Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

flk 2 - property practice > 3. The Contract > Flashcards

3. The Contract Flashcards

1
Q

What is the purpose of a contract?

A

Provides certainty and prevents withdrawal without liability.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

What are the formalities of a contract?

A

In writing, contains all express terms, signed by parties.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

What are the Standard Conditions of Sale (SCS) used for?

A

Residential and simple commercial transactions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the Standard Commercial Property Conditions (SCPC) used for?

A

High value commercial properties with detailed provisions for leases.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the three parts of both SCS and SCPC?

A

Particulars of Sale, Standard conditions, and Special conditions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are Title Guarantees?

A

Full Title, Limited, and No Title.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What are Specific Incumbrances?

A

Third party rights that run with the land.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Why is it necessary to specify incumbrances in the contract?

A

To identify all burdens on the property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Breach

A

Seller not meeting contract terms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Non-disclosure

A

Failure to disclose property burdens

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Searches

A

Investigation for hidden property burdens

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Excluded

A

Checking if mortgage is discharged after completion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Title Guarantee

A

Seller’s assurance of property ownership

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Full Title Guarantee

A

Seller owns entire legal and equitable title

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Limited Title Guarantee

A

Seller has limited knowledge of property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Effect of Title Guarantee

A

Seller’s implied covenants in property transfer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Different Guarantees

A

Varying title guarantees between parties

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Contract Rate

A

Interest charged for late completion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a relevant base rate?

A

High enough to incentivize completion on time.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a deposit?

A

Prepayment of purchase price made by buyer to seller.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is the purpose of a deposit?

A

Evidence of commitment and can be forfeited if buyer fails to complete.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is the stakeholder rule?

A

Deposit is payable to seller’s solicitor and cannot be handed over until completion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is an agent?

A

Buyer agrees deposit will be held by seller’s solicitor as agent.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What are the payment methods for SCS?

A

Electronic or cheque drawn on conveyancer’s client account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What are the payment methods for SCPC?

A

Electronic only.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is the purpose of special conditions?

A

To vary default terms of SCS or SCPC.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What are some common changes in special conditions?

A

Deposit reduced to 5% and VAT included in purchase price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Who is responsible for insurance?

A

Buyer, unless seller agrees to continue existing policy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Under what conditions is the seller obligated to insure a freehold property?

A

If required by a special condition in the contract.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

What happens if the seller agrees to insure the property?

A

Seller must maintain the policy until completion and hand over insurance proceeds to the buyer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is the risk of having two insurance policies on the same property?

A

Buyer’s insurer may reduce proceeds if another policy exists.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

What happens if the buyer cannot recover the full insurance proceeds?

A

Purchase price is reduced accordingly.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

What is the risk in a contract?

A

Buyer is responsible for property damage before completion.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

What are the basics of VAT in a contract?

A

SCS: purchase price includes VAT, residential property exempt.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Is VAT normally chargeable for residential properties?

A

No, purchase price and contents price are inclusive of any VAT.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

Does the purchase price in SCPC include VAT?

A

No, purchase price excludes VAT.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

When is VAT payable for commercial properties?

A

Standard Rated: property <3yrs old or seller opts to tax, Exempt: property >3yrs old + seller hasn’t opted to tax.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Why might a seller opt to tax for a commercial property?

A

To offset input and output VAT.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What should one be cautious of with VAT sensitive buyers?

A

Beware of VAT sensitive buyers.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What are the three possibilities for VAT to be payable under SCPC 2.2?

A
  1. Default position: purchase price exclusive of VAT, 2. Alter default: purchase price inclusive of VAT, 3. Transfer exempt: seller hasn’t made election for VAT.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Can VAT be added on top if there is a change in law between exchange and completion?

A

Yes, if the law changes to make an exempt supply chargeable at the standard rate, but the seller is contractually obliged not to opt to tax.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

What are the requirements of a lender?

A

Buyer creditworthy, property is good security for the loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

What factors should a buyer consider when choosing a lender?

A

Amount they can borrow, interest rates available, and particular products on offer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

What is a mortgage offer?

A

Offer made to the buyer by the lender, setting out the terms of the loan.

45
Q

What is a commitment letter?

A

Letter with a terms sheet and facility agreement, detailing lender terms for complex loans.

46
Q

What types of loans are residential and simple commercial loans?

A

Mortgage offers.

47
Q

What type of loans are complex loans?

A

Loans with commitment letters and facility agreements.

48
Q

What is the purchase price in relation to VAT under SCPC 2.2?

A

Default position: exclusive of VAT.

49
Q

What is the purchase price in relation to VAT if the default is altered?

A

Inclusive of VAT.

50
Q

What is the purchase price in relation to VAT if the seller hasn’t made an election for VAT?

A

Transfer exempt: seller hasn’t made election for VAT.

51
Q

Can VAT be added on top if there is a change in law between exchange and completion?

A

Yes, if the law changes to make an exempt supply chargeable at the standard rate, but the seller is contractually obliged not to opt to tax.

52
Q

What should one be cautious of with VAT sensitive buyers?

A

Beware of VAT sensitive buyers.

53
Q

What is a legal mortgage?

A

Lender’s first mortgage on borrower’s property.

54
Q

What power does a mortgage made by deed have?

A

Implied power of sale under s 101 of Law of Property Act 1925.

55
Q

What happens if the borrower cannot repay the loan?

