The RICS has recently proposed changes to the UK's stamp duty land tax, writes Kim Franklin. Jeremy Leaf, the chairman of its residential faculty, describes the structure of stamp duty as 'antique'.
He says the tax, which is levied on a 'slab' basis calculated with reference to the value of the property, urgently needs to catch up with house prices.
Under the current structure purchasers of property between £120,000 and £250,000 pay 1 per cent of the value of the property in stamp duty. For property between £250,000 and £500,000 it is 3 per cent, and for property over £500,000 it's 4 per cent. The RICS points out that as the average UK house price is £185,788, the upfront costs to rst-time buyers are keeping many of them in the rental market.
The RICS proposes that the 0 per cent band should be raised to £150,000 and that a marginal rate of 5.5 per cent be applied thereafter.
The current rate of stamp duty on houses over £500,000 has had an unexpected effect at the other end of the market.
The increase in house prices has resulted in a large number of people owning houses worth over £500,000. In London, family homes routinely cost more than £1 million, 4 per cent of which is, of course, a tidy sum. When faced with the need for more space, many are deterred from moving by the prospect of handing a large chunk of their savings over to the Treasury. Instead they stay put and use the money to fund house improvements, extensions and - particular favourites - loft conversions. The upshot is that the few family homes coming on the market are snapped up at overheated prices - and that business is booming for loft companies.
But before you rush to snub the Treasury and move into your loft, you might want to consider the case of Munt v Beasley (Judgment 04.04.06) and be sure that you own it first. Mr Beasley, who owned a two-storey house on the Isle of Wight, converted it into two separate self-contained flats and granted a long lease on the first-floor at which was sold, ultimately, to Mr Munt.
Unfortunately, the lease mentioned nothing about the loft. Upon moving in, Munt installed a velux rooflight and decking to the loft floor. When Beasley finally objected, Munt carried on with his plans for the loft and Beasley took Munt to court.
The Court of Appeal recognised that this apparently simple case raised numerous complex legal arguments as to what the lease meant, whether Beasley had in fact consented to the works or had stood by for too long before objecting, and whether Munt's actions amounted to trespass.
Ultimately the court held that the lease ought sensibly to have included the loft space and that as Beasley had known about the works from the outset he ought to have objected at the time. So Munt was entitled to treat the lease as if it included the loft. But he would have saved himself a lot of trouble if he had found that out first.
Kim Franklin is a barrister and chartered arbitrator at Crown Office Chambers in London. Visit www.crownofficechambers. com