Contract and Exchange Flashcards
What are the similar aims that a buyer/lender would have in a residential transaction?
- ensure property is worth what buyer paid
- ensure suitable for its purpose
- easy to sell if the buyer wants to move or lender needs to repossess and sell
Why is there a low risk of conflict when acting for buyer/lender in residential transactions?
- high street lender = standard non-negotiable mortgage terms, conditions documents
- solicitor’s discretion in acting is tightly controlled by standard instructions
What does the lender’s solicitor do in commercial transactions?
- specify enquiries and searches needed
- ask buyer’s solicitor to send copies of searches and replies to enquiries
- review them and ask buyer’s solicitor to make additional enquiries as required
- draft the legal charge and other security documents
- either draft the certificate of title or ask the buyer’s solicitor to provide it
What is a mortgage offer?
formal offer by lender to lend, subject to being satisfied with transaction + security (the property) (set out terms and conditions of the loan)
What is a certificate of title?
document where solicitor certifies that the title is satisfactory for lending
What is a facility letter?
commercial equivalent of a mortgage offer (terms and conditions of the loan)
What is a legal charge/mortgage deed?
creates the security interest and registered at LR
o the security is a charge by way of legal mortgage - gives lender right to repossess.
What is the format of a certificate of title for residential transactions?
usually a one page form which is completed and signed
What is the format of a certificate of title for commercial transactions?
City of London Law Society (CCLS) industry standard. series of statements that would be given if the property title is in perfect order. solicitor must give a disclosure after a statement if any are incorrect.
What are the formalities of the contract for sale?
- in writing
- incorporate all the terms which the parties have expressly agreed
- be signed by, or on behalf of, each party to the contract
When might a contract be unnecessary?
- a gift of property between family members
- land of low value
Why do we need a contract for sale?
- fix a completion date – for money and practical arrangements eg removal vans
- tie related transactions
- set out related obligations – eg buying furniture
- include conditions, such as obtaining specific planning permission
What is the standard form contract for sale?
- almost always standard form residential contract
- SFRC refers to Standard Conditions of Sale
- commercial standard contract incorporates the Standard Commercial Property Conditions
What is the tailor made contract for sale?
- Commercial – often firm’s own precedent bank/sources eg Practical Law
- contracts tend to run to more pages
- usually incorporate Standard Commercial Property Conditions and amend
- may be weighted in favour of seller expecting buyer’s solicitor to negotiate terms
What are the standard conditions of sale?
- incorporated into residential contracts
- LS Conv Protocol = obligatory
- also used for simple/low value commercial
What are the standard commercial property conditions?
- incorporate into most commercial transactions
- more detail on relevance to commercial property eg taxation, occupational leases
When can special conditions be used?
- standard form contracts have some tick boxes to choose as appropriate
- Seller’s solicitor following protocol = add other special conditions if absolutely necessary
- Otherwise matter of negotiation
What are the contract conditions for specified incumbrances?
Seller must disclose:
* Latent incumbrances - rights burdening the property not apparent on inspection eg covenants/easements
* Defects in title - issues that cast doubt on the seller’s ownership/ rights that affect it eg deed containing covenant missing
Standard conditions amend duty and list incumbrances need not disclose.
What are the specified incumbrances for Standard Conditions of Sale?
a) specified in the contract
b) discoverable by inspection before date of contract
c) seller does not/could not reasonably know about
d) those, other than mortgages, which the buyer knows about
e) Entries made before date of contract except in LR/Land Charges Dept/CH
f) public requirements