If you buy a house, who owns it between exchanging contracts and completion (that’s when you get the keys)?

Imagine you picked up the keys to your property (on completion) only to find someone had broken in, trashed the place and stolen the radiators, copper piping, etc. causing a leak!

You do not legally own a property until completion (this is when the rights of ownership are formally transferred or conveyed to you the purchaser).  When contracts are exchanged, the parties are legally committed and the completion date is fixed. 
 
It should be noted though that responsibility for the property is typically transferred to the buyer from the date of exchange of contracts, since this is presumed to be a binding commitment to proceed to completion. It is for this reason that the purchaser is best advised to make certain that buildings insurance cover starts from the date of exchange of contracts.

However, for new build properties it is usual for the developer to maintain the insurance up to the date of completion; so in this instant you only need to insure the property from the completion date.
Should the situation above arise the purchaser would still be expected to complete and would have to progress a claim with their insurance company.   In practice though, the seller is unlikely to have cancelled their buildings insurance and so all parties would likely need to submit joint claims and it's probable that the insurers would settle the liability between them.

Unfortunately, if you do not arrange buildings insurance cover effective as from exchange of contracts and the damage to the property occurred after exchange, subject to checking the seller's buildings insurance cover, the purchaser may well have no option but to dig into their pocket to pay for works needed to rectify the damage.

Please note The Will Centre does not offer a conveyancing service but we can recommend someone who does.

Business Relief for Inheritance Tax

1. Overview

Business Relief reduces the value of a business or its assets when working out how much Inheritance Tax (IHT) has to be paid.

Any ownership of a business, or share of a business, is included in the estate for IHT purposes.
You can get Business Relief of either 50% or 100% on some of an estate’s business assets, which can be passed on:

• while the owner is still alive
• as part of the will

How to claim relief

As the executor of the will or administrator of the estate, you can claim Business Relief when you’re valuing the estate.

You must use the market value of the business or asset when calculating relief at 50%.

You can claim relief on:

• property and buildings
• unlisted shares
• machinery

2. What qualifies for Business Relief

You can get 100% Business Relief on:

• a business or interest in a business
• shares in an unlisted company

You can get 50% Business Relief on:

• shares controlling more than 50% of the voting rights in a listed company
• land, buildings or machinery owned by the deceased and used in a business they were a partner in or controlled
• land, buildings or machinery used in the business and held in a trust that it has the right to benefit from

You can only get relief if the deceased owned the business or asset for at least 2 years before they died.

What doesn’t qualify for Business Relief

You can’t claim Business Relief if the company:

• mainly deals with securities, stocks or shares, land or buildings, or in making or holding investments
• is a not-for-profit organisation
• is being sold, unless the sale is to a company that will carry on the business and the estate will be paid mainly in shares of that company
• is being wound up, unless this is part of a process to allow the business of the company to carry on

You can’t claim Business Relief on an asset if it:

• also qualifies for Agricultural Relief
• wasn’t used mainly for business in the 2 years before it was either passed on as a gift or as part of the will
• isn’t needed for future use in the business

If part of a non-qualifying asset is used in the business, that part might qualify for Business Relief. 

Example If you use one room in a building as a shop and the other rooms are used as your home, the shop will qualify for Business Relief but the rooms won’t.

Relief for agricultural property

You may be able to get Business Relief on a transfer of agricultural property (e.g. farmland, buildings or farm equipment) which isn’t eligible for agricultural relief.

3. Give away business property or assets

Someone can give away business property or assets while they’re still alive and the estate can still get Business Relief on IHT, as long as the property or assets qualify.

How to get Business Relief on a gift

If someone gives away business property or assets, the recipient must keep them as a going concern until the death of the donor if they want to keep the relief.

They can:

• replace the property or assets - like machinery - with something of equal value if it’s for use in the business
• only get relief if the donor owned the business or asset for at least 2 years before the date it was given 

When is a gift no longer liable for Inheritance Tax

Any gift made more than 7 years before the donor’s death doesn’t count towards their estate for IHT purposes.

If you need further advice or help on this please call us on 01752 607040 or email us at facebook@thewillcentre.com

The Cohabitation Rights Bill

The concept of ‘Common Law’ marriage is a myth.  If you are not legally married or in a registered civil partnership then your rights of inheritance are limited or nonexistent.

In terms of inheritance you need to make a Will to protect your partner should you die whilst unmarried.  Call us on 01752 607040 for further advice.

There are plans to address this situation with The Cohabitation Rights Bill (the “Bill”), which aims to establish a framework of rights and responsibilities and provide basic protections for cohabitees similar to those available to married couples.

1.       What if you have chosen not to marry because you do not want the rights and responsibilities that come with being a spouse?

2.       What if you have deliberately sought to avoid the paperwork, the jewellery and the general fuss of divorce should you decide to separate?

