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FLK 2 - Property Practice > 1. Due Diligence 1 > Flashcards

1. Due Diligence 1 Flashcards

1
Q

What are the two most common types of mortgages?

A

Repayment mortgages and interest-only mortgages.

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2
Q

How do repayment mortgages work?

A

Borrower makes monthly payments to lender, which are partly instalments of loan and partly interest.

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3
Q

How do interest-only mortgages work?

A

Borrower makes monthly payments to lender, which are only interest chargeable on the loan.

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4
Q

What are the different interest options for mortgages?

A

Interest can be at the lender’s standard variable rate (SVR), fixed, or a ‘tracker’ rate of a percentage above UK base rate.

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5
Q

What happens at the end of the agreed period for fixed/tracker interest mortgages?

A

The interest reverts to the SVR.

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6
Q

What happens at the end of the mortgage term for repayment mortgages?

A

The borrower will have paid off their debt.

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7
Q

What happens at the end of the mortgage term for interest-only mortgages?

A

The borrower will still be in debt and will have to find an alternative source of finance to pay off the loan, e.g. savings.

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8
Q

What are some other types of mortgages for those who cannot enter into agreements that charge interest?

A

Sharia compliant mortgages, where the bank buys the property and resells it to the buyer at a higher price, with the buyer repaying the excess to the bank by instalments over a period of years.

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9
Q

What is Stamp Duty Land Tax (SDLT) and who has to pay it?

A

SDLT is a tax paid by the buyer of a property in England, depending on the value of the property and if they are a first-time buyer or not.

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10
Q

What is Land Transaction Tax (LTT) and who has to pay it?

A

LTT is a tax paid by the buyer of a property in Wales, depending on the value of the property and if they are a first-time buyer or not.

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11
Q

What is Capital Gain Tax (CGT) and who has to pay it?

A

CGT is a tax paid by the seller if they make a capital gain on the sale of their property at a higher price than what they bought it for, unless this property was their only or main home/residence.

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12
Q

What tax does the landlord of a rented commercial property have to pay?

A

The landlord will have to pay Corporation Tax on the rent.

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13
Q

What is CT?

A

Capital gains tax payable on property sale.

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14
Q

What is SDLT?

A

Stamp Duty Land Tax paid on property purchase.

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15
Q

What is LTT?

A

Land Transaction Tax paid on property purchase in Wales.

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16
Q

How is SDLT paid for residential freehold property?

A

0% up to £425,000, 5% on portion from £425,001 to £625,000.

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17
Q

Who can claim relief on SDLT for residential property?

A

First-time buyers of property for £625,000 or less.

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18
Q

How is SDLT paid for non-first-time buyers?

A

Rates vary based on consideration amount.

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19
Q

What is the SDLT rate for consideration up to £250,000 for non-first-time buyers?

A

0%.

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20
Q

What is the SDLT rate for consideration exceeding £250,000 but not exceeding £925,000 for non-first-time buyers?

A

5%.

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21
Q

What is the SDLT rate for consideration exceeding £925,000 but not exceeding £1,500,000 for non-first-time buyers?

A

10%.

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22
Q

What is the SDLT rate for consideration exceeding £1,500,000 for non-first-time buyers?

A

12%.

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23
Q

How can SDLT be saved when chattels are involved in the sale?

A

Apportion part of the purchase price to the chattels.

if someone buys a furnished house, they might allocate part of the purchase price to cover the value of the furniture and appliances (the chattels), separate from the house itself.

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24
Q

What is the SDLT rate for non-residential or mixed-use freehold property?

A

Rates vary based on consideration amount.

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25
Q

What is the SDLT rate for consideration up to £150,000 for non-residential or mixed-use freehold property?

A

0%.

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26
Q

What is the SDLT rate for consideration exceeding £150,000 but not exceeding £250,000 for non-residential or mixed-use freehold property?

A

2%.

exceeding 250k is 5%

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27
Q

How is SDLT paid if VAT is charged?

A

Payable on the VAT-inclusive sum.

so regardless whether VAT is included or excluded of price SDLT is payable on full purchase price plus VAT

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28
Q

How is LTT paid for residential freehold property?

A

Rates vary based on consideration amount.

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29
Q

What is the LTT rate for consideration up to £225,000 for residential freehold property?

A

0%.

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30
Q

What is the LTT rate for consideration exceeding £225,000 but not exceeding £400,000 for residential freehold property?

A

6%.

