Contract Flashcards
who usually prepares the contract?
the seller’s solicitor
is a contract necessary?
no, but it is desirable if there will be a gap between the checks and completion
what are the key elements of the contract?
- particulars of sale
- standard conditions
- special conditions
what is included in the particulars of sale?
- date
- buyer + seller details
- FH/LH title
- title number / root of title
- specified incumbrances
- completion date
- contract rate
- purchase price
- deposit
- title guarantee
what is title guarantee?
a legal promise from the seller that they have the right to sell the property
what are title guarantees can be given?
- full title guarantee
- limited title guarantee
- no guarantee
explain the standard conditions
these are the rules which govern the transaction. Every contract must have these. The standard conditions of sale or standard commercial property conditions may be used but they are not mandatory
explain full title guarantee
the seller owns the equitable and legal title. They promise they have the right to sell the property and that its free from undisclosed charges, incumbrances or third party rights
explain limited title guarantee
given by a seller with limited knowledge of the property’s history i.e. a PR, trustee. They guarantee they haven’t done anything themselves to adversely affect the title but make no wider promises.
explain no title guarantee
a seller might give no guarantee in very limited circumstances where they have little/no knowledge i.e. a liquidator selling the property
when are the SCS and SCPC used?
o Standard Conditions of Sale (SCS) = residential + simple commercial
o Standard Commercial Property Conditions (SCPC) = commercial
what is a specified incumbrance?
third party right which passes with transfer of land
what is the position regarding specified incumbrances under SCS/SCPC?
S agrees to sell property free of incumbrances apart from those listed in the standard and special conditions.
what are the specified incumbrances listed under the standard conditions in the SCS/SCPC?
o Those B would have noticed on property inspection
o Those S could not reasonably have known about
o Public requirements e.g. planning regulations
o SCS only B knows about or on a public register (not inc. LR, charges department or CH)
o SCPC only those which would have been uncovered by searches a reasonably prudent buyer would have made
what is the effect if an existing incumbrance is not caught by the standard or special conditions?
it could amount to non-disclosure and breach of contract. B could rescind/claim damages.
give an explanation of the contract rate
this is the interest rate for late completion.
under the SCS/SCPC, what is the contract rate paid on?
the interest is paid on the purchase price (minus the deposit if B is paying the interest)
under the SCS/SCPC, what rate is the contract rate?
law society’s interest rate from time to time in force
what does it mean if the deposit is held by the stakeholder?
it cannot be released to the seller until completion
under the SCS/SCPC, what is the position regarding the deposit (inc. how it is payable)?
B pays 10% of PP on exchange. Paid to S solicitor as stakeholder.
- SCS deposit payable electronically or by check to client account
- SCPC electronic only
what additional provision is there regarding the deposit under the SCS?
SCS allow deposit to be paid to S if using it to purchase property in England for themselves. Unused funds must be held by stakeholder.
under SCS/SCPC, what is the position regarding positive covenants?
B gives an indemnity covenant.
under SCS/SCPC, what is the position regarding liability for damage?
Risk of property damage passes to buyer on exchange
under SCS/SCPC, what is the position regarding insurance?
there is no obligation to insure. However, if insurance is obtained, then there are standard conditions that will apply:
1. If there is a special condition to insure, S must maintain the policy until completion and if the property suffers damage either:
Give B insurance proceeds; or
Assign policy rights
- If B + S both have insurance and B is unable to recover the full insurance proceeds, the PP is reduced
