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Regulation & Law

Dangers of giving ‘advice’ on stamp duty revealed in £30,000 mortgage case

Couple who were told they would not be liable for the extra 3% stamp duty on second homes during mortgage application win compensation from broker.

Nigel Lewis

stamp duty

A mortgage broker has been told to repay £30,000 to a couple who relied on it for advice on stamp duty after they were landed with an unexpected tax bill following a house purchase.

The decision by the Financial Ombudsman Service (FOS) is a severe warning to estate agents who also operate mortgage brokerages; the unnamed couple argued successfully that they were entitled to take the guidance they received from broker Advanced Mortgage Funding as advice.

The case hinged on whether Advance was giving advice or merely ‘passing on information’ and the broker unsuccessfully argued that it was the couple’s solicitor who should have alerted them to the likely extra duty.

Compensation

Because the advice from Advanced proved to be incorrect, the FOS therefore concluded at a hearing that the couple were owed compensation.

The two men both owned properties individually but decided to sell one of them to enable the purchase of a new home via a new joint mortgage.

Guidance received via email from Advanced about the deal confirmed that if they bought the new property, they would not be liable for the 3% additional stamp duty on a ‘second home’, provided it was made clear that their current home, where they both lived, was their ‘main residence’ prior to buying the new property.

The deal went ahead and the pair bought the property with a mortgage of £610,000, only to discover once they had exchanged contracts that the extra stamp duty would be due.

They then had to find the extra £30,000 and paid for it by increasing their mortgage, which attracted a higher rate of interest.

August 7, 2019

2 comments

  1. Dear me, so don’t read the fee and transaction summary from the solicitor then! Every quote I’ve seen has the total cost including stamp duty in the breakdown before you even instruct them. Can’t say I’m a fan of brokers, but come on, who buys a house and doesn’t check the stamp duty?, especially as they questioned it themselves to start with.

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