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31
Q

What is the LTT rate for consideration exceeding £400,000 but not exceeding £750,000 for residential freehold property?

A

7.5%.

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32
Q

What is the LTT rate for consideration exceeding £750,000 but not exceeding £1,500,000 for residential freehold property?

A

10%.

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33
Q

What is the LTT rate for consideration exceeding £1,500,000 for residential freehold property?

A

12%.

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34
Q

What is the LLT rate for non-residential or mixed-use freehold property?

A

Rates vary based on consideration amount.

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35
Q

What is the LLT rate for consideration up to £225,000 for non-residential or mixed-use freehold property?

A

0%.

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36
Q

What is the LLT rate for consideration exceeding £225,000 but not exceeding £250,000 for non-residential or mixed-use freehold property?

A

1%.

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37
Q

What is the LLT rate for consideration exceeding £250,000 but not exceeding £1m for non-residential or mixed-use freehold property?

A

5%.

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38
Q

What is the LLT rate for consideration exceeding £1m for non-residential or mixed-use freehold property?

A

6%.

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39
Q

How is LLT paid if VAT is charged?

A

Payable on the VAT-inclusive sum.

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40
Q

Where is SDLT paid?

A

To HMRC.

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41
Q

How is SDLT paid?

A

Through SDLT1 Form.

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42
Q

When should SDLT be paid?

A

Within 14 days of completion.

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43
Q

What happens if SDLT is not paid within 14 days of completion?

A

Transfer will not be registered and penalties may apply.

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44
Q

What is LLT payment?

A

Payment made to the Welsh Revenue Authority.

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45
Q

When is LLT payment due?

A

Within 30 days of completion.

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46
Q

What is CGT?

A

Capital Gains Tax charged on gains made on ‘chargeable assets’.

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47
Q

What transactions are also subject to CGT?

A

Transactions incidental to the sale of land, such as modifications of an easement.

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48
Q

How are gifts treated for CGT purposes?

A

Gifts are considered as ‘disposals’ and subject to CGT.

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49
Q

How is the gain on sale calculated for CGT?

A

Gain on sale = purchase price - current sale price. If property was bought before 1982, purchase price is the base value in 1982.

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50
Q

Can expenditure on improving the property be deducted for CGT?

A

Yes, expenditure on improving the property can be deducted for CGT.

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51
Q

What is the rate at which CGT is charged?

A

The rate is set by the Government after annual exemption.

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52
Q

What is Private Residence Relief (PRR)?

A

Benefit that can be claimed by the seller of a residential property if it is their main residence and they have lived there continuously.

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53
Q

Can an individual with multiple residences choose which one qualifies for PRR?

A

Yes, if the individual has more than one residence, they can choose which one qualifies for PRR.

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54
Q

What is the exception to PRR for sellers with a large garden?

A

If the seller has a garden greater than 0.5 hectares, the gain on the excess is chargeable to CGT, unless they can demonstrate that the extra garden was necessary for the enjoyment of the house.

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55
Q

What happens if any part of the house is used for business purposes?

A

Relief will be lost for that part of the house.

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56
Q

Who else can claim PRR?

A

PRR is also available to trustees if the property is occupied by a beneficiary as their main residence.

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57
Q

Are there any allowed periods of absence for PRR?

A

Certain periods of absence are allowed, such as travel, but there are specific conditions.

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58
Q

What are the basis of charge for VAT?

A

Taxable supplies and it is an indirect tax.

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59
Q

Who charges and collects VAT?

A

Suppliers who are taxable persons and have a turnover exceeding the VAT registration limit.

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60
Q

How is VAT collected?

A

HMRC collects VAT from each supplier at the end of each VAT period through the completion of a VAT return online.

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61
Q

What is output tax?

A

VAT charged by supplier on goods and services produced.

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62
Q

How is output tax indicated on invoices?

A

Expressly stated when charging customers.

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63
Q

What is input tax?

A

VAT charged to customers of goods or services.

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64
Q

How is VAT due to HMRC calculated?

A

Output tax charged minus input tax paid.

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65
Q

What does a supplier do with the input tax paid?

A

Account it to HMRC and recover it.

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66
Q

Under what conditions is input tax recovered?

A

If it is attributable to a taxable output supply and has an immediate and direct link.

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67
Q

What are the standard, reduced, and zero-rated VAT rates?

A

Standard: 20%, Reduced: 5%, Zero-rated: 0%.

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68
Q

What is the VAT status of exempt supplies?

