Property knowledge, Property in UK
Things about buying a house in the UK

Things about buying a house in the UK

One of the most frustrating parts of buying a house in the UK is to provide proof of the legitimacy of the source of funds. Today we are going to give you a look at how individual overseas buyers should prepare the proof of the source of funds needed to buy a house.  

 After the policy was implemented, the cost of buying a home in London, with an additional 2 percent stamp duty, reached nearly 15 percent, higher than Paris and Los Angeles, and still ranked behind Hong Kong, Singapore, Tokyo and Sydney  

 Black money?  How to do?  

In recent years, the tightening of foreign exchange controls has been a real annoyance to overseas investors, even daunting.  As for laws and regulations, it is not only the issue of domestic foreign exchange purchase, but also the mature property and capital laws in the UK that need to be observed.  One of them is the AML (Anti-Money Laundering) Act.  

To put it simply, because the British property market is open to the world and is therefore a hot spot for money laundering, the UK has introduced relevant laws requiring buyers to submit a series of information about their identity and the source of funds before buying a house to ensure that buyers are not using black money to buy London property.  

Here are a few key points to know about the law:  

There is no uniform standard for material review, only guidance and recommendations and routine practices that is the root of all evil.  Therefore, it will lead to different operating standards in the industry, and a small number of peers with weak risk awareness take risks.  The UK has a broad definition of black money, which is a little different from China. For example, if you fail to pay personal income tax on time while working legally, your income will be regarded as black money without proof of funds.  

 Many buyers don't mind providing materials, but just tell me once and for all what they want, not just this and that.  It is painful that lawyers are constrained from giving standard answers in black and white, such as "everything is fine as long as XXX is satisfied" instructions, and must make independent assessments based on the material presented in each case.  

 The worst result of investing is not losing money, but breaking the law...  Of all the criminal possibilities involved in buying a house or helping someone buy a house, the consequences of violating money laundering laws are the most serious and carry criminal risk.  

 In fact, apart from the extreme cases of breaking the law, sometimes people encounter AML problems mainly because of the source of foreign exchange.  

The annual purchase of foreign exchange per person in China is limited. For ordinary families, some people will choose to "ant move", that is, to move heads.  However, the remittance method of "ant moving" itself is very easy to be suspected of money laundering.  Want to move, legal and reasonable move, move pair of home just go, the most appropriate is period room, longer-term house property.  Note the following:  

Immediate family is the most reasonable, but it needs to be justified.  Overseas investment is a reason to choose carefully. If your child is studying at school or your family is away from home, you don't have to worry if the bank asks.  

 It is recommended that you inform the bank's account manager and consult before remitting to avoid unnecessary trouble.  If the amount is relatively large, you can handle the account of Hong Kong, Singapore and other financial free ports, so that you can make a one-time payment from either of these two accounts, proving that the source of funds is relatively simple.  

 If an overseas student wants to buy a house in the UK, he/she needs to show the original source of funds of the remittance from his/her parents, such as deposit certificate of his/her parents, bank statement, house sale contract, etc.  

 In fact, the anti-money Laundering law sounds serious, but it mainly targets "double DU".  No matter whether you buy a house or not, you should consider the investment of foreign exchange diversification allocation in advance. It is also suggested that you should use your quota and save it in your account for a rainy day.  Remember, the limit is only on foreign exchange purchases, not transfers.  Foreign exchange held in an account for a sufficient amount of time is treated as a deposit in the UK, especially for future housing, which is much more straightforward and easy to explain.  

 Keep in mind that as long as the income of funds is legal and compliant, it is a matter of planning and choosing legal channels.  We remind people to keep adequate proof of provenance, that is, buyers need to prove that the purchase was legally funded.  

Proof of identity/address

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Generally speaking, most UK lawyers will accept a certified copy of their passport as proof of identity for domestic buyers.  The so-called certification refers to the lawyer needs to see the original document and the holder, in the copy of the signature, and the original consistent.  Technically, this is done "face to face", but in practice online signatures via video or some software have become widely accepted.   

