Care should be taken if discussing or corresponding in any way about Stamp Duty with buyers, following a complaint to the Financial Ombudsman about a broker who gave incorrect information.
The Financial Ombudsman has ordered Advance Mortgage Funding, which trades as Primis Mortgage Network, to compensate the buyers over the next 30 years.
They were arranging a joint mortgage on a new home. Both Mr H and Mr S already had a mortgage on their own, separate properties when they decided to buy a house together.
The purchase was to be part-funded by the sale of Mr H’s property in which the pair were living. Mr S jointly owned his property with a third party, and it was let.
The purchasers asked their Advance broker in emails whether they would have to pay the 3% surcharge on second homes, and the broker said it would not apply.
The broker said he had checked with a solicitor and the extra charge would not be due as long as it was clear that Mr S’s main residence was Mr H’s home.
The broker recommended that Mr S register on the electoral roll and amend his bank account address.
The pair then exchanged contracts in November 2017 on their new home, with a joint mortgage arranged by Advance of £610,000.
A month later, before completion, they were told by their own solicitor that they would need to pay the higher rate of Stamp Duty.
The paid had to find an extra £30,000. They cancelled a holiday and increased their mortgage to £635,000.
Their new mortgage was not just for a higher loan but at a higher interest rate.
They complained to Advance, but were told that the broker was not acting as a tax adviser and that it was up to Mr H and Mr S’s solicitor to advise them.
However a Financial Ombudsman Service adjudicator said it was reasonable for Mr H and Mr S to rely on what the broker had said, and said Advance should pay a lump sum to cover the lifetime interest on the extra £25,000 they borrowed, plus £750 compensation.
The award was based on a 30-year loan, with rates set at 1.99% for the first five years and then 2%.
The adjudicator said that the broker “gave the impression he was giving advice on Stamp Duty. If he wasn’t, he should have made it clear to Mr H and Mr S that they needed to double check with their solicitor”.
Advance asked for the complaint to be reviewed by an ombudsman, who has upheld the adjudicator’s findings.
The Ombudsman said: “Advance cannot evade liability for the consequence of the broker’s actions.”