A

They are not VATable.

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69
Q

Are most residential transactions subject to VAT?

A

No, they do not involve the payment of VAT.

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70
Q

What is considered a new commercial property?

A

One within three years from completion of the building.

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71
Q

Are supplies of interests in commercial land or buildings exempt?

A

Yes, they are generally exempt.

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72
Q

What supplies are taxable or can be made taxable by exercising the ‘option to tax’?

A

Sale of greenfield site, supply of construction services, professional services, sale of new freehold building, grant of a lease.

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73
Q

Why would a client make an option to tax?

A

To enable recovery of input tax incurred.

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74
Q

What is the effect of exercising the option to tax for a seller of a new building?

A

They must charge the buyer VAT.

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75
Q

What is the effect of exercising the option to tax for a seller of an old building?

A

They have the choice to charge VAT.

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76
Q

Why would a seller of an old building exercise the option to tax?

A

To recover input tax incurred in relation to the building.

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77
Q

What is an EPC?

A

Energy Performance Certificate provided to buyer.

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78
Q

Who produces an EPC?

A

Accredited energy assessor.

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79
Q

When should the seller provide an EPC to the buyer?

A

Within 7 days of first marketing, within 28 days.

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80
Q

Why is it important to establish consensus between parties?

A

To avoid delay, frustration, and additional costs.

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81
Q

What are the two most common types of mortgages?

A

Repayment mortgages and interest-only mortgages.

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82
Q

How do repayment mortgages work?

A

Borrower makes monthly payments towards loan and interest.

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83
Q

How do interest-only mortgages work?

A

Borrower makes monthly payments for interest only.

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84
Q

What are the options for interest rates on mortgages?

A

Lender’s SVR, fixed rate, or tracker rate.

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85
Q

What happens at the end of a fixed/tracker rate mortgage?

A

Interest reverts to the SVR.

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86
Q

What happens at the end of a repayment mortgage?

A

Borrower has paid off their debt.

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87
Q

What happens at the end of an interest-only mortgage?

A

Borrower still owes the loan and needs alternative finance.

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88
Q

Are there other types of mortgages for those who cannot pay interest?

A

Yes, e.g. Sharia compliant mortgages.

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89
Q

What is the buyer’s responsibility in terms of taxation when purchasing a residential property?

A

Buyer may have to pay Stamp Duty Land Tax (SDLT) in England or Land Transaction Tax (LTT) in Wales.

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90
Q

What is the seller’s responsibility in terms of taxation when selling a residential property?

A

Seller may have to pay Capital Gain Tax (CGT) on any gain made from the sale, unless the property was their only or main home/residence.

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91
Q

What tax is payable on the rent of a commercial property?

A

Corporation Tax (CT) is payable on the rent of a commercial property.

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92
Q

What tax is payable if a commercial property is sold at a higher price?

A

Corporation Tax (CT) is payable on any gain made from the sale of a commercial property.

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93
Q

What is the relief available for first-time buyers of residential property in terms of SDLT?

A

First-time buyers of residential property for £625,000 or less can claim relief.

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94
Q

What is the SDLT rate for first-time buyers on the portion of the property price from £425,001 to £625,000?

A

5% SDLT.

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95
Q

What is the SDLT rate for non first-time buyers on the portion of the property price that does not exceed £250,000?

A

0% SDLT.

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96
Q

What is the SDLT rate for non first-time buyers on the portion of the property price that exceeds £250,000 but does not exceed £925,000?

A

5% SDLT.

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97
Q

What is the SDLT rate for non first-time buyers on the portion of the property price that exceeds £925,000 but does not exceed £1,500,000?

A

10% SDLT.

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98
Q

What is the SDLT rate for non first-time buyers on the remainder of the property price?

A

12% SDLT.

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99
Q

What can be done to save on SDLT when the sale involves valuable chattels?

A

Apportioning part of the purchase price to the chattels may save on SDLT.

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100
Q

What is the SDLT rate for non-residential or mixed use freehold property that does not exceed £150,000?

A

0% SDLT.

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101
Q

What is the SDLT rate for non-residential or mixed use freehold property that exceeds £150,000 but does not exceed £250,000?

A

2% SDLT.

upwards of 250 ]k is 5%

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102
Q

What is SDLT?

A

Stamp Duty Land Tax - a tax on property transactions.

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103
Q

How is SDLT paid?

A

Paid to HMRC through SDLT1 Form.

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104
Q

When should SDLT be paid?

