1. Shape of a freehold transaction Flashcards
How can the conveyancing transaction be divided into stages
- Pre-contract
- Post- contract (pre-completion)
- Post-completion
What are requisitions
Questions addressed to the seller, requiring them to resolve any apparent problems with the seller’s ownership or title/procedural queries
Why are pre-contract searches necessary
Searches reveal a large amount of info, helping the buyer make up their mind about the purchase
Why does the transfer deed need to reflect the contract terms
The contract terms state what the parties have agreed to do- the transfer deed activates the terms
Will the estate pass if the seller does not sign the transfer deed?
No
What must the buyer’s lender’s solicitor do in relation to residential transactions
Draw up the mortgage deed for signature by the borrower
Certify to the lender that the legal title to the property is in order
Obtain a clear bankruptcy search against the borrower, since the lender will be reluctant to lend money to a person who is the subject of bankruptcy proceedings
Completion statement
A document stating the exact amount of monies needed to complete the transaction
What is the purpose of pre-completion searches
To ensure that no last-minute problems have occurred with the title to the property
Redemption figure
Exact amount of money required to discharge seller’s mortgage
What happens if a solicitor fails to comply with the SRA codes
SRA may take regulatory action against the acting solicitor, the firm itself as an entity, its managers or compliance officers
What does para 6.2 of the SRA dictate
A solicitor or firm cannot act if the solicitor or firm has a conflict of interest or a significant risk of such a conflict
How is a conflict of interest defined
A situation where your separate duties to act in the best interests of two or more clients conflict
Exception to the 6.2 SRA no conflict rule
Where the clients have a substantially common interest in relation to a matter or a particular aspect of it (clear common purpose between clients and a strong consensus on how it is to be achieved)
What happens if there is a conflict of interest?
Solicitor or firm has to stop acting for at least one of the clients & only continue acting for the other if duty of confidentiality to the former client is not at risk
What if it has been decided that there was a substantially common interest despite conflict
Parties have to give informed consent in writing or evidenced in writing to the solicitor or firm acting for both of them, the firm is to put in place appropriate safeguards to protect parties confidential info, and solicitor to be satisfied that it is reasonable to act for both parties (solicitor should consider if one client will be prejudiced if not separately represented)
Can a buyer’s solicitor act for the lender
Mortgage express v Bowerman & partners - it is possible unless there is a conflict or significant risk of conflict
Potential conflicts when acting for a buyer and lender
- The terms of the mortgage offer are unfair to the borrower (extortionate interest)
- Instructions would be in breach of one of the terms
- Buyer is unable to comply with lenders terms
- Mortgage doc requires negotiation
When is it arguable that there is no conflict of interest when acting for lender and borrower
Where the mortgage is on standard terms
Where is there a higher risk of conflict when acting for lender and buyer
in commercial transactions (mortgage docs are likely to be the subject of significant negotiation between the solicitors for the two parties and would not be on standard terms)
What is required to rebut presumption of undue influence (Etridge guidelines)
Solicitor needs to:
- Explain to the wife the purpose for which (the solicitor) have become involved
- Explain that if necessary, the lender will rely on the solicitor’s involvement to counter suggestions that the wife has been unduly influenced or has misunderstood the nature of the transaction
- Obtain confirmation from the wife that she wishes the solicitor to act for her in the transaction, advise on legal and practical implications of the transaction
paragraph 6.3 SRA codes
A solicitor must keep the affairs of clients confidential unless disclosure is required or permitted by law, or the client consents
What is an undertaking
A statement made by a solicitor or their form that they will do something or cause something to do be done, or refrain from doing something, given to someone who reasonably places reliance on it
What does the SRA state in relation to undertakings
They must be performed within the agreed timescale, or in the absence of an agreed timescale, within a reasonable amount of time
What is money laundering
The conversion, concealement or disguise of the proceeds of crime, so as to make it appear that they come from a legitimate source.
Warning signs of money laundering
- CL makes payment using large sums of cash
- Sudden or unexplained changes in ownership of property
- Third party providing finance for the purchase, but the property being registered in someone else’s name
- Cash changing hand directly between clients
- Unusual sale price
- Cl paying a deposit but then withdrawing from a transaction without good reason and requiring deposit to be repaid
Consequences of failing to report or assisting a money launder
Prosecution under proceeds of crime act 2002
What is mortgage fraud
Where individuals defraud a lender through the mortgage process. (overstating income, forging someones signature, price being misstated)
What does the SRA state in relation to fraud
Principle 5- they must act with integrity, a breach of which may result in discipline, criminal prosecution or civil claim for negligence
EPC
Energy Performance Certificate
When is an EPC required
Where a building is to be sold or rented out, before the property can be marketed (if not received within 7 days, there is a further 21 days in which to obtain it)
Where can EPCS be obtained
From an accredited energy assessor
What can EPC’s recommend
Certain recommendations for improving the energy performance of the building
Minimum energy efficiency standard
EPC rating ‘E’
What is the purpose of taking instructions
To obtain sufficient info to be able to carry out the whole transaction so as to not overlook relevant matters
Why is it important to obtain official copies of the register
- Check info supplied by seller relating to the title is supported by that contained in the official copies
- The official copes represent the true state of the title at the time of their issue
Why is a company search necessary
To check that the co exists, has powers to buy and sell land, has no undisclosed fixed or floating charges affecting the land sold, is not in administration, receivership or liquidation
What does the pre-contract package need to contain
- PIF
- F&C
- Index map search for unreg land
- Land charges search in unreg land
- Copies of planning permissions, building regulation consents and other certificates/consents
What is secured lending
where the borrower grants the lender a legal mortgage over the property and additional security (fixed charge over fixtures and assignment of rental income)
Main sources of mortgage finance available
- Banks
- Building Societies
- Client’s employer
- Private Mortgage (loan from a relative or trust fund)
- Finance Houses
What is a repayment mortgage
- In return for the loan, borrower grants mortgage of property
- Borrower makes monthly repayments to the lender (some of which represents repayment of capital sum)
- The balance is interest on the loan
- At the end of the mortgage term, loan has been completely repaid and mortgage is discharged
What is an interest only mortgage
- Borrower only pays loan interest- whole of the capital remains outstanding at the end of loan term
- Lower monthly payments
- There is no guarantee that the investment plan will generate sufficient funds to pay off outstanding capital
What is the standard for residential mortgages
standard variable mortgage rate
What is a TIC
Where parties wish the amount of purchase contribution is reflected in the size of their share in the land
