Powers of Attorney in Scotland and England – what’s the difference?

We regularly advise clients on the many benefits of having a Financial and Welfare Power of Attorney in place. Powers of Attorney allow you to set out who you would wish to make Financial and/or Welfare decisions on your behalf, in the event that you require assistance or are otherwise certified by a Doctor to be suffering from mental incapacity at any point in the future.

It is a common misconception that our nearest and dearest already have these powers, but they don’t – unless you have granted Power of Attorney in their favour.

Powers of Attorney can only be granted whilst you have full mental capacity and so are something that are generally put in place whilst you are fit and well, ‘just in case’, you need to rely on it at any point in life. They are not just for the elderly – clients of all ages can be affected by a medical diagnosis, workplace or road accidents which can affect their mental capacity.

It is not unusual for clients to have family who live all over the UK and some may choose to move from Scotland to England (or vice versa) to be closer to them and may already have Powers of Attorney on the ‘home’ side of the border that they would want their Attorney to be able to use on the ‘new’ side of the border.

Will my existing Scottish Power of Attorney be accepted in England (or vice versa)?

Generally speaking, a Scottish Power of Attorney which has been registered with the Office of the Public Guardian in Scotland should be accepted by organisations in England and Wales or vice versa. However, this is not automatic and there can sometimes be difficulties if the organisations your Attorney is dealing with (e.g banks etc) refuse to accept it. This is not something your Attorneys want to happen at a time when you really need them to assist. The Laws in Scotland and England & Wales dealing with Adults with Incapacity are different and so different rules apply in each country.

What can you do?

The safest option is for a Power of Attorney to be granted in any jurisdiction where you have dealings and may need your Attorney to act. If you already have a Scottish Power of Attorney in place, still have mental capacity and are moving to England, we recommend that an English Lasting Power of Attorney is also put in place by an English Solicitor, as soon as possible, once you move. This does not replace the Scottish Power of Attorney but means that no matter which side of the border your Attorneys are dealing with your affairs on, they will have the necessary Power of Attorney to be recognised in that jurisdiction. The same applies for a person moving from England to Scotland.

What if the Adult has already lost capacity and so can’t do that?

Attorneys should seek advice on the ‘new’ side of the border about whether the existing Power of Attorney will be recognised by those organisations they will need to deal with. If the Power of Attorney will not be accepted, it may be necessary for an Intervention Order or Guardianship Order (or equivalent) to be sought. These can be quite complex legal procedures, which may take a long time and incur significant costs to put in place. Meanwhile, your Attorneys may be unable to act. By seeking advice as soon as possible following a move, or even ahead of time, Attorneys can take practical steps to ensure your rights and assets are protected.

Cross-border co-operation

The Law Societies of Scotland and England & Wales have recently issued a joint information note to help Solicitors and other organisations on both sides of the border navigate these differences. It includes guidance on the key Laws, procedures for recognition of Orders (such as Powers of Attorney or Guardianship Orders) and how the Courts in both jurisdictions can cooperate. Whilst these resources are intended for professionals, they underline the importance of advance planning for individuals wherever possible.

What to do if you want to know more about Powers of Attorney

Our experienced Private Client Team are on hand to assist with any questions you may have about Powers of Attorney in Scotland, whether you want to put one in place, already have one and have questions or are considering a move, or if you’re an Attorney looking to act on behalf of an incapable Adult. They can be contacted by calling our offices on 01383 620222.

Additional Dwelling Supplement: An Update

If you buy a house that is not your main residence or if you buy a house as your main residence but cannot sell your existing main residence, an Additional Dwelling Supplement (ADS) will be charged. The ADS is charged at a rate of 6% on the price of an additional property purchased. This payment is in addition to any Land and Buildings Transaction Tax which is payable on the purchase, whether it is your main residence or not.

However, when it was first introduced the ADS had some unintended consequences. The last Scottish Budget has addressed some of the anomalies. These changes become effective from 1 April 2024.

Reclaiming Additional Dwelling Supplement when your previous main residence is sold

If you are unable to sell your main residence before buying a new main residence, you must pay ADS on the purchase price of your new main residence. If you subsequently sell your former main residence, under the current rules you have up to 18 months to reclaim ADS. This time period has now been extended from 18 months to 36 months.

Reclaiming ADS on a jointly purchased main residence where one partner already owns a property

Where you buy a property jointly with someone else as your main residence but have not yet sold a property in your sole name, ADS will apply on the joint purchase of the new property with your partner.

