Money laundering is “the process by which criminal proceeds are sanitised to disguise their illicit origins”. It is estimated that up to £57 billion is laundered through the UK every year. There are large sums of money changing hands in the conveyancing sector making this an area of law heavily attacked by fraudsters as they can legitimise a large amount of money in one go.

The government have introduced compulsory checks to make it more difficult for criminals to illegally launder money. When instructing a solicitor to act for you in the purchase of a property you’ll need to:

  • Residential Sale (leasehold and freehold)
  • Provide Proof of Identity & Address

Proof of Identity & Address

In accordance with Anti-Money Laundering Regulations, you will be required to supply documentation that proves your identity and address. Your solicitor will insist on seeing photographic ID, such as a valid current passport, photocard driving licence, armed forces ID card, or National Identity Card.

Your solicitor will also need to see two separate pieces of evidence to prove you reside at the address you are living at. This is normally your main residence where you are registered on the electoral roll. A bank statement, PAYE tax coding notice, HMRC letter, utility bill or council tax bill can be used as evidence for proof of address. The reason for needing proof of address for the client’s current address and for limiting what types of correspondence are acceptable is that some fraudsters or money launderers will simply break into an empty property and use any mail addressed to the previous occupier to begin creating a new identity.

Your solicitor will ask to see originals of the documentation provided, of which copies will be taken and certified as being true copies of the original for the file. If you are unable to provide your solicitor with original copies of the required documentation to prove identity and address, your solicitor can accept copies certified as being true copies of the original by another solicitor, licensed conveyancer, accountant, teacher, post office, Minister of Religion, judge, barrister, police officer or a member of staff at a British embassy. The individual that certifies your documents must be FSA Regulated.

Proof of Funds

Proving your source of funds for the purchase of your property is the most important task in the conveyancing process. A solicitor cannot by law proceed with your purchase without knowing the source of your funds. This is to limit the potential for fraud, protecting the solicitor, the legal sector and most importantly, the buyer.

Proof of funds can be categorised into:

    • Savings

The best evidence of savings will be bank statements for the last 3 months showing an accumulation of funds in your bank account. If you have more than one bank account containing savings, you will need to provide statements for the last 3 months for those accounts.

    • Pension

A copy of your pension release document and a copy of your bank statement showing the money being received from the pension company.

    • Sale of Shares

A copy of the share release schedule and a copy of your bank statement showing the money being received from the shares.

    • Sale of another property

A copy of the completion statement from your solicitor and a copy of your bank statement showing the money being received from the solicitor following the sale.

    • Inheritance

A copy of the letter from the executors stating how much you are being paid as a beneficiary and a copy of your bank statement showing the money being received from the solicitor/executor’s bank account.

    • Dividends from a UK Company

A copy of your dividend certificate, a copy of the company’s accounts and a copy of your bank statement showing the money being received from the Company.

    • Gambling Winnings

A copy of your receipt proving your winnings and a copy of your bank statement showing the money being received.

    • Compensation Award/Court Settlement

A copy of your letter confirming your compensation settlement from a solicitor and/or Court and a copy of your bank statement showing the money being received from a third party/Court/solicitor.

    • Gift

We will require a letter from the person making the gift. The person making the gift will also have to prove the source of the funds in the same manner as you would have to. Read our blog post on Gifted Deposits here.

If the deposit/full funds are across separate accounts, we will need to see statements for ALL accounts and a final statement showing funds transferred to the main account for the deposit or full proceeds of the cost of the property.

The Law Practice UK Ltd is accredited by the Law Society’s Conveyancing Quality Scheme so you can be assured that you will receive a high standard of service and client care. For further information and advice, please contact us to speak to a member of our property team.

Help to Buy ISA – Who qualifies and how do I apply?

You need to be a first-time buyer and the property you are purchasing needs to cost less than the house price cap of £250,000 or less (or £450,000 or less in London).

You can open an account with any bank, building society or credit union that offers a Help to Buy: ISA account.

