FLK2 Property Flashcards
What is the purpose of caveat emptor?
This principle means ‘buyer beware’. A buyer should not enter into a contract unless they have carried out the relevant searches, enquiries and survey of the property.
Caveat emptor means that the seller is not obliged to disclose information about the property other than about limited matters of title and would not be liable for any defects in the property which later come to light. But it does not allow the seller to give misleading answers to the buyer’s enquiries.
Can a solicitor act for both a buyer and a seller?
A solicitor cannot act for both if there is a conflict of interest or a significant risk of a conflict of interest. This is particularly the case where the clients do not have equal bargaining power and where there has to be negotiation of the price.
The usual exceptions (I.e. substantially common interest and competing for same objective) DO NOT apply to a buyer/seller scenario.
Can a solicitor act for joint buyers?
A solicitor can only act for joint buyers if there is no conflict of interest or a significant risk of a conflict of interest.
It may be necessary to advise residential buyers separately about how they want to hold the equitable interest in the property, particularly if they are not married or in a civil partnership.
Can a solicitor act for a borrower and a lender?
This is possible unless there is a conflict of interest or a significant risk of a conflict of interest.
When considering acting for a borrower and lender, what would constitute a high risk of conflict?
If the mortgage is not on the standard terms of property to be used as the borrower’s private residence.
The mortgage is a standard mortgage but are not planning on using the approved certificate of title.
The solicitor should therefore not act for both.
Is it standard procedure for a solicitor to act for both lender and borrower in a residential transaction?
Yes, it is very normal for a solicitor to act for both lender and borrower in a residential transaction as the mortgage will usually be on standard terms and an approved certificate of title will be given to the lender.
In which circumstances could a solicitor act for a lender and borrower DESPITE there being a conflict of interest or substantial risk of a conflict of interest?
Even if there is a conflict of interest, if the parties have substantially common interests in relation to a matter and have proved that certain conditions are met, a solicitor can act for both lender and borrower.
Conditions:
- Both clients have given their informed and written consent
- Effective safeguards have been put in place to protect client confidential information
- Solicitor is satisfied that it is reasonable for them to act for both clients
Need to remember the duty of confidentiality and the duty of disclosure.
Would a solicitor usually act for a lender and a borrower at the same time in a large commercial property transaction?
The lender will usually have their own solicitors. This is because the mortgage documents will usually require negotiation and will not be on the standard terms.
But is common for the lender’s solicitor to ask the borrower’s solicitor to carry out the title investigation and the searches and enquiries and to report the results to the lender and the borrower as this avoids duplication of costs and time. The solicitors may agree that this is appropriate if the clients have a substantially common interest as the borrower wants the borrower to obtain good title to the property and they want to ensure that there are no problems affecting the property’s value.
Can a solicitor act for joint borrowers?
This is usually acceptable, as long as there are no conflicts of interest or substantial risks of a conflict of interest.
Can a solicitor withhold the fact that the prospective buyers are in a contract race from the buyers?
A contract race is where a pre-contract package is sent to multiple buyers who then compete to be ready to exchange contracts first.
This is allowed as long as all of the buyers know they are engaged in a race.
A solicitor cannot withhold this information from the buyers even if instructed to do so by the client. This would be misleading the buyers. If the seller does not agree to this disclosure, the solicitor has to stop acting and cannot disclose this to the buyers as they have a duty of confidentiality.
Are undertakings binding even if they out of the solicitor’s control?
Yes
An undertaking is a statement made by or on behalf of a solicitor or the firm to someone who reasonably places reliance on the statement that they will do or not do something.
Solicitors should perform the undertakings and within the agreed time frame. If they fail to do so this is a professional misconduct point.
Can a solicitor advise on mortgages?
A solicitor needs to be careful when advising on mortgages; if the solicitor is carrying out a regulated activity in relation to a regulated mortgage contract, then they must be authorised to do so under FSMA 2000.
They can give out generic advice on the differences of the types of mortgages or arranging the execution of a mortgage that has been chosen with independent advice.
If they do not have the knowledge to provide generic advice, should refer them to someone from the FCA.
If a regulated activity is involved but it is incidental to the provision of professional services I.e. that are regulated by the SRA in the solicitor’s case, they can rely on an exemption to provide advice. To do so, the solicitor has to comply with the SRA Financial Services Scope Rule sand the SRA Financial Services Conduct of Business Rules.
However, the solicitor can only do this is the borrower has taken advice from an independent source and the solicitor is merely endorsing that choice.
What is a regulated mortgage contract?
A regulated mortgage contract is where a) the borrower is an individual, b) the lender is taking a first legal charge over the property in the UK and c) atleast 40% of the property is intended for occupation by the borrower or a member of their immediate family.
What is the law society conveyancing protocol?
This only applies to residential conveyancing.
It standardises the conveyancing process. It is a set of instructions to conveyancers on how to carry out a residential sale and purchase and is accompanied by a series of standardised documents issued under the TransAction brand.
If a law firm wants to be part of the Scheme they have to comply with the Protocol and other measures. Membership of the Scheme is essential if the firm wants to be on the panel of solicitors that is approved by the residential mortgage lenders who approve whether a solicitor can act for a lender where the buyer is taking out a mortgage.
What tax needs to be paid if a commercial property is bought?
Stamp Duty Land Tax/ Land Transaction Tax
VAT (if chargeable)
What tax needs to be paid if a residential property is bought?
Stamp Duty Land Tax/ Land Transaction Tax
CGT but only if they did not use the property as their main residence
Can first time residential buyers claim a relief on SDLT?
Yes, they can claim relief from SDLT if they intend to occupy the property as their main residence and the purchase price is no more than £625,000.
They do not pay anything on purchases up to £425,000 and pay 5% on the portion from £425,001 to £625,000.
When would a residential property buyer have to pay a higher rate of SDLT/LTT?
If the buyer already owns a property and is buying an additional property or if the buyer is not a UK resident.
Is SDLT/LTT charged on the VAT inclusive or VAT exclusive sum for non-residential or mixed use freehold property?
SDLT is charged on the VAT inclusive sum.
How is SDLT paid?
It is paid to HMRC by online bank transfer using an SDLT1 form.
What is the deadline for paying SDLT?
Within 14 days of completion.
What is the difference between SDLT and LTT?
No relief for first time residential buyers
Rates at which tax is charged are different
When is LTT paid?
Must be submitted within 30 days of completion (rather than 14 days for SDLT).
What is CGT?
CGT is a charge on gains made on chargeable assets.
Chargeable assets include freehold and leasehold property and the interests of co-owners in the case of jointly owned property.
If a separate payment to release or modify an easement is made, this also is a disposal.
How is CGT calculated?
It is calculated by deducting the purchase price of the property from its current price.
Some expenditure to acquire or improve the property can also be deducted.