A

Within 14 days of completion.

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105
Q

What happens if SDLT is not paid within 14 days?

A

Transfer will not be registered and penalties may apply.

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106
Q

What are the rates for LTT on residential freehold property?

A

0% for up to £225,000, 6% for £225,000 to £400,000, 7.5% for £400,000 to £750,000, 10% for £750,000 to £1,500,000, and 12% for the remainder.

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107
Q

What are the rates for LLT on non-residential or mixed-use freehold property?

A

0% for up to £225,000, 1% for £225,000 to £250,000, 5% for £250,000 to £1m, and 6% for amounts exceeding £1m.

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108
Q

What happens if VAT is charged in LLT?

A

LLT is payable on the VAT-inclusive sum.

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109
Q

Where is LLT paid?

A

Paid to the Welsh Revenue Authority.

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110
Q

When should LLT be paid?

A

Within 30 days of completion.

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111
Q

What is CGT?

A

Capital Gains Tax - a tax on gains made on chargeable assets.

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112
Q

What transactions are subject to CGT?

A

Transactions incidental to the sale of land, such as modifications of an easement.

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113
Q

How is the gain on sale calculated for CGT?

A

Purchase price minus current sale price. If property was bought before 1982, the purchase price is the base value in 1982.

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114
Q

Can expenditure on improving the property be deducted from CGT?

A

Yes.

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115
Q

What is the rate at which CGT is charged?

A

Rate set by the Government after annual exemption.

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116
Q

What is Private Residence Relief (PRR)?

A

A benefit that can be claimed by the seller of a residential property if it is their main residence and they have lived there continuously.

applies to CGT

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117
Q

Can an individual with multiple residences choose which one qualifies for PRR?

A

Yes.

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118
Q

Are gifts considered as disposals for CGT purposes?

A

Yes.

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119
Q

What are the exceptions to PRR?

A

Not specified in the notes.

THBGS TO ASK FOR PRR: riya lived in her house continuously from 2009
* She owned and/or lived in more than one house during this time
* The garden is more than 0.5 hectares
* She used any part of the house for a business use

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120
Q

What is chargeable to CGT for sellers with a garden greater than 0.5 hectares?

A

Excess garden unless necessary for house enjoyment.

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121
Q

What happens if any part of the house is used for business purposes?

A

Relief will be lost for that part.

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122
Q

Who is eligible for PRR?

A

Beneficiary occupying property as main residence.

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123
Q

Are there allowed periods of absence for PRR?

A

Yes, with specific conditions.

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124
Q

What are the conditions for VAT registration?

A

Turnover exceeding £85,000 in the past 12 months.

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125
Q

How is VAT collected?

A

By HMRC from each supplier through VAT returns.

126
Q

What is output tax?

A

VAT charged by supplier on goods and services.

127
Q

What is input tax?

A

VAT paid by customers of goods or services.

128
Q

How is VAT due to HMRC calculated?

A

Output tax charged minus input tax paid.

129
Q

When is input tax recovered?

A

If it is attributable to a taxable output supply.

130
Q

What are the rates for standard, reduced, and zero-rated supplies?

A

20%, 5%, and 0% respectively.

131
Q

Are exempt supplies VATable?

A

No, they are not VATable.

132
Q

Do most residential transactions involve VAT payment?

A

No, the vast majority do not.

133
Q

What is the basis of charge for VAT?

A

Taxable supplies charged by suppliers.

134
Q

Who can charge and collect VAT?

A

Taxable persons with turnover exceeding £85,000.

135
Q

How often is a VAT return completed?

A

At the end of each VAT period (every 3 months).

136
Q

What does the supplier account to HMRC for?

A

The value added by its business.

137
Q

What is the requirement for input tax recovery?

A

Immediate and direct link to a taxable output supply.

138
Q

What is the ‘option to tax’ for taxable supplies?

A

Allows VAT payment on normally exempt transactions.

139
Q

What is a new commercial property?

A

Within three years from completion of the building.

140
Q

Are supplies of interests in, rights or licences to occupy commercial land or buildings exempt?

A

Yes.

141
Q

Is the sale of a greenfield site exempt?

A

Yes, subject to the option to tax.

142
Q

Are construction services taxable?

A

Yes, standard rated (may be reduced).

143
Q

Are professional services provided by an architect or surveyor taxable?

A

Yes, standard rated.

144
Q

Is the sale of a new freehold building taxable?

A

Yes, standard rated.

