Stamp Duty Holiday. Not a "holiday" for conveyancers.
In an attempt to prevent the housing market from stalling during the COVID 19 pandemic, a stamp duty holiday was announced for all residential purchases under £500,000 between 8 July 2020 and 31 March 2021.
According to HM Treasury, the holiday was a success, with house sales rising by 21.3% in September 2020 alone. This would have also had the knock on effect of creating additional work for conveyancers and other professions (33% of people having stated that they intended to spend their savings on renovations). Rishi Sunak recently announced an extension to the stamp duty holiday until the end of June 2021. Many buyers and sellers will have rejoiced at the news, particularly those struggling to meet the original deadline. Likewise, we anticipate that many conveyancers breathed a sigh of relief. However, whilst an initial reprieve, the bottle neck of urgent work looming for 31 March will have simply shifted to the end of June. Wherever a deadline is looming, the risks of making mistakes increases, and so therefore will the likelihood of claims against legal professionals.
Should there be a delay in a transaction which leads to the buyer missing the cut off for date for the stamp duty holiday, there is a real risk that this will be blamed on the legal professional dealing with the conveyance. Whether there is merit to such a claim will be dependent upon the specific facts of the matter but we can foresee that, in some situations, claims of this nature could be successful.
The risk is compounded by the difficulties of working from home, likely backlog in other processes (e.g. mortgage applications) and the likely increase in demand caused by the extension itself with people rushing to buy/sell during this time. There may also be a temptation to accept all new instructions, perhaps where capacity is already stretched, due to a fear of the market halting after the holiday. This should be resisted and legal professionals should be mindful of acting in their current clients' best interests.
In order to limit this risk we would recommend that all legal professionals dealing with conveyancing at this time consider the following practical tips.
- Provide full advice on the current stamp duty holiday and that, in some situations, it may not be possible to meet the deadline.
- Consider using an automatic email response advising that transactions may not complete before the end of the stamp duty holiday.
- Advise clients to have sufficient funds available to pay the stamp duty amount if necessary to avoid a failed transaction (particularly those who intend to complete close to the deadline).
- Keep the client informed throughout. If there are delays in the transaction, ensure that the client is made aware of them and the possible impact the delay may have going forward.
- Set multiple reminders and carry out regular file reviews to ensure that matters are being progressed where possible.
- Consider whether exchange and completion should be dealt with simultaneously. This may avoid situations where completion is delayed beyond the stamp duty holiday period but the parties have already exchanged (leaving the buyer committed to purchase and pay stamp duty or lose the deposit).