Arash Remasi, Partner and Head of New Build Outright

The positive impact over the years on the lives of many homeowners that Homes England has achieved though their equity loan assistance scheme is undeniable. It has helped so many people get onto, and indeed even move up, the property ladder earlier than they may have otherwise been able to, in the main due to the larger deposits required by lenders that has, sadly, become the norm in today’s lending market.

The current incarnation of this, the Help to Buy Equity Loan: 2021-2023 scheme, will certainly be no different.  The scheme however does undoubtedly have certain strict requirements and complexities that need to be fully understood and embraced in order for a matter to reach a successful exchange and completion.  That said, these should be for a buyer’s professional advisors to undertake diligently behind the scenes (hopefully utilising all their knowledge and experience!) rather than for a buyer to have to think about as, in essence, a legal advisor’s job is to make the transaction as approachable and simple as possible for a buyer.

When we as a firm started out on the equity loan “journey”, the scheme was known as HomeBuy Direct, which I am pleased to (just about!) recall, worked by way of the government and the housebuilder providing two separate equity loans to a buyer of a new home. This then evolved into to the FirstBuy scheme, which gave a single equity loan from the government to a first time buyer of a new home. It then became Help to Buy Equity Loan: 2013-2021, changing the eligibility criteria to allow existing homeowners to also benefit from a single equity loan from the government when buying a new home to live in.

At Direction Law we have acted for thousands of buyers purchasing under the various equity loan products above, and so we share the positive view held, no doubt, by those of you reading this article who intend to benefit, or indeed may already have, from Homes England’s latest equity loan product, the Help to Buy Equity Loan: 2021-2023 scheme.   On this, some key information and considerations for buyers is available online in a really approachable format at https://www.gov.uk/government/publications/help-to-buy-equity-loan-buyers-guide.  To summarise, some key parts of the latest scheme are that it:

• Reintroduces the requirement for the equity loan to only be available to first time buyers.
• As with the previous HTB product, no interest is payable for the first 5 years of the equity loan.
• Allows a buyer to borrow between 5% and 20% (or 40% if in London) of the market value of their new home, subject to new regional maximum price caps.
• Stipulates that a buyer must arrange a mortgage with a bank or building society of at least 25% of the purchase price of their new home.
• Specifies that a buyer must pay off the equity loan when paying off their main mortgage, selling their home or reaching the end of the equity loan term, which is normally 25 years.
• Requires that applications made by a buyer that is married, in a civil partnership, or in a co-habiting relationship, either now or on legal completion of their purchase, will have to be a joint application with any such partner or spouse.

The key message I really want to get across, particularly if you are reading this as a potential buyer, is the importance of instructing professional advisers to act for you who specialise in equity loans, whether that be your legal advisor acting for you on your conveyancing, or your mortgage broker in relation to applying for the loan.  In short, when appointing a professional advisor to act on a Help to Buy equity loan matter it is their experience that counts, now more so than ever before!

For more information about the Help to Buy purchasing process, and general conveyancing process, please take a look at the links below for useful information on timescales, what information you will need to provide, and more:

• Guide for HTB buyers
• Specialist New Build Solicitors
• Conveyancing Process video

When purchasing a shared ownership property (or any property for that matter), you will need to instruct a solicitor to act on your behalf.  It is worth getting a few quotations from different firms for a comparison of costs, but it is important to look beyond the “headline fee” to find out what each solicitor is actually charging for their services. 

What fees should you expect in your quotation?

Legal Fees – this is the fee the solicitor charges for their services. This can differ depending on the purchase price of the property and whether it is leasehold or freehold. A leasehold purchase tends to be charged more as there is more work involved.

Bank Transfer fees – this is a fee for organising the bank transfer of the purchase monies to the seller.

Preparing Stamp Duty Land Tax (SDLT) form – HMRC must be notified about property transactions on a Stamp Duty Land Tax (SDLT) return. This must be within 14 days of the date you complete your purchase, even if you do not owe any tax.  Your solicitor will do this on your behalf and charge a fee for doing so.

Mortgage lender fee – This is the fee a solicitor charges for acting for the mortgage lender.

These are all fees charged by solicitors for various aspects of the work they do for you. Most firms charge for the above items, but the amounts vary from firm to firm, resulting in very different final charges.

Some firms charge other fees for dealing with other aspects and some of the fees charged by a firm of solicitors may not be immediately obvious from their quotation and may be contained in their Terms of Service, so make sure that you get a copy of these before deciding who to instruct.

What about “disbursements”? 

These are expenses payable to third parties as part of the conveyancing transaction. They are paid via your solicitor to the third party; however, they can still vary from firm to firm.

Bankruptcy search fee – this costs £2 per name searched and should be the same irrespective of which firm you instruct.

HM Land Registry Search fee –This is another low-cost search and irrespective of which firm you instruct, the fee payable to the Land Registry will be the same.

Search fees – There are also searches that the solicitor needs to do as part of the conveyancing process, such as local search, flood search, water and drainage search, environmental search and chancel repair search. Depending on which provider a solicitor uses and which searches they choose to do, the amount quoted may vary from firm to firm. The searches are sometimes supplied by the Housing Association’s (HA’s) solicitors at a minimal cost if buying a new build property.

Land Registry registration fee – This is a fee for the registration of your title to the property.  There is a prescribed fee scale, based on the purchase price of the share, plus rent. Irrespective of which firm you instruct, the fee payable to the Land Registry will be the same.

Stamp Duty Land Tax – as this is a tax there is no flexibility here and the rules are the same irrespective of which firm does the conveyancing. The amount is calculated based on factors such as the price of the property, the share being purchased, and whether you are a first-time buyer.

Finally, there are some other things which a buyer of a new build shared ownership property ought to budget for:

1. It is standard practice for the HA’s solicitors to charge certain fees to the buyer. These vary depending on which firm of solicitors the HA uses and at the time of contacting a prospective solicitor for a quotation they will not know the level of those fees.
2. It is possible that there may be further fees payable to a superior landlord or managing agent.
3. HAs generally ask buyers to pay on completion the rent and service charge up to the end of the month of completion and for the whole of the following month. This could amount to paying nearly two months up front if you complete at the beginning of the month.

These expenses will be the same irrespective of which firm of solicitors the buyer instructs as their solicitor has no means of influencing them whatsoever, however many firms fail to mention these items in their quotation and so these costs can come as a nasty surprise.

In conclusion, when looking at quotations, it is important to make sure you read the quote carefully and don’t be afraid to seek clarification.  Be careful of cheap headline fees because often they aren’t as economical as they seem.  There is lots of legal jargon used by solicitors and quotations are often presented in a confusing way with lots of hidden charges.

Although this article focuses on fees, it is worth noting that price is only one factor. Buyers should also consider experience, expertise, recommendation and customer service when choosing their solicitor.