Financial advisers are warning their clients to expect additional legal fees when making property purchases through the Lifetime Isa.
Ahead of the new Isa’s April launch, advisers expect property lawyers to introduce a Lisa-specific fee to cover the extra administrative burden which comes with the product.
On top of the usual legal processes which come with a property completion, solicitors will have to prove that any Lisa savings are being used as a deposit on a home, and that the client is a first-time buyer.
This could add several hours onto the average legal bill, resulting in a fee that could be several hundred pounds.
“I know one solicitor who is quoting £100 to cover the cost of the dealing with the Lisa,” said Bob Riach, independent financial adviser and principal at Riach Financial.
“That’s something you don’t think about – the government is bringing these things out but someone else has to do all the work.”
The Lifetime Isa will be available from 6 April, although only two providers – The Share Centre and Hargreaves Lansdown - have stated that they are prepared to offer it from that date.
The tax-free savings scheme allows 18-40 year-olds to take advantage of a 25 per cent government bonus on investments up to the value of £4,000 per year.
However, the funds can only be used towards the deposit on the saver’s first home or towards their pension pot.
Mike Wragg, a senior associate at law firm BP Collins, estimated that solicitors could charge upwards of £200 to cover Lisa administration, but added that his firm would not be adding extra fees.
“It is almost certainly going to result in extra work,” he said. “It really is going to break down to extra form filling, checking facts, and going through all the paperwork.
“The government has put no standardised procedure in place.”
Wragg added that while it won’t be difficult to prove that the Lisa money is going to be applied towards the property, it may be harder to show that the client is a first-time buyer.
“Although we have the Land Registry, I can’t find out how many properties a person owns,” he said.
“The way it works is with a declaration for official purposes. And I’d also be asking them to sign a declaration to me that they are first-time buyers, and that they don’t own any share in any property anywhere in the world.
“You would assume that the government will have something in place, but the system isn’t set up to know for sure.”