A

Loan is paid first out of proceeds of sale.

56
Q

Can a solicitor act for both lender and borrower?

A

Yes, if there is a substantial common interest and safeguards are in place.

57
Q

What type of mortgage has standard terms?

A

Residential mortgage.

58
Q

Are the terms of a commercial mortgage standard?

A

No, they have to be negotiated and agreed.

59
Q

Why does the lender need to know about good title?

A

To ensure the property can be sold in the future if needed.

60
Q

What is a certificate of title?

A

Document disclosing any problems with the property to the lender.

61
Q

What does the certificate of title confirm to the lender?

A

No legal problems, ownership details, and completion date.

62
Q

When is a more detailed certificate of title needed?

A

In commercial transactions.

63
Q

When is the certificate of title given?

A

Immediately prior to completion of the loan.

64
Q

When are drafts of the certificate of title provided?

A

At earlier stages in the transaction.

65
Q

What happens before the buyer’s solicitors exchange contracts?

A

Lender must be satisfied with the certificate and disclosures.

66
Q

What is a power of sale?

A

The ability to sell the property to recover the loan.

67
Q

What is a mortgage deed?

A

A deed that creates a legal mortgage.

68
Q

What is a substantial common interest?

A

Shared interest between lender and borrower.

69
Q

What is a good and marketable title?

A

Title to the property without any legal problems.

70
Q

What is the purpose of a mortgage?

A

To provide security for a loan.

71
Q

What is the role of the buyer’s solicitor?

A

To prepare the certificate of title and disclose any problems.

72
Q

What is the role of the lender’s advisors?

A

To review the drafts of the certificate of title.

73
Q

What is a precontract report?

A

Summary of pre-contract searches and title investigation.

74
Q

What disclaimers are included in the precontract report?

A

Solicitor cannot advise on property value or structure.

75
Q

What is included in the report to the client?

A

Pre-contract report, terms of contract, and mortgage offer.

76
Q

What does the buyer’s solicitor report to the lender?

A

Good and marketable title for loan security.

77
Q

What needs to be ensured regarding deposit funds?

A

Cleared funds ready to send to seller’s solicitor at exchange.

78
Q

What needs to be checked regarding the mortgage offer?

A

In place, accepted, and buyer has sufficient funds to complete.

79
Q

What arrangements need to be in place for insurance?

A

Immediately following exchange.

80
Q

What needs to happen for the contract to be signed?

A

Each party of the transaction signs their copy.

81
Q

What needs to be negotiated and agreed before exchange?

A

Completion date.

82
Q

What does the seller need to do before exchange?

A

Prepare final versions of contract and obtain authority to exchange.

83
Q

What does the buyer need to do before exchange?

A

Check certificate of title is approved and obtain authority to exchange.

84
Q

What are the three ways to exchange contracts?

A

In person, by post, or over the telephone.

85
Q

When is Law Society Formula A used?

A

When one solicitor holds both parts of the contract duly signed.

86
Q

What is the process for Law Society Formula A?

A

Solicitors agree to exchange contracts by phone and send the signed part to the other solicitor.

87
Q

What are undertakings?

A

Solicitor sending signed contract to other side.

88
Q

What are buyer’s undertakings?

A

Sending deposit and signed contract to other side.

89
Q

What is Law Society Formula B used for?

A

When each solicitor holds their own client’s signed contract.

90
Q

What is the process for Law Society Formula B?

A

Agree contracts by phone, sign parts, and send to other side.

91
Q

What can be used instead of Formula C?

A

Release method.

92
Q

What does the buyer need to send in Formula C?

A

Client’s signed contract and deposit.

93
Q

What does the seller need to send in Formula C?

A

Client’s signed contract.

94
Q

What should be done if there is a variation in undertakings?

A

Agree and make a record.

95
Q

What does Formula A and Formula B both contain?

A

Undertaking for buyer’s solicitor to send deposit.

96
Q

What needs to be done if the deposit is sent electronically?

A

Vary the formula by agreement between solicitors.

97
Q

What is Law Society Formula C used for?

A

Chain transactions in residential property.

98
Q

What is the aim of Formula C?

A

Synchronize exchanges in the chain to avoid owning multiple properties.

99
Q

What is the process for Law Society Formula C?

A

Agree to release contracts for exchange for a limited period.

100
Q

What consent is needed for Formula C?

A

Other party’s irrevocable consent due to undertakings.

101
Q

What should be recorded in the record of exchange?

A

Date, time, formula, variation, completion date, deposit, solicitors’ identities.

102
Q

What are the consequences of exchange?

A

Binding contract, legal title retained by settler, beneficial interest held by seller, seller continues to pay outgoings.

103
Q

What information should be included in the file note?

A

Date, time, formula, variation, completion date, deposit, solicitors’ identities.

104
Q

What is the purpose of recording the exchange?

A

To document the details of the exchange for future reference.

105
Q

What happens after exchange?

A

Parties are legally bound to complete the transaction.

106
Q

Who retains legal title until completion?

A

The settler.

107
Q

Who holds the beneficial interest after exchange?

A

The seller on behalf of the buyer.

108
Q

What must the seller continue to pay until completion?

A

Outgoings such as community charges or business rates.

109
Q

Who should be informed immediately after exchange?

A

Respective clients and estate agent.

flk 2 - property practice (7 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions