END OF AN ERA FOR HELP TO BUY?
- AuthorJennifer Cooke
As it stands today, anyone purchasing a new build property could benefit from the existing Government Help to Buy: Equity Loan scheme which provides 20% of the value of new build properties outside of London and 40% in London. As a result, buyers would only need a 5% deposit to obtain a mortgage of 75% on a new build property outside of London, subject to being able to afford the payments. This would result in the Government and the mortgage lender having a charge against the property.
From April 2021 the scheme is due to change in readiness for the entire Help to Buy scheme coming to end in April 2023. As of April 2021 the scheme will only apply to "First Time Buyers". The definition of a First Time Buyer will be consistent with the definition that is already in place regarding buyers who qualify for First Time Buyer Relief in respect of Stamp Duty Land Tax.
To clarify, a first time buyer is a buyer who must not, either on their own or with others, have ever owned an interest in a dwelling, or equivalent interest in land, in the United Kingdom or anywhere else in the world.
If the Help to Buy purchase is in joint names both buyers must meet the conditions of a First Time Buyer. Buyers will need to sign a declaration at the point of reservation and also to a solicitor to enable the transaction to proceed.
One further change is that the scheme also intends to introduce regional property caps by setting a maximum purchase price on homes which are valid for the Help to Buy scheme within particular regions. The following are the proposed caps:-
Full Purchase Cap
Yorkshire and the Humber
What do this mean for current new build reservations?
In order to deal with the transition period between the existing scheme coming to an end and the new scheme beginning, longstop dates were created. Due to the recent Coronavirus pandemic, and the subsequent delays this has caused in build programmes, there have been requests for the Government to extend the longstop dates to keep the property market moving forwards and to enable more people to move into their new homes.
As a result a property must be practically complete (when it is built) by 28th February 2021 and legally complete (when a buyer gets their keys) by the 31st March 2021 to take advantage of the existing scheme.
Therefore, if a new build property is not practically complete until March 2021 this will be unable to go through on the existing scheme and will not be able to legally complete until, at least, April 2021. This effectively creates a lull between the end of February and beginning of April whereby any new sales that builders agree will not be able to complete until the new scheme starts in April 2021.
This will inevitably open room for discussion as to what "practical completion" will mean and builders will be striving to establish this position in readiness for February.
Furthermore, with the Government's Stamp Duty holiday on all properties below £500,000.00 until March next year, this holiday period will effectively be shorter for Help to Buy properties with buyers having to ensure that they complete their purchase by the end of 2020 if they are to benefit from both the existing Help to Buy scheme and the Stamp Duty holiday.
This blog is written to raise awareness of these issues. Whilst every effort has been made to ensure that it is correct at the time of first publication it may not be updated, even if the law changes. It is not intended to be specific legal advice and cannot be relied on as such. Chattertons are not responsible for any action taken or not taken as a result of this blog. If you think any of these matters affect you then we would be happy to advise.