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prop > 3. Drafting contract and exchange of contracts > Flashcards

3. Drafting contract and exchange of contracts Flashcards

1
Q

contract for sale of land must satisfy 3 elements to be binding

A

s. 2 LP(MP)A 1989
1. be in writing
2. incorporate all terms parties expressly agreed
3. signed by, or on behalf of, each party to the contract

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2
Q

indemnity covenant checklist

A
  1. is there a PC
  2. is there an indemnity in Proprietorship Reg
  3. if yes - S will insist B enters one, and SCPC 7.6.5 says B will
  4. put special condition in contract agreeing wording of the indemnity
  5. indemnity covenant itself is in the transfer (TR1)
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3
Q

VAT on commercial prop transactions = general position

A

supply of prop = generally exempt from VAT

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4
Q

VAT on commercial prop transactions = EXCEPTIONS

A

ONE - SALE OF NEW COM BUILDING (3 years from date it is completed)

  • S must account to HMRC for VAT at 20% purchase price
  • B asked to meet cost of VAT on top

TWO - OPTION TO TAX (OLD COM BUILDING)

  • S can opt to tax
  • might do this bc supplier can recover any VAT it incurred re: building (e.g. refurbishment works)
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5
Q

VAT = SCPCs

A

SCPC anticipates S will recover VAT from buyer (SCPS2)

IF NO VAT - TICK CONDITION A1 (special conditions) to disapply SCPC 2

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6
Q

drafting contract for sale - checklist

A
  1. check contract contains everything in Heads of Term
  2. check front page
  3. draft any further special conditions
  4. check typos
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7
Q

drafting contract for sale - seller’s name

A

matches Official Copies/root of title

  • must be legal entity (partnership is not one)
  • if partnership - do max of 4 individual partners

“[company] incorporated and registered in England and Wales with the company number [XXX] whose registered office is at [address]”

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8
Q

drafting contract for sale - buyer’s name

A

match Official Copies/Root of Title

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9
Q

drafting contract for sale - property

A

check address and title number matches official copies/root of title

(if property not as described, B may have a remedy for misrepresentation and breach of contract - SCPC 10.1)

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10
Q

drafting contract for sale - specified incumbrances

A

“The property is sold subject to matters contained and referred to in entry [ ] of the Charges Register of Title Number [ ]”

does not include mortgage (S not selling property subject to it)

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11
Q

drafting contract for sale - date

A

[date to be entered at exchange of contracts]

if left blank, SCPC 9.1.1 prevents contracts being void for uncertainty but if filled in, date overrides 9.1.1

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12
Q

drafting contract for sale - completion date

A

[date to be entered at exchange of contracts]

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13
Q

drafting contract for sale - contract rate

A

3-5% (lower better for B)

if no figure, SCPC 1.1.1(2)

This is the annual rate of interest at which compensation for late completion is assessed

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14
Q

drafting contract for sale - purchase price

A

write in from heads of term

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15
Q

drafting contract for sale - deposit

A

SCPC 3.2.1 says 10% (this can be varied by agreement)

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16
Q

drafting contract for sale -balance

A

purchase price minus deposit

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17
Q

S’s duty of disclosure = what S must disclose

A

LATENT incumbrance (not apparant on inspection)

DEFECTS IN TITLE (e.g. RC, PC, easement)

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18
Q

S’s duty of disclosure = what S does not need to disclose

A

PATENT incumbrnace (apparent on inspection)

PHYSICAL DEFECTS (e.g. rising damp or subsidence)

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19
Q

title guarentee - special conditions

A

full title guarnetee = normal

limited title guarentee = e.g. if trustee or PR (tick box 3)

different title guarentee = e.g. 1 gives full, 1 gives limited (e.g. if appointed to overreach TC) (special condition)

No title guarentee = B has no remedy against S if any difficulties with title following completion (remove standard condition 7.6.2 + do not tick box 3)

20
Q

vacant posession

A

IF TENANCIES: tick 2nd box 4 and attach list of leases (and delete first box 4) OR state “Property is sold subject to the lease to [ ] (occupying pursuant to a 10yr lease dated [ ]…but otherwise…”

IF NO TENANCIES: tick box 4 (delete 2nd box in box 4)

21
Q

PAYMENT into another bank account (other than solicitors)

A

tick box 6 and provide details

22
Q

time for completion

A

SCPC 9.1.2 = 2PM

tick box 7 to agree new time

23
Q

Boxes A2, B, C

A

Cross these out entirely - we don’t look at it in PLP

24
Q

indemnity covenant special condition

A

“The transfer to the buyer will contain the following provision…

the Transferee covenants with the Transferor to observe and perform the covenants contained or referred to in entry [] of the Charges Register of Title Number [ ] and to indemnify the Transferor against any liability for any future breach or non-observance of those covenants”

25
Q

non-owning occupier special condition

A

on seperate document:
“I, X, declare I have no legal or equitable interest in [address] and I will vacate the property on or before [time] on [the completion date]”

on contract:
“The seller will hand to the buyer, on completion date, a declaration of waiver in the form attached to this contract, signed by X, and dated at the date of this contract”