Annual exemption is then deducted and the tax is charged as per the rate set by the Government.
What is private residence relief?
This is a relief that can be claimed to reduce CGT payable on a residential property.
What are the conditions for private residence relief?
It is their only or main residence. If an individual has more than one residence, they need to choose which one should qualify by making an election to HMRC. PPR also available to trustees if it is the beneficiary who’s house is the private residence.
Must have occupied it for the whole period of ownership. Short periods of absence are allowed.
If they own a garden of over 0.5 hectares, they have to pay CGT on the excess. This is unless they can prove that the extra garden was necessary for the reasonable enjoyment of the house.
The relief may be lost if any part of the house is used exclusively for business.
What is VAT charged on?
Taxable supplies = some goods and services that are provided by a taxable person in the course or furtherance of business.
VAT can only be charged if the supplier is a taxable person - what qualifies as a taxable person?
VAT will only be charged if the supplier is a taxable person.
To charge and collect VAT, the supplier must be a taxable person i.e. turnover over the past 12 months has been over £85,000 (the registration limit).
When is VAT paid?
It is collected from each supplier at the end of each VAT period which is usually 3 months.
The supplier has to complete a VAT return online.
How is VAT calculated?
Output tax - income tax = net amount sent to HMRC
This is the VAT that is charged by the supplier on its goods and services. The consumer pays this.
The supplier has to mark out the VAT separately on its invoices when charging its customers.
The supplier deducts the income tax it has paid against the output tax it has charged and only the net amount is sent to HMRC.
When is VAT income tax recoverable?
When the input is attributable to a taxable supply/output supply and there is an immediate and direct link between the two.
What are VAT exempt supplies?
These are businesses that are exempt meaning they cannot register for VAT and therefore cannot recover an input tax.
This means that any output tax cannot be offset against input tax and they end up not being able to recover costs that have gone into the supply goods or service.
Insurance companies, banks and building societies make exempt supplies to customers.
What is the tax rate for standard rated supplies?
20%
What is the tax rate for reduced rate supplies?
5%
What kind of supplies would be classified as reduced rate supplies?
Domestic fuel supplies and certain construction, conversion and renovation services.
What is a zero rated VAT supply?
They are still taxable supplies but are charged at a 0%. This means that no VAT is paid.
Is VAT paid on residential property?
Most transactions do not involve payment of VAT. The sale of a new build house by a developer is a 0% rated supply so the buyer will not pay any VAT and the subsequent sale of a residential property by a private individual will not be in the course of business so the seller will not be charging VAT to the buyer in addition to the purchase price.
Will VAT be charged on commercial property?
This depends on whether the commercial property is new or old.
New commercial property (within 3 years of completion) is standard rated (20%). Old commercial property is exempt with the option to tax.
What kind of transactions are VAT exempt but subject to the option to tax?
The sale of a Greenfield site is exempt, subject to option to tax.
Sale of an old freehold building
Grant of a lease
What kind of transactions are VAT standard rated?
- Supply of construction services
- Professional services
- Sale of a new freehold building
Why would a client make the option to tax?
They may want to do this to recover input tax incurred in relation to the building e.g. building work on it and professional fees incurred.
The disadvantage is that they have to charge VAT on the purchase price when they sell. This is not an issue if the buyer makes taxable supplies and can recover input tax. But if the buyer is an exempt, the purchase price is effectively increased by the option to tax VAT.
If the option to tax has been made before the date of transaction the VAT will count as chargeable consideration for SDLT/LTT purposes so there is effectively extra SDLT/LTT to pay.
What form should be used instead of TR1 if it is a transfer of part not a transfer of whole?
TP1
When inserting the names of the transferee’s into a TR1 what needs to be remembered?
Insert here the full names of all the people to whom the property is to be transferred. It is usual not to include the titles “Mr”, “Ms” or “Mrs”, but any other title (such as Doctor, Professor, etc) should be included. These details should also be reflected in the contract.
Remember, that if the transferee is a company or LLP, you must complete the additional information in this panel. Look for the details in your assessment materials.
When filling out the TR1, if the there is a discrepancy of the transferor’s names in the documents that you have been given e.g. they have taken a new name, which name will be the correct one for Panel 4 of TR1?
Insert here the full names (including all middle names) of those people who are going to transfer the property. This must be the names of the registered owners as set out in the Proprietorship Register, or any person acting on their behalf (such as an executor or a second trustee appointed to execute the Transfer where one of the joint owners has died). These details should also be reflected in the contract.
Look out for a registered proprietor’s surname on the contract being different from that in the Proprietorship Register. You are likely to find the explanation in a deed poll (change of name deed), marriage certificate or civil partnership certificate supplied with your assessment materials.
Remember, that if the transferor is a company or LLP, you must complete the additional information in this panel. Look for the details in your assessment materials.
In Panel 6 of the TR1, you will have to insert a correspondence address for the transferee(s), which address should be used?
Insert here for each transferee a correspondence address for Land Registry purposes. This must be a postal address either in the UK or abroad including any postcode or overseas equivalent.
A buyer who has purchased the property to live in will usually want any relevant communications sent to their new address. If the property will be tenanted, the buyer may want communications sent to another address, such as a registered office in the case of a company.
For Panel 8 of a TR1, the consideration needs to be entered (if it is not being transferred as a gift or for consideration’s worth). How should the purchase price of £640,000 be set out?
£640,000 (six hundred and forty thousand pounds).
This is the full amount being paid for the property as recorded in the contract. The separate consideration of £4,500 being paid for the contents should be ignored.
In accordance with the instructions that the clients wish to hold the title to the property as tenants in common in unequal shares, namely one third to Rebecka and two thirds to Valentina, how would you draft this in Panel 10 of the TR1?
‘The transferee is more than one person and they are to hold the property on trust for themselves alone as tenants in common in the following unequal shares:
(a) one third to Rebecka Jakobsson, and
(b) two thirds to Valentina Bartoli.’
Where would a restrictive covenant appear in the Official Copies of registered land?
Charges register
Where would a restrictive covenant appear in the Epitome of Title of unregistered land?
They appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser. If the property is unregistered, a post-1925 restrictive covenant will only be binding against the buyer if it was validly registered as a D(ii) Land Charge against the name of the original covenantor. This can be checked with a Land Charges search.
Where would a positive covenant appear in the Official Copies of registered land?
Charges register
Where would a positive covenant appear in the Epitome of Title of unregistered land?
In the conveyance, often in or immediately after the first operative paragraph conveying the property to the buyer.
A positive covenant is not binding on successors in title. What can a covenantor do to ensure that a new buyer is bound by the covenant?
They can require them to provide an indemnity covenant. This only works if an indemnity covenant is given every time the property changes hands so that there is a chain of indemnity leading back to the original covenantor.
How would an indemnity covenant appear in a conveyance of land in unregistered land?
