The Gazette 1978

GAZETTE

DECEMBER 1978

CONVEYANCING NOTES STAMP DUTY ON NEW HOUSES CERTIFICATES OF REASONABLE VALUE, THE NEW DOCUMENTATION The Department of the Environment has introduced a new procedure affecting Certificates of Reasonable Value for new houses and flats following the introduction by the Department of its new arrangements, advertised on 22nd September 1978, relating to new houses and requirements for Building Society Loans. In a letter to the Society the Department indicated that the relevant Certificates were:— (i) Certificate of Reasonable Value for grant type house (ref. no. HP3; coloured blue). (ii) Certificate of Reasonable Value for non-grant type houses (ref. no. HP4; coloured yellow) (iii) Certificate of Reasonable Value for grant typeflats (ref. no. FP3; coloured blue). (iv) Certificate of Reasonable Value for non-grant type flats (ref. no. FP4; coloured yellow). (v) Certificate of Exemption from the requirement to obtain a Certificate of Reasonable Value in respect of a grant type house (ref. no. CE6; coloured green). (vi) Certificate of Exemption from the requirement to obtain a Certificate of Reasonable Value in respect of non-grant type house (ref. no. CE7; coloured Green). The Department's letter indicated that Certificates HP3 and FP3 being in respect of grant type houses would confer exemption from stamp duty. The question of stamp duty did not normally arise for houses for which Certificates CE6 or CE7 were appropriate. The Certificates numbers HP3, FP3 and CE6 indicated that the dwellings as designed, satisfied grant requirements; grants would be payable if the building were constructed satisfactorily and the Grant Applicant were eligible. The Society immediately made representations to the Departnient pointing out that since the Department issued a single CRV which covered a number of houses, builders solicitors and purchasers and lending institutions' solicitors had to rely on photocopies for individual cases and accordingly a system of identification which relied largely on the colour of the paper which was used, to differentiate one type of Certificate from another, was impractical. The Department have accepted this point and have advised the Society that the Certificates HP4 and FP4 will in fact bear on the face of them an indication that the Certificate will not normally confer an Exemption from stamp duty. The Society wishes to draw the particular attention of solicitors to the need for carefully noting the particular type of Certificate which is being issued in any given case. The effect of the new arrangements for CRV would appear to be that fewer houses will automatically qualify for exemption from stamp duty. It will of course still be possible to have the first transfers of such houses adjudged free of duty (other than duty on the site fine or rent) as long as appropriate forms of building contract and agreement for sale or transfer are entered into prior to the roofing of the house. The attention of practitioners is particularly directed to the need of ensuring that the building contract and agreement for transfer/sale are not so interlocked as to disqualify the subsequent purchase deed from exemption from duty. Any provision in the

agreement for sale/transfer which provides for the forfeiture of the right to call for a transfer of or conveyance of the land in the event of the proposed Transferee failing to pay the builder on foot of the building contract will have the effect of disqualifying the subsequent transfer or conveyance from exemption from duty. It is still possible to provide in the agreement for sale/transfer that failure to comply with the terms of the agreement for sale/transfer, e.g. a covenant to erect a house upon the plot within a prescribed time, will not be construed as so interlocking the two documents as to disqualify the subsequent purchase deed from exemption from stamp duty. ALTERATION TO SOCIETY'S STANDARD FORM OF CONTRACT, 1979 EDITION The 1979 edition of the Society's standard Contract for Sale will contain two amendments which the Society's Conveyancing Committee consider it necessary to make in the light of experience. In General Condition 4 an amendment is being made to provide that interest will run as from the date which the parties have agreed amongst themselves to be "the closing date" even if such closing date is not the closing date as defined in the conditions. It was represented to the committee that in a situation where both parties agreed to postpone the closing to a date subsequent to the closing date fixed by the conditions of sale and one party declined to complete on the postponed date, on a strict reading of the condition the innocent party would not be entitled to claim interest from the postponed date. The second amendment is in General Condition 6 and also relates to the payment of interest. A member was advised by a leading senior Counsel in a case where it had proved impossible to complete the sale on the agreed closing date, through the Vendors default (and the position would have been the same if the closing had been postponed without either party being in default) the Vendor was not entitled to receipt of the rents and profits after the closing date. In the case of property which was sub-let this would clearly have left die Vendor at some loss, even though Counsel further advised that in the circumstances the Vendor ought to be entitled to get interest from the Purchaser but only at the ordinary rate of the commercial banks. The effect of the amendment is to ensure that where a sale is not completed on the closing date either through the Vendor's default or where neither party is in default the Vendor will be entitled to receive the rents and profits of the property up to the actual date of closing. SEARCHES The Conveyancing Committee wishes to remind Practitioners that it has reversed its recommendation of November 1976 that the Purchaser should be responsible for making Negative Searches. The Committee has been particularly concerned to note that in recent months certain solicitors acting for Builders or Developers of housing estates have been declining to provide Searches against the Builders or Developers. The Committee at all stages considered that such Searches should be provided as a matter of proper professional Practice by Builders or Developers solicitors and specifically referred to this in their recommendation of November 1976. 209