However, you can reclaim the Additional Dwelling Supplement you have paid when you sell the previous property that was owned in your sole name.

ADS Relief on Divorce or Separation

There may be circumstances where a couple separate or divorce and where one of the couple remains in what was the main residence but the other does not. If the individual who has moved out but their name remains on the title to the former main residence, they may be entitled to ADS relief. This would apply provided there is a court order or a separation agreement stating that the individual who has moved out must retain an interest in the former main residence. That means when the individual who has moved out buys their own new main residence, it will not be subject to Additional Dwelling Supplement. This harmonises the rules as they stand in England, Wales and Northern Ireland.

ADS and Inherited properties

ADS relief is available in a very limited set of circumstances. These circumstances are if you inherit a property after you have concluded missives for a new main residence but before the date of entry. This is an extremely tight window so you need to calculate the potential impact of the inherited property causing you to own 2 properties.

Additional Dwelling Supplement and small shares in a property

If you own a small share in a property, you will be exempt from the two-property rule. That means if your share in the ownership of the property is worth less than £40,000, you will not have to pay the ADS on another property you buy. This also brings Scotland into line with England, Wales and Northern Ireland.

Need advice about ADS?

If you need advice about the Additional Dwelling Supplement when you are buying a house, please contact us. Our solicitors have many years of experience in looking after our clients’ interests when they are buying a house. We look after our clients’ house purchase needs in Dunfermline, and Kinross, across Fife and throughout Scotland.

100% Mortgage – Good or Bad?

Prior to the financial meltdown of 2008, which had a significant impact on global economies, 100% mortgages were common. The availability of such high loan-to-value mortgages became non-existent because of the crisis. Though 100% mortgages have made a resurgence, until recently they needed a guarantor to vouch for the borrower’s loan obligations in case of a default. However, Skipton Building Society has introduced a 100% mortgage that does not require a guarantor. This type of loan is accessible to individuals with a positive credit history and at least a year’s history of paying rent on time. As with any mortgage, standard affordability checks apply.

What’s the upside of a 100% mortgage?

For potential homeowners, one of the biggest hurdles is accumulating the funds for a deposit. This can be particularly challenging for people renting properties, where high rental costs make saving difficult. Furthermore, in various regions of the UK, renting can be costlier than buying. Thus, purchasing a home with a 100% mortgage can decrease your monthly outlay.

A 100% mortgage can be a steppingstone for those who can’t afford a deposit, allowing them to own a property that will probably increase in value over time. As the mortgage balance declines and the property’s value rises, homeowners can build up equity that can be used for a future property purchase.

Eliminating the need for a guarantor simplifies the buying process. A guarantor would have to consider the significant risk to their assets if the borrower fails to repay, making the no-guarantor option from Skipton Building Society an attractive proposition.

What’s the downside of a 100% mortgage?

While first-time homebuyers can benefit significantly from full financing home loans, there are inherent risks. Obtaining Skipton Building Society’s 100% mortgage is not entirely effortless. The borrower must have a record of paying rent punctually and in full for at least a year and have a good credit score. Once these conditions are met, standard mortgage checks, including affordability assessments, will be conducted.

It’s important to note that 100% mortgages come with a higher interest rate. This implies that compared to borrowers with a deposit, those opting for a 100% mortgage will end up paying more. If interest rates rise, the loan could become unaffordable, a risk that’s not exclusive to 100% mortgage holders.

Since there is no equity in the house at the time of purchase, any default on mortgage repayments can lead to a negative equity scenario – owing more on the mortgage than the home is worth. It’s crucial to keep open communication with your mortgage provider if you’re unable to meet your repayments. Avoiding the issue won’t help; most lenders will try their best to assist you.

Another potential issue is a drop in the property market. If this happens, you may find yourself stuck in a house that’s worth less than the outstanding loan. However, as property markets tend to rise in the long run, such situations usually resolve themselves given time and patience.

Where can I seek advice on this?

Our team of experienced solicitors can assist with various aspects of buying or selling a house. We don’t offer financial advice, but we do recommend speaking with your financial advisor about mortgages. If needed, we can direct you to one of our trusted partners for an in-depth discussion of your needs.

Feel free to contact us to discuss any aspect of property transactions.

Understanding the Private Landlord Registration Rules in Scotland

The Scottish government introduced new regulations for private landlord registration that came into effect in September 2019. Although private landlord registration had been mandatory in Scotland for several years, these new regulations expand the information landlords must provide to the government. These requirements apply to individual landlords as well as trusts, charities, and companies. In this article we hope to give you an understanding of the private landlord registration rules in Scotland.

