to accommodate.
Harpal Singh (pictured), managing director of Broker Conveyancing, said: “While I can partly understand why the Chancellor might wish to put the brakes on buy-to-let investment, the method of increasing stamp duty land tax for these purchasers will have a huge impact on the housing market as a whole and could result in a less than smooth process and, quite frankly, mayhem.
“The four-month notice period is incredibly short and it is likely to mean a very busy time for all stakeholders, particularly the conveyancing profession who are going to be pushed by all concerned to try and complete purchases before the 31st March next year. This will mean serious resource issues for these firms, especially when we factor in the double whammy brought about by the timing of the Easter break next year and the fact we’re not just talking about individual investment property completions but also the entire chains that they will sit within.
“Another conveyancing issue will be the ‘no completion, no fee’ deals currently on offer – if these buy-to-let and second home purchases do not complete then there is a greater likelihood of them falling through. It seems almost certain that buy-to-let conveyancing fees will rise in order to cope with this, the extra workload, and I wouldn’t be surprised to see some firms pulling back on their ‘no completion, no fee’ offers. It will be apparent to all advisers that ensuring their buy-to-let clients deal with specialist conveyancing firms is an absolute necessity in order to have that chance of securing a pre-1st April completion.
“Finally, we have to consider the impact on the market after this deadline is passed – we are likely to see a considerable slowdown and conveyancing firms, along with many other stakeholders, could move from feast to famine. Resource and business issues will need to be managed carefully in such an environment.”