145
Q

Is the sale of an old freehold building exempt?

A

Yes, subject to the option to tax.

146
Q

Is the grant of a lease exempt?

A

Yes, subject to the option to tax.

147
Q

Why would a client make an option to tax?

A

To charge the buyer VAT.

148
Q

What is the effect of making an option to tax for a seller of a new building?

A

Must charge the buyer VAT.

149
Q

What is the effect of making an option to tax for a seller of an old building?

A

Has the choice.

150
Q

Why would a seller of an old building exercise the option to tax?

A

To recover input tax incurred in relation to the building.

151
Q

What are some examples of input tax that can be recovered by exercising the option to tax for an old building?

A

Building work costs and professional fees incurred in renovating the building.

152
Q

What is a possible disadvantage of opting to tax the supply of an old building?

A

The seller has to charge VAT on the purchase price.

153
Q

Is it a problem if the buyer of an old building makes taxable supplies?

A

No, they can recover input tax by offsetting it against the output tax.

154
Q

What happens if the buyer of an old building cannot recover its input tax VAT?

A

The purchase price is effectively increased.

155
Q

What can VAT-sensitive buyers do if they cannot recover input tax?

A

Seek a reduction in the price or be deterred from buying the property.

sensitive buyers include bank, building society and insurance company.

156
Q

Do VAT-sensitive buyers make taxable supplies as part of their business?

A

No.

157
Q

Can VAT-sensitive buyers recover input tax?

A

No.

158
Q

What is ‘tax on tax’?

A

VAT counting as chargeable consideration for SDLT/LTT purposes.

159
Q

What types of real estate transactions are exempt from VAT?

A

Most transactions, especially residential ones.

160
Q

When is VAT compulsory on commercial properties?

A

Only on ‘new’ commercial properties.

161
Q

When is VAT not charged on ‘old’ commercial properties?

A

When the seller has an option to tax.

162
Q

When does the seller need to opt to tax for ‘old’ commercial properties?

A

If they want to recover VAT they have paid.

163
Q

Can the buyer recover VAT paid if the seller opts to tax?

A

Usually, yes.

164
Q

Can a buyer making exempt supplies recover VAT fully?

A

No, they may be unable to recover fully.

165
Q

What can a buyer making exempt supplies do to resist the seller’s option to tax?

A

Resist the option or seek a compensatory reduction in the purchase price.

166
Q

What should solicitors check during the marketing stage?

A

Agreements made and provision of an Energy Performance Certificate (EPC).

167
Q

What is an Energy Performance Certificate (EPC)?

A

A document provided by the seller, produced by an accredited energy assessor.

168
Q

When should the seller provide the EPC to the buyer?

A

Preferably within 7 days of first marketing, and within 28 days at the latest.

169
Q

Why is it important to establish consensus between parties?

A

To avoid delays, frustration, and additional costs later in the transaction.

170
Q

What is the distinction between registered and unregistered land?

A

Registered land is recorded by the Land Registry with property and ownership details.

171
Q

Where is registered land recorded?

A

In the Land Registry.

172
Q

What information does the Land Registry hold for registered land?

A

Information relevant to the property and ownership details.

173
Q

What is unregistered land?

A

Land not recorded before 1 December 1990.

174
Q

Why is it now compulsory to register unregistered title on a change of ownership?

A

To ensure proper record keeping.

175
Q

What does the seller’s solicitor need to obtain during the investigation of title to freehold registered land?

A

Copies of the register of title and the Land Registry plan.

176
Q

What is the purpose of deduction of title?

A

To prove ownership to the buyer.

177
Q

When must the deduction of title take place?

A

Before exchange.

178
Q

Can the buyer object after exchange has taken place?

A

No.

179
Q

What should the seller supply to the buyer during the deduction of title?

A

Official copies less than six months old.

180
Q

What are the three registers shown in the official copies of registered land?

A

Property register, Proprietorship register, Charges register.

181
Q

What information does the Property register contain?

A

Description of land, type of title, easements, and excluded rights.

182
Q

What information does the Proprietorship register contain?

A

Current owners, class of title, price paid (if sold), indemnity covenant, and restrictions on selling.

183
Q

What does the Charges register contain?

A

Details of any charges or mortgages on the property.

184
Q

What is included in the description of the land in the Property register?

A

Postal address and title plan.

185
Q

What does the class of title in the Proprietorship register indicate?

A

The type of ownership (freehold or leasehold).

186
Q

What does the Proprietorship register indicate if the owners gave an indemnity covenant?

