News focus: Conveyancers brace for SDLT uncertainty

Measures to be announced by the government in today’s mini-budget to boost the economy will reportedly include a stamp duty cut. The question will inevitably be asked: what does this mean for conveyancers?

Sarah Dwight, a sole practitioner in Birmingham, who sits on the Law Society’s conveyancing and land law committee, reckons there was a ‘collective groan of disappointment’ from conveyancing solicitors and their teams when The Times reported the prospect of a stamp duty cut earlier this week.

Dwight said: ‘We are all still reeling from the SDLT cut in what was seen to be a buoyant market as we came out of the first lockdown. Following the end of the SDLT holiday in September 2021, the market has remained busy, transaction times have increased, and many experienced conveyancers have left the profession.

‘While we do not know what the proposed cuts will be on Friday, I am sure that many conveyancers will not wish to go through the experience of a SDLT holiday again. The headline has created uncertainty in the market which will last until the full announcement is made. Many transactions are now being halted. Clients who are due to move on Friday are now delaying in case there is a possibility of saving money. We cannot advise our clients on what is going to happen. And who knows what will happen after Friday. All we can hope is that it is not another cliff-edge scenario.’

David Bridge, head of conveyancing at Kiteleys Solicitors and a member of the Conveyancing Association’s executive board, raises several questions that would need to be answered. Will the stamp duty cut, if confirmed, be temporary or permanent? What is the effective date for the change? How easy will the change be – is it a universal cut or another relief that will need to be calculated according to conditions? If so, what are they? Finally, what are the transaction arrangements?

‘Overall, we of course welcome anything that ensures a buoyant housing market. However it is likely to create additional work for conveyancers at a time when the industry as a whole is dealing with ongoing capacity issues,’ Bridge said.

‘We would also want to avoid any cliff edges. For example, pre-announcing a change for the future as that will kill the market. Or, if temporary, a cliff edge when it comes to its end, as that would overwhelm the market.’

CA executive board member Tom Parkinson, director and head of property at Rowlinsons Solicitors, said: ‘It is difficult to pre-empt any announcements. However, if the announcement is around simple changes to increase the first-time buyer threshold and amend the tax bandings with an immediate change, then this wouldn’t create too much difficulty. However, if the changes announced are to take place at some point in the future, with more complex requirements to be considered, such as reliefs for people downsizing, then this is likely to cause conveyancers a real headache by creating more work and increasing the pressure on firms.’

Elizabeth Small, a partner at Forsters, says residential conveyancing is already a complicated area. The nuances of legal elements, coupled with the emotions of the sale and purchase of a home, can lead to significant transaction times.

‘Recent added complications to SDLT, such as the additional rate for second homes and non-resident surcharge, have made understanding a client’s tax position more complex. With the temporary Covid rate cut seeing a surge in purchases, a similar cut could see large increases in workloads for already busy conveyancers. Any tweaking or amending of the SDLT rules will add further delays as lawyers grapple with changes,’ Small said.

Cutting stamp duty at a time of high inflation and a cost of living crisis is likely to be popular in the short term, says Lorna du Sautoy, legal director at BDB Pitmans. ‘The reality is that with a lack of housing supply, this is a “quick-fix” and, as we have seen before, introducing more buyers to an overheated market will increase prices and consequently mortgage payments.

‘The proposal is intended to improve conditions for first-time buyers and downsizers, and to offset the impact of rising mortgage rates. A short-term reduction may encourage market activity to take advantage of the window but in practice it is wealthy investors and second-home buyers who tend to benefit most. If we settle into a pattern of raising and reducing rates periodically, it becomes less effective if buyers decide to sit tight when the rates are raised again and wait for the next opportunity.’

HM Treasury said it did not comment on speculation around tax changes outside of fiscal events.