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SQE1 - Property Practice 🏠 > 3. Completion (Stage 5); Post-Completion (Stage 6); Remedies for Delay; and Commercial Security of Tenure > Flashcards

3. Completion (Stage 5); Post-Completion (Stage 6); Remedies for Delay; and Commercial Security of Tenure Flashcards

1
Q

What are the three methods by which completion can take place, and what should these not be confused with?

A
  1. Personal attendance
  2. Agent
  3. Post (most common)

Not to be confused with the three Ps by which exchange can occur: person, post, phone.

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2
Q

What does merger on completion mean and what does it mean for the buyer?

A

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)

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3
Q

How long after completion must the buyer’s solicitor send the SDLT Form and pay tax?

A

Within 14 days of completion, even if no tax is payable

  • HMRC issues SDLT5 as proof that tax has been paid.
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4
Q

What are the implications of missing the agreed completion time?

A

Completion is deemed to take place the next working day.
* particularly problematic if planned completion was on a Friday.

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5
Q

How long after completion must the buyer’s solicitor send the LTT Form and pay tax?

A

Within 14 days of completion, even if no tax is payable

  • Wales Revenue Authority then issue a WRA certificate as proof that tax has been paid.
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6
Q

Within what time of completion must buyer’s solicitor register the title for (1) registered and (2) unregistered property?

A

Registered: 30 days
Unregistered: Two months

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7
Q

What is the effect of first registration on the title deeds?

A

They no longer have legal effect

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8
Q

Delayed Completion and Remedies

What is the only circumstance where delay will give the innocent party the right to cancel the contract outright?

A

Only where time was of the essence

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9
Q

Delayed Completion and Remedies

Under the Standard Conditions, what is required for time to be of the essence in a residential context?

A

It must be specified in the contract

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10
Q

Delayed Completion and Remedies

Even if time is not of the essence, what does any delay in completion, however minimal, give rise to?

A

Damages in the form of an interest penalty

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11
Q

Delayed Completion and Remedies

What is the interest penalty calculated on?

A

The proceeds outstanding, i.e. purchase price minus deposit

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12
Q

Delayed Completion and Remedies

As long as they notify the delaying party, what other option is available to an innocent buyer where there is a tenant in situ in the property?

A

They can elect to take the rental income instead of the interest

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13
Q

Completion

When does time become of the essence ?

A

Once a notice to complete is served.
- 10 working days to complete, failure to gives rise to right to rescind.

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14
Q

Completion

From what point can a notice to complete be served, and what three things must be true of the party serving?

A

Any time after completion was due but not after it has taken place, and innocent party must be ready, able, and willing to complete

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15
Q

Completion

After service of a notice to complete, how long does the delaying party have to complete?

A

Ten working days

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16
Q

Completion

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?

A

Top up deposit to 10%

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17
Q

What are the seller’s options when the buyer does not comply with a notice to complete?

A
  1. Rescind the contract
  2. Retain deposit
  3. Claim damages
  4. Resell property
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18
Q

What are the buyer’s options when the seller does not comply with a notice to complete?

A
  1. Rescind the contract
  2. Reclaim deposit with interest at the contract rate
  3. Claim damages
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19
Q

What remedies are available for other pre-completion breaches, depending on the breach?

A
  1. Specific performance
  2. Damages
  3. Rescission
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20
Q

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?

A

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

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21
Q

Under the Standard Conditions, in what two situations is rescission available pre-completion?

A
  1. Misrepresentation because of an error or omission
  2. Landlord’s consent to assignment is not forthcoming
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22
Q

One of what two conditions must be met to rescind a contract for misrepresentation under the Standard Conditions pre-completion?

A
  1. Element of fraud or recklessness, or
  2. Property is substantially different from what the innocent party expected to take, to their detriment
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23
Q

What must be true of the misdescription to allow damages or rescission pre-completion?

A

It must be significant

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24
Q

What transfer form must be completed to transfer the entirety of a leasehold/freehold title?

A

TR1 Form

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25
Q

What transfer form must be completed to transfer part of a leasehold/freehold title?