A

Evidence of a chain of indemnity covenants.

187
Q

What information may be included in the Proprietorship register if the land was sold since 1 April 2000?

A

The price paid by the current owners.

188
Q

What restrictions on selling may be found in the Proprietorship register?

A

Notices and restrictions on the owners’ ability to sell.

189
Q

What is the purpose of the Land Registry plan?

A

To provide a visual representation of the property.

190
Q

What is the purpose of the Charges register?

A

To show any charges or mortgages on the property.

191
Q

What is a restriction?

A

A limitation on dealing with a property.

192
Q

What is the difference between a restriction and a notice?

A

A restriction is more powerful than a notice.

193
Q

What does the State guarantee in relation to title?

A

The State guarantees the title and may provide compensation for defects.

194
Q

What are the three classes of title for freehold land?

A

Absolute title, possessory title, and qualified title.

195
Q

What is absolute title?

A

The most common and best class of title, where the registered proprietor has the legal estate subject to certain conditions.

196
Q

What is possessory title?

A

Granted when the proprietor is in possession of the property but has lost the title deeds or is claiming through adverse possession.

197
Q

What is qualified title?

A

Granted when there is a specific identified defect that cannot be overlooked.

198
Q

Why would a buyer be concerned if the class of title is not absolute?

A

It may affect their ability to obtain a loan or sell the property in the future.

199
Q

What does the Charges register identify?

A

Incumbrances on the property.

200
Q

What are some examples of incumbrances listed in the Charges register?

A

Covenants, easements, charges, leases, and notices.

201
Q

What are covenants affecting the property?

A

Restrictive or positive obligations related to the property.

202
Q

What are easements affecting the land?

A

Rights of way or other rights over the property.

203
Q

What are charges over the land?

A

Most commonly mortgages.

204
Q

What are leases granted over the property?

A

Leases of the whole or part of the property.

205
Q

What are notices registered by third parties?

A

Claims of interest in the property by third parties.

206
Q

What does the buyer’s solicitor do with the information from the Charges register?

A

Identify any problems and advise the client on necessary actions.

207
Q

What are easements?

A

Rights over another person’s land.

208
Q

Where can easements that burden a property appear?

A

Charges register and Property register.

209
Q

Where can easements that benefit a property appear?

A

Property register.

210
Q

What financial obligations may be attached to easements that benefit a property?

A

Maintenance costs.

211
Q

What does a mining exception mean?

A

Seller doesn’t own mines and minerals.

212
Q

What happens if a buyer encroaches on mines and minerals with a mining exception?

A

It constitutes trespass.

213
Q

What does a reservation indicate regarding mining?

A

Mining has taken place in the vicinity.

214
Q

What should be enquired about if there is a reservation for mines and minerals?

A

Ground stability and subsidence.

215
Q

Where is a mining exception noted in registered land?

A

Property register.

216
Q

What should the buyer’s solicitor conduct to identify the owner of mines and minerals?

A

Index Map search at Land Registry.

217
Q

Declaration as to rights of light and air

A

A landowner may sell off a part of their land (‘Part A’) and retain the other part (‘Part B’) for their own purposes.

218
Q

Preserving the right to develop Part B

A

The landowner may declare in the transfer of Part A that Part A does not enjoy the benefit of any rights of light and air over Part B.

219
Q

Blocking off light to windows

A

The owner of Part B may build on the land and block off light to the windows in the building on Part A.

220
Q

Co-ownership

A

When two or more people co-own a property, the legal interest can only be held under a joint tenancy.

221
Q

Jointly owning the equitable interest

A

Equitable interest in a property can be jointly owned as joint tenants or tenants in common.

222
Q

Joint Tenants

A

Joint tenants have an equal interest in the property.

223
Q

Survivorship in joint tenancy

A

If one joint tenant dies, the other becomes the sole owner.

224
Q

Inability to leave share by will in joint tenancy

A

Joint tenants cannot leave their share to anyone else by will.

225
Q

Tenants in Common

A

Tenants in common can own equal or unequal shares.

226
Q

Distribution of share in tenants in common upon death

A

Upon death, the share of a tenant in common passes according to their will or to close relatives if there is no will.

227
Q

Leaving share by will in tenants in common

A

Tenants in common can leave their share by will to anyone they choose.

228
Q

Assumption of joint tenancy in registered land

A

In registered land, the equitable interest is assumed to be held as a joint tenancy unless a restriction appears in the Proprietorship register.

