1. Different Types of Transactions, Preliminary Matters (Stage 1); and Starting a Conveyancing Transaction (Stages 1 and 2)

Question 1

What is a head lease?

Answer 1

Lease granted by a freehold owner to a tenant

Question 2

What is an sublease/underlease?

Answer 2

Lease granted by a tenant to a subtenant

Question 3

What limits the length of time a sublease can be granted for?

Answer 3

It cannot exceed the length of the head lease.

If it does, it is deemed that the tenant had assigned their entire lease to the subtenant.

Question 4

In a leasehold situation, a remaining term of less than what length is usually unacceptable to a mortgage lender, and why?

Answer 4

80 years. Lifespan of a mortgagor.

Question 5

Is an absolute prohibition on assignment of a residential lease acceptable?

Answer 5

No

Question 6

What has the Solicitor to keep in mind in a joint instruction situation and after what two steps can the clients agree that only one should provide instructions going forward?

Answer 6

If the solicitor is acting for more than one seller or buyer, to prevent fraud and guard against conflicts of interest, the solicitor must ensure that they are instructed by each of the clients.

A Solcitor can take instruction from one party going forward after:

1. Initial instructions
2. Identification requirements are satisfied

Question 7

What is a declaration of a trust, and when is it recommended to enter one?

Answer 7

A document which sets out the circumstances of the purchase, the contributions, and ownership shares, recommended when buyers hold the beneficial interest as tenants in common

Question 8

In the pre-contract stage in the unregistered system, what must the seller’s solicitor do regarding the title deeds if they are held by a lender?

Answer 8

Write the the lender to obtain the deeds and give an undertaking not to part with the deeds until such time as the mortgage is paid off

Question 9

Who does the Law Society Conveyancing Protocol require to remedy pre-contract title defects?

Answer 9

The seller’s solicitor, rather than waiting for buyer to raise an inquiry

Question 10

Where there is more than one buyer or seller, what must a solicitor acting for both ensure?

Answer 10

That they are instructed by both clients

Question 11

What situation on the exam will suggest a conflict of interest?

Answer 11

The key conflict to avoid in the conveyancing transaction is acting for the seller and the buyer of the same property in the same transaction. Best practice demands that the solicitor not act for both the seller and the buyer, due to the risk of conflict and the inability of the solicitor to act in the best interests of both clients in such circumstances.

Question 12

What is required for the buyer’s solicitor to disclose information to the lender (who also becomes their client), and what must happen if this does not occur?

Answer 12

The buyer’s consent. If the buyer wishes for the solicitor to keep something from the lender, the solicitor must cease acting for the both parties.

Question 13

What are other situations you have to look out for in the exam that might give rise to a conflict of interest.

Answer 13

Conflicts might also arise if there are two sellers, two buyers, a seller and an occupier, and a buyer and a parent gifting a deposit.

Question 14

Within what time after completion must capital gains taxed be reported and paid?

Answer 14

60 days

Question 15

What type of defect/encumbrance is the seller under a duty to disclose in the contract and what on type is he not?

Answer 15

Must disclose latent defect/encumbrance
Need not disclose patent defect/encumbrance

Question 16

What is a latent defect?

Answer 16

Non-physical burden that would not be apparent from an inspection of the property, e.g., underground easement for a pipeline or restrictive covenant.

Question 17

What is a patent defect?

Answer 17

One that would be revealed by an inspection e.g. visible right of way

Question 18

What two remedies are available to the buyer where the seller breaches a duty to disclose?

Answer 18

Withdraw from contract after exchange and claim damages.

Question 19

What is the limitation of the duty to disclose latent defects and to which the principle of caveat emptor applies?

Answer 19

The duty to disclose latent defects in the contract does not extend to physical defects in the property (for example, rotted timbers within walls) due to the doctrine of ‘caveat emptor,’ which means ‘buyer beware.’ It is the buyer’s responsibility to inspect the property for physical defects.

Question 20

In what one situation will a seller actually be held liable where there is a defect which is both patent and physical?

Answer 20

Where the seller has willfully tried to obscure the defect. (Could lead to tort claim and depending on circumstances even Fraud)

Question 21

What are the three sections in the Contract Incorporating the Standard Conditions of Sale?