How long will Help to Buy: ISAs be available for?

You’ll be able to open a Help to Buy: ISA until 30 November 2019. After that date, they won’t be available to new savers anymore – but if you opened your Help to Buy: ISA before then you can keep saving into your account until 30 November 2029 when accounts will close to additional contributions.

You must claim your bonus by 1 December 2030.

ISAs must be opened by individuals aged 16 years and over and cannot be opened on behalf of someone else. ISAs are only available to individuals. If you plan to buy a home with someone else who is also a first-time buyer, they can open and save money into their own account. If the property you wish to purchase is within the price caps you can separately claim the government bonuses due on your savings and put both bonuses towards the home you are buying.

I have property in a trust, do I still qualify as a first-time buyer?

If you have or had an ongoing beneficial interest in a residential property via a trust, (including a trust created by a will or divorce), then you are not a first-time buyer.

However, you are still a first-time buyer if:
(a) you are named as a beneficiary of residential property in the will of a person who is still living; or,
(b) if the trust to which you are or were a beneficiary was only created for the purpose of selling the property and other assets following a death or divorce, and the title of the residential property was never transferred to your name or to a trust which you are an ongoing beneficiary; or
(c) if you are only acting in a trustee role and will not be entitled as a beneficiary in the future, (and do not have any other interests in residential property).

Is there a limit on how much I can save in a Help to Buy: ISA?

Yes. The maximum amount you can save every month is £200. In the first month, you can save an additional £1,000.

Do I have to save £200 every month?

No. You don’t have to save money every month and the amount you save into the account every month is up to you – as long as you don’t go over £200. However, you can’t roll over your allowance.

For example, if you don’t save any money during January and February, this doesn’t mean you’re allowed to save £600 during March.

Can I withdraw money from my Help to Buy: ISA?

Yes. You can withdraw money from your Help to Buy: ISA account at any time. But you can’t put all the money you’ve withdrawn straight back into the account – you’re still only able to save up to £200 in every month. For example, if you deposit £200 and then withdraw £50 in the same month, you will have to wait until the next calendar month to make another deposit.

If you plan to withdraw all your money in your Help to Buy: ISA for your home purchase, you will need to let your ISA manager know. Your ISA manager will then close your account and provide you with a closing statement. Don’t just withdraw all of your money as you will not receive the closing statement and you won’t be able to claim your bonus.

There are exceptions if you withdraw your money in order to purchase a home and the sale falls through.

Does the Help to Buy: ISA bonus contribute towards the deposit I need to buy my first home?

Yes. The government bonus contributes towards your overall deposit (sometimes referred to as the ‘mortgage deposit’) and therefore increases your savings for your first home. When calculating the size of your mortgage, banks, building societies and credit unions will seek evidence of the funds that you have available to put towards your first home. This will include the amount that has been saved into your Help to Buy: ISA account and banks, building societies or credit unions will factor in the amount of the government bonus into their calculation of how much you need to borrow.

What is the difference between an exchange deposit and a mortgage deposit?

A ‘mortgage deposit’ is the amount you are contributing towards your first home upfront. For instance, you may pay 5% of the value of the property upfront and borrow the remaining 95% from a bank or building society.

An ‘exchange deposit’ is the money your conveyancer pays to the seller’s conveyancer at the point of exchanging signed copies of the contract.

Can I use the money I have saved in my Help to Buy: ISA for the deposit at the exchange of contracts for my home purchase?

Yes. If you plan to use the money you have in your Help to Buy: ISA to pay for the deposit at exchange of contacts you will need to let your ISA manager know. Your ISA manager will then close your account and provide you with a closing statement. You can then withdraw your savings from your account and use those savings towards the deposit at the exchange. It is important that you don’t just withdraw your savings without getting a closing statement. The government bonus will be paid out just prior to completion and contribute to the overall deposit.

Will my interest on my savings count towards my government bonus?

