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Property > Freehold > Flashcards

Freehold Flashcards

1
Q

What does seller’s solicitor do at initial stage?

A

Investigate the seller’s title

If mortgage on the property will ask lender for an indicative redemption figure.

Preparation of the contract pack

Seller has duty to disclose latent defects and latent burdens on the land

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2
Q

Why will seller’s solicitor investigate the seller’s title?

A

To confirm seller owns and existence of any mortgage or other charge.

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3
Q

Why will seller’s solicitor ask lender for an indicative redemption figure?

A

To ensure that the sale proceeds will be sufficient to redeem the existing mortgage on completion.

This is because seller’s solicitor will give an undertaking to pay off any mortgages out of the sale proceeds on completion.

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4
Q

What does the contract pack include?

A
  • Draft contract in duplicate for the seller to sign one and the buyer the other
  • Property Information Form
  • Fittings and Contents Form
  • Copy of the seller’s title – if unregistered the epitome of title.
  • Copy of title plan
  • Any guarantees or planning permissions.
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5
Q

What does the Property Information Form include information relating to?

A
  • Disputes with neighbours about the property
  • Building work/alterations by the seller to the property
  • Notices received
  • Flooding
  • Services that cross the property
  • Utilities the property is connected to
  • Occupiers
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6
Q

What does Fittings and Contents Form set out?

A

Personal property included and excluded and their price – this is annexed to and becomes part of the contract.

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7
Q

What is a latent defect?

A

Things not apparent from a property inspection such as an underground easement or restrictive covenant

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8
Q

What happens if the duty of disclosure is breached?

A

The buyer may have the right to withdraw from the contract after exchange and claim damages for losses

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9
Q

What doesn’t duty to disclose extend to?

A

physical defects in the property (eg rotted timber within the walls) under the doctrine of caveat emptor (buyer beware).

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10
Q

What happens if seller tries to deceive the buyer by covering up a patent defect?

A

Amounts to wilful deceit and the seller could be liable in tort.

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11
Q

What does buyer’s solicitor do at initial stage?

A

When receives contract pack should investigate title to ensure the buyer is will receive good title. Also identify if any issues with the title that may affect the buyer’s future plans for the property

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12
Q

Process of analysing Land Registry official copy entries?

A

Buyer’s solicitor will check whether title number matches that in the contract, encumbrances and class of the seller’s title.

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13
Q

If title is unregistered what must seller’s solicitor do to deduce ownership?

A

Locate and review the title deeds and any charges in the seller’s name

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14
Q

What is an epitome of title?

A

A chronological list of documents proving title to the land with copies of those documents attached

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15
Q

What must an epitome of title show?

A

An unbroken chain of ownership with a root of title going back at least 15 years.

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16
Q

What is buyer’s solicitor looking for on epitome of title?

A

See if the land should already have been registered (ie whether a transaction in the epitome of title after 1 December 1990 was a type of transaction that required first registration). If so will ask the seller to register the land before the sale.

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17
Q

Buyer’s solicitor will check whether the epitome reveals a good root of title by looking at what?

A
  • Goes back at least 15 years
  • Deals with the whole legal and equitable interest in the property
  • Contains an adequate description
  • Casts no doubt on title.
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18
Q

If any defects in title (eg missing documents, name discrepancies) under Law Society Conveyancing Protocol what should the seller’s solicitor do?

A

Should take care of them as part of their investigation

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19
Q

What should seller’s solicitor do with the title plan?

A

send to the seller so they can confirm that the plan represents the full extent to the land being sold

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20
Q

If the buyer’s solicitor has any issues with the title that require resolution what will they do?

A

Raise pre-contract enquiries.

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21
Q

If a defect is identified on a title what is the best way to resolve it?

A

Enter into a deed of variation or deed of rectification to put the problem right. When this isn’t possible indemnity insurance may be purchased to cover future losses that might arise from the defect.

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22
Q

What is purpose of making searches and raising enquiries?

A

Find out as much information about the property as possible before exchanging and buyer bound. Seller’s duty to disclose is limited to certain matters affecting the title in the draft contract so need to raise enquiries and make searches

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23
Q

What are the typical searches raised by buyer’s solicitor?

A
  • Local Authority
  • Drainage and water
  • Environmental search
  • Search the Index Map – if the property is unregistered to check whether the property is fully or partially registered
  • Company search – if the seller is a company to check if company is subject to any winding up or liquidation proceedings
  • Bankruptcy search – if obtaining a mortgage to reveal any pending or actual bankruptcy orders against the buyer
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24
Q

Why should buyer themselves should visit the property?

A

To look for evidence of a right of way, a person in occupation and check the physical condition of the property

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25
Q

What does CPSE stand for?

A

Commercial Property Standard Enquiries

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26
Q

What should buyer’s solicitor do if searches reveal something unexpected?

