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What Price goes in the Contract?

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  • What Price goes in the Contract?

    I've made a few posts previously about a sale of a property from a estate, of which I am an executor - along with 2 others.

    A beneficiary of the estate is buying the property, and it has been agreed that they will pay the asking/market price (£190k) less their share (as a beneficiary). So the amount payable is £166.25k

    Solicitors on both sides have previously agreed and written a contract of sale stating this £166.25k as the price payable - the 'chargeable consideration'.

    HMRC have confirmed that this chargeable consideration £166.25k is the amount on which stamp duty is charged in SDLT1. And I presume that the buyers solicitor will put £190k on form TR1, as the amount here is the purchase price before deductions.

    However, one executor is now refusing to sign the contract, as it does not show £190k as the purchase price. Which has caused a further delay of almost a month. (Although I believe they are deliberately delaying, as they have done this before).

    So, what price should be on the contract?

    Thanks for your help, Peter
    Last edited by Peter; 19-06-2012, 07:58 AM.

  • #2
    Re: What Price goes in the Contract?

    Peter, I am guessing that no one has the definitive answer for this, hence no response. However, as solicitors for both sides and - most importantly - HMRC agree that £166,250 is the chargeable consideration, common sense (and this is just my layperson's opinion) suggests that this should be the price on the contract. The one stubborn executor is outnumbered by the experts. If he continues to refuse, my understanding is that the administration of the estate cannot be completed and the other executors could apply tothe court to have the stubborn one removed or replaced as an executor. Very expensive. It would eat up the proceeds of the estate. There are firms of solicitors who specialise in this area of law and some offer free, limited, initial advice. Is it worth trying this and then deciding what to do? Is it also worth explaining to everyone - executors and beneficiaries - what the situation is and letting them reflect on it? It cannot possibly be in anyone's best interests - including the stubborn one - to delay and delay in this way and, you know, peer pressure can sometimes be a power for good. What a difficult situation. I can only wish you the best of luck.

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    • #3
      Re: What Price goes in the Contract?

      Thanks Jeannie,

      This is getting pretty stupid now.

      I've just found out that both conveyancing solicitors have agreed that the Purchase Price (on the Contract) should be £190k - and that this means the buyer WILL have to pay Stamp Duty on £190k, despite HMRC already having confirmed that Stamp Duty is payable on only £166,250!

      Their reason was that it was "good practice". How can that be 'good practice'?

      I'm writing an email to 'my'solicitor now, and will call him tomorrow, to get a proper explanation - otherwise I'll have to go to the ombudsman if I'm not satisfied.
      To top things off, the other executor has sent me a cheque to sign for the solicitor's bill, and the deposit hasn't been deducted. And, apparently, the solicitor will make a cheque out to the estate for the deposit. Why not just deduct it from his bill? Seems a 'strange practice' to me.

      Sorry - just needed to rant

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      • #4
        Re: What Price goes in the Contract?

        I would put the lower figure in the contract and the TR1. Only possible reason for higher figure is to placate a stupid mortgage lender who can't understand that a beneficiary doesn't want to pay himself for something he effectively already part owns.
        RICHARD WEBSTERwww.rwco.co.uk
        As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.

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        • #5
          Re: What Price goes in the Contract?

          My sister (the buyer), after much persistence, has finally managed to get her solicitor to phone HMRC himself, and confirm that SDLT is chargeable on £166.25k. So, thankfully, it looks like she will be paying SDLT on £166.25k after all.

          However, she is concerned (given all that has gone on already with the other troublesome executor) that some provision should be made in the contract to show the figure she is actually paying. I agree with her concerns. So, I asked my solicitor (the seller's) if something on the following lines could be included in the contract:
          1) Agreed Market Valuation (for purposes of Land Registry title transfer) : £190,000
          2) Agreed Deduction (in respect of [buyer's name] 1/8th entitlement as a beneficiary): £23,750
          3) Purchase Price: £166,250

          He refused and is now saying that placing £166.25k as the purchase price would amount to "stamp duty evasion". I which I really can't comprehend - given that HMRC's position has now been confirmed with solicitors.

          He isn't being helpful at all
          I'm thinking of going down the complaint procedure/ombudsman - even if it's done retrospectively.

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          • #6
            Re: What Price goes in the Contract?

            He refused and is now saying that placing £166.25k as the purchase price would amount to "stamp duty evasion". I which I really can't comprehend - given that HMRC's position has now been confirmed with solicitors.
            Complete and utter twaddle!

            SDLT is payable on the price actually paid. That is all that is really being paid here for the obvious reasons given. HMRC are concerned about situations where the paperwork is drawn up in such a way as to attempt to disguise a higher real price.

            In this case when completing the land Transaction return they can say, in answer to a question about any covenants or other matters that affect the value, that the price paid is effectively for 7/8ths of the value as OP is entitled to 1/8th under a will.

            Suppose the house was sold on the open market and was advertised for £190K and a buyer offered £185K which was accepted. Would any one say that SDLT should be payable on £190K?

            Threaten to make a formal complaint to the solicitor and request that he refunds the difference.

            Useful references:
            HM Revenue & Customs: What value is SDLT charged on?
            HM Revenue & Customs: SDLT when transferring ownership of land or property
            Last edited by Richard Webster; 03-07-2012, 03:15 PM.
            RICHARD WEBSTERwww.rwco.co.uk
            As a conveyancing solicitor I want to be helpful (England/Wales only) but can't accept liability for this.

            Comment


            • #7
              Re: What Price goes in the Contract?

              I was just writing to my (yes my) solicitor (if you can believe it) to say pretty much the same as you said Richard. And to ask that he make provision in the Contract to state the actual consideration my sister is making (£166.26k). Thanks, by the way.
              And he's just sent me an email saying that he will only discuss this matter with the buyer's solicitor, otherwise he will be charging extra if he has to deal with me directly on this matter!

              I will go straight to making a formal complaint, as I'm pretty pee'd off to say the least.
              Last edited by Peter; 03-07-2012, 03:36 PM.

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