Exchange Of Contracts Flashcards
When would a seller have limited or no title guarantee?
If they are a executor or trustee or appointed following the insolvency of the owner.
What does the seller impliedly covenant?
They have the right to dispose of the land
They will do all they reasonably can to transfer the title
In the case of leasehold land, the lease is subsisting at the time of disposal and there is no breach of covenant making the lease liable to forfeiture.
With full title guarantee, the seller will also impliedly covenant that the land is disposed of free from incumbrances other than those the seller does not know about and could not reasonably know about. This is limited to exclude matters which the buyer knows about at the time the disposition is made and those entered into the registers of title
What is the contract rate?
Rate of interest that will be charged if a party is late to complete. Usually 4% above Barclays Bank.
What happens to the deposit paid on exchange if buyer fails to complete?
The seller may forfeit and keep the deposit.
What does the SC provide re deposit?
10% deposit is payable on exchange to the seller’s solicitor as stakeholder. This cannot be paid to seller until completion but may be used as a deposit on a related purchase of a house for the seller.
What does it mean if parties agree for the sellers solicitor to hold the deposit as agent ?
Can be released to the seller immediately after exchange for any purpose whatsoever.
When would an indemnity covenant be necessary?
Where a seller has an ongoing liability even after they part with the land either because they are the original covenantor or they gave an indemnity covenant to the previous seller when they acquired the property. Under the SC and SCOC buyer must give an indemnity to observe the covenants affecting the title and should they breach them, they indemnify the seller should they be sued under their original covenant.
What happens to the risk of damage upon exchange of contracts?
Passes to buyer, so should ensure adequate insurance is in place.
What must a buyers solicitor do if their client is funding the purchase by way of mortgage?
Ensure the buyer has received, understood and if required by the lender, accepted the mortgage offer prior to exchange.
They must explain to the borrower it’s obligations under a mortgage deed and in particular, advise on the consequences in defaulting on the mortgage and powers of the lender in events of default.
What must the buyers solicitor prepare for the lender?
Certificate of title.
What is the purpose of a certificate of title?
Confirms to the lender:
- there are no legal problems with the property
- who will own the property once the sale has completed
- the completion date when the funds are needed
Consists of a series of statements which disclosure needs to be made if any statement rings untrue. If any information in the CoT is wrong, the lender can sue the firm for breach of warranty.
What happens if a solicitor does not have express or implied authority to exchange?
Liable in negligence.
Requirements for creating a binding contract for the sale of land?
Must be in writing
Incorporate all of the agreed terms in one doc
Must be signed by both parties
What are the different formulae’s for exchange?
A - series here one solicitor holes both parts of the contract duly signed
B - where each sol hold their own clients signed contract and undertake to send them to each other by first class post or DX
Both include that the buyer will send the deposit by bankers draft or client account cheque so if it is to be sent electronically then will need to be varied accordingly by agreement between the sols.
C - where two or more properties are being sold
What are the consequences of exchange
Legally binding contract
Seller retains legal title but holds beneficial title on behalf of buyer
Seller must pay outgoings such as community charge or business rates until completion unless contract otherwise provides and buyer bears the risk of any loss or damage to the property