Yes. Your government bonus will be calculated based on the amount of money you have in your account when you close it. This includes both the money you have saved and any interest you have earned on that money. The maximum government bonus is £3,000.

Will I get interest on my government bonus?

No. Your government bonus won’t be paid into your account. Just prior to completing on your first home purchase, your solicitor or conveyancer will apply for your bonus. Once they receive the bonus, they will transfer it to the seller with the other money you are putting towards your new home.

How do I apply for my bonus?

When you find your home, your prospective mortgage lender will ask you to hire a solicitor or conveyancer. They will handle all of the legal aspects of buying your home and can advise you on whether the property you are buying is eligible for a government bonus. In order to claim a bonus your conveyancer will need a closing statement from your Help to Buy: ISA account. So when you need to withdraw all of your funds make sure you close your account and get a closing statement from your ISA manager. Don’t just withdraw all of your money as you will not receive the closing statement and you won’t be able to claim your bonus. If you lose your closing statement, your ISA provider will be able to give you a new one. You will need to take this closing statement to your solicitor or conveyancer so that they can apply for your bonus.

Your conveyancer will apply for your government bonus on your behalf. The bonus will be sent to your conveyancer or solicitor to be included with the other funds which have been consolidated for the completion of the property transaction.

If completion is imminent, there is an expedited bonus application process that your solicitor or conveyancer can follow that does not require a closing statement. You should speak to your solicitor or conveyancer to find out more.

How do I apply for a Help to Buy: ISA government bonus if I am exchanging and completing on the same day?

Your conveyancer will still use the standard bonus application process, but it will be important that you speak to your ISA manager and solicitor or conveyancer as early as possible to inform them that you wish to claim a government bonus.

There is an expedited bonus application process that your solicitor or conveyancer can follow that does not require a closing statement and where an up-to-date Help to Buy: ISA account statement can be used instead.

When is the Help to Buy: ISA government bonus paid?

The government bonus is paid once it is certain the transaction will go ahead. This means that your solicitor or conveyancer will claim the bonus between exchange and completion. The government bonus contributes towards your completion funds (sometimes referred to as the ‘mortgage deposit’)

If you are in the situation where you need the government bonus to make up the deposit on exchange of contracts then your solicitor or conveyancer will be able to advise you on your options. In this instance your solicitor or conveyancer should be able to agree a smaller deposit at exchange with the seller; with the promise of the government, bonus to follow as part of the overall deposit.

What about if I want to buy a home before I’ve saved enough to claim the £3000 bonus?

You need to save at least £1,600 to receive the minimum government bonus of £400. If you close your account without saving that amount you will not receive a bonus. If your Help to Buy: ISA has a balance of £1,600 or more, you can apply for your bonus at any time.

What happens if my house purchase does not go ahead?

If your property purchase doesn’t go through after you have closed your Help to Buy: ISA in anticipation of claiming a bonus, you can re-open your Help to Buy: ISA. To do this your solicitor or conveyancer will give you a document (called a purchase failure notification) confirming your property purchase did not complete. If you take this to your bank, building society or credit union, they will re-open your account for you. At this point, you will be able to deposit your money as a lump sum. So, if you closed your account with £12,000 in it, you will be able to re-deposit £12,000. If you decide not to re-open a Help to Buy: ISA, you can use your purchase failure notification to deposit your lump sum in a cash or stocks and shares ISA. This will not count towards your annual ISA subscription limit.

If the government bonus has already been transferred, your solicitor or conveyancer will first need to return your bonus to the Help to Buy: ISA Scheme Administrator before you can receive a purchase failure notice.

 

Call The Law Practice today for further advice on your first home purchase. Contact us today.

A gifted deposit is any amount that somebody (usually bank of mum or dad) gives a home buyer towards their deposit or gifts them the entire deposit.

More and more people are relying on gifted deposits to get a mortgage, but what does this mean for you?

