1 (2) Freehold Property Transactions Flashcards
What happens during ‘exchange of contracts’
fixes the completion date and gives buyer time between exchange of contracts and completion, to make final preparations, point at which parties are bound to the transaction, buyer will pay deposit at this stage to be held by solicitor until completion
What happens during ‘completion’
The bulk of the purchase money is paid to the seller and the transfer deed is completed to transfer the property to the buyer, buyer pays balance of purchase money in exchange for the keys
Pre-Contract Stage: Role of Seller’s Solicitor
submit pre-contract package of documents to buyer’s solicitor, including draft contract and evidence of the seller’s property title
Pre-Contract Stage: Role of Buyer’s Solicitor
- check documents of title to ensure (1) seller can sell (2) no encumbrances (ie third party interests), must be thorough as contracts may prohibit further queries on the title
- Carry out additional searches about boundaries, access, disputes, outgoings, and previous works (which seller is not obliged to answer but likely will)
- Carry out pre-contract searches of statutory, public and private bodies to obtain property info (most incur a fee, Solicitor must pick and choose)
What happens if there is falsification by the seller during the pre-contract stage?
The buyer can sue using the cause of action of misrepresentation
When does the ‘Pre-Completion’ stage occur?
In between exchange and completion
What happens during ‘pre-completion’
(1) Spent insuring correct money and documents will be available at completion (2) Transfer deed prepared and executed (3) Buyer’s Solicitor: carry out pre-completion searches to check that information obtained at the pre-contract stage is still valid and registration will go smoothly
Post-Completion Stage; Seller’s Solicitor
ensure mortgage paid off and removed (given undertaking)
Post-Completion Stage; Buyer’s Solicitor
ensure Stamp Duty Land Tax (England) or Land Transaction Tax (Wales) is paid on the transfer, register client as new owner and register any mortgage
What is ‘CQS’ Membership?
Membership to the law society’s Conveyancing Quality Scheme, necessary condition to be on panels of solicitors approved by mortgage lenders to act for lenders
Can a solicitor act for both a borrower and a lender? On a property transaction
Only if the risk of a conflict of interest is low: ie. no substantial negotiation (standard terms and conditions on mortgage)
When is the risk of a conflict of interest in a property transaction high?
(1) Clients do not have equal bargaining power (2) mortgage not standard mortgage of residential property (3) mortgage is standard but does not use approved certificate of title
Can solicitors act for Joint Buyers? What should they advise them of?
Usually yes: so long as they comply with 6.2 in the CoC (Confidentiality, Exceptions) (2) Prudent to advise buyers separately about holding equitable interest in the property, particularly if they aren’t married / civil partners
When can solicitors not act for joint borrowers?
Solicitor should take caution when one partner is electing to use matrimonial property as security for a loan, and non-initiating spouse pleads undue influence to try to have mortgage set aside
What are the ‘Etridge Guidelines’: what duties do they impose on the lender
Applicable when advising joint borrowers who are also spouses (undue influence), the lender should provide the solicitor with the following:
a. Purpose of loan
b. current amount of debt
c. amount of current overdraft facility
d. amount and terms of the new loan
e. copy of any written application made by the borrower for the loan
What are the ‘Etridge Guidelines’: what duties do they impose on the solicitor?
The solicitor must:
a. explain to the spouse the purpose for which the solicitor has become involved;
b. explain that the lender will rely on the solicitor’s involvement to counter any suggestion that the spouse has been unduly influenced or has not fully understood the nature of the transaction; and
c. obtain confirmation from the spouse that they wish the solicitor to act for them in the transaction, and to advise them on the legal and practical implications of the transaction.
Guidance for Solicitors in Undue Influence Situations
a. Meet spouse face to face without borrower
b. Advise in non-technical language
c. Explain documents and consequences and risks and whether transaction is in their interest
d. Emphasise their freedom of choice
e. Ask spouse whether they would like solicitor to confirm matters have been explained to them (to the lender), which must not be done until they have the requisite documents from the lender and the express consent of the spouse
DEF: Contract Races
Pre-contract package sent to multiple buyers, competing for who is ready to exchange first
Are contract races permissible?
Yes, so long as buyers understand the race is occurring, application to paragraph 1.4 CoC (solicitor must not mislead buyers)
General Rule of Undertakings
Paragraph 1.3: solicitors should perform all undertakings, and do so within an agreed timescale.
Where should solicitors provide clients with information about costs including stamp duty, land tax etc.
The letter of engagement
When does a solicitor need authority under Financial Services and Markets Act 2000?
(1) When carrying out regulated activity in relation to regulated mortgage contract
DEF: Regulated mortgage contract
A regulated mortgage contract includes one where the borrower is an individual, the lender takes a first legal charge over property in the UK and at least 40% of the property is intended for occupation by the borrower or a member of their immediate family.
