Chapter 3: Starting a Conveyancing transaction

Question 1

For how long is an Energy Performance Certificate valid?

Answer 1

10 years

Question 2

What kind of building does generally not require an Energy Performance Certificate?

Answer 2

Listed buildings.

Question 3

In a commercial transaction, the commercial estate agent will negotiate heads of terms. What are these?

Answer 3

• Agreed terms between the landlord and prospective tenant.
• Commercial equivalent of the memorandum of sale in residential transactions

Question 4

What is a licence to assign?

Answer 4

• Landlord’s permission for a tenant in occupation to assign the lease to a new incoming tenant
• Sets out landlord’s conditions and is signed by landlord, tenant and incoming tenant.
• Granted once landlord is satisfied incoming tenant able to meet obligations.

Question 5

What is an indicative redemption figure and when will it be requested?

Answer 5

• Funds required to redeem existing mortgage.
• Requested by seller’s solicitor during pre-contract stage to ensure sale proceeds will be sufficient to redeem mortgage.

Question 6

Must a seller disclose latent defects (encumbrances) and patent defects (encumbrances)?

Answer 6

A seller must disclose latent defects (encumbrances).

Question 7

What two remedies are available to the buyer where the seller breaches a duty to disclose?

Answer 7

Withdraw from contract after exchange and claim damages

Question 8

What is the limitation of the duty to disclose latent defects and to which the principle of caveat emptor applies?

Answer 8

Duty to disclose does not extend to physical defects, e.g. rotting wood in the walls

Question 9

If the seller’s solicitor is satisfied that the seller has title, they will draft a contract and send the contract package to the buyer’s solicitors. What is included in the contract package?

Answer 9

1. The draft contract in duplicate.
2. Property Information Form.
3. Copy of title.
4. Any guarantees or copies of planning permission.

Question 10

What is the Law Society Conveyancing Protocol?

Answer 10

A statement of best practice for residential conveyancing transactions. However, it is not designed for use in the purchase of new build homes.

Question 11

What are the parts of the Contract Incorporating the Standard Conditions of Sale?

Answer 11

• Particulars of sale
• Standard conditions of sale
• Special conditions of sale

Question 12

What are the particulars of sale?

Answer 12

Contains key transaction details:
* Date
* Names of parties
* Details of the property
* Any specified encumbrances
* Title guarantee
* Completion date
* Purchase price
* Contents price

Question 13

What are the standard conditions of sale?

Answer 13

The small print of the contract:
* VAT
* Deposit
* Proof of title

Question 14

What are the two parts of the Standard Commercial Property Conditions?

Answer 14

Part one - Covers general issues such as encumbrances and insurance. These apply unless expressly excluded.

Part two - Covers provisions which will only apply if expressly incorporated e.g. details on VAT and taxation.

Question 15

Under the Standard Conditions of Sale, how is the deposit held and by whom?

Answer 15

On exchange of contracts, the buyer’s deposit is held by the seller’s solicitor as stakeholder. The deposit cannot be paid to the seller until completion.

Question 16

What is the distinction between a solicitor holding a deposit as an agent vs stakeholder?

Answer 16

Agent: Seller’s solicitor send’s buyer’s deposit as soon as exchange has taken place.

Stakeholder: Seller’s solicitor holds deposit on behalf of both parties and does not send to seller until completion.

Question 17

Under the Standard Conditions of Sale, even where the parties negotiate a lower deposit, what is the buyer liable for if they breach?

Answer 17

Full 10% deposit

Question 18

Does a contract incorporating the Standard Conditions of Sale include vat?

Answer 18

The purchase price and contents price includes vat unless contract is amended

Question 19

Under the Standard Conditions of Sale, the seller sells the property with full guarantee. What does this guarantee include?

Answer 19

• Seller entitled to sell property
• Seller will, at own cost, do all in their power to transfer title to buyer
• Seller is selling property free of encumbrances and charges other than those already disclosed

Question 20

Under the Standard Conditions of Sale, what is limited title guarantee?

Answer 20

• Seller warrants that they have not created any charges or granted any rights during their period of ownership which have not been disclosed.
• Can be agreed by parties as opposed to full title guarantee

Question 21

Under the Standard Conditions of Sale, what is no title guarantee?

Answer 21

• Land conveyed without title guarantee.
• Typically occurs when seller has no knowledge of property e.g. disposition acquired by way of gift

Question 22

What is an indemnity covenant under the Standard Conditions of Sale?

Answer 22

If the contract discloses obligations on the buyer relating to the property, the buyer agrees to carry out the obligations and to indemnify the seller if the buyer breaches

Question 23

Under the Standard Conditions of Sale, who must insure the property?

Answer 23

• Risk passes to buyer on exchange.
• Seller need not insure property between exchange and completion.

Question 24

If a completion date is not inserted into the contract, when will completion take place under the Standard Conditions of Sale?

Answer 24

20 working days after exchange.

Question 25

What should the buyer's solicitor do when they receive the draft contract?

Answer 25

Investigate title and, if appropriate, raise requisitions (questions)

Question 26

If a defect in title is identified, what is the best way of resolving the problem?

Answer 26

- Enter a deed of variation or deed of rectification. - If problem cannot be resolved via deed, it may be necessary to purchase indemnity insurance