A

Raise further enquiries

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27
Q

Under statute solicitor can only do what regarding mortgages?

A

Give a client generic advice - can describe the various types but not help the client choose one offer over another.

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28
Q

What should buyer’s solicitor do to avoid possible liability under AML laws?

A

check the source of funds used by the buyer as a deposit or to pay for a portion of the property

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29
Q

What is the purpose of a mortgage?

A

security for the loan and gives the lender the right to sell the mortgaged property to satisfy the debt if the buyer defaults on the loan.

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30
Q

What are the 4 types of mortgages?

A
  1. Repayment mortgage
  2. Interest only mortgage
  3. Endowment and pension mortgages
  4. Sharia compliant mortgage
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31
Q

What is the characteristic of a Repayment mortgage?

A

borrower pays interest and repays some capital each month

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32
Q

What is the characteristic of an interest only mortgage?

A

borrower pays interest for the term of the loan and repays the capital sum at the end of the term

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33
Q

What is the characteristic of an endowment and pension mortgages?

A

Combined with life insurance policies and pensions.

Borrower pays monthly premiums for the insurance or pension with the intention that the policy or pension will have enough funds to pay off the loaf at the end of its term.

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34
Q

What is the characteristic of a Sharia compliant mortgage?

A

Is compliant with Islamic law to address concerns about the payment of interest.

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35
Q

When may a Solicitor represent both the buyer and a lender in a property transaction?

A
  • The lender is an institutional lender (not the borrower’s friend or relative)
  • Standard certificate of title is provided
  • Client confidentiality is maintained between the two.
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36
Q

Until the purchase has completed and the mortgage registered with the LR what can’t the mortgage be?

A

Completed and perfected against third parties who might also have an interest in the mortgaged property.
Search with priority can prevent any new charges being registered.

37
Q

What does a lender typically issue?

A

a set of instructions explaining what they require the solicitor to do

38
Q

Most lenders follow guidelines in the UK Finance Mortgage Lender’s Handbook examples of requirements include what?

A
  • Ensure the seller is legally represented
  • Ensure usual and necessary searches and enquiries have been carried out (and no more than 6 months old)
  • Not release the mortgage advance unless the solicitor has sufficient funds to pay SDLT, LR fees and register the mortgage.
  • Establish if any adult other than the mortgagor will be living in the premises following completion and obtain a waiver/consent form to ensure the non-owner doesn’t acquire any rights in the property.
39
Q

How must a legal mortgage be created?

A

By deed

40
Q

What must the buyer’s solicitor submit before a lender will release the mortgage funds?

A

a clear Certificate of Title

41
Q

What are the 2 purposes of clear Certificate of Title?

A
  1. Confirms to the lender that the title is good and marketable; and
  2. Acts as a request for the release of the mortgage advance.
42
Q

What are the key conditions contained in the Standard Conditions of Sale?

A

Purchase price and contents price include VAT, unless contract amended.

Deposit is 10% of the purchase price and held by seller’s solicitor as stakeholder.

Seller provides full title guarantee

If the contract discloses obligations relating to the property which will bind the buyer (for example maintain a fence) then the Standard CoS provide that the buyer agrees to perform the obligation and indemnify the seller if the buyer breaches the obligation in the future.

If the completion date is not inserted into the contract on exchange (most cases it will be) then under the Standard CoS this will be 20 working days after exchange by 2pm.

43
Q

Under Standard Conditions of Sale what does seller provides full title guarantee include?

A

That the seller is entitled to sell the property, will at their own cost do all in their power to transfer the title to the buyer and the property is free from all charges and encumbrances other than those disclosed in the contract.

Note: parties may agree for no title guarantee or limited title guarantee (that the seller has not created any charges or granted any rights during their period of ownership that have not been disclosed in the contract).

44
Q

What are the key conditions contained in the Standard Commercial Property Conditions?

A

Designed for use in more complex or high value commercial property transactions. Two parts. Part 1 are general, part 2 conditions contain provisions on VAT, capital allowances and reversionary interests in flats, as only relevant to certain transactions will only apply if specifically incorporated by special condition.

45
Q

What is the purpose of the special conditions?

A

Includes conditions specific to the particular transaction such as whether property will be vacant on completion, whether a different time for completion has been agreed.

46
Q

What do the certain pre-printed special conditions in a Contract Incorporating the Standard Conditions of Sale include?

A
  • Whether the property will be vacant on completion or a tenant in situ (if so tenancy agreement subject to will be inserted)
  • Whether a different completion time agreed
  • Whether any occupiers on the property such as seller’s relative (if so will need to confirm their relinquishment of any rights on completion)
47
Q

Under what circumstance can a seller use the deposit before completion?

