Conveyancers should be careful when providing SDLT ‘advice’

The issue

Each year hundreds of thousands of house buyers are ‘advised’ on the SDLT that they will need to pay in respect of their house purchase by their conveyancer. I have used inverted commas here because the conveyancer (often being forced by the market to offer very competitive fixed rates) does not think that they are advising at all but rather providing an ‘SDLT estimate’. The small print of any engagement letter will often clarify that no SDLT advice is being provided and it is up to the buyer to inform the conveyancer about any reliefs which are available, however, in reality, most buyers get the impression that they have been advised on SDLT.

SDLT rules have become increasingly complex in recent years and with the introduction of a 3% surcharge and a growing gap between residential rates and non-residential rates the cost of mistakes can be high.

It is against this background that a mortgage broker has been ordered to compensate clients for providing incorrect SDLT information.


The case of Advance Mortgage Funding (AFM)

In a Financial Ombudsman Service (FOS) decision upheld in June, the ombudsman found the clients had been reasonably entitled to take the broker’s stamp duty guidance as advice and given the advice was incorrect, the pair were owed compensation.

The clients asked the broker whether a 3% surcharge would be due on a transaction and the broker said in an email that it would not. This ‘advice’ proved incorrect and the clients ultimately had to find an extra £30,000 to fund their purchase. AFM argued that the broker was not acting as a tax adviser but just “passing on information” and didn’t uphold the complaint, suggesting it was up to the clients’ solicitor to advise them on the tax liability. However, a FOS adjudicator said the broker gave the impression he was giving advice on the stamp duty liability and, if he was not, should have made it clear and told the clients to double-check with their own solicitor. The clients were therefore awarded damages to cover the lifetime interest on the extra £25,000 that they needed to borrow along with £750 of compensation.

On a review of the case Ombudsman Jeff Parrington said, “Whatever the limits on the broker’s remit should have been…… and regardless of what areas any disclosure document said that remit did or didn’t cover………..I’m satisfied [the clients] were reasonably entitled to treat the broker’s email as advice……..There would be no reason for [the clients] to ask elsewhere for advice on stamp duty; as far as they were concerned, they’d already asked and been told what they needed to know…….In that context, I’m afraid Advance cannot evade liability for the consequences of the broker’s actions by saying [the clients] should have got the right advice from their solicitor; nor for any other reason, for that matter”.


Forbes Dawson comment

Although this is a Financial Ombudsman Service decision, I expect that this will resonate with many conveyancers. We are coming across a lot of cases where clients think that they have received SDLT advice but then the conveyancers claim no responsibility for this. We have seen cases of conveyancers wrongly stating that no ‘multiple dwelling relief’ claim should be available and then the buyer has been out of time to make a reclaim, costing up to £86,250.

Conveyancers may want to consider being much more explicit when it comes to SDLT. For example, they should specifically ask clients whether they are happy to blindly pay the maximum SDLT liability or whether they would like an SDLT review. This should help mitigate the risk of unwanted legal claims and may end up significantly decreasing the effective cost of the house for the client. Forbes Dawson is already providing this service on a regular basis to many firms of solicitors.

 

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