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Cemap 2&3 Self Testing > 4. Principles Of Mortgage And Property Law > Flashcards

4. Principles Of Mortgage And Property Law Flashcards

1
Q

What is conveyance?

A

The TRANSFER of rights in property

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2
Q

Who is:
1. The mortgagor
2. The mortgagee

A
  1. Borrower
  2. Lender
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3
Q

What 3 acts are included in the Three Property Acts (1925)?
Clue - LLL PCR

A
  1. Law of Property Act
  2. Land Charges Act
  3. Land Registration Act
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4
Q

What are the 3 changes that were brought about by the Three Property Acts (1925)?
Clue - O, LR, LR

A

Change 1. Ownership
Introduced, “fee simple”, freehold and leasehold

Change 2. System of land registration

Change 3. Legal remedies for lender if the borrower defaults or breaks terms of the mortgage

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5
Q

What is “fee simple”?

A

The right for property to be inherited upon death

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6
Q

What is absolute ownership? Who has it

A

Ownership without limits.

Freeholds always have absolute ownership.

Leaseholders have ownership for a term absolute

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7
Q

What other key provisions were introduced by the property acts (1925)? (5)

A
  1. Borrower has right to let mortgaged property, unless deed says otherwise
  2. Lender has right to determine how insurance proceeds are used in claims relating to the mortgaged property
  3. A minor cannot hold interest in land
  4. Lender is not liable for loss if it has to execute its power of sale
  5. Where there are two or more loans secured on a property, priority is determined by date of registration
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8
Q

Define ‘in possession’.

A

The immediate right to occupation.

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9
Q

What is est solum, eius est usque ad coelum et ad inferos?

What are the limitations?

A

Whoever owns the soil, owns everything up to the heavens and down to the depths of the earth

You own the airspace above and groundspace below the property.

Must be for ordinary use and enjoyment (can’t sue planes for flying above)

What you dig beneath can’t be oil, coal, natural gas, gold and silver (this belongs to the crown)

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10
Q

What are the two types of mortgage that are available since the property acts 1925? (used to be lots before). Briefly describe each.

A
  1. Mortgage by the way of legal charge - owner owns the property, debt is secured on the property by lender
  2. Mortgage by demise - lender owns the property. Ownership is transferred to the borrower when debt is repaid.
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11
Q

What type of property can mortgage by demise be arranged on?

A

Only on unregistered property.

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12
Q

In joint property ownership, what are legal owners? How many can there be?

A

Those registered on land registry
Or
If unregistered, those shown in last conveyance

Max of 4 legal owners allowed

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13
Q

In relation to joint ownership, what are equitable owners? What is another name for them?

A

Where there is more than 4 people with right to a property, the 1st 4 will be registered as legal owners and the rest will be equitable owners.

Another name is beneficial owners

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14
Q

Can legal and equitable owners transfer ownership of a property or raise a mortgage against it?

A

Equitable owners do not have the right to transfer or raise a mortgage

Legal owners can do both so long as they all agree

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15
Q

What is joint tenancy? What happens in death of one?

A

Both own 100% of property
On death, remaining one will take over legal ownership automatically.

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16
Q

A man has joint tenancy of a property with his mother. The man passes away and has written in his will that he wants his son to inherit his share of the house. Who is entitled to the share of the property? The mother or son?

A

The mother, joint tenancy cannot be over ridden by any wills or laws of intestacy.

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17
Q

What are tenants in common? What happens in death of one?

A

Both are legal owners of 100% and trustees of the property.

However, each tenant is a beneficial or equitable owner of only a defined interest (proportion of the property)

A tenant can decide who gets control over their beneficial share, but not their legal ownership. On death, the legal ownership automatically transfers to the other tenant and they become the sole legal owner and trustee. They must look after the property in the interest of the beneficial owner until a new legal owner can be appointed.

The property can be sold until there are two legal owners.

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18
Q

What are the obligations and options of the surviving tenant in common?

A
  1. Surviving owner is not obliged to appoint a second legal owner.
  2. The surviving owner can choose to appoint someone as a trustee of the dead owner’s beneficial share. This is often the executor of the dead owners estate. Legal ownership is then transferred into joint legal ownership of the surviving tenant and trustee.
  3. Both legal owners have a duty of care to look after the property in the interest of any beneficial owners.
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19
Q

In joint property ownership, who is responsible for the mortgage?

A

All owners are jointly and severally responsible for the mortgage, regardless of type of tenancy

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20
Q

When someone passes away, their share of any jointly owned property forms part of their estate for IHT purposes. How are the following types of joint owners affected in terms of IHT and how the surviving partner inherits?

  1. Married couples
  2. Unmarried couples
A
  1. Surviving partner becomes legal owner of 100%. No IHT due, married couples are exempt transfers between them.
  2. Surviving partner becomes legal owner of 100%. But, partner’s share becomes part of their estate and IHT is due on anything above the nil rate band. Surviving partner could end up paying IHT on a property that’s already theirs. If they are not selling the house, they will have to find the funds from somewhere to pay the IHT Bill.
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21
Q

Who is the additional residence nil rate band available to?

A

Direct descendents inheriting property.

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22
Q

What is tenure?

A

The way in which the title to property is held

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23
Q

If freehold the best form of title?

A

Usually yes, but not always the best form of secuirty. e.g. freehold flats are usually not suitable for mortgage

24
Q

What is a covenant?

A

Promise to previous owners you will maintain the property in a certain way

25
Q

What is the different in positive and restrictive covenants?

A

positive = something you must do
restrictive = something you can’t do

26
Q

What is a flying freehold?

A

part of a freehold property which extends above or below someone else’s property

27
Q

How much is the original term of a lease normally?

A

commonly 99 year, but can be as much as 999 years

28
Q

What is the head lease?