A

TP1 Form

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26
Q

Procedure for completion

A

1- buyer’s solicitor drafts deed of transfer (engrossment) and sends it to seller’s solicitor
2- S’s solicitor sends it to the seller to execute.
3- S’s solicitor holds undated, but executed transfer deed until completion date.

27
Q

Can a buyer occupy the property before completion?

A

Yes, but would be regarded as a licensee under the standard conditions.

28
Q

At exchange, who is tasked with drafting the contract?

A

seller’s solicitor

29
Q

Under the Standard Conditions, are both the buyer and seller liable to pay each other contractual compensation where there is a delay in completion?

A

SC (residential) - either party may be liable for completion.

SCPC (commercial) - only the buyer is liable for compensation.

30
Q

For registered land, what form must be completed and sent to the HMRC post-completion, and what purpose does it serve?

A

Form AP01 - submit within the next 30 days following completion.
- registers buyer as registered proprietor and lender as holder of new mortgage over the property.
- removes seller’s mortgage (if form DS1 is attached)

31
Q

What additional documentation should be sent alongside Form AP01 (post-completion)?

A
  • certified copy of TR1
  • HMLR fee
  • SDLT5/WRA certificate
  • Form DS1 (what old lender provides as proof that mortgage was discharged)
32
Q

For unregistered land, what forms must be completed and sent to the HMRC post-completion?

A

Use Form FR1 - plus unreg specific bits below
* Documents from epitome of title
* Contract
* Pre-contract searches
* Pre-completion search certificates

33
Q

When does legal title pass for
registered land?

A

once buyer is registered at HMLR

34
Q

Where no completion date is specified, what is the default deadline provided in the Standard Conditions?

A

20 working days after the date of the contract (SC 6.1.1)

35
Q

What will the court take into account when deciding on whether to make an order for rectification?

A

where it would be unjust to the registered proprietor.
- indemnity can be claimed by party suffering a loss as a result of the rectification, provided they did not play a part in causing it.
- rectification can be either of purchase deed or contract.
- apply to First-tier Tribunal (Property Chamber)

36
Q

In what context might a seller be entitled to claim a lien over the property?

A

where not all the purchase money has been paid at completion, then give seller equitable right to apply to court to sell property or set aside contract.
- needs to be protected by registration either as class V(iii) land charge or as notice at L.R.

37
Q

How are the SCs and the SCPCs different in respect of compensation due under their respective terms?

A

SCPCs only the seller has right to claim compensation, whereas in the SCs both parties can.
* implication - buyer needs to have recourse to the common law.

38
Q

What are the respective forms that must be send post-completion for both registered and unregistered land?

A

AP1 - application to register disposition of a registered title
* within OS1/2 priority period.

FR1 - for unregistered title
* within 2 months of ocmpletion

39
Q

What information is contained in Forms DS1 and DS3 respectively?

A

executed by lender.
* DS1 - discharge over whole of reg title.
* DS3 dischage over part of reg. title

40
Q

When should Form DI be used?

A

to disclose any overriding interests

41
Q

What pre-completion searches are carried out?

A

Property-related
* Registered land - OS1 or OS2 search (30 working days)
* Unregistered land - K15 search (15 working days)

Confer a priority period on party in whose favour search is conducted.
* if lender is involved, the search should be conducted in their name.

Solvency-related
* if acting for lender and buyer - bankruptcy seller agains the buyer (15 days priority)
* If buyer is a company and lender is involved - company search (no priority, so carry out as late as possible)
* If seller is a company - company search against seller.

42
Q

When will a buyer also execute the transfer form at completion?

A
  • Declaration of trust
  • New right is created (i.e. indemnity covenant)
43
Q

How is completion generally conducted?

A

By post adhering to Law Society Conveyancing Protocol

  • seller solicitor acts as agent for the buyer’s solicitor and undertakes to follow the completion procedure.
  • Triggered once seller’s solicitor receive monies.
  • Undertakes to send executed transfer form by 1st class form/DX on same day.
44
Q

What forms need to be submitted to register a buyer’s title?

A

Registered land - AP1 Form
* TR1 Form
* DS1 (if dischaging an existing mortgage)
* SDLT5 or WRA

Unregistered land - FR1 Form
* DI Form

45
Q

Taxation

What must a buyer pay before it can register its title?

