Buying a dwindling asset
Q. Two years ago we replied to an advertisement claiming that we could buy a two-bedroom property for £155,000 instead of £183,000, its real value, if we bought off plan. We paid a 5% deposit and a £4,500 finder’s fee. Now the property is valued at no more than £160,000. The construction itself is at least three months behind schedule and we want to pull out, but we have been told we may be sued for a further 5% or even forced to complete. Is any of this legal?
A. It depends what your contract says, and whether misrepresentation was involved. Property values have dipped recently, but it’s possible that the property you contracted to buy was indeed worth £183,000 at one stage. Anyone purchasing property takes this gamble. It’s unlikely that the contract will contain a release clause in the event of a downturn in the market. There should however be penalty clauses for the developer as regards construction delays. Hopefully your own solicitor checked the contract before you signed it. You should take his advice in this situation.

Tax avoidance
Q. I am a widow and own two properties. If I transfer my house into my daughter’s name and another property I own into my son’s name, would this enable them to avoid the 40 per cent inheritance tax and pay a lesser “lifetime” tax instead?
A. Anything you leave above £300,000 (£600,000 if on your husband’s death all his estate passed to you with the benefit of spouse exemption) is taxed at 40 per cent. If you give away the house you are not living in and survive for seven years after making that gift, no inheritance tax will be payable in respect of the value of the second home. However you are likely to be liable to pay capital gains tax on the transfer of your second home if you give it away before you die. If you continue to live in your main home after giving that away it will be regarded as a gift “with reservation” and will still be subject to IHT on your death. The “lifetime” tax you mention is associated with trusts. See a solicitor specialising in tax and trusts to discuss your plans – including the subject of where you are to live if you give your home away!

No turning back
Q. We have also been caught by the clause in an estate agent’s contract which says they get paid even if the house isn’t sold (“Contracts to Avoid” 5th Dec). After two-and-a-half years on the market and a price reduction we finally got a buyer. But we are unable to find a house to purchase because prices have gone up so much. However we have been told it will cost us £1400 to pull out of the sale. When we signed up with the agents we were told it was a standard “No Sale, No Fee” contract and didn’t have time to read it.
A. If the estate agents insisted you sign up there and then without having an opportunity to read the contract they may not be able to enforce the clause demanding payment where they have found a “ready willing and able” purchaser. If you have really decided that you can’t afford to move you should discuss this with a solicitor. Since what you were told at the time of signing appears to have been a misrepresentation it could potentially make the contract void.

Close neighbours
Q. We’ve received a letter from the council about an application for planning permission to build a block of flats next door to our house. But they’ve already started building work, and attached the front facing wall directly to our property. I’m not sure they actually have the legal right to do this. What should we do?
A. See a solicitor immediately! If they don’t have the right to build on to your property it will be better to stop the work going ahead at an early stage than to try to get the builders to rectify matters later. You may need to take out an injunction to prevent damage to your property. If your house is registered at the Land Registry your solicitor will be able to look at your title deeds online to discover why the builders think they may have the right to encroach on your land. The planning permission issue is separate, but you should discuss what’s going on with the planning officers.

So much to give
Q. The value of my estate at the date of my death is likely to exceed the inheritance tax threshold. To keep my estate below the threshold, I would like to pass on some money now to my children. Are there any limits to the amount I can give, and am I right in assuming that the £3,000 limit only applies to those at, or near, the inheritance tax threshold?
A. With the rapid rise in the value of property, more people than ever are likely to find their estates crossing the inheritance tax threshold. There’s no limit to how much you can give away, but if you give more than the £3,000 annual allowance and then die within seven years, any amount you gift over the “nil rate band” threshold, (currently £300,000) will get taxed on your death at 40%, subject to the application of taper relief if you die more than 3 years after you have made the gift. As you may be aware, an unused annual allowance can be rolled over for one year, and gifts out of income can also be made free of IHT if they can be treated as normal expenditure. In addition to the annual exemption, gifts in any one tax year of less than £250 to any one person are exempt, as are some gifts to couples getting married.