2b. Property - Practice Flashcards
Preliminary matters
If acting for the buyer, what is the first thing you should advise them to do?
Carry out a physical inspection of the property to determine whether there are any structural defects or problems which might affect the value
Preliminary matters
What are the three requirements for a solicitor to represent their buyer and the lender?
- Lender is an institutional lender
- Standard certificate of title is provided
- Confidentiality as to both parties is maintained
Preliminary matters
What is required for the buyer’s solicitor to disclose information to the lender, and what must happen if this does not occur?
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
Preliminary matters
What situation on the exam will suggest a conflict of interest?
Solicitor acting for parties on different sides of a transaction
Preliminary matters
Where there is more than one buyer or seller, what must a solicitor acting for both ensure?
After what two steps can the clients agree for one to take the lead?
That they are instructed by both clients
After: 1. Initial instructions, and 2. Identification requirements are satisfied
Starting a conveyancing transaction
How long is an Energy Performance Certificate valid for?
What buildings don’t require one?
10 years
Not required for listed buildings
Starting a conveyancing transaction
What things should be considered when entering into a commercial leasehold transaction?
Checklist applies to all leases in reality
An offer in writing should be made including clear terms on:
* Rent and length of term
* Rights to break the lease
* Rent review
* Rights to assign
* Obligations
Starting a conveyancing transaction
How is title investigated in (1) the registered system and (2) the unregistered system?
- Copy of the register of title and title plan is obtained from HMLR
- Title deeds and charges in the seller’s name need to be located
Starting a conveyancing transaction
Who does the Law Society Conveyancing Protocol require to remedy pre-contract title defects?
The seller’s solicitor, rather than waiting for buyer to raise an inquiry
Starting a conveyancing transaction
In the unregistered system, what must the seller’s solicitor do regarding the title deeds if they are held by a lender?
Write to 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
As such, they will also seek an indicative redemption figure so they know if there will be enough money to make good on this undertaking
Starting a conveyancing transaction
What is included in the contract package sent to the buyer from the seller of freehold property?
- Draft contract in duplicate
- Property Information Form, and Fittings and Contents Form
- Copy of the seller’s title
- Copy of title plan
- Guarantees, or planning permission, if any
Starting a conveyancing transaction
The Property Information Form contains details of what issues?
- Disputes with neighbours
- Building work or alterations by the seller
- Notices received about the property
- Flooding
- Services that cross the property, e.g. pipes, wires serving neighbours
- Utilities property is connected to
- Occupiers
Starting a conveyancing transaction
What is the title plan?
A map showing the location of the property being sold and a red outline of the land included in the title
Starting a conveyancing transaction
What type of defects (1) must the seller disclose and (2) need not be disclosed?
Must disclose latent defect
Need not disclose patent defect
Starting a conveyancing transaction
What is (1) a latent defect and (2) a patent defect?
- Latent: Non-physical burden that would not be apparent from an inspection of the property, e.g. underground easement or restrictive covenant
- Patent: One that would be revealed by an inspection e.g. visible right of way
Starting a conveyancing transaction
What two remedies are available to the buyer where the seller breaches a duty to disclose?
Withdraw from contract after exchange or claim damages
Starting a conveyancing transaction
In what one situation will a seller actually be held liable where there is a defect which is both latent and physical?
Where the seller has willfully tried to obscure the defect
Starting a conveyancing transaction
What is included in the contract package sent to the buyer from the seller of leasehold property, i.e. assigning their leasehold interest?
- Draft contract in duplicate
- Official copies of leasehold register of title and plan
- Copy of the lease
- Property Information Form, Leasehold Information Form, and Fittings and Contents Form
- Copy of landlord’s freehold register of title and plan
- Copy of insurance policy for entire building
- Copy of last three years’ service charge accounts
Starting a conveyancing transaction
What are the three sections in the Contract Incorporating the Standard Conditions of Sale?
- Particulars of sale
- Standard conditions of sale
- Special conditions of sale
Starting a conveyancing transaction
What is required of something agreed between buyer and seller to be legally binding?
It must be in the contract
Starting a conveyancing transaction
What is the default deposit under the Standard Conditions?
10% of the purchase price, although the parties can agree lower
Even where the parties negotiate a lower deposit, buyer liable for full 10% if they breach
Starting a conveyancing transaction
As long as the property is in England and Wales, what can the buyer do with the deposit before completion?
Count it towards their deposit on a new residence
Starting a conveyancing transaction
Under the Standard Conditions, how is the deposit held between exchange and completion?