Here at The Law Practice, we ask for proof of funds covering three months to see where the deposit is coming from and to ensure that this amount has been in your account for at least three months. During these three months, if we see that any significant amounts have gone into your account then we ask for a trail to be seen such as bank statements to show that an amount has been transferred from your savings account into your main account.

However, if this amount is a gift from anyone else then please note that Anti-Money Laundering laws require us to do the following:

A signed statement will be obtained from the gift donor: The purpose of this statement is to ensure that this amount is a non-repayable gift and the person has no interest in the property. This is directly sent to the gift donor once you provide us with their contact details.

A Bankruptcy Search will be carried on the gift donor: This will be done on completion and then £2.00 will be added to your bill.

Obtain certified photographic ID and proof of address from the gift donor.

An ID check on the gift donor: This will be £10.00 plus VAT and be completed as soon as the ID is received.

Obtain source of funds: This must show that the gift amount has been in their account for at least 3 months, if not then we must see a trail of where it came from.

At The Law Practice, for gifted deposits, there is a cost of £50.00 plus VAT for doing all the above work.

Different lenders have their own rules and requirements regarding the gifted deposit. We report this gift to the lender and ask them to confirm whether they are happy to proceed with the purchase. Some lenders also require their own statements to be completed by the gift donor. Therefore, if you are getting a gift towards your purchase please let us know as soon as possible so that we may carry out the above steps and allow the lender time to respond back to us in time for your transaction to not be delayed.

If you have any further questions, please do not hesitate to contact our conveyancing department on 0121 778 2371 or send us an email.

You’ve done all the leg work, you’ve found the perfect home to settle down in, it’s essential now that you get the first week right, we are going to summarise the essential checklist when it comes to moving into your new home.

Moving house is a big transition in life and with it comes a certain level of uncertainty. Cardboard boxes, bubble wrap, and lots of newspaper is what you will be accustomed to when moving house. Ask anyone who has moved before and you will always misplace (lose) something, It’s a chaotic time and there will be times when you feel helpless, however, we are going to run down everything that will ensure you have a smooth moving in day.

Six weeks before you move in is a good time to begin transitioning all your bills, insurance and post to your new address, it is also the chance to notify your landlord if you are in rented accommodation your estimated move date. Start getting removal quotes too.

Four weeks before, start going through things and having a sort out. There are bound to be things you have been meaning to get rid of for years. Go through wardrobes/loft etc and start a charity bag. Start packing the non-essentials such as books and pictures.

Three weeks before talking to your solicitor about completion dates that work for you.

Two weeks before the big day start the process of packing the rest of your items for moving day. Now would be the perfect time to notify the bank of any changes to your direct debits and standing orders.

Now is also about the time to confirm completion dates with your solicitor and ask them to check with all other solicitors in the chain so everyone is working to the same date.

The stress factor will be ramping up now as you approach the big day.

Mark boxes clearly and puts them in the relevant rooms the other end.

Food is often overlooked so take some basic food items such as breakfast cereals, bread, spreads and tableware separately with you to your new home if that is feasible.

When moving it’s essential to not get overwhelmed, moving is an ongoing process. If a few days into packing/unpacking you need to take some time out to just take stock of the situation then do that.

Like anything, it’s important to have a plan, so we’ve made the essential Moving Home Checklist with a handy tick box feature so you can keep track of what you have done.

Good luck!

Is the Lifetime ISA really the answer to your property ladder problems?

After long anticipation, the Lifetime ISA (‘LISA’) will finally be making an appearance on 6 April 2017, with only certain people eligible to reap the benefits. The LISA is an individual savings account available to those aged between 18 and 40. Chancellor, George Osborne, first introduced the LISA in his 2016 Budget, offering a solution for those struggling, trying, and failing to climb the unforgiving property ladder. It is also designed to tackle the other large milestone in life through providing a tax-free pecuniary pot upon turning 60. Given that Local Government Secretary, Sajid Javid, has confirmed that we are amidst a ‘broken’ housing market, we will be discussing the former.