THE Purchaser hereby COVENANTS with the Vendors to observe and perform the covenants contained in the Conveyance and shall indemnify the Vendors from and against all actions costs proceedings and claims in respect of any future breach thereof.
Does an indemnity covenant need to appear as a special condition in the contract?
No, because SC 4.6.4 and SCPC 7.6.5 state that, where the seller has such an ongoing liability in relation to the property, the buyer must give the seller a personal indemnity covenant in the transfer, i.e., they will require a covenant from the buyer to observe the covenants affecting the title and, should the buyer breach them, to indemnify the seller should they be sued as a result under their original covenant.
How would you draft an indemnity covenant in Panel 11 of a TR1?
The transferee covenants with the transferor to:
11.1 (by way of indemnity only) observe and perform the covenants referred to in entry 1 of the charges register of title number ESX112233 (‘the Covenants’) so far as they are subsisting and capable of taking effect; and
11.2 indemnify the transferor against any liability incurred for any breach or non-observance of the Covenants occurring after the date of this transfer.
Can one party to the transfer witness the signature of another party to the transfer?
No, because a party to the deed cannot witness the signature of another party to the deed.
Whilst the spouse, civil partner, co-habitee or relative of a transferor or transferee can act as a witness (if they are not a party to the deed), this is best avoided. The witness should be independent to counter any potential allegation of undue influence. One person may witness more than one signature but must sign and complete their details for every signature witnessed.
Why would the buyer of a property want to investigate whether it is subject to planning permission?
When a buyer buys property, they will want to check that the property has permission to be on the site its on and that it is being used for an authorised purpose.
Planning permission is usually subject to conditions so need to check whether the conditions have been complied with.
Who is liable for a breach of planning permission?
Planning permission, once implemented, runs with the land forever and any conditions attached to it will burden the land forever.
When is planning permission required?
If the change to the property qualifies as a ‘development’.
A development is the a) carrying out of building, engineering, mining or other operations in, on, over or under land or b) the making of any material change in the use of any buildings or other land.
Planning permission is basically needed whenever the development of land IS NOT one of the exceptions.
What does not constitute a development in the context of planning permission?
a) The maintenance, improvement or other alteration of any building or works which affect only the interior of a building
b) The maintenance, improvement or other alteration of any building or works do not materially affect the external appearance of a building.
c) Changes of use that are within the same class
Some changes of use are not a development. E.g. a change within use class E (E(a) to E(c)) would not be a change of use. A change from B2 to B3 would require planning permission.
E(a) – retail sale of goods, other than hot food
E(b) – sale of food and drink for consumption on the premises
E(c) – financial and professional services
E(g) – uses which can be carried out in a residential area without detriment to its amenity,
including offices to carry out any operational or administrative functions and research
and development.
Changes to and from sui generis will always require planning permission. Sui generis encompasses uses. That could potentially have adverse effects on the locality and include entertainment establishments, drinking establishments and take aways.
When is express planning permission not required?
If the works do not constitute a development.
Some acts may be a development but do not require express permission if it is set out in a General Permitted Development Order.
What acts would come under a GDPO?
- Developments within the curtilage of a dwelling house (e.g. extensions below a certain size)
- Minor operations (e.g. painting outside of a building or installing CCTV)
- Specified changes of between use classes and for changes from certain sui generis uses (should be checked on each occasion because changes frequently)
How can a GDPO be excluded?
By an Article 4 direction. This needs to be checked in the latest version of the GDPO.
This would be revealed by a local search.
What is a certificate of lawfulness?
If there is any uncertainty about whether the works or change of use are a development or permitted by a GDPO an application can be made to the LPA before commencement.
The LPA will either a) issue a certificate to say that they are satisfied the proposals are not a development, b) they come under the GDPO or c) they refuse the application because express planning permission must be obtained.
What is the effect of planning conditions?
Planning permission is only effective for planning purposes. It does not erase the need for other permissions such as building control regulation or allow the breach of an enforceable covenant.
How long does planning permission last?
It continues to exist for the benefit of the land and of all persons for the time being interested in it (unless otherwise specified in the planning permission itself).
What is the implementation period for planning permission?
A planning permission will usually state that it has to be implemented within a certain time and will lapse if not implemented in that time. In England, this is usually within 3 years of the date of the permission.
Implementation is different to completion, there is usually no time limit on completion.
What is a completion notice?
If a local authority believes that completion of building subsequent to planning permission will not take place within a reasonable time, they can serve a completion notice which states that the permission will cease to have effect if completion has not taken place by the expiration date stated in the notice.
How can the LPA investigate if there has been a breach of planning permission?
The LPA can exercise the right of entry into the property or serve a planning contravention notice. This requires the recipient to provide information about operations, use, or activities being carried out on the land and any matter retain tot the conditions attached to a planning permission.
What can the LPA do if it discovers a breach of planning permission?
If the LPA decides to take action, it can serve an enforcement notice on the owners, occupier and any other person having an interest in the land such as a mortgagee.
In England, from 25 April 2024 LPAs in England have the power to issue enforcement warning notices when it appears that there has been a breach of planning control.
The enforcement warning notice is an invitation to the recipient to regularise the breach by applying for a retrospective planning permission.
When will an enforcement notice become effective?
28 days after service.
What should the enforcement notice specify?
The alleged breach, the steps to be taken or the activities to be discontinued in order to remedy the breach and the timescale for this.
Who can appeal an enforcement notice?
Anyone with an interest in the land can appeal the enforcement notice.
What is a stop notice and how is it used?
As an enforcement notice cannot become effective until 28 days after it has been served and its effect is suspended if the recipient appeals it, the LPA can serve a stop notice to bring the activities to an immediate halt before the enforcement notice takes effect.
Can a stop notice be served on its own?
An enforcement notice has to be served first. A stop notice cannot be served on its own.
An LPA can serve a temporary stop notice for 28 days only to give it time to conduct an investigation.
LPA could also apply for an injunction.
What is a condition notice and what is it used for?
This can only be served where the breach is a breach of a condition associated with a planning permission.
There is no right to appeal a condition notice.
How can injunction be used to stop a breach of planning permission?
To apprehend an actual or apprehended breach of planning control.
This is a discretionary remedy so the LPA must show that an injunction is expedient and necessary and that the remedy is appropriate in the circumstances.
What is the deadline for taking enforcement action?
If there is a breach of planning control, the time limit for enforcement action will depend on whether the property is in England or Wales.
In England, the LPA must take enforcement action within 10 years of the alleged breach. However, for breaches involving operational development (such as building works) or changing the use of a building to use as a single dwelling house that took place before 25 April 2024, the time limit is the one that applied before this date, which is within four years of the alleged breach.