A

The lease itself, sets out the terms, rent, rights and obligations

29
Q

What is the Lessee?

A

The leaseholder

30
Q

What is the Lessor?

A

Freeholder

31
Q

What is subleasing? is it usually allowed? If so, on what condition?

A

Where a leaseholder creates a lease which allows another person to use the property. Usually allowed so long as the new lease is shorter than the first one.

32
Q

Are help to buy scheme properties allowed to be leasehold?

A

No

33
Q

Who’s responsibility is it to maintain and repair a leasehold property?

A

Leaseholder

34
Q

Who has the right to decide which company insures a leasehold property? the freeholder or leaseholder?

A

Freeholder.

35
Q

What is the usual unexpired lease term that lender require when offering a mortgage?

A

30-40 years past the term of the mortgage itself

36
Q

What is forfeiture?

A

A terminated lease as a result of failing to compy with the lease terms. Normally this would mean that the freeholder would regain ownership of the property, but majority of lenders now include a clause which says if the leaseholder breeches the lease terms then the lender will step in and meet the terms of the lease instead. They will charge the leaseholder for any costs relating to this.

37
Q

Who has to agree for a leasehold block of flats to be turned into commonhold?

A

All leaseholders and the freeholder

38
Q

If a block of flats in converted into commonhold, who owns the following:
1. each flat
2. common areas

A

Flats are owned by the original unit holder, but now on a freehold basis
The Commonhold Association (company) owns the common areas

39
Q

Who is in charge of the Commonhold Association with commonhold properties? How are decisions made?

A

Each unit holder gets a share in the company, only unit holders can be shareholder. However, up to two directors who are not shareholders can be appointed. Shareholder vote in an AGM on issues relating to the building. Shares don’t have to be equal, can be based on property size, but each person gets equal right to vote.

40
Q

What is a commonhold assessment?

A

a fee which unit holders pay to the commonhold association for the running of the company and maintenance of the building

41
Q

What three rights were set out in the commonhold and leasehold reform act (2002)?

A
  1. Right to Buy the Freehold
  2. Right to Extend the Lease
  3. Right to manage
42
Q

What three rights were set out in the commonhold and leasehold reform act (2002)?

A
  1. Right to Buy the Freehold
  2. Right to Extend the Lease
  3. Right to Manage
43
Q

What is enfranchisement?

A

Owners of a leasehold building joining together to buy the freehold

44
Q

What makes a qualifying tenant for having the right to buy a freehold? (5)

A
  1. Original lease at least 21 years
  2. don’t have to live at the property, can be a landlord
  3. Leaseholder cannot be a charitable housing trust
  4. Leaseholder cannot hold more than 2 flats in the building
  5. Lease cannot be for commercial purposes
45
Q

Who has to agree in order to buy the freehold for a block of flats?

A

At lease 50% of leaseholders have to agree. If more than 50% agree, they will buy the freehold and those who didn’t agree will now pay ground rent to them instead.

46
Q

There are also rules on the type of building to enable qualifying tenants to be able to by the leasehold:
1. What is the minimum number of flats in the property?
2. What proportion of the flats must have an original lease of 21 years or more?
3. Can any of the building be use for commercial purposes?

A
  1. 2
  2. two thirds
  3. up to 25% of the building
47
Q

What is a resident landlord? What affect does this have on buying the freehold?

A

Someone who has owned the freehold since before the property was converted into leasehold, and either they or their family have lived within one of the flats within the past 12 months

If a building has 4 or less flats and a resident landlord, the freehold cannot be bought

48
Q

To gain the right to extend a lease, what sort of lease must a tenant have and how long must they have held it for?

A

must have a long lease (originaly 21+ years) and have held it for at least 2 years

49
Q

If a tenant exercises the right to extend a lease, how long will it be extended by? e.g. if someone with a remaining lease of 30 years applies to extend, what will their new lease term be?

A

extended by 90 years

if you extend a 30 year lease, it would become a 120 year lease

50
Q

Extending the lease of a leasehold property usually incurs a premimum. What is the cost of the premimum based upon? What three factors is it determined by?

A

Based upon market value taking into account:
1. Reduction in freeholder’s financial insterest
2. Increase in property value as a result of longer lease
3. Compensation for the loss of ground rent

51
Q

What happens to the ground rent of a property when the lease is extended?

A

It becomes a peppercorn rent, i.e. a negligable amout or zero

52
Q

What two options does a vendor have if they want to sell a property with a short lease?

A
  1. Extend the lease
  2. Begin the process of applying to extend the lease, but assign their right to extend to the buyer (who would normally not be able to extend until after they had owned the lease for 2 years) - this means the new owner would pay the premium instead, so purchase price will be lower than if vendor extends it themselves
53
Q

Can leaseholders who have an original lease of less than 21 years extend the lease?

A

Yes, but they don’t automatically have the right - it is at the discretion of the freeholder. Downside to this is:

  1. ground rent not automatically reduced or cancelled
  2. premimum set by landlord
  3. landlord can refuse
54
Q

What is the right to manage?

A

Taking over the management of a building from teh freeholder by setting up a management company

55
Q

What is the qualifying criteria to exercise the right to manage ?(5)

A

Same as buying freehold:
1. must contain at least 2 flats
2. two thirds must be owned by leaseholders
3. no more than of floor area 25% commercial
4. if 4 or less flats, can’t have a resident landlord
5. at least 50% of leaseholders must agree

56
Q

If the right to manage is exercised, is it the management company or freeholder who is in charge of the following?
1. Maintenance
2. Alterations
3. Enforce lease obligations
4. Begin forfeiture procedures

A
  1. Management company
  2. Freeholder
  3. Management company
  4. Freeholder

Cemap 2&3 Self Testing (29 decks)

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