Advance Mortgage Funding has been ordered to compensate clients for providing incorrect stamp duty information that landed the pair with a tax bill £30,000 larger than anticipated.
In a Financial Ombudsman Service decision upheld in June, the ombudsman found the clients had been reasonably entitled to take the broker’s stamp duty guidance as advice and given the advice was incorrect, the pair were owed compensation.
The clients, who the Fos called Mr H and Mr S, approached Advance in 2017 to arrange a joint mortgage for them on a new home.
Both Mr H and Mr S had a mortgage on their own properties when a change in work situation meant Mr S moved in with Mr H.
Mr H and Mr S decided to buy a property together, funding the purchase by selling Mr H’s property and using equity, savings and a new joint mortgage to cover the excess.
Mr S still had his property, which he jointly owned with a third party and rented out to family members.
The ombudsman heard the pair had asked their Advance broker in emails exchanged on October 26, 2017 whether they would need to pay the higher rate of stamp duty — the 3 per cent surcharge payable on second homes — and the broker told them the extra tax would not fall due in their situation.
In his reply, the broker said he had checked with a solicitor and that the extra charge wouldn’t be due provided it was clear Mr S’ main residence was Mr H’s current home, and he recommended they put Mr S on the electoral roll and record the address for his bank account.
The pair then exchanged contracts on their new home in November 2017 after Advance arranged a mortgage of £610,000.
But in a meeting with their solicitor the following month, Mr H and Mr S — who were contractually bound to complete the purchase — were told they needed to pay the higher rate of stamp duty.
This meant Mr H and Mr S needed to find an extra £30,000 for the purchase, and the ombudsman heard the pair cancelled a holiday and increased their mortgage from £610,000 to £635,000 in order to do so.
Their new mortgage also had a higher interest rate and this, combined with the bigger loan, increased their monthly payment to a level they said they were not comfortable with.
Advance argued the broker was not acting as a tax adviser but just “passing on information” and didn’t uphold the complaint, suggesting it was up to Mr H and Mr S’ solicitor to advise them on the tax liability.
But a Fos adjudicator said the broker gave the impression he was giving advice on stamp duty liability and, if he was not, should have made it clear and told the clients to double check with their own solicitor.
Therefore the Fos adjudicator thought it was reasonable for Mr H and Mr S to rely on what the broker had said.