229
Q

Restriction on disposition by sole proprietor

A

A restriction may prevent a sole proprietor from registering a disposition unless authorized by a court order.

230
Q

Selling property jointly owned by one co-owner

A

The missing co-owner must be found and be a party to the contract and transfer.

231
Q

Finding the missing co-owner

A

To sell property jointly owned, the status of the missing co-owner must be determined.

232
Q

Alive missing co-owner

A

If the missing co-owner is alive, they must be a party to the contract and transfer.

233
Q

Transfer of property with missing co-owner

A

The missing co-owner must be involved in the transfer of the property.

234
Q

Determining the status of the missing co-owner

A

To sell property jointly owned, it is necessary to find out what has happened to the missing co-owner.

235
Q

Passing of share in tenants in common

A

Upon death, the share of a tenant in common passes according to their will or to close relatives if there is no will.

236
Q

What does the seller’s solicitor need to provide if the missing co-owner has died?

A

Certified copy of the death certificate.

237
Q

How did the co-owners hold the legal title to the property?

A

As joint tenants.

238
Q

What can the buyer assume in registered land regarding the equitable joint tenancy?

A

It was not ‘severed’ prior to the death of the co-owner, unless stated in the Proprietorship register.

239
Q

What needs to be done to overreach the equitable interest of the deceased co-owner?

A

Appoint a second trustee.

240
Q

How can the appointment of the second trustee be made?

A

In the transfer of the property or by separate deed of appointment.

241
Q

What happens if the buyer pays the purchase price to at least two trustees on completion?

A

The equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of it.

242
Q

What should the contract provide for regarding the appointment of the second trustee?

A

For the purposes of the transfer.

243
Q

How can it be proven that the deceased co-owner’s interest passed to the surviving co-owner?

A

By producing certified copies of the grant of probate and the assent from the PRs to the surviving co-owner as beneficiary.

244
Q

Is it necessary to appoint a second trustee if there are two or more legal owners remaining?

A

No, overreaching will take place as the purchase price will be paid to at least two trustees on completion.

245
Q

What do restrictive covenants do?

A

Prevent land from being used in particular ways.

246
Q

Who are restrictive covenants binding on?

A

Successors in title to the original parties.

247
Q

Where do restrictive covenants appear in registered land?

A

In the Charges register.

248
Q

What are the buyer’s solicitors’ options?

A

Factors to consider.

249
Q

Who currently owns the property with the benefit of the covenant?

A

Ask the seller.

250
Q

Can the buyer come to an arrangement with the owner over the proposed use?

A

Ask the owner.

251
Q

What is a possible solution for a breach of covenant?

A

Obtain a restrictive covenant insurance policy.

252
Q

When is a restrictive covenant insurance policy not appropriate?

A

If the person with the benefit of the covenant is likely to object.

253
Q

What is another option for modification or discharge of the covenant?

A

Apply to the Upper Tribunal (Lands Chamber).

254
Q

What are the grounds for applying to the Upper Tribunal?

A

Obsolete covenant, no practical benefit, contrary to public interest.

255
Q

What is a potential drawback of applying to the Upper Tribunal?

A

Not quick or cost-effective.

256
Q

Are the options mutually exclusive?

A

Yes, they can be.

257
Q

What is a positive covenant?

A

Obligation to carry out works or incur expenditure.

258
Q

Where do positive covenants appear in registered land?

A

Charges register.

259
Q

Who does a positive covenant always bind?

A

The original covenantor.

260
Q

Does the burden of a positive covenant run to a successor in title?

A

No, it does not run with the property.

261
Q

What is a chain of indemnity?

A

A binding agreement.

262
Q

Is a chain of indemnity always binding?

A

Not necessarily.

263
Q

What is a positive covenant?

A

A binding obligation on the property owner.

264
Q

Is a positive covenant binding on a new buyer?

A

No, not at first sight.

265
Q

What is an indemnity covenant?

A

A covenant that allows the original covenantor to recover losses from their buyer if the covenant is breached.

266
Q

What is a ‘chain of indemnity’?

A

A series of indemnity covenants from the original covenantor to the current seller of the property.

267
Q

What can be checked to see if the current seller gave an indemnity covenant?

A

The entry in the Proprietorship register in registered land.

268
Q

What does the entry in the Proprietorship register indicate?

A

That the transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.

269
Q

What does the seller give at the time of purchase?

A

An indemnity covenant.

