The Difficulties When Buying in the UK from Abroad: Georgina Haddon writes for Property Wire
Residential Property Senior Associate, Georgina Haddon, has authored an article for Property Wire entitled 'The Difficulties When Buying in the UK from Abroad'.
The article was first published by Property Wire on 25 October and can be read in full below.
Despite the protracted Brexit process and the undeniable impact that Covid-19 has had on the capital, it is becoming increasingly clear that London’s international popularity is not going anywhere. History, food and dining, education, the arts (particular the return of live performances over recent months) and, of course, the city’s incredible diversity continue to tempt both overseas investors and occupiers to our resilient metropolis and ever more notably to the UK’s other cities such as Manchester and Birmingham.
The London property market, though desirable, has its nuances. Forewarned is forearmed, and this is irrefutably true when looking to purchase in Bonnie Blighty.
Freehold and Leasehold
The majority of flats in the UK are probably leasehold properties. Leasehold seems to be a tenure which is individual to the UK and is unsurprisingly confusing for most buyers (“why do I have a lease if I’m buying the property?”) and particularly for those residents in jurisdictions where leasehold does not exist. Despite the Leasehold Reform we have been promised for years, changes that have been brought in are few and (relatively) minor, the more significant overhaul seems lengthy and tricky to implement and it seems likely that leasehold in some form or another is here to stay for now. Competent property advisors and lawyers will know what to look for and help guide buyers through this minefield.>/p>
SDLT (and UK taxes generally)
Even conveyancers struggle with SDLT (stamp duty land tax) now. We are a world away from the straightforward slab rates from a few years ago. Is it an additional property? Could multiple dwellings relief apply? Is the purchaser a company and if so, does it qualify for business relief? And do remember to add on the extra 2% non-resident SDLT.
The government online calculator can be a helpful starting point but be sure to ask a lawyer or tax advisor to assess the likely SDLT position and any other tax implications. An overseas investor would be wise to use law firms with tax teams so that they can obtain all the relevant advice in one place.
Anti Money Laundering procedure
No one enjoys this process. No one. But with residential property continuing to prove an attractive ruse for money laundering, a rigorous compliance check to establish the person and source of funds behind each property purchase is essential. There is a lot to be said for starting this process before an offer is made and even before the property search begins to ensure there are no unnecessary delays which might impact on the purchase itself.
Savvy investors may well be looking to add value by renovating and/or extending their purchased property. It is worth considering from the outset what (if any) work is intended and taking bespoke advice from surveyors and lawyers as to the relevant planning regulations – these differ depending on the local borough and are frequently amended. In particular, consider whether the property is listed and/or in a conservation area which may restrict or require additional consents and impose further conditions on any planned alterations.
It (almost) goes without saying that instructing a good team is integral to the buying process. In a world where global travel is yet to return to 100% restriction free, it would hardly be surprising that many international investors might not be willing to make the trip to the UK to visit potential properties themselves for fear of changes in traffic light systems, or because (understandably) they do not wish to face weeks of possible quarantine on their return. A trusted team must be assembled to ensure a smooth transaction.
One hugely valuable asset could well be a buying agent. Unlike the US and Southeast Asia where savvy buyers will likely have a broker, estate agents in the UK are appointed by, and therefore primarily act for, the seller. Buying agents provide an independent and experienced insight into the property market, whilst often having access to properties which are not yet listed for sale. Many who instruct buying agents would argue that, as well as the invaluable advice they offer, their fees are often recovered by the discount they are able to negotiate thanks to their expertise and knowledge of the industry.
And of course, experienced, commercial lawyers with a strong knowledge of the local area are a must. The right lawyer should provide a thorough review of the title, searches and information provided by the seller, raise bespoke and relevant enquiries and keep buyers properly informed along the way. Lawyers can make or break a property sale/purchase, so it is worth shopping around and choosing a firm with an excellent reputation, as well as a proactive, solution-based approach.
Georgina is a Senior Associate in our Residential Property team.
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