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  • Property-a-holics

    Compulsory Purchase Query

    Hi

    If a  property is compulsory purchased will the purchaser compensate specifically as a matter of course / law  the early repayment charge ( ERC ) on any mortgage outstanding ?  I am aware they will compensate on many other fees/costs aspects but am unsure on the ERC itself . My suspicion is they will.

    These ERC`s could be quite hefty in some cases. The answer to this question would have a bearing maybe on someone who was pondering on the pros and cons of  whether or not to take  out a 2 / 5 /10 year fixed mortgage if they were aware that a property may be in line for a compulsory purchase a few years down the line

    Thank you

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    Jonathan Clarke. http://www.buytoletmk.com

    About 10 years ago i went through the process and the law said at the time "you must not be left in a worse or better position". We had around 5 property's that came under the CPO, we received reasonable money for them, they also paid cost involved such as finding an alternative investment, ERC on the original mortgage, application fees for the new mortgage.

    As we provided carpets and blinds they also covered this cost. I think our claim was for around £80,000 on the 5 houses. This was questioned and we backed it up with paperwork and it was paid.

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    [Image: New-logo2.png] Manchester based investor. I buy, sell, renovate and rent investment property in East/North Manchester Wink email: mike@brentwoodinvestments.co.uk Call: 0161 681 3724


    Thanks Michael that`s helpful

    I may have quite a few as well coming under a CPO so glad they covered all you listed.

    One more thing which occurs to me .

    If they do say 5 at once then i will only get 1 lot of CGT allowance  in that year

    So  I would lose out 23,400 cgt allowance x 4 as a direct result of the CPO

    So my cgt tax bill @ 28% would be and extra 6552 x 4 = 26,208 if my calculations are correct

    Was  your cgt position affected adversely at the time as well ?

    And if so did you consider claiming for that loss adjustment as well?

    As in an ideal world i may have wanted to sell  1 a year to take full advantage of the cgt allowance so by that reasoning I could demonstrate that the CPO x 5 has left me in a worse off position having now to sell all in one tax year rather than over a 5 year time span

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    Jonathan Clarke. http://www.buytoletmk.com


    I guess if the rationale is to leave former owner in a neutral financial position - then the CGT issue would also be relevant - as well as SDLT surcharge on replacement properties.

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    You could have a look at https://www.gov.uk/government/publication...heet/acssc. If you replace the property with another BTL, then you probably won't pay CGT. I would expect if you don't take advantage of this then you won't be able to charge for a property sourcer. I would also expect you to not to be able to charge for your time if you source properties yourself (unless the properties are in a limited company - courts tend to value your time at £0.

    Also, parts of your compensation are taxed in different ways so you will need to take account of this.

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    Thanks for your replies

    It gets more complex the more you get into it . I got some reading to do 

    Some stuff will be seen as me trying to have two bites at the cherry i suspect

    I guess I will claim for everything I can think of then they will try to negotiate me downwards .

    If I get around 80% of the total claim I will most likely settle at that figure

    Thank you


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    Jonathan Clarke. http://www.buytoletmk.com

    Jonathon, From what i remember there were no tax implications for me as they were held in a Ltd Company

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    [Image: New-logo2.png] Manchester based investor. I buy, sell, renovate and rent investment property in East/North Manchester Wink email: mike@brentwoodinvestments.co.uk Call: 0161 681 3724