Exchange of contracts Flashcards
What are the conditions for a valid property contract?
- Must be in writing
- Must incorporate all terms expressly agreed by the parties
- Must be signed by , or behalf of, each party to the contract
Contract conditions: title guarantee
Full title guarantee: default (SCS and SCPC)
Limited title guarantee: no incumbrances were created during the seller’s period of ownership
No title guarantee: offered by administrators/liquidators, no remedy against seller if a title issue arises after completion
Contract conditions: VAT
Residential: usually exempt / 0 rated, under SCS the purchase price is inclusive of VAT
Commercial: SCPC default is standard rate (20%), but can be amended where there are exceptions (property over 3 years old and seller has not made an option to tax)
Contract conditions: indemnity covenant
Seller can require buyer to give an indemnity covenant to continue the chain (burden of positive covenants)
SCS and SCPC make this an obligation, if relevant
Law Society Formula B – the telephone call
- Solicitors will identify any blanks left and agree what wording/figures need to be inserted (e.g. completion date)
- Once both solicitors are happy, they agree that they will exchange the contracts under Law Society Formula B, agree the date and time of exchange, and give each other their names to write on the contract
Law Society Formula B undertakings
To hold the signed contract to the other solicitor’s order – this means that the buyer’s signed part belongs to the seller and vice versa
To post the signed contract to the other solicitor that day by first class post or DX or by hand delivery
Buyer’s solicitor: to send the deposit in the form of payment specified by the contract (SC(P)S provide for the deposit to be held by the solicitor as a stakeholder i.e. solicitor must keep deposit safe and not pay it to the seller until completion, unless the residential seller needs it for a related transaction)