270
Q

What does the seller require from their buyer in the transfer of the property?

A

An equivalent indemnity covenant.

271
Q

What happens if the buyer does not observe and perform the positive covenant?

A

They will be liable to the seller in contract.

272
Q

What are unknown covenants?

A

Covenants whose nature and wording is unknown.

273
Q

Why are unknown covenants often present?

A

Because they were in an older deed that has been lost.

274
Q

What does the entry in the Charges register indicate about unknown covenants?

A

That the details were not available when the property was first registered.

275
Q

What is the safest option when dealing with unknown covenants?

A

To assume that the covenants are restrictive and will be binding on the buyer.

276
Q

What should be considered when dealing with problematic restrictive covenants?

A

The options for dealing with them.

277
Q

What is often the most cost-effective course of action when dealing with problematic restrictive covenants?

A

Obtaining an indemnity insurance policy.

278
Q

What is a defect in title?

A

A problem or issue with the legal ownership of a property.

279
Q

When should the seller disclose a defect in title?

A

In the contract, to prevent the buyer from objecting.

280
Q

Is the seller obligated to disclose a defect in title?

A

No, as long as they don’t mislead the buyer.

281
Q

What is a mortgage?

A

A loan secured by a property.

282
Q

Is a mortgage usually a problem in property sales?

A

Rarely.

283
Q

What does the seller usually intend to do with the mortgage?

A

Discharge it using the sale proceeds.

284
Q

What condition must be met for a buyer to commit to buying a property with a mortgage?

A

They must be satisfied that the seller will discharge the mortgage on completion.

285
Q

How can you tell if a registered property is subject to a mortgage?

A

There will be two entries in the Charges register, one for the date and purpose of the charge, and the other for the lender’s identity.

286
Q

What is a restriction in the Proprietorship register?

A

A limitation preventing the borrower from disposing of the property without the lender’s consent.

287
Q

What should the buyer’s solicitor check regarding the mortgage?

A

That the contract states the property is being sold free of the mortgage, and that the seller’s solicitor will discharge it on completion.

288
Q

What is a lease?

A

A legal agreement granting possession of a property for a specified period.

289
Q

Is the existence of a lease a problem for all buyers?

A

No, it depends on the buyer’s expectations and intentions for the property.

290
Q

When is the existence of a lease a problem for a buyer?

A

When they expect the property to be sold with vacant possession.

291
Q

What is the term for a lease that lasts more than 7 years?

A

A lease for a term of more than 7 years.

292
Q

What are third party interests?

A

Interests that should be registered against the landlord’s title.

293
Q

How are protected interests recorded?

A

As notices in the Charges register.

294
Q

When do protected interests bind the buyer?

A

If they are protected by the date of property transfer registration.

295
Q

What types of leases may be enforceable as overriding interests?

A

Legal leases for a term not exceeding 7 years and equitable leases where the tenant is in actual occupation.

296
Q

What should the buyer’s solicitor do if a lease is revealed during title investigation?

A

Report it to the buyer.

297
Q

What should the buyer’s solicitor check regarding a lease?

A

That its existence and terms are compatible with the buyer’s proposed use of the property.

298
Q

What are notices in registered land?

A

Entries in the Charges register regarding the burden of an interest affecting a registered estate or charge.

299
Q

What are the two types of notices?

A

Agreed notices and unilateral notices.

300
Q

How are agreed notices put on the register?

A

With the agreement of the registered proprietor.

301
Q

When are unilateral notices used?

A

When the registered proprietor has refused consent or has not been asked about it.

302
Q

Does the entry of a notice guarantee the validity or existence of the interest?

A

No, it does not.

303
Q

What rights does a notice give the person who registers it?

A

None over the property itself.

304
Q

What does a notice serve to ensure?

A

The protection of the priority of the interest referred to in the notice against subsequent interests.

305
Q

What are home rights?

A

Statutory rights for a non-owning spouse or civil partner to occupy the matrimonial home.

306
Q

Do home rights create an interest in land?

A

No, they do not.

307
Q

When does a home right bind a buyer in registered land?

A

If it is protected by a notice in the Charges register by the date of property transfer registration.

308
Q

What is a home right?

A

A right held by a non-owner occupier of a property.

309
Q

What should the seller do if a home right is revealed?

A

Require the non-owning occupier to release all rights and agree to vacate.

310
Q

How is the release of home rights usually handled?

A

In the contract for the property sale.

FLK 2 - Property Practice (7 decks)

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