12.8: Preparation for and exchange of contracts Flashcards
If a client wishes to have a tenancy in common, what must their solicitor do?
Their solicitor would advise
them to have a declaration of trust prepared, which is a behind-the-scenes document, setting
out more detail about their contributions.
At what point does the matter become legally binding on the buyer and seller?
At the exchange of contracts
What must the solicitors have in place before the exchange of contracts?
solicitor must ask the buyer for the 10% deposit and the buyer and seller must sign the contracts
irrevocable authority of all parties to the contract = essential
all parties in the exchange must agree to the completion date
If the property is registered, how will proprietorship register denote that there is a tenancy in common?
in the form of a Form A restriction
If the property is unregistered, how will the solicitor find out if they hold the property as tenants in common or joint tenants?
through the conveyance to the legal owners which will state whether they hold the beneficial interest as joint tenants or tenants in common
What steps should the buyer’s solicitor take before they give their report on the property to the client?
- investigation of title
- pre search enquires and responses
- received all search results
What is the role of the buyer’s solicitor?
receive all information on the property that the buyer intends to purchase so they can make a decision on whether to purchase the property or not.
What should the buyer have in place on the exchange of contracts to protect against any risk?
buildings insurance ready to place on risk on exchange
Synchronising transactions means
When the buyer wants to sell their house and move into their new one on the same day. A solicitor who fails to achieve this will be negligent.
What sort of authority must the solicitor for the seller receive from all legal owners?
Irrevocable authority and best practice demands that the solicitor obtains the client’s written authority to exchange to ensure that there is evidence on file
What is a redemption figure and what must the seller’s solicitor do?
If the seller has a mortgage over the property, the seller’s solicitor must obtain a redemption figure and state that they will pay off the mortgage from the sale proceeds (in the form of an undertaking).
Exchange is the
Point of no return in a transaction and once it has taken place both the seller and the buyer are legally bound. If one party wishes to withdraw they will be liable for breach of contract
Summarise the key methods of exchange:
- solicitors meet in person. Not used mush in practice.
- by post. Not used much in practice due to the uncertainty.
- by phone. Solicitors discuss over the phone. Used the most in practice
Uncertainty can result from exchange of contracts by phone, what have the law society produced to resolve this?
a formulae, which sets out a list of steps solicitors must follow.
What is the generic formulae that solicitors must follow (steps wise) when exchanging over the phone
must give an undertaking that the contracts will be received that day. If not possible they must make clear when the contracts are expected to be received.
Must also:
- check the contracts and confirm they are identical
- write a written memorandum for exchange of contracts on the file
- agree to the date and time of the exchange
When is Formula A (Law Society Phone Exchange) used and what is the process?
Used when the seller’s solicitor holds both contract parts and the buyer’s deposit.
Process: Buyer’s solicitor sends the signed contract and deposit in advance, held to order.
Exchange: Phone call confirms contract details, completion date, and exchange time.
Final Step: Seller’s solicitor sends the signed contract to the buyer’s solicitor after exchange.
When is formula c used and what is the process?
Used when there is a chain transaction where the deposit moves up the chain.
Process: Two sets of phone calls ensure coordination.
Confirm clients are ready and agree on the completion date.
Confirm the actual exchange of contracts.
Purpose: Prevents broken links in multi-property transactions.
When is formula b used and what is the process?
Used when each solicitor holds their own client’s signed contract.
Process: Both solicitors confirm identical contracts via phone.
Exchange: Completion date and exchange time are confirmed.
Final Step: Seller’s solicitor sends the signed contract to the buyer’s solicitor, while the buyer’s solicitor sends their client’s signed contract and deposit.
Remember the formulas relate to
Law Society Phone Exchange
Whatever formula is used, each solicitor must keep on the exchange of contracts a written memorandum which sets out
- solicitor’s name
- date and time of the exchange
- formula used
- completion date
- deposit amount
The formaulae A, B and C set out
Th different methods of exchange by phone
What are the three methods of exchange
- post
- person
- phone
If a solicitor will not be in the office to exchange contracts by phone in a transaction, what is the most appropriate formula?
A
What is the most common method of exchange?
by telephone
