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Nicola-mod
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Category: Property Law
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HiI have recently received advice from your site on a proposed

Customer Question

Hi
I have recently received advice from your site on a proposed sale of residential property to my son.
I intend to sell at ‘undervalue’ and gift the remaining equity.
I am happy with the advice I received and indeed have augmented it with further advice from a law firm dealing in tax matters.
I therefore do not need any further advice on this issue.

My question now relates to the sale process -
It was my intention to transact the sales via a local solicitor. Having made an appointment and produced the necessary paperwork (passports etc) I was frankly shocked at the fees being asked. More so since most of the work is not necessary (searches and property information etc) in relation to my situation (no advice needed on the prudence of this – thanks)

A solution to this has been suggested to me by a friend of the family (who happens to be an accountant) who bought a house privately from his brother and found the paperwork for a freehold sale – including SDLT payments and land registry documents - to be perfectly straightforward.

He suggested the answer to my problem is to conduct a private sale using the standard contract of sale (5th edition).
In my case this would be with some minor amendments / added conditions.

1 – Nominal deposit
2 – Long completion date (to give my son time to raise finance)
3 – contract assignable (as an added ‘special’ condition - to allow my son to sell the property on if he fails to raise the finance to complete)

My questions on the subject are as follows –
- Is there any reason my son and I cannot contract this sale between ourselves in this manner?

– are there any problems with such an arrangement if my son decides to sell the contract on?
(this is unlikely but I need to take it into account)

- are there prescribed or recommended ways of doing such a transaction?
Eg – do we need to have the signing / exchange in the presence of a solicitor

- Does the fact I am selling at “undervalue” and gifting the equity to my son require an additional document of some kind?

Any other insights or advice in general would be welcome.

Thanks
Submitted: 3 years ago.
Category: Property Law
Expert:  cityguru replied 3 years ago.
Thanks for your question. Does your son need a mortgage to fund this?

Customer: replied 3 years ago.

And thanks for your question.


The answer is no that is not his current intention. The amount of funds required to complete is relatively small. He expects to be able to provide these within the term of the date for completion which will be one year.


 


However i would be grateful for any views you have on this as if his expectations are wrong it may be considered.


 


For the same reason please address the issue of whether he can sell the contract on if he wishes (eg if the value of the house rose substantially within the year)


 


(ps - i will be off line for a hour after posting this. any further issues will get back to you on return)

Expert:  cityguru replied 3 years ago.
Ok well if he does not need a mortgage then you could do it yourself without any of the formalities. you would just execute a transfer for the agreed price. you do not really even need a contract unless you want to have one. Any undervalue is not relevant for those purposes . If you do want a contract then certainly a long completion date is ok
As long as he has registered title and along as he lives in the property then there are no issues if he resells. If he simply flips the contract then he will be liable to CGT.

You will need to complete all the land registry formalities which are necessary and it is more difficult without a solicitor but should not be a major issue.
Customer: replied 3 years ago.
thanks for the reply.

It appears to endorse the idea but I am sorry to say I found it rather casual / vague as to detail.

For example to say 'you could just do it yourself without any of the formalities" is a little non specific and does not address my questions.


Perhaps I should say i am aware that generically i could scribble a contract on a piece of old newspaper and in law this would suffice but in a context where there are large sums of money and serious tax implications some guidance on how to improve on this

scenario would be welcome.


You tell me 'you would just execute a transfer' but i did not ask for suggestions as to other and more casual ways this could be done or ways to avoid using a contract.

If you re-read my questions you will see that the first question ends with the words

"...in this manner" Which means specifically as described above. Which means a sale using the standard contract of sale (5th edition) with very particular amendments and special conditions.

Because without this context my questions to do with the contract being assignable are meaningless. It is not a matter of whether I 'want' a contract. It is a matter of understanding the best way of doing this - allowing for the option of assignment.

Taking into account that further parties such as lenders and HMRC might wish to see a process which is documented / witnessed / dated and acceptable to a reasonable standard - bearing in mind it may be adopted by a third party purchaser.

If you would keep this in mind when you augment your original answer i would be gratelful. Please also keep in mind the reference to 'assignment of contract' as I believe this can cause difficulties with lenders and HMRC.

Lastly some input on the issue of 'undervalue' and 'gifting' would also be welcome .

When you say '...undervalue is not relevant for those purposes" i have no idea what purposes you are talking about. Are you saying that gift of equity does not need to be recorded or specified but is simply implicit in the transaction? Or is there a method - ie a documented means - for doing this that you think unnecessary.

To conclude i wish to emphasis i am looking for advice on how to do this properly. And advice as to potential problems. As much specific legal detail as possible would be very helpful.

Thanks.
Expert:  Nicola-mod replied 3 years ago.

Hello,

It seems the professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new professional to assist you with your question, but sometimes finding the right professional can take a little longer than expected.

I wonder whether you're OK with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you.

Thank you!
Nicola
Customer: replied 3 years ago.

thanks.


i will abandon question

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