Skip to content

Menu

LexBlog, Inc. logo
NetworkSub-MenuBrowse by SubjectBrowse by PublisherBrowse by ChannelAbout the NetworkJoin the NetworkProductsSub-MenuProducts OverviewBlog ProBlog PlusBlog PremierMicrositeSyndication PortalsAbout UsContactSubscribeSupport
Book a Demo
Search
Close

Would you sell your own grandfather?

By Chris Somorjay & Aaron Burchell on July 6, 2016
Email this postTweet this postLike this postShare this post on LinkedIn

The dust has largely settled since the shock rise in SDLT rates on commercial property transactions announced in the Budget on 16 March.    However, the SDLT changes still possess the power to trap the unwary – especially those who sought to avoid the increases by rushing transactions through before the Chancellor’s midnight deadline.

When HMRC published the proposals on 16 March, they confirmed – as is typical in such circumstances – that “where contracts have been exchanged but transactions have not completed before 17 March” (in other words, so long as you had exchanged contracts before midnight at the end of Budget Day), you would be protected from having to pay the increased rates – even if completion only happens some time later.  Commonly this is referred to as “grandfathering”.

The devil, of course, is in the detail.  The draft Finance Bill provides for two scenarios in which a purchaser may elect that the new calculation rules do not apply:

  • Where contracts were exchanged before 17 March and the contract was also substantially performed (by the purchaser or tenant taking possession or paying over the whole, or substantially the whole, of the consideration) before that date;
  • Where contracts were exchanged before 17 March and the contract is completed on or after that date, provided that there is no “subsection 15” event – broadly, an event which results in the effect of the contract on completion being different from that envisaged when it was first entered into.

“Subsection 15” sets out three situations which will result in the new SDLT rates applying even if contracts were exchanged before 17 March 2016.  They are where:

  1. there has been a variation of the contract, or assignment of rights under the contract, on or after 17 March 2016;
  2. completion of the transaction is by the exercise of an option, pre-emption right or similar, on or after 17 March 2016;
  3. the land subject to the contract (or part of it) has been assigned or is subject to a sub-sale to another person on or after 17 March 2016, as a result of which a person other than the original purchaser or tenant becomes entitled to call for the transfer or lease.

The second of those exceptions makes it clear that there is no comfort for anyone who merely had an option or a pre-emption right prior to 17 March 2016: if you exercise any such right after Budget Day, you fall within the new rules.  The third exception is also something to be aware of, but not something one might do inadvertently.

It is the first of the exceptions where the unwary could easily fall into having to apply the new rates compulsorily.  Whether or not a contract has been varied will be a question of fact and will need to be considered in the context of each particular transaction, but there are significant grey areas.  There are many types of variation that parties might choose to make to a contract – often seemingly insignificant – perhaps even just recording them in an exchange of correspondence.  It is clear, though, that to agree any such variation without considering the potential loss of grandfathering could be a rash move.

  • Posted in:
    International, Real Estate & Construction
  • Blog:
    Keeping It Real Estate
  • Organization:
    Hogan Lovells
  • Article: View Original Source

LexBlog, Inc. logo
Facebook LinkedIn Twitter RSS
Real Lawyers
99 Park Row
  • About LexBlog
  • Careers
  • Press
  • Contact LexBlog
  • Privacy Policy
  • Editorial Policy
  • Disclaimer
  • Terms of Service
  • RSS Terms of Service
  • Products
  • Blog Pro
  • Blog Plus
  • Blog Premier
  • Microsite
  • Syndication Portals
  • LexBlog Community
  • Resource Center
  • 1-800-913-0988
  • Submit a Request
  • Support Center
  • System Status
  • Resource Center
  • Blogging 101

New to the Network

  • Tennessee Insurance Litigation Blog
  • Claims & Sustains
  • New Jersey Restraining Order Lawyers
  • New Jersey Gun Lawyers
  • Blog of Reason
Copyright © 2025, LexBlog, Inc. All Rights Reserved.
Law blog design & platform by LexBlog LexBlog Logo