By the seller’s solicitor as stakeholder, i.e. on behalf of buyer and seller, and can’t be paid to seller until completion
Possible for seller’s solicitor to hold as agent for seller, but not advisable for buyer to allow this
Starting a conveyancing transaction
What three things does it mean when the Standard Conditions provide that a seller sells a property with full title guarantee?
Seller:
- Is entitled to sell the property
- Will, at their own cost, transfer this title to the buyer, and
- Is selling the property free from all charges or encumbrances other than those disclosed in the contract
Starting a conveyancing transaction
To compare, what is a limited title guarantee?
Seller merely warrants they have not created any charges or encumbrances during their period of ownership other than those disclosed in the contract
Starting a conveyancing transaction
What is the buyer’s indemnity covenant in the Standard Conditions?
If the contract does disclose any obligations on the buyer relating to the property, the buyer agrees to carry these out and to indemnify the seller if the buyer breaches
Starting a conveyancing transaction
Under the Standard Conditions, when does risk pass to the buyer and why?
On exchange, because that is when the equitable interest passes
The seller does not have to insure the property between exchange and completion
Starting a conveyancing transaction
When do terms in the Contract Incorporating the Standard Conditions have legal effect?
What trap should we look out for on the exam?
On exchange
Look out for suggestion of the applicability of contract terms pre-exchange
Starting a conveyancing transaction
Under the Standard Conditions, when will completion occur if the contract is silent?
20 working days after exchange
Starting a conveyancing transaction
What is the consequence of the buyer not sending funds by 2pm on the day of completion?
When does this not apply?
Buyer liable to pay interest at the rate specified in the contract, even if they have already moved into the property
When the reason for not sending the funds is because the seller has not vacated
What two things might be included in the Special Conditions of Sale, if they are relevant?
- Whether property will be vacant on completion or if there will be a tenant (or other occupants) in situ
- Completion is to occur at a time other than 2pm
Buyer should confirm occupants will leave the property upon completion
Starting a conveyancing transaction
What three things should the buyer’s solicitor do if they discover a defect in title having inspected the contract package?
- Request seller’s solicitor provide a draft insurance policy, and confirm seller will pay
- Include this agreement as a special condition in the contract
- Notify the buyer’s lender
Indemnity insurance or seller indemnifying buyer will usually greenlight a defect situation
Investigating title
What must a seller’s solicitor do if they discover there has already been a triggering event in relation to unregistered property they are dealing with, and when?
Make an application to HMLR before drafting the contract
If the buyer notices this, they must ask seller to register the property
Investigating title
When investigating registered property, what should the buyer’s solicitor look for?
Whether there are any encumbrances on the charges or proprietorship register
They also check the property register for benefits
Buyer’s pre-contract searches and enquiries
What are the six pre-contract searches which are always carried out by the buyer’s solicitor?
- Local search
- Drainage and water search
- Environmental search
- Index map search
- Bankruptcy search (if buyer is borrowing)
- Company search (if seller is a company)
Buyer’s pre-contract searches and enquiries
What things are revealed by the local search?
- Local land charges which aren’t on the charges register due to small sums
- Planning agreements related to development of the property
- Listed buildings on the property
- Standard enquiries such as road frontage; public rights of way; planning entries; building regulations consents
Buyer’s pre-contract searches and enquiries
Why is an environmental search important?
Because a buyer will be liable for paying for the clean up costs of any land they own which is contaminated, even if it was caused by the seller
Buyer’s pre-contract searches and enquiries
What are some location specific searches which might be needed?
- Coal mining search
- Chancel liability search (ancient obligation to upkeep a church)
Buyer’s pre-contract searches and enquiries
What is the equivalent of the property information form used where the property is commercial?
Commercial Property Standard Inquiries
Planning
Under the Town and Country Planning Act 1990, planning permission is required for any development. In what two ways is development defined?
- Building, structural changes, engineering, mining or other operations with regard to land, or
- Making any material change of use of any buildings or other land
Planning
What is a permitted development?
What are some examples?
A development which has deemed permission and does not need to apply for express permission
Small home extension, porch, fence, conservatory
Planning
What is the effect of a local authority passing an Article 4 Direction?
It revokes the permitted development exception for the relevant area, meaning that all developments must be applied for
Planning
What are the two types of express planning permission?
- Outline
- Detailed
A property owner must apply for express permission if deemed permission either doesn’t apply or has been revoked
Planning
What is outline permission?
Broad permission to the principle of the development, (subject to any reserved matters which if part of the permission must be approved by the authority within three years)
Planning
No longer than how long after the grant of outline permission (or the approval of reserved matters where relevant) must development begin?
Two years.
Therefore it could be five years before development needs to begin
Planning
Where detailed, i.e. full permission is granted, within what time limit must development begin?
