Freehold Transactions

Question 1

Why do Clients need Property Lawyers?

Answer 1

• To Advise them on any legal risks concerning the property; and
• To handle the conveyancing process.

Property transactions are extremely high-value, and accordingly, carry significant risks if something goes wrong.

Question 2

What are the Buyer’s aims in a Freehold Transaction?

Answer 2

To complete the transaction quickly, cheaply, with minimal risk and maximal liberty.

Question 3

As a Lawyer, what are your Objectives when acting for a Buyer?

Answer 3

Ensure that:
* The Seller is entitled to sell the Property.
* The Property’s condition is fit for the Buyer’s purposes.
* The Property is, or will be, free from security interests.
* The Sale Agreement reflects the Parties’ true intentions.
* The Property is appropriately valued and that adequate financing is available.
* All rights associated with and affecting the Property are properly identified and understood.

Question 4

What are the Lender’s aims in a Freehold Transaction?

Answer 4

To ensure the Property is easily marketable and sufficiently valuable to cover the Buyer’s credit risk.

Question 5

As a Lawyer, what are your Objectives when acting for a Lender?

Answer 5

Ensure that:

• The Property is appropriately valued.
• The Property’s condition is fit for the Lender’s purposes.
• The Sale Agreement reflects the Parties’ true intentions.
• The Lender’s security interest is valid and enforceable.
• The Property is, or will be, free from third-party security interests.

Question 6

What are the Seller’s aims in a Freehold Transaction?

Answer 6

Sell the Property and receive the proceeds quickly, cheaply, and with minimal risk.

Question 7

As a Lawyer, what are your Objectives when acting for a Seller?

Answer 7

Ensure that:
* The Sale Agreement reflects the Parties’ true intentions.
* The transfer of funds and ownership is smoothly facilitated.
* The transfer of information is smoothly facilitated.

Question 8

What are the Three Stages of the Conveyancing Process?

Answer 8

1. Pre-Contract to Exchange.
2. Pre-Completion to Completion.
3. Post-Completion.

Question 9

What occurs during Pre-Contract to Exchange?

Answer 9

The Parties:
* Conduct legal due dilligence;
* Arrange financing; and
* Approve a draft contract.

Question 10

What occurs during Pre-Completion to Completion?

Answer 10

The Parties:
* Approve the Transfer Deed;
* Reply to Completion enquiries;
* Conduct Completion searches; and
* Prepare for Completion.

Question 11

What occurs during Post-Completion?

Answer 11

The Seller:
* Sends the completed Transfer Deed and any discharged security to the Buyer.

The Buyer:
* Fulfills any tax obligations.
* Registers its security interests with Companies House and its property interest with the Land Registry.

The obligation to register a security interest with Companies House only applies if the Buyer is a corporate entity.

Question 12

How does the Principle of Caveat Emptor apply in the context of Freehold Transactions?

Answer 12

• The Buyer takes the Property as they found it; and
• The Seller is under no obligation to provide all the information they may need.
• Should the Buyer find issue with the Property after exchanging contracts, they will have no recourse merely by that fact.

Hardy v Griffiths [2014] is a very instructive example.

Consequently, it is the Buyer’s counsel’s role to investigate the Property as thoroughly as possible and to ask all the right questions.

Question 13

In light of Caveat Emptor, how should the Buyer’s Counsel approach Pre-Contract to Exchange?

Answer 13

• Investigate the Property’s title.
• Submit enquiries to the Seller concerning relevant information.
• Request information from various bodies regarding the rights and obligations concerning the Property.
• Hire a surveyor to inspect the Property, report on its value and condition, and flag issues for further investigation.

Question 14

When taking instructions from a Client, what are you likely to initially Address?

Answer 14

• Tax.
• Title enquiries.
• Timescales and costs.
• Surveys of the Property.
• Legal aspects of co-ownership arrangements.
• Evaluation of the Energy Performance Certificate (“EPC”).

Question 15

Which Surveys are advisable for a Buyer to conduct?

Answer 15

• A Basic Valuation.
• A Homebuyer’s Report.
• A Full Structural Survey.

The Surveryor conducts a Survey, as instructed by the Buyer. All other searches, we conduct ourselves on the Buyer’s behalf.

Question 16

What are the Primary Tax Considerations in a Freehold Transaction?

Answer 16

• Value Added Tax (“VAT”).
• Capital Gains Tax (“CGT”).
• Stamp Duty Land Tax (“SDLT”).°

Land Transaction Tax (“LTT”) is only relevant in Welsh transactions.

Question 17

What is Private Residence Relief (“PRR”)?

Answer 17

An exemption most residential Sellers may use to avoid CGT.

Question 18

For a Buyer, what are the main Transaction Costs in a Freehold Transaction?

Answer 18

• Tax.
• Lawyer’s fees.
• Purchase price, including add-ons or supplements.
• Lawyer’s disbursements (e.g. Land Registry fees, search fees, etc.).