Information Required from Individual Landlords

If the landlord is an individual, the regulations now require basic information. This consists of the landlord’s name, address, and date of birth. In addition, landlords must disclose whether they have gone by any other name, details of their past addresses for the previous five years. Landlords also must disclose whether they have been convicted of a crime or issued with an anti-social behaviour order.

If the property is owned jointly, the landlord must also provide the joint owner’s details. All landlords, including individuals, must provide their contact number and email address. This means all named persons on the title deeds of a rented property must all register as landlord and have a landlord registration number.

Additionally, landlords must indicate if they have any license, accreditation, or registration in relation to letting property in the UK. They also have to disclose whether any of these have been refused or revoked.

Information Required from Non-Individual Landlords

For non-individual landlords, the regulations require that they disclose whether they are a charity or trust. In addition, if the landlord is a company, the company registration number.

Requirements for the Property

As well as information about the landlord, the new regulations require information about the property itself. Landlords must confirm that the property meets the tolerable and repairing standards. They must also confirm that the property complies with the Gas Safety (Installation and Use) Regulations. If the property has a private water supply, the landlord must confirm it meets the Water Intended for Human Consumption (Private Supplies) (Scotland) Regulations 2017.

Landlords must also confirm that the tenant has been given a copy of the EPC (Energy Performance Certificate), the Gas Safe record, and the Electrical Inspection Condition Report. If the property is part of a tenement building, landlords must declare that there is adequate buildings insurance in place. They also need to confirm they are aware of their obligations in relation to common repairs and maintenance.

If the property is an HMO (House in Multiple Occupation), landlords must confirm that it is licensed. Finally, landlords must confirm that relevant legionella risk assessments have been carried out. If any issues arise as a result of that assessment, they must confirm that the necessary steps have been taken to remedy these.

Marketing and Deposit Requirements

Finally, landlords must confirm that any advertisements for the property included their registration number and the EPC. If the tenancy falls under the Tenancy Deposit Scheme (Scotland) Regulations 2011, landlords must confirm that the deposit has been lodged with an approved scheme or will be lodged within the relevant time frame.

What do the private landlord registration rules mean for private landlords?

The private landlord registration rules in Scotland are much more extensive than before. They now require landlords to provide detailed information about themselves, their properties, and their tenants. Failure to comply with the regulations can lead to penalties. These include being prohibited from renting out the property. It’s important that landlords are aware of these new regulations and to comply with them to avoid any legal issues.

We have a dedicated lettings department and our team will advise you on the registration requirements. We can also help you find tenants and to manage your lettings. If you would like to discuss anything lettings related, please get in touch.

Missives concluded – does that mean I’ve sold my house?

You’ll have heard lawyers and, perhaps, your friends and family talk about “missives” when they’re buying or selling a house. Missives are the letters lawyers exchange that make up the contract for sale and purchase. So, when you hear people talking about missives concluded, that means that the contract has been completed. But does that mean you’ve actually sold your house.

We always remind clients when they accept an offer that it isn’t binding until missives are concluded. When we receive the offers for your sale and discuss these with you, you will indicate which offer is the most acceptable. We then get on with the exchange of letters with the buyer’s solicitor to finalise the terms of the contract. The exchange of letters will accept, remove or impose conditions. Whilst this process continues, either party can withdraw without penalty. The exchange of letters between solicitors can go on for a few weeks. Once this process is completed, the terms of the contract are agreed.  At this stage we will tell you that “missives have been concluded.

The concluded missives contain conditions on both seller and buyer. Some are technical and relate to the title to the property. Others will cover the condition of the property and the things you are leaving. There will be conditions on the buyer to pay the price on the date or entry in exchange for the keys. The sellers has to give vacant possession of the property to the buyer. There will always be a condition that outlines what happens if the buyer fails to pay the purchase price.

Missives concluded – but they contain suspensive conditions

There are, however, situations where the buyer can withdraw from the purchase without penalty. That can happen when the missives include some “suspensive” conditions. An example of this type of condition might be that the purchase is subject to the buyer securing a suitable mortgage. Alternatively, it might be that the purchase is subject to the buyer selling his or her own house.

If the missives contain conditions such as these, whilst missives are concluded, and for all intents and purposes you’ve sold your house, it still means the buyer can pull out without penalty.