In Wales, for breaches involving operational development (such as building works) or changing the use of a building to use as a single dwelling house, the time limit for enforcement action is within four years of the alleged breach. The time limit for all other breaches of planning control is within 10 years of the alleged breach.
An LPA can apply to a magistrates court for a planning enforcement order to enable enforcement action to be taken when the statutory time limits have expired and the breach of planning control has been concealed.
What happens if the LPA fails to take enforcement action?
No further action can be taken in respect of the breach if not done during the time period.
What happens if the owner of a property fails to comply with planning permission and related notices?
Offence punishable by fine.
What is building regulation consent?
Building regulations are concerned with the health and safety aspects of buildings being constructed or altered and they control the materials and the construction methods used.
Is building regulation consent always needed?
May need to apply for this even where planning permission is not necessary.
How is building regulation consent obtained?
Apply to building control authority for building regulations consent.
The work is inspected by a building control officer.
After final inspection, the building control authority issues a certificate of compliance.
Or if its a self-certification scheme, a separate application may not be required and they can self-certify and send the notification to the relevant body.
What are the consequences for failing to obtain building regulation consent?
If building regulation control has not been sought out when it should have, the building control authority can prosecute for breach of building regulation control.
The local authority can seek out injunctions which are not time limited if the work is unsafe.
What is the deadline for the authorities taking action for lack of building regulation consent?
Building control authorities can prosecute for breach of building regulations control. In Wales a prosecution must be brought within two years of the offence. In England there is now no time limit for bringing a prosecution: prior to 1 October 2023 the prosecution had to be brought within six months of the breach being discovered and within two years of completion of the building work.
What does an enforcement notice do in the context of building regulation consent?
A building control authority can also serve an enforcement notice requiring the work to be altered or removed. In Wales an enforcement notice must be served within one year of completion of the work. In England, the time limit is within 10 years of completion of the work.
Why is it important that a building regulation consent or a regularisation certificate has been obtained for a prospective buyer?
Prospective buyers will be concerned about the safety of the building if there is no building regulation consent.
A lender may not agree to lend unless there is a full structural survey/they may keep some of the mortgage advance until the remedial works have been carried out.
How can a buyer check building regulations have been complied with?
Using the searches and enquiries usually carried out before exchange of contracts.
The CON29 would reveal building regulations consents and any certificates granted as well as the enquiries of seller.
What can a prospective buyer do if they discover that the property they are interested in is missing building regulation consent?
The buyer can ask the seller to obtain a regularisation certificate from the local authority which lists the work required to bring the building up to standard.
Insurance could be obtained to cover the cost of future enforcement proceedings. This will not cover personal injuries or business interruption caused by a defective building.
What should a solicitor consider if they discover their client’s property is a listed building?
If listed, the owner will require listed building consent to demolish, alter or extend the building in addition to planning permission.
The higher the listing, the harder it is to obtain listed building consent from the local authority.
It may be required, even where planning permission is not required.
There are a number of classes of permitted development under the GDPO that do not apply to listed buildings so if this type of work is carried out to a listed building, express planning permission will be required.
What should a solicitor consider if they discover their client’s property is in conservation area?
All the features, listed or otherwise, within a conservation areas are protected by the conservation order.
This would mean that it is more difficult to make changes to the property than would normally be the case:
a) Changes to the external appearance of a building in a conservation area may require planning permission from the LPA that is not required elsewhere.
b) Demolition or substantial demolition of a building.
c) Any work planned to a tree in a conservation area must be notified to the LPA six weeks in advance so that the LPA may determine whether or how the work to the tree should take place.
What questions should a solicitor consider with regards to planning law?
Is there planning permission for the construction of the building or was planning permission not needed?
Is the building current being used for its authorised purpose?
Are there any planning conditions which would prevent the buyer’s future use or any proposed alterations?
Are there any existing breaches of planning law for which action could be taken against the buyer after completion?
Have any works been done which would have required building regulations consent?
Is the building listed or in a conservation area?
How can a seller/buyer solicitor dealing with registered land check the official copies of a property?
These can be ordered from the Land Registry (the law firm will probably have an account) but more usual for the seller to ‘deduce’ title and provide the official copies to the buyer at their own expense. The official copies need to be less than 6 months old.
It is usual for the buyer to only be able to raise questions about title before exchange of contracts and to be prevented by a clause in the contract from raising any more after exchange.
The buyer’s solicitor will also need to investigate whether there are any overriding interests affecting the property. They can find this out through searches and enquiries.
What is the edition date in the official copies?
The edition date is the date the LR last updated the official copies (probably when the property was last sold or issued a mortgage).
What is the search from date in the official copies?
This is the date often referred to by conveyancers as the search from date, the specific date of the official copies showing the entries subsisting on the register at a certain time.
What information can be found in the property register?
Description of the land including the address and the title plan,
Indicate whether it is freehold or leasehold,
May show that there are easements or rights benefiting the land and that the easements and rights are subject to obligations,
May also show that rights that a buyer may expect to come with the land such as a right to light or air may not be included in the title I.e. they have been excluded.
What information can be found in the proprietorship register of the official copies?
Will state the current owners and their address,
Identify the class of title (the State guarantees title and compensation in certain circumstances if a defect is found in a registered title). The class of title will be determined by the LR when the property is first registered.
If the land has been sold since 1 April 2000 it may indicate the price paid for the land by the current owners,
It will also show if the owners have given an indemnity covenant when they bought the land which will be evidence of a chain of indemnity covenants.
Any restrictions (more powerful) or notices on the owners’ ability to sell.
What land would qualify for an absolute title?
The legal estate is subject only to entries on the register, overriding interests and if the proprietor is a trustee, minor interests of which they have notice such as the interests of the beneficiaries under the trust.
What land would qualify for an possessory title?
This is granted where the proprietor is in possession of the property but has lost the title deeds or is claiming through adverse possession and this means that the proprietor is also subject to all adverse interests existing at the date of first registration.
What land would qualify for a qualified title?
Given if there is a specific identified defect which the Registrar feels they cannot overlook or cure by granting absolute title.
Why is the class of title important?
Having any class of title that is not absolute may affect their ability to obtain a loan to purchase the property and/or sell it in the future.
Name three examples of restrictions/notices that would appear in the proprietorship register
A co-ownership restriction
A lender restriction
Court order restriction for course of litigation or family proceedings
What information could be found in the charges register of the official copies?
a) Covenants affecting the property, positive or restrictive
b) Easements affecting the land such as a right of way over the property
c) Charges over the land e.g. mortgages
d) Leases granted over the whole or part of the property
e) Notices registered by third parties claiming an interest in the property
What two things should a seller solicitor check first when dealing with the sale of unregistered land?
a) That there is no caution against first registration
b) The property has not actually been registered
What is a caution against first registration?
It is possible a third party has lodged a caution against first registration, warning any person attempting to deal with the land that they have an interest in the land such as an easement.