26
Q

removing a fixture special condition

A

“[If the seller receives Listed Building Consent from X council], the seller will remove the college crest currently affixed in the [ ] at the property before the completion date, provided that the seller will make good any damage caused to the reasonable satisfaction of the buyer”

27
Q

RC insurance - special condition

A

S must obtain RC insurance
re: what breaches?
provide B with original policy on/before completion date
share cost of premium qualitly
B will pay S appropriate sum within X days of receipt of evidence of premium paid by S

28
Q

regularisation certificate special condition

A

“The seller will, on or before the completion date, obtain a regularisation certificate to approve the building of X at the property”

29
Q

Repairing a fence special condition

A

“The seller will, on or before the completion date, ensure that the fence referred to in covenant [] of the schedule of covenants contained in the Charges Register of Title Number [] is put into a good state of repair”

30
Q

occupation before completion - special condition

A

“The buyer shall be permitted to access the property between the hours of 9am and 5pm Monday to Friday for the sole purpose of…”

“The buyer shall return the keys of the property to the seller at the address listed on the front page of this contract before Xpm each day the buyer accesses the property”

“The buyer shall make good any damage “

31
Q

draft certifiate of title - when to send

A

prior to exchange of contract

  • send to lender’s bank’s solicitor for approval
  • if wait till after, danger B commits to contract without mortgage funds complete
  • send to buyer report on title too

before completion
- check with lender that money will be sent for completino

on day of completion

  • send signed, dated, final form certificate of title to lender/their certificate
  • acts as a formal request for mortgage money (to be released to B’s solicitor)
32
Q

pre-exchange steps

A

ONE - completion date (confirm with client)

TWO - contract (agree and finalise form of contract and send to client ready to sign)

THREE - deposit (electronic transfer, make sure client sends to firm and u have cleared funds in client account)

FOUR - send draft certificate of title to lender’s solicitor

FIVE - obtain instructions from client that client wants to exchange

(check searches and docs and whether survey has been carried out)

  • check B has completion monies to be ready for completion
  • check mortgage offer is acceptable and received and whether B has to do anything to accept the offer
33
Q

formula B auto undertakings

A
  1. hold signed part on other side’s order
  2. send on that date by 1st class post
  3. send deposit by cheque
34
Q

risk between completion and exchange

A

on B

  • s has no obligation to insure unless contract provides for this (SCPC 8.1)
  • get B to get insurance cover from exchange if S has no obligation
35
Q

death between exchange and completion

- of single seller or buyer

A

PR obtain grant of representation and sell

PR obliged to complete

36
Q

death between exchange and completion

- of co- seller

A

beneficial JT - survivor sells himself

beneficial TC (1 left) - appoint 2nd trustee to overeach beneficial interest

beneficial TC (2 at least) - remaning sell

37
Q

death between exchange and completion

- co-buyer

A

survivor bound to complete

BUT mortgage - lender might revoke offer of finance so PR has insufficient funds to complete (S will be able to keep deposit if B does not complete)

38
Q

insolvency/bankruptcy between exchange and completion

- corporate seller

A

B only affected if it has notice of entry made at CH (done at CH on morning of completion)

39
Q

insolvency/bankruptcy between exchange and completion

- individual seller

A

B only affected if it has notice of bankruptcy made on relevant register

  • unreg land = on CLC register
  • reg land = restriction on Proprietorship reg

single seller - bankrupt’s assets vests in trustee, if not at undervalue, no reason why purchase won’t go ahead

co-seller - trustee joins sale with solvent owner

40
Q

insolvency/bankruptcy between exchange and completion

- individual buyer

A

benefit of contract passes to B’s trustee in bankruptcy who may not complete transaction

also if need mortgage, lender will revoke (making it impossible to complete)

Trustee can disclaim any contracts it considers onerous so may not have to complete

41
Q

insolvency/bankruptcy between exchange and completion

- corporate buyer

A

benefit of contract passes to administrator/liquidator who may not complete transaction

lender may revoke mortgage

administrator/liquidator can disclaim any contracts it considers onerous so may not have to complete

42
Q

insolvency/bankruptcy between exchange and completion

- co-buyer

A

benefit of bankrupt’s share passes to B’s trustee in bankruptcy

remaining co-owner still contractually obliged to complete but might not be able to do so without mortgage

43
Q

UNDERTAKINGS

A

statement to do/not to do something which is reasonably relied on in the course of practice

  • can be oral
  • failure to do it can result in displinary action and/or enforcement by SRA/court and might have to pay compensation

O(11.2) - must perform undertakings

IB(11.5) - have system to record them

44
Q

seller’s solicitor - pre-exchange steps

A
  1. obtain provisional redemption figure to check proceeds of sale will be sufficient to pay off loans/mortgage
  2. reply to enquiries, agree to contract
  3. prep for exchange, prepare engrossments and obtain signature from his client
  4. obtain instructions for agreed completion date
45
Q

who can sign contract

A
  • client
  • appoint a power of attorney
  • solicitor can with no POA
  • any officer (if company)
  • any member (if partnership) - but need all members to max of 4 who hold legal title to execute purchase deed
46
Q

EXCHANGE BY TELEPHONE

A

exchange of contract must be documented in writing by way of attendance note

any variation of formula must be agreed to at time of exchange and confirmed in writing

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