A proposed new The Cohabitation Rights Bill decides that the default position is couples are automatically opted in and so should you wish to exclude yourself from the framework of the Bill you must expressly opt out of it.  Although the Bill is currently at Committee Stage and not yet on the statute book, the proposed legislation gives cohabitees three ways to opt out as follows:

By entering into a…

Opt-out agreement - there are a number of formalities required, not dissimilar from those which apply to Qualifying Nuptial Agreements (the Government’s vision for an all-English enforceable pre-nup). Both parties must have received independent and separate legal advice and understand the operation and consequences of entering into an opt-out agreement; i.e. that a Financial Settlement Order (“FSO”) will not be available to them on the breakdown of their relationship. The parties can agree that an FSO will not be available under any circumstances or they can apply their agreement to certain assets or situations only, such as a FSO not being available in respect of the parties’ home, or a FSO being available only if the parties have a child together. This certainly seems like a flexible and user-friendly solution. However, opt-out agreements can be varied or revoked by the court, although only in circumstances where the court views such an agreement as manifestly unfair to the applicant due to the circumstances in which it was entered into or an unforeseen change in circumstances.

Cohabitation agreement - these are a helpful and flexible method of recording a parties’ intentions about the way they will organise their affairs whilst they are a couple and/or when they separate. Litigation brought to investigate parties’ intentions about the legal and beneficial ownership of their property can be long-running and expensive and to have intentions set out expressly in an agreement can save time, money and heartache on separation. A cohabitation agreement may also provide for one party to pay maintenance to the other party upon a breakdown of the relationship, something which is not currently available to unmarried couples.

Deed of trust - a deed of trust can be used to show who has a legal and/or beneficial interest in a particular asset or property. Trust deeds were historically the main and most popular source of protection for cohabiting couples wishing to protect their interest in a property where they were both living. Where beneficial interests are not clearly and plainly set out in a trust deed, difficulties can arise and the courts are often called upon to infer the parties’ intentions and construct or imply trusts where no formal deed was entered into, often years after those intentions were formed, which can lead to great uncertainty of outcome.

Under the proposed legislation, the court may vary or revoke a cohabitation agreement or deed of trust “in such circumstances and to such extent as the court considers appropriate”. Although there are no formalities or requirements to be fulfilled in entering these latter two types of agreement, it may be wise to follow the formalities set out in respect of opt-out agreements to secure the best chance of the agreement being enforced and avoiding a variation or revocation by the court.

The Cohabitation Rights Bill is currently at the Committee Stage and is not yet law in force in England and Wales.

Divorce, the Final Frontier?

Obtaining a divorce does not have to be a complex process; the process is laid out below.  But remember, that divorce DOES NOT invalidate any Will you have made.  Certain parts may no longer be valid but the rest of the Will still stands!  If you want advice on the effect a divorce or separation has on your Will, or if you don’t have one then please contact us on 01752 607040 for a FREE Review at our office in Stoke Village.

The advice below is general; this is NOT a service we offer at The Will Centre.

If you need a referral to a divorce expert please let us know.

Q. When can I start divorce proceedings?

A. Divorce proceedings cannot be commenced until you have been married for at least a year.

Q. How is the divorce process started?

A. The person wishing to begin the divorce proceedings must file an application at Court known as a ‘petition’. The person who files the petition is referred to as the Petitioner, and the person who receives the petition is referred to as the Respondent.

Q. What are the grounds I can use to get a divorce?

A. There is only one ground for divorce and that is the irretrievable breakdown of the marriage.

The fact that the marriage has irretrievably broken down is evidenced in the petition by citing one of five possible facts:-

• Adultery


• Unreasonable behaviour


• Two year separation with mutual consent


• Desertion by your spouse


• Five years’ separation whether or not your spouse consents

Q. Should I be the Petitioner or the Respondent?

A. A divorce petition is often seen as a means to an end and in some circumstances it can be politic to agree to be the Respondent, rather than to commence the proceedings (i.e. be the Petitioner).

However, generally, it is preferable to be the Petitioner for several reasons. Firstly, it gives you more control over the timetable of the divorce itself. Also the Petitioner may obtain an order for costs against the Respondent on the two fault-based petitions namely adultery or unreasonable behaviour.

It is possible for the parties to determine who is to issue the petition in advance by providing for this in either a Pre-nuptial or Post-nuptial Agreement. For further information please see our Briefing Note on Pre-nuptial Agreements.

Q. How long will a divorce this take?

A. Anywhere between three to six months to obtain a divorce if there are no delays; longer if the financial arrangements are not finalized within this timeframe.

Q. Are divorce proceedings defended these days?

A. Not usually these days.  The Respondent has to argue either that the marriage has not irretrievably broken down and/or refute the particulars on which the Petition is based. 

A Respondent who accepts that the marriage has broken down may still choose to defend the petition and file their own petition (technically referred to as a cross petition) setting out his or her grounds for the breakdown of the marriage.  This will increase the costs of the divorce considerably for both parties but can, on occasion, be appropriate. It is also sometimes possible to agree that the Decree should be pronounced on both petitions, called cross Decrees.

Q, What is the Procedure?

A. The procedure is as follows:

1.     Lodging the Petition

2.     Service of the Petition

3.     Applying for Decree Nisi

4.     Filing Documents at Court

5.     Decree Nisi (does not end the marriage)

6.     Application for Decree Absolute (ends the marriage)

Six weeks and one day after the Decree Nisi is pronounced, the Petitioner can apply for the Decree Absolute. It is only when you receive this Decree, that you are finally divorced.

Q. I’ve heard of something called a ‘Judicial Separation’; what is that?

A. It is possible to start judicial separation proceedings, or nullity proceedings, if you have been married for less than a year (or later if appropriate).  Judicial separation proceedings will not terminate the marriage and you would not be free to re-marry at the conclusion of the proceedings. This is usually most appropriate for people who have religious objections to a divorce.