When the application for first registration is lodged, the LR will warn the cautioner. This means that they have a limited period of time to establish their rights over the land and if they cannot, the registration will proceed and the cautioner will lose their rights.
What searches are made to check whether there is a caution against first registration?
An Index Map search at the LR on Form SIM (Search of the Index Map) accompanied by a plan of the property.
How does a seller’s solicitor deduce title of unregistered land?
Need to examine the parchment or paper deeds that have been used to transfer ownership in the past.
This usually includes conveyances, mortgages, assents (between PRs and beneficiary under a will), deeds of gifts and land charges searches.
The seller’s solicitor will usually be able to obtain the title deeds from the client, if the property is free of mortgage or from the mortgage lender if it is subject to a mortgage.
What happens if title is discovered that should have triggered registration in unregistered land?
If the title should have already been registered then the seller will be required to register it before any other transactions can proceed.
The buyer’s lender is likely to insist on this.
How should the good root of title be chosen?
A number of documents in a set of title deeds might be capable of being a good root of title but the seller solicitor must choose the single document that is most appropriate to be a good root of title for that sale. This is usually the most recent document that satisfies all of the requirements of a good root of title.
Once it has been identified, most older documents than the root of title can be ignored. The only exception is where the root refers back to a third party right created in an earlier conveyance. This should be included.
Conditions:
a) Deal with or show who owns the entire interest (legal and equitable) that is being sold by the current owner,
b) Contain a recognisable description of the relevant land,
c) Do nothing to cast doubt on the seller’s title,
d) Be at least 15 years old.
What is the epitome of title?
This is where the seller’s solicitor creates a bundle of documents from and including the root of title up to the present day. The documents should be numbered and listed in chronological order. They will be copies not originals.
There should be an unbroken chain from the owner in the root of title to the present seller. There should be documentary evidence of every change of ownership as legal title can only be transferred in a deed.
If PRs are listed in the transfer deed then the seller should check grant of probate identifying the PRs.
What should the seller solicitor look out for when investigating the title deeds of unregistered land?
The solicitor should look out for incumbrances.
E.g. Easements will often appear in a conveyance beginning with the words ‘EXCEPTING AND
RESERVING’.
The words ‘SUBJECT TO’ also are used to introduce an incumbrance.
What key things should a seller solicitor do when deducing title for unregistered land?
Step 1 - Check first registration
Step 2 - Find root of title
Step 3 - Create epitome of title
Step 4 - Checking each title deed listed in the epitome if title
a) Chain of ownership
b) Description of the land
c) Stamp duty
d) Incumbrances
e) Execution
f) Local charges search
In a land charges search for unregistered land, what would a land charge of C (iv) indicate?
An estate contract
In a land charges search for unregistered land, what would a land charge of D (ii) indicate?
Restrictive covenant
In a land charges search for unregistered land, what would a land charge of D (iii) indicate?
An equitable easement
In a land charges search for unregistered land, what would a land charge of F indicate?
A home right
Does a seller solicitor need to make searches against the names of all estate owners in the epitome of title?
The solicitor must ensure that valid searches have been made against the names of all the estate owners revealed in the epitome of title and the attached documents, even if their period of ownership pre-dates the root of title.
A form K15 search should be made against each owner for the period that they owned the land.
Which conveyances are preferred for good root of title?
A conveyance is preferable to a mortgage as good root of title as it is more likely to include a detailed description of the property by reference to a plan and more details of the incumbrances affecting the property. These will provide double guarantee (seller will have looked 15 years back and so will buyer so 30 years in total).
If there are no mortgages or conveyances to use, can use a deed of gift or assent. However as there was no transfer for value, they will not be as good as they do not provide double guarantee.
What indicates that the seller of the unregistered land has both legal and equitable rights over the land?
The solicitor should look for a paragraph beginning with the word ‘WHEREAS’ stating that
the Vendor (seller) is ‘seised of the property … for an estate in fee simple and is selling the
same to the Purchaser’ (buyer). The conveyance should also state that the Vendor conveys the
land as ‘beneficial owner … unto the Purchaser’. Such a conveyance is dealing with the entire
legal estate and equitable interest in the land.
Where would an entry for an easement granted or reserved be located in a conveyance of unregistered land?
Easements are usually granted or reserved in the first operative paragraph of the conveyance.
In registered land, where would an entry for an easement be found in the official copies?
This should appear in the Charges register.
May also appear in the Property register if the LR has extracted the text from a conveyance and easements that burden the property are mixed with easements that benefit it.
The Property register will also show the financial obligations that contribute attached to easements that benefit the property.
In unregistered land, where would an entry for an easement be found in the official copies?
Usually granted or reserved in the first operative paragraph of the conveyance.
What is a mine and mineral reservation?
This means that the seller does not own any mines and minerals underneath the surface of the property and cannot transfer them to the buyer.
The buyer should be informed and the enquiries made as to who is able to exercise the right and if it has ever been exercised in the past.
All interests in coal are vested in the Coal Authority and a coal mining search should be carried out.
Even if the registered, consider making an iNDEX MAP search at the Land Registry on form SIM to check whether mines and minerals are registered under a separate title as this will help to identify the owner of the mines and minerals and any associated rights.
In unregistered land, where would an entry for a mine and mineral reservation be found in the official copies?
This will be in the conveyance.
In registered land, where would an entry for a mine and mineral reservation be found in the official copies?
This will be in the Property register.
What are declaration as to rights of light and air and where would they be in the official copies of registered land?
A landowner may sell off a piece of land and retain the other part with the intention of developing the retained land. In such a case they may preserve the right to the light and air over the sold land land in order prevent them from stopping the development of the retained land.
Look for entries in the proprietorship register of a registered freehold property.
Where would a restriction for co-ownership of land be in the official copies of registered land?
It can be assumed that the equitable interest is held as a joint tenancy unless a restriction appears in the Proprietorship register.
Where would a restriction for co-ownership of land be in the title of unregistered land?
The conveyance to joint buyers will state whether the equitable interest is to be held as joint tenants or tenants in common.
What should the seller solicitor do if there is a missing co-owner in joint tenancy of unregistered land?
If the title investigation shows that a property is jointly owned but is only being sold by one of the co-owners, it is necessary to make enquiries about the missing co-owner.
If they are alive, they must be party to the contract and the transfer of the property.
If they have died, the seller’s solicitor must provide a certified copy of the death certificate. As the only way to hold the legal title is by co-owners, they would have held the legal title as joint tenants. If the equitable title was also held as joint tenants then the surviving co-owner can transfer the property alone.
With unregistered land, when can the buyer assume that the equitable joint tenancy was not severed?
