Due Diligence Flashcards
What is conveyancing?
The process of transferring the ownership of a property
At what stage in a property transaction will the parties be bound?
Exchange of contracts
What are the two key milestones of a freehold property transaction?
Exchange of contracts (not compulsory but useful as fixes completion date, any conditions that must be fulfilled pre-completion; records agreed terms
Completion (bulk of purchase money paid; transfer deed is completed to transfer property to buyer)
What are the 3 stages of a freehold property transaction?
Seller
↓
Pre-contract
↓
Exchange of contracts
↓
Pre-completion
↓
Completion
↓
Post-completion
↓
Buyer
What is the principle of caveat emptor?
‘Let the buyer beware’
Seller not obliged to disclose information about property (other than limited matters about title) & not liable for any defects which later come to light
ie. Onus is on buyer to discover as much as possible about property before exchanging contracts
What is the Law Society Conveyancing Protocol?
Applies to residential conveyancing only
Sets out how to carry out residential sale & purchase + standard docs
Who must comply with the Law Society Conveyancing Protocol?
All firms undertaking residential conveyancing & who want to be members of The Law Society’s Conveyancing Quality Scheme
Can you act for seller & buyer?
No
- High risk of conflict where land being transferred for value, especially where client’s don’t have equal bargaining power or negotiation on price
- The ‘substantially common interest’ exception does not apply to propery purchases
Can you act for joint buyers?
Usually acceptable provided no conflict or significant risk of conflict
(eg. may be necessary to advise residential buyers separately about how they want to hold equitable title in property if aren’t married)
Can you act for the borrower & the lender?
Usually acceptable (more so in residential transactions) - provided there isn’t conflict or significant risk of conflict
High risk of conflict if:
- Mortgage not on standard terms
- Not using approved certificate of title
Remember certain conditions must be complied with for the substantially common interest exception, ie. informed written consent, safeguards, reasonable!
Can you act for joint borrowers in a property transaction?
Usually acceptable provided there isn’t conflict or high risk of conflict
eg. Conflict where matrimonial home owned by couple jointly & one of them agreed to mortgage as security for business loan
What are the Etridge guidelines?
Guidlelines solicitors must follow when acting for two borrowers in situation where property charged in return for loan that is not made to all the property owners
- Lender, with eg. husband’s consent, provides solicitor with information about the loan
- Solicitor explains to eg. wife in face-to-face meeting without husband
- Solicitor checks if wife wishes to proceed & gives her advice if think not in her best interests
Can a solicitor act in a ‘contract race’?
‘Contract race’: pre-contract package sent to multiple buyers who then compete to be ready to exchange contracts first
Allowed so long as all prospective buyers know they are in a race
→ If seller refuses to disclose this, solicitor must stop acting
What are two things the seller’s solicitor does at the pre-contract stage?
Produce evidence of title for the buyer’s solicitor & drafts the contract
What is something the buyer’s solicitor does at the pre-contract stage?
Raises pre-contract searches & enquiries