So, having missives concluded in your sale is essential, making your sale pretty secure and giving you a considerable degree of certainty. If, however, the missives contain suspensive conditions, there is always the risk the buyer can pull out even though missives are concluded.

We would always take your clear instructions on any suspensive clauses prior to concluding missives.

If you have any questions or concerns about a property matter, please get in touch.

Disappointment for property buyers as LBTT relief reversed

Kate Forbes, MSP, Cabinet Minister for Finance disappointed property buyers with her announcement on LBTT in the Scottish Budget. The Finance Secretary raised the LBTT threshold to £250,000 in July last year as the property market came out of lockdown. This took a huge number of buyers out of paying tax. The Finance Secretary announced that the threshold, would be reduced to the pre-pandemic level of £145,000. For first-time buyers, the starting threshold is £175,000. This change has been scheduled to come into effect on 1 April 2021.

It remains to be seen what impact, if any, this will have on the property market.

It has been very busy indeed since the property market was unlocked in June last year. People took advantage of the increased threshold. They paid no Land & Buildings Transaction Tax on any purchase up to £250,000. Those who purchased for more than that made a saving of £2,100.

What does this change in the LBTT mean?

This change now means that those paying over £145,000 will have to pay LBTT. The Cabinet Secretary did make the point that first time buyers don’t start paying until they reach their threshold of £175,000 which means they save £600.

Interestingly, the LBTT paid in the last quarter of 2020 was more than the LBTT paid in 2019 despite the threshold being higher.

We might not yet have heard the last of this. The Chancellor of the Exchequer delivers the UK Budget on 3 March 2021. If he decides to extend Stamp Duty (the English equivalent of LBTT) then the Finance Secretary will have a very difficult decision to make. Should she follow suit or stick to her guns and bring the threshold back down.

There’s still time to buy and beat the deadline! Your purchase will need to settle before 1st April 2021. So, if you are thinking of buying and want to beat the deadline get your skates on!

Property Tax Holiday

What is Land & Buildings Transaction Tax?

Land & Buildings Transaction Tax (LBTT to many) is a property tax paid by buyers of property in Scotland. It’s the Scottish property tax that replaced Stamp Duty some years ago.

 So, what’s changed?

The Scottish Government has announced that the threshold after which you pay the LBTT has been raised from £145,000 (£175,000 for first-time buyers) to £250,000. The change came into effect on 15th July and will last until 31st March 2021.

The coronavirus lockdown brought the property market in Scotland to almost a complete standstill. This change in the property tax threshold is designed to support the Scottish property market.

The increase in the LBTT threshold also helps those who buy for more than £250,000 so this is a win/win for all property buyers. If you buy for more than £250,000, you’ll save £2,100!

 How is LBTT calculated?

LBTT is calculated on a sliding scale depending on the price of the property you’re buying. It’s based on a percentage of the value of the property and the more expensive the property you buy, the higher the tax.

The current and previous LBTT bands are as follows:

*If you’re a first-time purchaser, you don’t pay any LBTT up to £175,000 and after 31 March 2021 you’ll pay 2% on the difference between £175,000 and £250,000

LBTT is a “progressive” tax.  This means that you pay the percentage for each band up to the price of the property. For example, if you’re buying a property right now for £350,000, here’s how the LBTT works out:

If you wait till after 31 March 2021 to make the same purchase for £350,000, here’s how the LBTT will look:

I’m a first-time buyer, how does this affect me?

First-time buyers also enjoy the current concession of not having to pay LBTT for any purchase up to £250,000.

When things return to normal after 31 March 2021, first-time buyers will only start paying LBTT if the price is more than £175,000.  This means first-time buyers save £600 in LBTT over home movers.

Is there anything else I should know about LBTT?

Yes.  There’s something called the Additional Dwelling Supplement (ADS). The ADS is charged on any second or subsequent home you buy and you might end up paying this if you don’t manage to sell your present home before buying a new home.

It’s charged at a flat rate of 4% on the purchase price. You also have to pay this in addition to any LBTT you might have to pay.

If you have to pay the ADS because you can’t sell your present home, you have up to 18 months to reclaim the ADS once you finally sell your present home.

If this all sounds too complicated to work out, thankfully, Revenue Scotland has a calculator that works out the numbers for you. You can click here to go there and have it work out the LBTT you’ll have to pay on your new house.

What if I have any questions about LBTT or ADS?

Get in touch with us. Call our Dunfermline office on 01383 620222 (email info@morganlaw.co.uk)  or our Kinross office on 01577 863424 (email kinross@morganlaw.co.uk)