If the following conditions are met:
a) There is no memorandum of severance endorsed on the conveyance of the property to the joint tenants,
b) There are no bankruptcy proceedings registered against either of the joint tenants at the Land Charges Registry,
c) The transfer by the surviving owner to the buyer contains a statement that the survivor is solely and beneficially entitled to the land.
What should the seller solicitor do if there is only one surviving tenant in common of unregistered land?
If the equitable interest was held as tenants in common and there is only one surviving legal owner, a second trustee needs to be appointed to overreach the equitable interest of the deceased co-owner.
The appointment of the second trustee can be made in the transfer of the property or by separate deed of appointment. As long as the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of the interest.
The contract should provide for the appointment of a second trustee for the purposes of the transfer.
What should the seller solicitor do if the interests of tenants in common of unregistered land passed under will or intestacy rules?
This can be proved by producing certified copies of the grant of probate and the assent from the PRs to the surviving co-owner as beneficiary.
Where would a restrictive covenant be in the official copies of registered land?
This will appear in the Charges register.
Where would a restrictive covenant be in the title of unregistered land?
This will appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser.
Post-1925 restrictive covenant:
This will only be binding against the buyer if it was validly registered as a D(ii) Land Charge against the name of the original covenanter.
This can be checked with a land charges search.
How should a seller solicitor deal with restrictive covenants?
a) Enquire with seller about who owns the property with the benefit of the covenant. Go to that person and ask if they can come to an arrangement over the proposed use such as a permanent release of the covenant or a one-off consent. This may not be the best option if the covenant is very old and the owner cannot be easily identified.
b) Restrictive covenant insurance policy for the proposed breach of covenant. Common and cost-effective but not appropriate if the person who benefits is aware of the use and will object to it. This will not be possible if the person has been approached already.
c) Apply to Upper Tribunal (Lands Chamber) to modify or discharge he covenant on the grounds that the covenant is obsolete or confers no practical benefit of substantial value or advantage or is contrary to public interest and the loss of the covenant can be compensated in money. Not a quick or cost-effective option.
Where would a positive covenant be in the official copies of registered land?
This will appear in the Charges register.
Where would a positive covenant be in the title of unregistered land?
This will appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser.
Is a positive covenant binding on the original covenantor?
The original covenantor is bound.
Is a positive covenant binding on the successor in title?
The successor in title can only be bound indirectly through an indemnity covenant if there is a chain of indemnity.
It is likely that the original covenantor required the buyer to give them an indemnity covenant so that if the buyer breached the covenant and the original buyer was sued directly for the breach, they could recover their losses from their buyer.
This should have been repeated each time the property changed hands, resulting in a chain of indemnity from the original covenantor to the current seller of the property.
Where would an indemnity covenant be in the official copies of registered land?
The indemnity covenant would be in the Proprietorship register.
Where would an indemnity covenant be in the title of unregistered land?
The indemnity covenant would be in a conveyance.
What should a seller solicitor consider with regard to indemnity covenant?
If the seller did give an indemnity covenant when they purchased the property, they will require the buyer to give an equivalent indemnity covenant in the transfer of the property so the buyer will be liable to the seller in contract if they do not perform the positive covenant.
It must be in a contract.
If the seller is requiring an indemnity covenant from the buyer, the buyer’s solicitor should inform their client and instruct a surveyor to take stock of the condition of the subject of the indemnity covenant.
They should also ask the seller whether they have been complying with the covenant and if not, if anyone has tried to enforce it. The covenant may be an extra expense the buyer has not foreseen.
What is an unknown covenant?
There may be cases where the property is subject to covenants but the exact nature is unknown often because they were contained in an earlier deed that has now been lost.
Where would an unknown covenant be found in the official copies of registered land?
An entry in the Charges register will make it apparent that the details of the covenant were not available when it was first registered.
Where would am unknown covenant be found in the title of unregistered land?
The existence of covenants may be apparent on the face of a conveyance.
What should a buyer solicitor do upon discovering an unknown covenant?
Assume the covenant is restrictive and will be binding on the buyer and consider options for dealing with that covenant.
An indemnity insurance policy may be the most cost effective. An indemnity insurance policy may be the most cost-effective option.
The seller should disclose this defect in title in the contract so the buyer can make an informed decision whether or not to proceed with the purchase.
Will the seller’s mortgage over the property be an issue for a buyer?
Rarely a problem because the seller usually intends to discharge it using the proceeds of sale immediately after completion.
The buyer will not commit to buying the property unless they are satisfied that the seller’s mortgage is discharged on completion of the sale.
Where would a mortgage be found in the official copies of registered land?
There will be two entries in the Charges register, one giving the date and purpose of the charge and the other stating the identity of the lender.
The lender may also have put a restriction in the Proprietorship register to prevent the borrower form making a disposition of the property without the consent of the lender.
Where would a mortgage be found in the title of unregistered land?
The mortgage will appear as one of the title deeds listed in the epitome of title.
The buyer will only be concerned by a mortgage that has not been paid off. If it has been discharged there will usually be a vacating receipt.
If it is not discharged they will want it discharged on completion so that they do to take subject to it.
The buyer’s solicitor should check that the contract states that the seller is selling the property free of the mortgage and that the seller’s solicitor gives and undertaking to discharge the mortgage immediately on completion.
Will a lease of the property be an issue for a prospective buyer?
The existence of a lease will only be an issue if the buyer is expecting the property to be sold with vacant possession.
Will a lease for more than seven years or the disposition of a (previously unregistered) lease with more than seven years to run be enforceable against a new buyer of registered land?
If there is a lease is for a term of more than seven years or the disposition of a (previously unregistered) lease with more than seven years to run, this must be registered in their own right with their own title number but must also be registered against the landlord’s title.
This will be in the Charges register. If they are protected by the date the transfer of the property to the buyer is registered then they will bind the buyer.
If a lease for a term of more than seven years is not registered, then it will not bind the buyer but it may qualify as an overriding interest if the tenant is in occupation.
Will legal leases for a term not exceeding seven years and equitable leases where the tenant is in actual occupation be enforceable against a new buyer of registered land?
Potentially as overriding leases.
Will a legal lease be binding over a new buyer of unregistered land?
A legal lease should have been created by deed and should be one of the title deeds scheduled in the epitome of title.
If it is a parol lease, this does not require any formalities and will be binding on the buyer whether they know about it or not.
What should a buyer solicitor do if they discover evidence of a lease either by title investigation or searches and enquiries?
The buyer’s solicitor should report it to the buyer and check that the existence of the lease and its terms are compatible with the buyer’s proposed use of the property.
What is a notice in the context of the official copies of registered land?
A notice is an entry into the Charges register in respect of the burden of an interest affecting a registered estate or charge.
What is an agreed notice in the context of the official copies of registered land?
An agreed notice is where a notice is put on the register with the agreement of the registered proprietor.
What is an unilateral notice in the context of the official copies of registered land?
