Freehold transactions Flashcards
What are some of the buyer’s aims in a freehold transaction?
-ensure the seller has the right to sell the property
-identify any rights the property enjoys
-identify any rights that burden the property
-ensure the property is free from any security interest
What are the lender’s aims in a freehold transaction?
The lender will want to know:
-that the property is marketable
-that the property’s value is sufficient to cover any losses if the buyer does not repay the mortgage
What are the seller’s aims in a freehold transaction?
To sell the property and receive the money as soon as possible.
What are the three distinct stages in the conveyancing process?
Pre-contract to exchange
Pre-completion to completion
Post-completion
What happens at the pre-contract to exchange?
-Buyer decides to buy property, agrees price
-Surveyor carries out survey and reports on its value and condition
-Buyer’s solicitor investigates and reports on title
Only when the buyer is satisfied with the above, will they proceed to exchange.
What happens at exchange?
On exchange, the seller and buyer enter into a contract to sell and buy the property on the completion date. The buyer usually pays a 10% deposit.
From this point on, neither party can pull out without serious financial consequences.
What happens at pre-completion to completion?
-Buyer’s solicitors orders mortgage funds and ensures has full money from client in time for the completion date
-Seller and buyer book removal vans
-Seller ensures that it has all the necessary paperwork to transfer the property on completion
What happens at completion?
-Buyer’s solicitors send the purchase price to the seller’s solicitors and the necessary paperwork is exchanged to transfer the property to the buyer’s solicitors
-Buyer gets the keys and the parties physically move house
What happens at post completion?
-Seller’s solicitor pays off the seller’s mortgage and pays balance to seller
-Buyer’s solicitors pays SDLT and register buyer as the new owner at the Land Registry
What does the phrase caveat emptor mean?
Let the buyer beware-the buyer takes the property as they find it.
At what point can a buyer withdraw from a transaction?
At any point up to exchange of contracts. After exchange, they cannot withdraw because they subsequently find a problem with the property.
Is the seller under an obligation to give the buyer all the relevant information relating to the property?
No, it is the buyer’s solicitors job to investigate as thoroughly as possible and report to the buyer.
In relation to the principle of caveat emptor, describe the outcome of Hardy v Griffiths (2014).
The parties exchanged contracts for the purchase of a property and the buyer paid a 5% deposit on exchange, with the contract stating it would be increased to 10% if the C didn’t complete on the agreed date.
The buyer failed to complete and sought return of their deposit on the basis of misrepresentation-they alleged the seller had failed to reveal rising damp and dry rot.
It was held that the C had to pay the full 10% deposit-it was for the buyer to discover any physical defects and they failed to commission a survey.
What is a basic valuation survey?
Cheapest option, intended to ensure that the lender will be able to recover any losses by selling the property.
What is a homebuyer report?
A detailed report suitable for properties in reasonable condition less than 150 years old.
What is a full structural survey?
Suitable for any property but it is the most expensive and should be considered when the property is listed or had extensive renovations.
When must SDLT (stamp duty land tax) be paid?
When a buyer buys a property or land over a certain price in England and Northern Ireland.
What is CGT (capital gains tax)?
It is a tax on profit when you sell certain assets that have increased in value. It is only the gain you make that is taxed.
What is VAT (value added tax)?
A tax that is added to the price of certain goods and services. A buyer must pay VAT on the sale price to the seller if applicable.
What is a capital repayment mortgage?
Borrower repays the capital sum by monthly payments, together with an interest amount monthly. At the end of the term, the loan has been paid off in full.
What is an interest only mortgage?
Borrower only pays interest on the loan, meaning they pay less per month but the capital remains outstanding which is generally only repaid upon the sale of the property.
What is an endowment mortgage?
No longer available-interest only mortgages topped up with a payment that is invested into an endowment policy that repays the capital at the end of the term.
What are the two exceptions that allow you to act on a matter in which you may a conflict of interest?
-Substantially common interest
-Competing for the same objective
What are the conditions for the exceptions to apply?
-all the clients have given informed consent, given or evidenced in writing, to you acting
-where appropriate, you put effective safeguards in place to protect your clients’ confidential information; and
-you are satisfied it is reasonable for you to act for all the clients.
