SDLT surcharge - need help please

[rajpal_bal]

Dear all,

My wife and I own 3 buy to let properties and currently live with my parents which I own a 33% interest in the property with my parents owning the 66% and am on the mortgage also. My only reason for being on the title deeds with an interest is to allow my parents to be eligible for a mortgage. I pay my parents rent every month to reside in “their property”

I am now looking to move out but having spoken to the mortgage company my name cannot come off the property as my parents will not meet affordability checks etc.

Given these circumstances do i still have to pay the surcharge?

Your comments are appreciated.

[SDLT Geek]

Do you really have a 33% beneficial share in the property? If so, I do not see why you would call it "their property" and pay them a rent. Is it actually that the three of you are named as registered proprietors of the property and you are all liable on the mortgage, but the beneficial interest is held entirely for your parents? Is there a declaration of trust that makes the position clear?

The "starting point" as to who owns what is important when it comes to look at how the SDLT surcharge works.

[rajpal_bal]

Thank you for your prompt reply.

I am assuming i have a 33% interest given my name is held on the title deeds a long with my parents?

I do not have a declaration of trust in place. How can this change my situation?

Thank you

[SDLT Geek]

Just because your name is on the deeds does not make you a beneficial owner of the property. Did you contribute one third of the price at the time of the purchase? Or did your parents intend to make a gift to you?

If the property was sold, would the expectation be that you get 1/3 of the sale proceeds, or would all of the money go to your parents?

What is the background with the mortgage? Do you make the repayments, or is it more a case of you "lending you name" and creditworthiness so that your parents were able to borrow?

[someone]

If you had had your name taken off the mortgage, would your parents have paid you anything?

If the answer to that is no then it appears your maximum share is 1/3 of the mortgage value - could be less.

It might actually be to your benefit to have a share - giving that share to your parents would be a disposal of your main residence which would then get you exemption from the higher rate SDLT on your new main home.

You need to calculate possible CGT and SDLT implications on giving your share to your parents. You also need to make sure that the gift really happened as I suspect HMLR might ask to see evidence of the disposal of your former main residence. AIUI property transactions have to be in writing and witnessed.

The fact that you pay rent to your parents is a complication - but do they declare this income?

Did you have a former main residence that you sold when you moved into your parents house - which might be another way the 3% could be avoided.

[rajpal_bal]

Thanks.

The background is that my parents bought the property in their own names. They borrowed additional monies on the property to renovate etc around 10 years into buying the property and in order for them to do this I was asked to come on the mortgage (past 6 years of total 15 years of ownership). Given the mortgage companys’ requirements are for me to also be on the title deeds than I also had to do this.

I did not contribute to the purchase price of the property and only pay rent into my parents bank account as well as paying a direct debit for one of the loans taken out on the property going out of my account (as part of the rent).

Do I need to fill in Form 17? Or will a simple declaration to land registry declare i am not entitled to the proceeds should the property be sold which is the factual case.

Also for inheritance purposes my parents would like the property to be split in equal % between all my siblings (4 in total so 25% share each). No will drafted as of yet.

My name cannot come off the mortgage given they will not pass the affordability checks due to their age.

Given I am not beneficially entitled to anything what am I dosposing? Also, I have lived with my parents from birth so no previous main residence.


Thank you for your time.

[someone]

The fact that you own three other properties means that you have to pay the 3% surcharge.

The exception to that rule is if you are replacing your main residence.

Your latest reply indicates you have never had a main residence so you can't replace it.

The confusion has arisen because you talked about a 33% interest in the home you are living in. But it now appears you only have an interest in the legal title (which I understand is always owned as joint tenants so percentages don't really make sense)

[rajpal_bal]

Thanks.

Is there any formal way of me declaring I do not have any beneficial entitlement to the property?

When I buy my property (in a few weeks) is there any steps for me to undertake?

[someone]

Thanks.

Is there any formal way of me declaring I do not have any beneficial entitlement to the property?

When I buy my property (in a few weeks) is there any steps for me to undertake?

Your new property transaction is completely unrelated. The only thing I can think of that you might be referring to is the mortgage - but your new mortgage, if you have one, will have been given based on affordability and they'll have taken your existing liabilities into account.

To formalize that you are only a trustee of your parents house, you need a declaration of trust. Your conveyancing solicitor almost certainly can prepare one - although it might be that they will want your parents to take independent advice. The only thing you would need to make clear is that you are formalizing the existing position and there is no change of beneficial ownership - I don't know if this needs specific wording in the DoT or not. What you can't do is backdate the DoT - but that doesn't matter. When the parties trust each other, the only real benefit of a DoT is that it lets you prove the situation to others - for example, were you to be made bankrupt in the future you could prove that you never had an interest in your parents house - otherwise there could be a suspicion that you were attempting to hide assets.

You can google example DoT yourself. Whether a DIY one achieves what you want is your own risk. By using a solicitor you have someone to sue if the wording isn't correct and doesn't achieve what you wanted.

[RMC]

Maybe you could sell your share in your parents’ property to one of your siblings or cousins with mortgage potential to spare? This may of course create tax issues for them. Alternatively, find a solicitor or conveyancer that does not mind being sued.

Fortunately, ownership of BTLs will not trigger the 3% surcharge, as the Governments of all colours are prioritising assistance to hard-working landlords up and down the country.