A

If has a related purchase for their residence in England/Wales they can use the deposit received on their sale towards the deposit required on that related purchase.

48
Q

What are two methods of holding a deposit?

A

Stakeholder
Agent

49
Q

How does holding deposit as a stakeholder work?

A

Seller’s solicitor holds in client account on behalf of both parties and the deposit can’t be paid to the seller until completion.

Standard Conditions of Sale (unless using for another deposit) and Standard Commercial Property Conditions both provide that the deposit should be held as stakeholder.

50
Q

How does holding deposit as an agent work?

A

If the deposit is held as agent seller’s solicitor can pass the deposit to the seller at any point, usually as soon as it’s paid. Can cause issues if the seller defaults and buyer wants deposit back.

51
Q

When does risk of loss in the property pass to the buyer?

A

on exchange

52
Q

What happens if property is destroyed or damaged between exchange and completion?

A

buyer must still go ahead with the purchase.

Seller has no duty to insure the property after exchange (but typically will continue to do so)

53
Q

What is the basics of VAT in a contract?

A

For residential typically zero rated. Commercial property then price deemed to be inclusive of VAT if contrary not specified.

54
Q

What happens once buyer and seller are happy with results of pre-contract searches and enquiries?

A

They will exchange contracts.

55
Q

What methods of exchange?

A

in person, exchange by post or by phone. By phone is most common method.

56
Q

What are Law society’s three formulas for exchange by phone call?

A

A. One solicitor (usually sellers) holds both signed parts of the contract. Buyer’s solicitor having sent signed contract and deposit cheque in advance. Seller’s solicitor confirms both parts are the same and inserts exchange and completion dates on both.
B. Each solicitor holds their own client’s signed part of the contract. Solicitors confirm in a call that the versions are the same and each will send their signed part to the other.
C. If there is a chain of transactions and deposit money are to be sent directly to another firm further up the chain will make 2 calls, the first to confirm the solicitors are ready and the second to confirm actual exchange.

57
Q

What are the consequences of exchange?

A

Matter becomes legally binding on the seller and the buyer.

58
Q

If the completion date is more than a couple weeks after exchange what should the buyer’s solicitor consider?

A

Registering the contract on the charges register (or as land charge if unregistered land).

59
Q

What happens if after exchange one party wishes to vary their contract?

A

They will have to re-execute new contracts with the new terms included (one party can’t alter independently)

60
Q

Who fills out the Completion Information and Undertakings form?

A

a standard protocol form that the seller’s solicitor fills out prior to completion

61
Q

What does Completion Information and Undertakings form include?

A
  • Details of the client account the purchase money must be sent to on day of completion
  • Amount due on completion
  • Where keys for property will be available for collection
  • An undertaking to pay off the mortgage out of the sale proceeds and to provide evidence of discharge when received.
62
Q

What are the four types of purchase deed for a transfer and when are they used?

A
  1. Transfer – can be used for all registered and unregistered land, TR1 or TP1
  2. Assent – used by personal representatives to transfer land to a beneficiary
  3. Conveyance – older document used for unregistered land
  4. Assignment - used for unregistered leasehold land.
63
Q

What is the purpose of pre-completion searches?

A

To ensure all information received about the property remains correct, carried out by buyer’s solicitor

64
Q

What are the pre-completion searches?

A
  • Search with priority (OS1 or OS2);
  • Full land charges search repeated if property unregistered against full names of current owner/seller for period of ownership;
  • Repeat bankruptcy search if the buyer obtaining a mortgage;
  • Repeat company search if the seller is a company; and
  • Should advise the buyer to repeat the physical inspection of the property.
65
Q

Purpose of search with priority (OS1 or OS2)?

A

Will inform if any entries added since date of official copies have been provided.
Also gives 30 working day priority to submit registration of transaction with LR and any mortgage

66
Q

Purpose of repeating full land charges search pre-completion?

A

gives priority period of 15 working days for transaction to complete within

67
Q

If any searches reveal a new entry what will the buyer’s solicitor require?

A

The seller’s solicitor to resolve it before completion.

68
Q

What pre-completion steps should be carried out?

A

If seller has a mortgage, seller should ask lender for an updated mortgage redemption figure and ask estate agent their fees so a completion statement can be prepared.

Buyer’s solicitor will prepare a completion statement showing the sum required from the buyer to complete.

69
Q

When does buyer’s solicitor send balance of purchase money to the seller’s solicitor?

A

on completion day

70
Q

How can completion take place? And what is most common method?

A

Completion can be done in person, through agent or by post. Post most common method and if elected to follow the Law Society Conveyancing Protocol and haven’t indicated otherwise this is presumed.

71
Q

Law Society have established a Code for Completion by Post which may be adopted by solicitors. What are the main points?

