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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.
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