Unilateral notices are used where the registered proprietor has refused to consent to the entry or has not been asked about it.
What is the purpose of a notice in the context of the official copies of registered land?
The entry of a notice does not guarantee that the interest is valid or exists and does not give the person who registers it any rights over the property. It just means that the interest is protected against any subsequent interests if it is indeed valid.
What should the buyer solicitor do if they come across a notice in the official copies?
Ask the seller’s solicitor to what the notice relates to.
Option 1: Walk away from the transaction.
Option 2: Refuse to proceed any further with the transaction until the seller deals with the unilateral notice.
The buyer should require the seller to get the notice cancelled by the LR before exchange of contracts.
What is a home right?
This is a statutory right for a non-owning spouse or CP to occupy the matrimonial home.
A home right does not create an interest in land.
Where would a home right be found in the official copies of registered land?
A home right will bind a buyer if there is notice in the Charges Register by the date the transfer of the property to the buyer is registered.
Where would a home right be found in the title of unregistered land?
Must be protected by Class F land charge in order to be binding on the buyer.
What should a buyer solicitor do if they discover a home right in the official copies/title of property?
If discovered, seller should be required to obtain a release of rights to the property and agreement to vacate prior to completion in the form of a contract.
What is the purpose of pre-contract searches and enquiries?
Due to the principle of caveat emptor, it is important that searches and enquiries are done before the property is bought.
It is also important for a lender.
Who is liable if the correct pre-contract searches and enquiries are not carried out?
If the solicitor fails to make the correct searches and enquiries they could be sued for negligence from a buyer if they suffer a loss.
Which searches are undertaken for every property transaction?
- Survey and personal inspection
- The local search
- Water and drainage search
- Pre-contract enquiries of seller
- Environmental searches
- Flood search
What is a survey/personal inspection and why is it important?
Should always be recommended to a client.
If the lender is relying on a mortgage to finance the transaction, the lender will require a survey. They will always require the borrower to pay for a valuation to assess whether the property is adequate security for loan but will not necessarily reveal much about the structure of the property.
Solicitor may be asked to advise on the most appropriate type of survey. The most appropriate type depends on the age and location of the property.
A full structural survey is a good idea if there are concerns about the structure or the state of the property.
A home buyers valuation and survey is the basic structural survey that will contain advice on repairs and maintenance requirements.
A personal inspection is also a good idea as it will reveal more than is evident from a plan but this is expensive on top of the cost of a survey.
What is a local search and what is its purpose?
LLC1 - Provides details of any financial charges or restrictions on land that have been imposed by public authorities under statute e.g. planning consents, tree preservation orders and conservation area designation orders.
CON29 - Planning permissions, any restrictions on permitted development (such as an Article 4 Direction), whether land has been designated as contaminated land, liability of road repair.
CON290 - Environmental and pollution notices and rights over common land.
This only relates to the property and not the adjoining land.
What is a water and drainage search?
Raised with a specific statutory undertaker on form CON29DW for residential properties and CommercialDW for commercial properties.
The search establishes whether the drains and sewers are adopted. If they are adopted, this means that they are the responsibility of a statutory undertaker rather than the owner of the property.
The search shows whether or not the property is connected to a public sewer for could and surface water drainage and whether it is connected to a public water supply.
If the property does not drain into a public sewer then the buyer will be liable for the costs of maintaining the drains and sewers and may be liable for the costs of bringing them up to the adoption standard if the water authority decides to adopt them.
What pre-contract enquiries should be asked of the seller?
- Whether the seller has had any disputes regarding the property
- Whether there are any third parties occupying the property
- Compliance with any covenants contained within the title
- Planning permission
- Issues about boundary maintenance
- In case of commercial properties, the VAT status of the transaction
What is an environmental search?
The costs of cleaning up contaminate sites is high. The owner/occupier of the property may be subject to liability not just the original polluter.
If the solicitor does not advise this, they could be found negligent.
CON29 and CON90O contain some questions relating to environmental notices and entries but they are not sufficient to identify the environmental risks.
There are different types of environmental search that differ in terms of scope and detail.
The most basic is the desktop search which essentially looks at all plans of the area and any information published by the EA. If anything is found in the desktop search a physical search is a good idea.
Insurance is also an option to for environmental liability.
What is a flood search?
Should be done in every property as not all properties are backed by insurance (not commercial usually) and whilst can enquire with seller, they may not reply under caveat emptor.
A key thing to look at in any report is whether the property can be insured at normal rates. If there is a flood risk, a specialist report can be obtained to advise the buyer on flood risk and possible flood damage mitigation measures.
Which searches and enquiries should be undertaken for particular properties and transactions?
- Chancel repair
- Mining searches
- Canal and river trust search
- Commons search
- Railways
- Highways
- Unregistered land
- Company search
- Bankrupcy/insolvency search
What is the purpose of a chancel repair search?
Some properties may be liable to pay the cost of repairing the parish church if they are in a specific area.
When will a registered property be liable to pay for chancel repair?
Continues to bind if the transfer for value occurred before 13 Oct 2013.
When will a unregistered property be liable to pay for chancel repair?
This will only be required if the chancel repair liability is referred to in the title deeds or protected by a caution against first registration lodged prior to first registration.
Because of this some firms may actually carry this search out as a standard search even where the transfer of value was after the 13 Oct 2013.
Insurance is an alternative way to avoid the costs of the searches.
When should a mining search be undertaken?
A coal mining search of the Coal Authority on a CON29M form will confirm whether the property is in an area where mining has taken place in the past or is likely to take place in the future whether there are shafts on the property, existence of underground workings or subsidence.
It is important to find out whether there has been a claim for subsidence as this may prevent a future claim from being made.
A mining search should definitely be done if there are a mines and minerals reservation revealed in the turtle investigation.
Areas affected by mining activity:
Cornwall (tin)
Devon (tin)
Somerset (tin)
Cornwall (clay)
Devon (clay)
Dorset (clay)
West Midlands (limestone)
Cheshire (Brine and salt)
When should a canal and river trust search be undertaken?
If the property is near a river or a canal, the buyer needs to find out whether they are liable for the repair or maintenance.
When should a commons search be undertaken?
This is appropriate if the property is near an open space such as as village green as this may be affected by commons rights.
This may affect the current enjoyment of the land or future development to the property so the. Buyer should raise optional enquiry 22 in the CON29O form.
When should a railways search be undertaken? What search will reveal whether the property is subject to a specific rail scheme?
Search should be done if the property is close to a railway to see if there are any obligations to maintain the boundary/any restrictions on development near the railway.
Network rail will not answer general enquiries and the seller is not obligated to under caveat emptor so approaches should be made for any specific proposals.
Optional enquiry 22 in the CON29O form may reveal whether the property is subject to a specific rail scheme.
When should a highways search be undertaken?
