Any legal experts out there? I have a land registry query ...

[StrangewaysHereICome]

We are part exchanging our house for a new build. The builder as completed the TP1 form stating we are receiving x amount for our house in panel 9. Our solicitor says this is wrong as it is a part exchange so we will not actually be receiving x amount. We are getting that reduction off the new house and paying the difference. We are now at stalemate with neither budging. We are meant to be exchanging and completing tomorrow and my stress levels are through the roof.

So who is right? Our solicitor thinks the builders approach is at best illegal and at worst fraudulent. However the builder who does hundreds of part exchanges says this is the way they do it and they are not budging. Meanwhile we are stuck in the middle

I am a commercial property lawyer so do not do part exchanges so not sure of what happens ordinarily but the Land Registry guidance should clear it up as follows:

"3 Exchanges

If the transfer is an exchange, you must use a separate form of transfer for each part of the exchange. Complete the receipt and additional provisions panels as follows.

If the transferee is paying equality money, select the third alternative in the receipt panel and enter the desired receipt, for example: ?The transferor has received from the transferee equality money of...?.

If the transferee is not paying equality money, ignore the receipt panel.

Enter in the ?additional provisions? panel: ?This transfer is made in consideration of a transfer (or conveyance, or as appropriate) dated today, [if applicable and of the sum stated above paid for equality of exchange]?.

Please note that stamp duty land tax will normally be payable on the market value of each property acquired in the exchange (unless there is a relief) and you must submit a land transaction return to Her Majesty?s Revenue & Customs (HMRC)."

It is important is that both parties pay the requisite SDLT on the purchase. I am sure there is a box on the SDLT 1 form which deals with exchanges.

PS My interpretation of this is that I think the builder is right. Let's suggest your current house is £100k and the new is £300k.

On the transfer of your current house panel 9 should state that you receive £100k.

On the transfer of the new house panel 9 should state they receive £200,000 plus the transfer of your old house.

The Completion Statement deals with the money movement, so although the price is £300k, you only send them £200k on completion, the remaining £100k being paid by the "transfer" of the current house.

So in reality you do not actually hold the £100k at any point but this is the consideration for your old house as reflected in the TR1s.

Hope this makes sense.

Thank you Spotty I could kiss you!! I had read the land registry guidance but my poor sleep deprived brain couldn't make sense of it in our situation. Now I think I've got it. So as long as the transfer on the new house mentions the exchange amount on our old house it's all in order? And the completion statement will set out the details of the transaction. Consideration doesn't actually mean money as such, but the value of our old house.

Thank you

Ha ha, it is complicated.

Consideration is the money or money's worth being paid.

You do not actually receive £100k in your hand because you immediately use it to pay part of the for the new house. You pay £200k for the new and hand over your house (so the TR1 for the new house is £200k plus the money's worth, the old house).

The transfers happen simultaneously in real life but at law the transfer of your old house happens a scintilla of a second before the transfer of the new as that facilitates the purchase, forming part of the consideration.

Presumably you have a contract which states that the acquisition of the new is conditional upon the sale of the old house, ie so you cannot be left obliged to buy the new house without the Builder coming good on its part of the deal.

I know in layman's terms you have had the price of the new "reduced" but this is how it should work to my mind.

So...
Old house TR1 £100k

New house TR1 should have £200,000 as the money handed over plus reference to the transfer of the old house to the value of £100,000 in panel 12.

Ah well we have had some issues with the contracts. The builder did have the ability to rescind on the purchase of our house without penalty we would have still been tied in to buy the new one as they are using 2 contracts. We have decided to exchange and complete on the same day to reduce the risk. Our solicitor has worked very hard on making the contracts more equal and this land registry is the last hurdle.

Thanks again.

That makes sense, no wriggling out of it that way.

Good luck with it all!