3): Steps in Progressing a Freehold and/or Leasehold Property Transaction to Exchange of Contracts Flashcards
(21 cards)
What are the Standard Conditions of Sale (SCS) and SCPC?
5 points
- 📄 SCS: Standardised for residential and small commercial contracts
- ⚙️ SCPC: Used for complex commercial transactions
- 🧭 Governed by Law Society Conveyancing Protocol
- 📌 SCPC typically used when:
-Tax flexibility needed
-Occupational leases involved
-Greater complexity - ⚖️ Can be amended
What amendments might be made to the SCS/SCPC?
- Specified encumbrances (restrictive covenants, easements)
- Title guarantee:
-Full = land unencumbered
-Limited = seller unaware of adverse interests - Deposit changes
- Method of holding deposit (stakeholder vs agent)
Which SCS’s, SCPCs + general conditions apply?
- SCS (1-8)
- SCPC Part 1 (always applies) + SCPCs 1–12
- SCPC Part 2 (only if inc. by special condition):
A: VAT
B: Capital allowances
C: Reversionary flat interests
What are special conditions and what do they cover?
🧩 Tailor the contract / override standard conditions
🔍 Often cover:
-Title defects, limited/no title guarantee
-Deposit changes (e.g. <10%)
-VAT treatment
-Fixtures/fittings exclusions
-Indemnity covenants
How much is the deposit and how is it paid?
💷 Normally 10% of price
💻 Paid electronically (solicitor to solicitor)
Who holds the deposit and in what capacity?
Seller’s Solicitor as:
👨⚖️ Stakeholder (default):
-Can’t release before completion
🧾 Agent (Special C required):
-Can release on exchange
-⚠️ Risk to buyer if seller defaults
What if the buyer fails to complete?
❌ Seller may forfeit + keep deposit
📈 Interest payable on deposit under SRA Accounts Rules
What is the stakeholder’s position on deposit interest/use?
🔒 No release before completion unless agreed
🔁 May be used for seller’s onward purchase (if buyer agrees)
💰 Interest usually goes to seller on completion
When does risk pass to the buyer and what must they do?
📆 On exchange of contracts (SCS/SCPC)
🔐 Buyer should insure property from that point
Is the seller obliged to insure the property?
❌ No – unless:
🏢 Lease requires it
💸 Lender/contract obliges seller
What if both buyer and seller are insured?
📝 Contract should avoid reducing buyer’s claim
💷 Price reduction may be possible if double insured
When is VAT not payable in property transactions?
In the sale of:
🏠 Private residential property= exempt
🆕 New homes = zero-rated
🏢 Commercial buildings over 3 yrs old = exempt (unless opted to tax)
What is the purpose of the option to tax?
🔄 Turns exempt supply into taxable supply
💵 Enables VAT input recovery by seller
What should the contract say if VAT applies?
🧾 State whether buyer must pay VAT in addition to the purchase price
What must a solicitor do before exchange
✍️ Obtain client’s written authority
📑 Ensure contracts are signed by both parties (same/identical copies)
What are the three formulas for exchange of contracts?
A: One solicitor holds both signed contracts + posts their client’s signed part to other side
B: Each solicitor holds one part – they meet and swap physically
C: Used in chains – exchange by phone with promises to send contracts
What must be recorded after exchange?
📆 Date, time, and parties
🧾 Formula used
✅ Confirmation of undertakings + deposit paid
What are the legal effects of exchange of contracts?
🚫 Neither party can withdraw without breach
⚖️ Binding contract formed
🧯 Risk passes to buyer → must insure
Who should be notified after exchange?
📣 Client
🏠 Estate agent
🏦 Lender
🛡️ Insurer
When should the contract be registered after exchange?
if there are:
🕓 Long delays before completion
⚠️ Doubts about seller’s conduct
❗ Disputes or missed completion date
How is the contract registered depending on land type?
Unregistered land:
🧾 Register a Class C(iv) land charge (estate contract)
Registered land:
📘 Enter a notice on the Register (minor interest)