The LISA will ensure that the Government pays a bonus of up to £1,000.00 per year on investments made. However, the catch is that savers may only pay a maximum of £4,000.00 into their account annually. Towards the end of the first year, there will be a 25% bonus. From the year 2018/19, this bonus will be monthly. Somebody aged 18 can potentially earn up to £32,000.00 in a ‘free’ Government hand-out. This is provided that they gradually pay £128,000.00 into their account until they turn 50, which is the cut-off point for paying into the LISA.

As well as being within the necessary age range, this must be your first residential purchase. You will not qualify for the LISA if you have owned a property before, including acquirement through inheritance. This is regardless of whether the property is in the UK or not.

It is also worth noting that the purchase price is capped at £450,000.00, whether you live in or outside London. This is unlike the Help-to-Buy ISA (‘HTB Isa’) which limits the purchase price to £250,000.00 if the property is outside London. This blanket limitation could still prove to be a challenge if, for example, the cost of houses continue to escalate. It would appear that the purchase price restriction does not take the future rise and fall of the property market into consideration. Further, it remains to be seen whether the cap will be revised and/or adjusted accordingly in future.

Withdrawing money from your LISA is not without its shortcomings and incurs a 25% exit fee (except in the year 2017/18). The only exceptions are where you are buying your first home; are above 60 years of age; or have a terminal illness. Arguably, this charge may be deemed punitive; particularly if a saver happens to require urgent access to their monies for reasons other than those stipulated. Given the stringent consequence, the Financial Conduct Authority has stressed the importance of investors being forewarned.

To put the exit fee into perspective, we can look at a hypothetical situation. In this scenario, a keen teen is fortunate enough to invest £4,000.00 in their LISA and receive a 25% boost from the Government. Their total savings would now be £5,000.00. Due to unforeseen circumstances or perhaps a change of direction in their life, they need to withdraw from their pot of money earlier than expected. Unfortunately though, this entails a hefty penalty of 25%. They would be penalised by £1,250.00, only to discover that their savings amount to £3,750.00 – a shocking 6.5% less than their initial investment. It begs the question, is their LISA truly worth it?

Evidently, the scheme is bountiful in a situation where you do not need to prematurely access your money and it can prove generous in other ways too. One example of this is where you and your partner/spouse have both opened a LISA each and are looking to buy a house together (both as first-time buyers). Provided that the house costs no more than £450,000.00, you can theoretically benefit from two bonuses.

Whether purchasing alone or with your significant other, the money is paid directly to the Conveyancer/Solicitor handling your transaction. Unlike the HTB ISA, the money stored in the LISA may be utilised for the deposit at Exchange of Contracts (‘Exchange’). This is the point at which the Buyer(s) and Seller(s) become legally bound by the Contract they have afore signed. Do be advised that these savings may only be used on Exchange or Completion if your LISA has been open for at least a year.

Scepticism has risen since the unveiling of the LISA. Tom McPhail, Head of Pensions Research, has warned that, ‘stoking the demand side of the equation isn’t going to fix the problem – it’s going to accelerate the problem’ and insists that the Government should facilitate ‘more house construction’ instead. This echoes the beliefs of Sajid Javid who advises that, ‘The only way to halt the decline in affordability and help more people onto the housing ladder is to build more homes.’

When simplified, the LISA appears to be a lot like free money, particularly where people are able to and can afford to save. If you cannot afford to save, then surely this lifeline being offered by George Osborne is not actually a lifeline after all. One may argue that climbing the property ladder will not become any easier even if the LISA is there to assist. Therefore, it is logical to deduce that the imbalance between the privileged and those from less fortunate backgrounds is as prevalent as ever; thus the introduction of the LISA only serves to perpetuate this. For that reason, perhaps it would be beneficial to now address the major issue of sustained property price inflation so that a significant chunk of one’s life is not spent merely saving for a first home.

Written by Harj Mann, Trainee Solicitor