Replies to enquiry 2 of CON29 will provide some information about the roads adjoining the property but not the verges and pavements.
If the property is near a public highway, the buyer solicitor should send a plan to the relevant highways authority to ask about the boundaries of the publicly maintainable highways and the verges to be marked on.
Which searches should be made specifically for unregistered land?
Index map search (SIM) and Land Charges Department search against the seller and the previous estate owners.
Why should a company search be made?
This should be done if the seller is a company to confirm whether the seller has the capacity to enter into the contract, confirm the identity of the current officers of the company and see if there are any fixed and floating charges on the property that need to be discharged on completion.
The search needs to be repeated just before completion to check for insolvency issues.
If the property is unregistered, the searches should also be carried out against any corporate estate owners revealed in the epitome of title.
Why should a bankruptcy/insolvency search be made?
Solicitor acting for the lender should make a search against the borrower to ensure that there are no bankruptcy proceedings or insolvency proceedings affecting them.
The searches must be made right before completion. Some firms also do them before exchange of contracts to allow for time to sort out any issues in good time.
If the borrower is an individual then the search is on K16 form which is sent to the Land Charges department.
If the borrower is a company, a company search is needed.
Which searches are undertaken to find out whether planning permission or planning conditions are attached to the property?
The buyer’s solicitor needs to check for any planning permissions and whether there are any planning conditions attached to the permission which would prevent the buyer’s proposed alterations or future use of the property and whether there are any existing breaches of the planning conditions for which action could be taken agains the buyer after completion.
If an LLC1 search shows that there is a planning permission, the solicitor needs to contact the seller or the local authority to obtain a copy of the permission. The buyer’s solicitor needs to check the rest of the CON29 results (for enforcement and stop notices) and the CON29O results (for completion notices) to check no enforcement proceedings have been taken.
Also need to enquire with the seller whether they have complied with the planning permission and any notices received about it from the local planning authority.
What is often discovered from the pre-contract searches and enquiries?
- Planning permission
- Road adoption
- Conservation orders
- Tree preservation orders
- Occupiers
Which search would indicate that a road has been adopted?
The CON29 part of the local search should be checked for information about roads and public highways adjacent to the property.
Which search could indicate that the property is subject to a tree preservation order?
This would be revealed by a LLC1 search. The buyer will need to be told about this as it is a criminal offence to chop down a tree that is subject to a TPO.
The solicitor should raise pre-contract enquiries of the seller to obtain a copy of the TPO to establish the location of the protected trees and check that the TPO has been complied with.
Which search would indicate the property is in a conservation area?
This would be revealed in a LLC1 or CON29. The buyer should be informed as it will be more difficult to make changes to the property than would be the case normally.
How should a buyer solicitor deal with occupiers of a the property?
In some circumstances, the occupier may be able to claim an equitable interest or a tenancy in the property.
A non-owning spouse may have a protected home right and this will be revealed in the title investigation.
If there is an adult occupier, the seller should be required to obtain a release of all rights in the property and agreement to vacate on or prior to completion - usually dealt with in a contract.
What is the purpose of a contract in a property transaction?
There is technically no need for a contract but there are many advantages for exchanging contracts.
- There is some delay before completion is going to take place e.g. because buyer is finalising their financing arrangements
- Parties need more time to organise practical aspects
- Prevents either party from withdrawing from the transaction without being liable for breach of contract
- If there are matters that are not technically to do with the transfer but require a binding contract to make them enforceable e.g. repair works
- Time table for completion
Who drafts the contract?
Usually the seller’s solicitor. Then sent to the buyer’s solicitor as part of the initial pre-contract package.
Need to decide whether to use a pre-printed form by a law stationers or to draft the contract in the firm’s preferred style.
Either way it will have to incorporate a set of standard conditions, the Standard conditions of sale (SCs) or Standard Commercial Property Conditions (SCPCs).
Whilst there are open contract rules which are derived from statute and common law to assist where the contract is silent, it is better to have express conditions in the contract which are known as standard conditions.
When are the standard conditions of sale used when drafting a property contract?
This is used for all residential transactions and some simple commercial transactions that have a straight forward title and a low price.
When are the standard commercial property conditions used when drafting a property contract?
This is more suitable for high value commercial properties and contains more detailed provisions for the management of occupational leases with which the property is being sold.
What can be found on the front page of the SCs and SCPCs?
- Headings relating to the description of the property and the terms of sale (particulars of sale).
- Include information about the buyer, the price, the deposit and the fixtures and fittings.
- Information about the seller which they need to cross check with the information in the proprietorship register in the official copies for a registered property or the title deeds for an unregistered property.
- The title documents provide the details of the property, including address and whether the property is leasehold or freehold and whether the property has the benefit of any rights over adjoining properties such as a right of way.
- In registered property, the title number and the class of title* need to be included which are found in the proprietorship register of the official copies.
- The class of title can be incorporated into the address by the Property heading or typed in brackets after the (Title Number)
What can be found in the body of the text of the SCs and SCPCs?
This is where the standard conditions are and they are designed to apply to all transactions. This is either the SCs or the SCPC which contain the details.
These are the terms that govern the transaction unless the parties specifically agree something different.
SCPC has two parts. Part 1 applies unless it is excluded and the Part 2 which only applies if it is specifically included.
What can be found on the back page of the SCs and SCPCs?
These are the special conditions. They are specifically drafted to met the particular requirements of the transaction.
There are some pre-printed suggestions at the top of the page and then a blank space into which the parties insert any requirements of their own.
What are firm specific contracts?
These are property contracts specific to the firm but will include the usual details about the property, the financial terms and the special conditions.
There will usually be a clause incorporating one of the two sets of standard conditions.
What could happen if the seller does not specify all incumbrances?
Incumbrances are third party rights that survive the transfer of the property to the buyer e.g. restrictive covenants, easements and obligations to contribute to shared facilities.
If these are not specified the seller could be in breach of a special condition which states that the seller sells the property free of all incumbrances other than those specific in the contract or those listed in the Special Conditions of the SCPC and SC.
What search should be made to find out whether an individual borrower is bankrupt?
If the borrower is an individual then the search is on K16 form which is sent to the Land Charges department.
What search should be made to find out whether an corporate borrower is insolvent?
Company search
What are the consequence if SDLT is not paid within the deadline?
If it is not paid the transfer of the property to the buyer will not be registered by the Land Registry. Failure to file and pay on time will also attract penalties and interest.
What are incumbrances?
Incumbrances are third party rights that survive the transfer of the property to the buyer e.g. restrictive covenants, easements and obligations to contribute to shared facilities.
What is the consequence of not specifying incumbrances in the SC and SCPC?
If these are not specified the seller could be in breach of a special condition which states that the seller sells the property free of all incumbrances other than those specific in the contract or those listed in the Special Conditions of the SCPC and SC.