Three years
Planning
What is the consequence of planning issues running with the land?
The buyer is liable for any planning issues relating to land they own
Planning
Within what time limit of breach must a planning enforcement notice be served where it is regarding (1) unauthorised building works and (2) all other breaches, e.g. breach of conditions of planning?
A planning enforcement notice is the prerequisite to a planning enforcement action
- Unauthorised building works: Four years
- Other breaches e.g. material change of use: Ten years
No time limit for listing building
It could require compliance with planning laws or even pulling down or rebuilding a development
Planning
On the exam, what should a planning issue not be confused with, and which takes priority?
A planning issue should not be confused with a title issue, and planning permission will not cure a title defect
Planning
Even though a development might not need planning permission, what will all works require?
Compliance with building regulations
Planning
Within what time limit of breach must a local authority bring an enforcement action regarding building regulations?
What option is always available to a local authority?
12 months
A local authority can always seek an injunction requiring the owner to comply with building regulations
Planning
Where the time for buildings regulation enforcement has passed, what might a buyer still seek from a seller where it is an issue?
What should not be done before this step is completed?
Buyer should ask seller for an indemnity
Local authority should not be contacted, as it can negate the availability of insurance
Planning
Regarding planning in a commercial context, what is a use class?
A category of use describing the activities of the building, e.g.:
- Commercial, business, and service, e.g. shop, restaurant
- Learning and non-residential institution, e.g. museum, library
- Local community, e.g. small shops, community hall
Planning permission generally required to change use class, even if no building work is being done
Planning
When planning permission is granted for a use class, is further permission needed to change the activity within the same use class?
Not unless actual building work is required to make that change
Planning
Whilst some changes from one use case to another are allowed under permitted development, in what two situations will this not be available and changes to a use class will therefore require an application?
- Conservation area
- Listed building
Buyer’s funding
Regarding buyer’s funding of the property, whilst a solicitor cannot offer a financial opinion on the mortgage offer, what can they do?
Explain the mortgage options available and the general terms, e.g. length, interest rate, conditions, but not whether it is a good product or not
Buyer’s funding
What are the mortgage options available to a buyer?
- Repayment mortgage
- Interest only mortgage
- Endowment and pension mortgage (buyer pays monthly premium and the insurance policy/pension will cover the balance of the mortgage at the end of term)
- Sharia compliant mortgage
Buyer’s funding
What are the two functions achieved by the buyer’s solicitor submitting a clear Certificate of Title to the lender?
- Confirms to lender that title is good and marketable
- Requests a release of the mortgage funds
Buyer’s funding
What should we look for on the exam which might not appear to trigger a registration requirement for unregistered property but actually does, and why?
A client mortgaging property they already own which has not previously been subject to a mortgage, because a first legal mortgage is a trigger for registration
Buyer’s funding
What is required to complete and perfect a mortgage against third parties who might have an interest in the mortgaged property?
Purchase is completed and mortgage registered with HMLR
Buyer’s funding
If mortgage completion triggers a registration requirement concerning unregistered land, within what period must the buyer’s solicitor register the mortgage?
Two months
Exchange of contracts
What are three methods of exchange?
- Person
- Post
- Phone (most common)
Exchange of contracts
When is Formula A used for exchange and what is a quick way to remember this?
When one solicitor holds both signed parts of the contract.
Remembered because one solicitor is Away and the other is doing All the work
Exchange of contracts
When is Formula B used for exchange and what is a quick way to remember this?
When each solicitor hold their own client’s part of the contract.
Remembered because Both solicitors are working.
Most common
Exchange of contracts
When is Formula C used for exchange?
When there is a Chain of transactions
Exchange of contracts
If there is to be more than a few weeks’ wait between exchange and completion, how is the interest in a sale contract protected after exchange, where land is (1) registered and (2) unregistered?
Registered: Notice of the estate contract placed on the seller’s charges register
Unregistered: C(iv) estate contract registered against the seller’s full name
Both are removed upon completion.
Exchange of contracts
How is a contract varied after exchange?
Both parties must exchange contracts again with the variation included in the new contract
Pre-completion
If the seller has a mortgage, what is the first pre-completion step for the seller’s solicitor?
Ask lender for an updated redemption figure and prepare a completion statement
Pre-completion
What are the three types of purchase deed used to transfer freehold property?
- Conveyance (unregistered)
- Transfer (registered and unregistered)
- Assent (used by PRs to transfer to beneficiary)
Pre-completion
What are the two types of form used when (1) whole of the land and (2) part of the land in a title is being transferred?