A

Pay SDLT/LTT

46
Q

Taxation

How many days does a buyer have to pay LTT?

A

30 days from completion

47
Q

Taxation

What is first time buyers relief?

A

A discount (relief) is applicable for a first-time buyer where the purchase price is no more than £625,000.
* If there is more than one person buying, all must be first-time buyers.

No SDLT for the first £425,000 of the purchase price, and 5% on any part of the price over £425,000 (but not exceeding £625,000).

Only applies to SDLT.

48
Q

Taxation

What are the implications of buying a second property for SDLT?

A

SDLT of 3% is charged on the whole of the purchase price.

  • Calculate the SDLT that would be chargeable as usual, and then add 3% of the total purchase price.
49
Q

Taxation

What can be excluded from the purchase price for the purposes of calculating SDLT/LTT in residential transactions?

A
  • Parties can allocate a separate value to contents, such as carpets, white goods and furniture, etc - will not form part of the purchase price for the purposes of the SDLT/LTT calculation.
  • Care must be taken that it is a genuine value, as tax authorities may otherwise consider it tax fraud.
50
Q

Where VAT is payable on the purchase price, does the SDLT calculation include VAT due?

A

Yes

51
Q

Taxation

What exemptions may reduce a residential sellers’ CGT liability?

A

Annual exemption
* £6,000 per year.

Private residence relief
* it has been the person’s main home for all the time that they lived in it (except for allowed absences)
* they have not let it out (other than taking a lodger)
* it has not been used for business purposes (using a room as a temporary office is ok)
* the grounds including all buildings are less than 5,000 square metres
* Not bought just to make a gain
* Married couples and civil partners can only treat one property as their main home (cannot each have one)

52
Q

Taxation

What exemptions may reduce a business sellers’ CGT liability?

A

Business Property Disposal Relief
* Owned for at least 2 years prior to disposal date.
* Decreases CGT liability from 20% to 10% for qualifying disposals for up to £1 million (in one’s lifetime).
* Not available to investors or non-trading businesses - ie. buying a home and letting out as investments ≠ qualify.

53
Q

Taxation

What can be deducted from a taxpayer’s taxable gain on sale of their property?

A
  • costs incurred in acquiring the asset (such as conveyancers’ fees for the purchase)
  • costs incurred that contribute to the value of the asset (such as the cost of building an extension but not costs of maintenance or repair)
  • costs incurred in disposing of the asset (such as conveyancers’ fees for the sale and estate agents’ commission)
54
Q

What is the difference between the remedies available for delayed completion in residential compared to commercial transactions?

A
  • SCs - either party may be liable to pay contractual compensation.
  • SCPCs - only the buyer is liable to pay contractual compensation.
55
Q

What happens to the deposit if the buyer fails to complete?

A

they will forfeit the deposit

56
Q

Who is responsible for drafting the transfer deed signed at completion?

A

Buyer’s solicitors
(TR1 Form)

57
Q

What is the difference between who signs the transfer deed where a lease is assigned versus granted?

A
  • On assignment, the deed is typically signed by the outgoing tenant and the incoming tenant.
  • On grant, the deed is signed by landlord.
58
Q

When is the mortgage deed executed (i.e. dated)?

A

after the TR1 has been dated.
* lender’s solicitor will do this - or buyer’s depending on if these are two different people.

59
Q

How must money be paid at completion under the standard conditions?

A

completion money to be paid by direct transfer/ electronic means in cleared funds from an account held in the name of a conveyancer at a clearing bank.
* buyer will first send their solicitors the funds needed to complete.

60
Q

When and why does a deed need to be witnessed?

A

Where the deed is executed by a private individual, the signature must be witnessed by an
independent witness, to counter any potential allegation of undue influence

61
Q

Under what amount is SDLT not payable?

A

£250,000

62
Q

What are the implications of purchasing a second home for SDLT purposes?

A

Additional 3% rate payable on top of standard rates.

This increased rate applies to properties bought for £40,000 or more.

63
Q

What are the implications of purchasing a home as a non resident for SDLT?

A

pay an additional 2% on top of the existing Stamp Duty rates for properties costing more than £40,000.

SQE1 - Property Practice 🏠 (4 decks)

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