A
  • Seller’s solicitor acts as agent for the buyer’s solicitor to date and execute the transfer and other relevant documents for the buyer’s solicitor
  • Buyer’s solicitor sends completion money by bank transfer, seller’s solicitor will notify them as soon as it arrives
  • Seller’s solicitor will complete the transfer documents
  • Seller’s solicitor will confirm to buyer’s solicitor by phone, fax or email the time completion takes place and notify the keyholder to release the keys to the buyer. Latest time to send written confirmation that completion has taken place is the end of working day following the day of completion.
72
Q

When does title pass?

A

If land is registered the title passes when the buyer becomes registered at HMLR if the land is unregistered title passes on completion.

73
Q

What is an effect of completion on the contract?

A

merges with the purchase = purchaser can no longer sue on the contract terms

74
Q

What are the post-completion steps for seller’s solicitor?

A
  • If undertaken to redeem a mortgage from completion funds must discharge using the appropriate HMLR form or method depending on type of charge.
  • Usually pays estate agent fees and will remit the rest to the seller.
75
Q

What are the post-completion steps for buyer’s solicitor?

A
  • Has duty to pay HMRC any SDLT within 14 days of completion. Must complete form even if falls within nil rate band.
  • LR:
    o Must register the title within 30 working days of official search if title registered.
    o If unregistered must register a mortgage that triggers first registration within 2 months of completion of the mortgage.
    o If new leasehold for more than 7 years must apply to register so HMLR create new title for that lease
  • If the buyer is a company with a mortgage this must be registered at Companies House within 21 days of completion.
76
Q

What are the remedies for delayed completion?

A

Common law damages
Contractual compensation
Notice to complete
Rescission

77
Q

In remedies for delayed completion when can common law damages be claimed?

A

After exchange and before completion if contract was misleading or inaccurate due to an error by the seller the buyer is entitled to damages sufficient to as far as possible put the buyer in the position they would have been if the property was as described (difference in value between what was described and what was received).

Land is considered unique so if a party fails to complete the innocent party may seek an order for specific performance requiring the breaching party to perform as promised and seeking damages arising from the delay.

78
Q

In remedies for delayed completion when can contractual compensation be claimed?

A

Under the Standard Conditions of Sale completion must occur no later than 2pm on the day set for completion, a delay (any payment after 2pm) entitles the innocent party to damages caused by the delay and at the very least interest.

79
Q

What are the specifics for remedies for delayed completion under contractual compensation?

A
  • Interest is calculated on the amount of the purchase price and contents price less any deposit
  • The rate is applied to the period between the contractual completion date and the actual completion date
  • Payments received after 2pm (or time set out in contract) are treated as being received the next day.
  • If the property has a tenant the innocent party can elect to take the rental income until completion instead of compensation by notifying the other party.
80
Q

In remedies for notice to complete when can common law damages be claimed?

A

If contract doesn’t include a time is of the essence clause an innocent party can cancel the contract for delay in completion only if they serve a notice to complete.

81
Q

When can notice to complete can be served?

A

Any time after the completion date by a party who is ready, able and willing to complete (if innocent party not ready, able and willing can’t serve the notice).

82
Q

What happens once notice to complete served?

A

Defaulting party has 10 days to complete excluding the day of service.

If the buyer is in default and paid less than 10% of the deposit on receiving the notice the buyer must pay the seller the difference between what they paid and 10%.

83
Q

Under notice to complete if the buyer is the defaulting party and fails to complete within 10 days what may the seller do?

A
  • Rescind the contract
  • Retain the deposit
  • Resell the property
  • Claim damages (limited to the difference between the contract price and what the seller resells the property for)
84
Q

Under notice to complete if the seller is the defaulting party and fails to complete within 10 days what may the buyer do?

A
  • Rescind the contract
  • Reclaim their deposit money with interest at the contract rate
  • Claim damages sufficient as far as is possible to put the buyer in the position they would have been in had the seller performed
85
Q

In remedies for delayed completion when can rescission be claimed?

A

After exchange and before completion if contract was misleading or inaccurate due to an error by the seller the buyer is entitled to rescind (cancel) the contract only if:
* An error or omission was made fraudulently or recklessly; or
* If the buyer took the property it would be substantially different in quality, quantity or tenure from the property they expected to take to their prejudice.

86
Q

When can rescission be sought for leasehold property?

A

if the landlord’s consent is required and the licence to assign is not forthcoming

87
Q

Delay doesn’t give the right to rescind the contract unless what?

A

the contract specifies that time is of the essence. In Standard Conditions of Sale unmodified there’s no time is of the essence clause, although can be added as a special condition.

88
Q

What is a covenant?

A

A promise made about the land which creates a right over the land

89
Q

What is an easement?

A

A right attached to one party’s land over another party’s land

Property (5 decks)

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