- Whole: TR1 Form
- Part: TP1 Form
Pre-completion
In a leasehold situation, what is the final version of a lease called, and what are its two parts?
An engrossment made up of the original and counterpart
Pre-completion
What is the purpose of the buyer’s pre-completion searches?
What should they not be confused with?
To ensure information received and understood about the property remains accurate, including charges and encumbrances
Not to be confused with the pre-contract searches
Pre-completion
What is the benefit of performing a search with priority?
Prevents any new charges from being registered that would impact the buyer or mortgagee’s rights
Pre-completion
Regarding registered property, what search begins the priority period to complete registration at HLMR free from third party interests?
How long does this priority period last?
- OS1 search (against full property)
- OS2 search (against part of the property)
The priority period is 30 working days
Pre-completion
Regarding unregistered property, what pre-completion searches are carried out?
How long does this priority period last?
Repeat the pre-exchange full land charges search against the full names of the landowner/seller for the full period of their ownership
15 working days
Completion
What are the three methods by which completion can take place?
What should these not be confused with?
- Personal attendance
- Agent
- Post (most common)
Not to be confused with the three Ps by which exchange can occur: person, post, phone.
Completion
What are the main steps required of the solicitors upon completion under the Code of Completion by Post?
Buyer’s solicitor:
* Sends completion money by bank transfer
Seller’s solicitor:
* Acts as agent for the buyer’s solicitor (dating and executing the transfer document, etc.)
* Notifies buyer immediately after becoming aware completion money has been received
* Completes the transfer documents upon receipt of completion money
* Confirms when completion has taken place and notifies the keyholder to release the keys to the buyer
The latest time the seller’s solicitor can notify the buyer’s solicitor that completion has taken place is the end of working day following completion
Completion
What does merger on completion mean and what does it mean for the buyer?
On completion, the contract merges with the purchase deed, meaning the buyer can no longer sue on contract terms (unless the contract provides it will not merge on completion)
Post-completition
Within what time of completion must the buyer’s solicitor send the Stamp Duty Land Tax Form and pay tax?
Within 14 days of completion, even if no tax is payable
Post-completition
What are the main steps required of the solicitors if the transaction was an assignment of an existing lease?
Seller’s solicitor:
* Send buyer’s solicitor the original lease and licence to assign
* Prepare final service charge adjustment
Buyer’s solicitor:
* Arrange payment of SDLT
* Serve notice of the assignment and any new mortgages on the landlord
* Register transfer of lease, and any new mortgages at HMLR
Post-completition
What is the effect of first registration on the title deeds?
They no longer have legal effect
Delayed completion and remedies
What remedies are available to the buyer if any plan or statement in the contract was misleading or inaccurate?
Also available to either party for any breach, i.e not completing
When is option 2 only available?
- Damages
- Rescission
Rescission only available if error or omission was fraudulent or reckless, or the property was substantially different from what the buyer thought they were getting (to their detriment)
Delayed completion and remedies
Where there was an error or omission, or misleading statement, only when is rescission available to a buyer?
- Error or omission was fraudulent or reckless
- Property was substantially different from what the buyer thought they were getting (to their detriment)
- Landlord’s consent to assign not forthcoming
Delayed completion and remedies
What is the only circumstance where delay will give the innocent party the right to rescind the contract outright?
What is required for this in a residential property context?
Only where time was of the essence
In a residential property context, that time is of the essence must be specified as a special condition in the contract
Delayed completion and remedies
Even if time is not of the essence, what does any delay in completion, however minimal, give rise to?
What is this calculated based on?
Damages in the form of an interest penalty
Calculated based on the purchase money outstanding, i.e. purchase price minus deposit
Delayed completion and remedies
As long as they notify the delaying party, what other option instead of damages is available to an innocent buyer where there is a tenant in situ in the property?
They can elect to take the rental income instead of the interest
Delayed completion and remedies
Where completion is delayed and time is not of the essence, what must the innocent party serve on the breaching party if they want to set the ball in motion toward being able to cancel the contract?
What is the effect of this?
A notice to complete
It makes time of the essence
Delayed completion and remedies
From what point can a notice to complete be served, and what three things must be true of the party serving?
What is a notice to complete not available?
Any time after completion was due but not after it has taken place, and innocent party must be ready, able, and willing to complete
When completion has already occurred
Delayed completion and remedies
After service of a notice to complete, how long does the delaying party have to complete?
Ten working days
Delayed completion and remedies
Upon receiving a notice to complete, what must the buyer do if they have negotiated and paid a deposit lower than 10% to the seller?
Advance enough funds such that 10% of the purchase price has been paid over
Delayed completion and remedies
What are the both parties’ options when the other does not comply with a notice to complete?
