Ch3: Drafting the contract

Question 1

What are the 3 requirements for a binding contract for the sale of land?

Answer 1

Law of Property (Miscellaneous Provisions Act 1989)
• be in writing

• incorporate all the terms which the parties have expressly agreed (either in one document or, if contracts are exchanged, in each document);
• be signed by, or on behalf of, each party to the contract

Question 2

What does SCPC 1.4 say?

Answer 2

Assignment

The contract is personal to the buyer, which means the buyer cannot transfer the right to buy the property to a third party.

Question 3

What does SCPC 1.5 say?

Answer 3

Third Party Rights

The Contracts (Rights of Third Parties) Act 1999 does not apply to the contract.

Question 4

What does SCPC 7.6.5 say?

Answer 4

Indemnity from buyer

Requires the buyer to give an indemnity to the seller in the transfer deed.

This is when if there is a Note in the Proprietorship Register of the title to the property confirming that the seller gave an indemnity covenant.

Question 5

What does SCPC 9.8 say?

Answer 5

Notice to Complete

Time is not of the essence for a contract under the SCPS.

To force the completion of the sale a seller may serve a notice to complete on the buyer if the buyer has not completed on the completion date set out in the contract.

Question 6

What does SCPC 10 say?

Answer 6

Sets out the remedies available to the seller and the buyer in the event of default by the other party.

Question 7

What does SCPC 10.1 deal with?

Answer 7

Deals with remedies available in the case of misrepresentation

Question 8

What does SCPC 10.3 deal with?

Answer 8

Remedies available in the case of late completion

Question 9

What does SCPC 3.2.1 say?

Answer 9

The buyer will pay on exchange a deposit of 10% of the purchase price.

Question 10

How should you draft the clause if you don’t want the SCPC apply?

Answer 10

‘SCPS 3.2.1 shall not apply and on or before the date of this contract …..’

Question 11

What should you look out for on the Proprietorship Register relating to that the seller must have legal title to the property?

Answer 11

The ‘registered proprietor’ showing on the Proprietorship Register may not be the legal owner.

Question 12

What are the 3 requirements for the seller in a sale of property contract?

Answer 12

1) The seller must have legal title to the property
2) All legal owners must be parties to the contract
3) The seller must have a legal personality

Question 13

What should you check when a non-limited liability partnership is a seller?

Answer 13

That is not a legal entity and does not have a legal personality.

The Seller in the contract would be a maximum of four named individual partners

The appropriate partners will be determined by the partnership agreement.

Question 14

What should you check about the buyer on a contract?

Answer 14

It is essential that you include all buyers in the draft contract, or the seller could refuse to add buyers after exchange of contracts.

Question 15

What happens if the contract did not clearly describe the land?

Answer 15

The contract could be void for uncertainty

Question 16

What does s.62 of the LPA 1925 say?

Answer 16

The land and everything attached to it and benefitting the property will pass automatically on the sale of the land without having to be set out in the contract and transfer deed.

Question 17

What’s an incumbrance

Answer 17

Something which burdens the land and may restrict the owner or occupier from using the land in a certain way or may restrict the ability to seller freely.

Question 18

Examples of latent incumbrance:

Answer 18

Covenants (both positive and restrictive)

Easements burdening the land being sold

An obligation not to cause a nuisance

A neighbour having a right to use pipes under the land being sold (an easement burdening the land)

Question 19

What are defects in title?

Answer 19

Matters that bring into question the seller’s ownership of the property, or the rights and burdens that affect the property.

Question 20

How are defects come about?

Answer 20

Missing title deeds.
If a deed containing restrictive covenants has been lost it will not be clear how the buyer’s use of the property might be restricted.

Question 21

What does the seller not have a duty to disclose to the buyer?

Answer 21

Patent incumbrance

Physical defects
i.e physical problems with the property such as rising damp or subsidence.

The buyer should be able to ascertain such problems from their survey.

Question 22

Which SCPS contains a list of the incumbrance the property is being sold subject to?

Answer 22

SCPC 4.1.2

Question 23

What are the incumbrances subject to which the property is sold?1

Answer 23

• those specified in the contract
• those discoverable by inspection before the date of the contract
• those the seller does not and could not reasonably know about
• matters, other than mortgages, disclosed or which would have been disclosed by the searches and enquires which a prudent buyer would have made before entering into the contract
• public requirements

Question 24

What do you need to ensure for the seller’s mortgage pre-exchange of contract?

Answer 24

SCPS 4.1.2(d) gives effect that the buyer will buy free of any mortgage the seller has on the property, so there is no need for a special condition in the contract saying that the seller will release the mortgage.

Question 25

What does SCPC 9.1.1 say?

Answer 25

It prevents the contract from being void for uncertainty by stating a completion date of 20 working days from the date of exchange.

Question 26

What does special condition 2 of SCPC say?

Answer 26

Only written representations can be relied on (e.g. the replies to enquiries).

Any oral statement made by the seller will not be binding unless it has been confirmed by the seller or their solicitor in writing before exchange of contract.

Question 27

What does SCPC 8.1 say?

Answer 27

The seller is under no obligation to insure the property unless either the contract specifically provides for this, or where the seller is required to insure the property for another reason.