Answer 21

1. Particulars of sale
2. Standard conditions of sale
3. Special conditions of sale

Question 22

What is required of something agreed between buyer and seller to be legally binding?

Answer 22

It must be in the contract

Question 23

What is the default deposit under the Standard Conditions?

Answer 23

10% of the purchase price, although the parties can agree lower

Question 24

Even where the parties negotiate a lower deposit, what is the buyer liable for if they breach?

Answer 24

The full 10% deposit

Question 25

As long as the property is in England and Wales, what can the buyer do with the deposit before completion?

Answer 25

Count it towards their deposit on a new residence

Question 26

Regarding this deposit for new purchase rule, what traps should we look out for on the exam?

Answer 26

1. Non residential purchases, e.g. buy to let
2. Property outside England and Wales

Question 27

Under the Standard Conditions, how is the deposit held between exchange and completion?

Answer 27

By the seller’s solicitor as stakeholder, i.e. on behalf of buyer and seller

Question 28

Is it possible to amend the Standard Conditions to hold deposit as agent?

Answer 28

Yes, but not advisable for buyer to allow this. Holding the deposit as agent would allow the sellers solicitor to pay over the buyer’s deposit immediately after exchange of contracts.

Question 29

What three things does it mean when the Standard Conditions provide that a seller sells a property with full title guarantee?

Answer 29

Seller:

1. Is entitled to sell the property
2. Will, at their own cost, transfer this title to the buyer, and
3. Is selling the property free from all charges or encumbrances other than those disclosed in the contract

Question 30

To compare, what is a limited title guarantee?

Answer 30

Where the seller merely warrants they have not created any charges or encumbrances during their period of ownership other than those disclosed in the contract

Question 31

What is the indemnity covenant in the Standard Conditions?

Answer 31

If the contract does disclose any obligations on the buyer, the buyer agrees to carry these out and to indemnify the seller if the buyer breaches, e.g., buyer agrees to upkeep a shared fence for the benefit of the neighbour.

Question 32

Under the Standard Conditions, when does risk pass to the buyer and why?

Answer 32

On exchange, because that is when the equitable interest passes

Question 33

Do the Standard Conditions require the seller to insure the property between exchange and completion?

Answer 33

No

Question 34

Under the Standard Conditions, when will completion occur if the contract is silent?

Answer 34

20 working days after exchange

Question 35

Under the Standard Conditions, what is the cut off time by which if the buyer has not sent funds, the completion is treated as taking place the next working day?

Answer 35

2pm

Question 36

What is the consequence of the buyer not sending funds by 2pm on the day of completion?

Answer 36

They are liable to pay interest at the rate specified in the contract, even if they have already moved into the property

Question 37

When does the interest penalty for a late completion not apply?

Answer 37

When the reason for not sending the funds is because the seller has not vacated.

Question 38

When do terms in the Contract Incorporating the Standard Conditions have legal effect, and what trap should we look out for on the exam?

Answer 38

On exchange. Look out for answer choices suggesting the applicability of contract terms pre-exchange.

Question 39

What four things should the buyer’s solicitor do if they discover a defect in title?

Answer 39

1. Raise it with seller’s solicitor
2. Request seller’s solicitor provide a draft insurance policy
3. Confirm the seller will pay for this policy
4. Include this agreement as a special condition in the contract

Question 40

On the exam, what should we look for that can usually give the green light to proceeding even in spite of defects?

Answer 40

Indemnity insurance or seller indemnifying buyer

Question 41

What is required for rent review to be available?

Answer 41

Express provision must be made for it in the lease

Question 42

In a commercial situation, what will be a considered a reasonable reason for a landlord to refuse consent to assign?

Answer 42

If the landlord has reason to believe the assignee will not be able to pay through the lease term

Question 43

What is a Mandatory Energy Performance Certificate and for how long is it valid?

Answer 43

The seller of the property must provide the buyer with a valid Energy Performance Certificate (‘EPC’). An EPC contains information about a property’s energy use and typical energy costs. The ECP is valid for 10 years.

Question 44

What are the two circumstances in which a Energy Performance Certificate is not needed?

Answer 44

1. An EPC is not needed for a property that is a ‘listed building’.
2. If a seller still has a valid (less than 10-year-old) EPC for their property, they do not need to obtain a new one.