What one additional option does the seller have?
- Rescind the contract
- Retain deposit if seller or reclaim deposit if buyer
- Claim damages
Seller also has the option to resell the property
Delayed completion and remedies
What is the function of damages for each party in this situation?
To put them in the position they would have been in if the other party perfomed
Delayed completion and remedies
Pre-completion, where a seller is claiming damages from a buyer, what is the limit on what can be claimed, and what is the effect of this?
Difference in value between contract price and value on resale, so if the resale value is higher, a claim for damages against the original buyer will not be available
Security of tenure for commercial tenants
What is the statutory protection given to commercial tenants under the Landlord and Tenant Act 1954?
Tenant does not have to vacate their property at the end of a contractual lease, unless the landlord uses one of the statutory methods of terminating the lease
Security of tenure for commercial tenants
What are the four ways a tenancy protected by the 1954 Act can be terminated?
- Forfeiture by the landlord
- Surrender by both parties
- Landlord serves a valid section 25 notice (to terminate lease or suggest new lease), or
- Tenant serves a valid section 26 notice (to request a new lease)
Security of tenure for commercial tenants
What are three types of tenancy to which the 1954 Act does not apply?
- Fixed term tenancy not exceeding six months
- Employee in property of employer
- Contracted out tenancy
Security of tenure for commercial tenants
What are the three statutory requirements for a landlord to contract out of the 1954 Act?
- Health warning from landlord
- Declaration from tenant
- Reference in the lease
Security of tenure for commercial tenants
What three things does a health warning explain?
How long before the tenant completes the lease must it be given by the landlord?
A health warning explains:
1. What security of tenure is
2. That the tenant will be giving up these rights, and
3. That they should seek professional advice
14 days, unless waived by tenant by signing a statutory declaration in front of an independent solicitor
Security of tenure for commercial tenants
What two things must the tenant’s declaration in response to the health warning confirm?
Not the one waiving the 14 day period, if relevant
Tenant confirms they:
- Have received the health warning
- Agree to contracting out and to the consequences
Security of tenure for commercial tenants
When are section 25 and section 26 notices relevant?
When the tenancy was not contracted out of the 1954 Act
Security of tenure for commercial tenants
What is a section 25 notice?
When must it be served?
A notice sent by the landlord informing the tenant that they require the premises back at the end of the term, or that they wish to enter into a new lease with the tenant
Served between six and twelve months before they wish the tenancy to end
Security of tenure for commercial tenants
What are the five statutory grounds, one of which must be contained in a section 25 notice?
One of which concerns tenant fault and four of which do not
What is the impact of the discretionary grounds?
Discretionary:
- Breach of obligation (failure to repair, persistent delay in paying rent, or other substantial breach (tenant fault)
- Landlord requires whole premises (if tenant only rents part) (no tenant fault)
Not discretionary (all no tenant fault):
- Has suitable alternative premises for the tenant
- Intends to demolish or reconstruct premises which cannot be done with tenant in occupation
- Intends to occupy premises himself
Even if landlord argues and proves a discretionary ground, the court still has discretion to order a new tenancy
Security of tenure for commercial tenants
What is a section 26 notice?
When must it be served?
A notice sent by the tenant requesting a new lease
Served between six and twelve months before they wish the tenancy to end
Security of tenure for commercial tenants
After receiving a section 26 notice, how long does the landlord have to inform the tenant if they intend to oppose the request?
What must a landlord do in response to a section 26 notice if they are unwilling to agree to a new lease?
Two months
If unwilling to agree to a new lease, landlord must justify their refusal by reference to one of the statutory grounds they would be able to use for their own section 25 notice
Security of tenure for commercial tenants
What is a tenant entitled to if a landlord quits the lease using a no-fault ground?
Why is the tenant not entitled to this where there is alternative premises?
Compensation, on the basis that they have not done anything wrong
Because they will not have suffered any loss
Security of tenure for commercial tenants
What determines how compensation is computed when a tenant is entitled upon to termination due to a no-fault ground?
Whether the tenant has been in occupation for 14 years or less
Security of tenure for commercial tenants
How is compensation calculated when the tenant has been in occupation for (1) less than 14 years and (2) at least 14 years?
What can the 14 year period be made up of?
- The ratable value of the premises, i.e. one year’s rent
- Twice the ratable value of the premises
If the tenant took over the business from someone and their combined tenancy is 14 years, it will count
Security of tenure for commercial tenants
In a section 25 or 26 situation, what is the maximum length a court will order the new lease to be where the lease itself is silent as to term?
15 years