In the UK, proof of address means providing a utility bill or bank statement for three months with the name and address of the buyer.  

 But in practice we found that this address certificate should be one of the major problems encountered by domestic customers.  In China, the water, electricity and gas bill usually shows only the address instead of the individual's name. Moreover, most people in China use wechat or Alipay to directly pay and deduct money, and the corresponding electronic bill does not show the address.  And the general bank savings card details without address, even if you can show the address of the credit card details, often because the customer card to provide the address and the actual address is inconsistent and lead to do not meet the requirements of the proof of information   Capital source

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Generally speaking, there are several main sources of funds commonly used by domestic buyers. The legal proof of the corresponding source of funds can be prepared in the following ways:  

● Personal savings This is the simplest and most traditional way.  This case generally need to provide bank water list, need to explain the origin of the funds at the same time, such as deposits mainly wage income, you will need to pay the company a work proof, as far as possible with company letter head, indicating position, working years, income and bonus, build official seal of the company.  

For some of our clients, the purchase funds come from their own or their family's long-term savings, which may not be directly certified. For some clients who run their own companies, including their family members who also work in the company, they cannot simply and clearly explain the source of funds with salaries or dividends.  In this case, please be sure to prepare proof materials in advance under the guidance of experienced lawyers or professionals, because it takes time to prepare some documents, so the earlier you know, the better you make arrangements.   

● Proceeds from house sale  

Many overseas buyers finance their UK purchases with proceeds from the sale of their home.  In this case, it is necessary to provide the corresponding property certificate and the transaction contract when selling the house.  

● Income from investment such as stock financing  

If the funds come from sources such as stocks, rent, or other financial income, records of stock transactions or financial transactions should be provided.  The relevant certificates can be leases, certificates issued by securities markets or financial management companies, or bank account details that can reflect transactions.  

● Gift income  

Chinese buyers, especially young ones, usually get their money from their parents.  This method of funding requires the buyer's lawyer to provide donor information and related documents, such as:  

- Proof of relationship between donor and donee  

- Donor's identification document  

- Proof of the donor's valid address  

- Source of grant funds  

- Written gift letter between donor and donee (usually with template)  

- If the gift funds are from a deceased relative (estate), a will will be required  

We once met a client who asked us for advice. Her purchase money was donated by her parents. Since it is a small place, most of the funds are in the form of cash, and most of her parents' income is received in cash and deposited in the bank.  What do you do in this case?  In fact, there is a way, through the guidance and witness of our lawyers finally helped the client to solve the problem.  

Money to prove  

Proof of funds generally requires three months of bank statements for overseas accounts.  A few years ago, three months as long as there is a bank account if there is no big spending or changes in general will no longer require additional data to prove that the source of funds, but with the British capital regulation is more and more strict, no matter how long funds in the UK bank saved, lawyers and financial institutions have the right to let the buyer provide income sources and to explain the legitimacy of the source of deposit.  So again, plan early and prepare for funding and provenance.   

According to our experience, different real estate developers, transaction lawyers and financial institutions will have different requirements and reviews for certification materials, that is to say, they will deal with them on a case-by case-basis basis, which requires real estate agents and transaction lawyers to give appropriate guidance and suggestions according to buyers' own conditions.  Here we also want to remind overseas buyers for UK law don't understand, don't trust some irresponsible remarks, act up providing false materials, because if the anti-money laundering investigation materials exist in the fraud case, unfortunately, is an investigation found that it is not only losing money so simple, will face the risk of criminal.  

 In fact, it is not difficult to deal with the anti-money laundering investigation when buying a house in The UK. In this matter, the interests of clients, intermediaries and lawyers are actually the same.  To deal with the UK to buy a house requirements of the source of funds to prove that the key is to consult professional institutions as soon as possible, make a good purchase planning and relevant preparations in advance, as far as possible to avoid unnecessary trouble.