Freehold transactions MCQs Flashcards
You are acting for the buyer of a property. In an effort to speed up the sale, you submit searches which will involve an expense to your client. These form part of your investigation of title. At what point in the transaction would you expect to send these?
After receiving a draft contract and before exchange of contracts.
As soon as your client indicates that they have put an offer in on the property.
After exchange of contracts.
After completion.
After you have ensured that the draft contract is in final form.
After receiving a draft contract and before exchange of contracts.
Correct. Any issues which might arise need to be dealt with in the contract. You don’t necessarily know who the buyer is once you have received instructions from your seller client - you need the Heads of Terms. After agreeing the contract is too late - and the contract will be agreed by exchange. After completion is far too late. The best answer here is before exchange of contracts. Often it is once you have received the Heads of Terms - you will send the official copies and the standard CPSE replies if your firm has some prepared. If not, the buyer’s solicitor will send their standard set of CPSEs and enquiries.
You act for a client buying a house at a price of £200,000 with the help of an 80% mortgage. Searches and enquiries have been carried out, and you have agreed with the seller’s solicitor to aim for exchange by no later than the end of next week.
You receive a call from the seller’s solicitor to say that the seller has had an offer from a third party of £210,000 and that your client will need to match it, or the seller will sell to the third party.
Your client tells you that they were already overstretching themselves, and it will be impossible to do this.
How do you advise your client?
You should ask to see proof of the third party’s offer, as a seller may only withdraw from an existing sale if a genuine offer has been received.
Your client can see if they can persuade the seller to honour the original price, but if the seller refuses, then your client will unfortunately lose the property.
You advise your client that as you are holding the contract, you can exercise a lien over it and refuse to return it to the seller’s solicitor until they honour the original price agreed.
You should see whether your client wishes for you to refer it to a litigation colleague to issue proceedings to force the sale to proceed.
Your client should be prepared to lose the property, but at least they can recover the costs of their searches and survey from the seller.
Your client can see if they can persuade the seller to honour the original price, but if the seller refuses, then your client will unfortunately lose the property.
Correct. Until exchange of contracts, either party can walk away from the deal without incurring any liability. The seller can choose to sell to another party who is offering a higher price without any liability - this is know as ‘gazumping’ in practice. There is no obligation on the seller to prove another genuine offer has been received and the buyer would not be able to recover the costs of their searches and survey from the seller.
You act for a client buying a house near an industrial plant. When viewing the house, your client was concerned by offensive chemical smells coming from the plant. The seller reassured your client both verbally and in a written reply to enquiries that it only happens once or twice a year when the plant carry out a particular process.
The contract incorporated the Standard Conditions of Sale (Fifth Edition).
Following completion, your client calls to say that the plant emits the smell every weekend. Correspondence with the plant operator confirms that they carry out the process weekly, and have done for the last few years. Your client’s surveyor gives the opinion that the house is worth £20,000 less than it would be if the seller’s statement had been correct.
Which of the following options best describes if your client can make a claim for damages?
Your client cannot make a claim against the seller because of the principle of caveat emptor
Your client may wish to a claim for damages from the seller based on misrepresentation
Your client cannot make a claim for damages as it has not suffered any loss in the circumstances
Your client may wish to claim for damages from the search provider as this should have been flagged in the desktop environmental report
Your client cannot make a claim against the seller because it is a subjective matter and most of the neighbours are not offended by the smell
Your client may wish to a claim for damages from the seller based on misrepresentation
Correct. Although the principle ‘caveat emptor’ means the buyer takes the property as it find its and there is no onus on the seller to disclose patent incumbrances or physical defects in the property, the seller cannot mislead the buyer by answering questions dishonestly, which it has done here. The standard conditions of sale do not require the buyer the prove they were induced to reply on the conduct or statement; it is sufficient to prove that there was an error or omissions, which there has been there. The client can therefore make a claim for damages.
You act for a buyer who is buying a house with a loan to be secured by a mortgage. You also act for the mortgage lender.
One of the conditions of the mortgage is that the buyer will meet the balance of the purchase price from their own funds, and not further borrowing.
You are due to exchange tomorrow, or the seller has indicated that they may withdraw from the transaction. The deposit has arrived today. Your accounts department tell you that the payment has been made from a company who only deal in personal loans.
How should you proceed?
You should advise your client that the loan company should have made the payment to your client, and then from their account to you, so that it would appear as a cash advance.
Given the urgency of the transaction, you should exchange, but raise this issue with the client before completion.
You should notify your lender client, and let your client know when you have their response.
Under the Conveyancing Protocol, you should advise the seller’s solicitor of the issue so that they understand the cause of the delay.
You should advise your client that you will need to disclose this to your lender client, and if your client does not give their consent to you doing this, you will need to cease acting for both buyer and lender.
You should advise your client that you will need to disclose this to your lender client, and if your client does not give their consent to you doing this, you will need to cease acting for both buyer and lender.
This is correct. In residential transactions it is common for the buyer’s solicitor to act for the lender because there is unlikely to be a conflict of interest between these parties.
On the facts, you have a duty to disclose (CCS 6.4) all information material to the matter which you have knowledge, which includes the fact the balance of the purchase price is being met by a company who deal in personal loans, not the buyer ie in breach of one of the conditions of the mortgage.
The duty of confidentiality (CCS 6.3) that you owe your buyer client will override the duty, which means you cannot disclose this information without the permission of the buyer.
If the buyer does not give consent, you will have to cease to act for the lender. You would be advised to stop acting for the buyer as well.
A solicitor is acting for a buyer of a registered freehold title in England. Part of the purchase price is to be funded by a mortgage loan.
Which of the following options describes what the buyer’s solicitor will do after completion of the purchase?
Pay Stamp Duty Land Tax and register the buyer as owner of the property, and the lender as a chargee, at the Land Registry.
Nothing. Completion marks the end of the transaction.
Pay off the outstanding balance of the seller’s mortgage.
Exchange contracts.
Report on title to the buyer.
Pay Stamp Duty Land Tax and register the buyer as owner of the property, and the lender as a chargee, at the Land Registry.
Question 1
A solicitor acts for a client who has been ready to exchange contracts on the purchase of
her new house for several weeks. The purchase is being funded by a new mortgage and
the proceeds of the sale of her current flat. The plan is to exchange on the sale of the flat
and the purchase of the house simultaneously. The client has phoned, in a very distressed
state, to say that the buyer of the flat has just said that he can only proceed if the price of
the flat is reduced by £5,500 as his surveyor says that the flat needs to be rewired.
Which of the following statements best describes the client’s position following the
buyer’s demand to reduce the sale price of the flat?
A The client will have to agree to the price reduction on the flat and proceed with the
purchase of the house even though she may not have enough money to complete the
purchase of the house.
B The client cannot recover any of her wasted conveyancing costs if the sale of the flat
and the purchase of the house does not proceed.
C The client is not obliged to agree to the price reduction on the flat and can recover her
wasted conveyancing costs from the buyer of the flat.
D The client will have to agree to the price reduction on the flat because she should have
told the buyer of the flat that the flat needed rewiring.
E The client was not obliged to tell the buyer of the flat that the flat needed rewiring, but
she will have to reimburse him for his wasted conveyancing costs if he decides not to
proceed.
Answer
Option B is correct. Neither party has any legal rights against the other unless and until
contracts are exchanged, so the buyer is at risk of being ‘gazumped’ (where the seller
raises the price at the last minute) and the seller is at risk of being ‘gazundered’ (where the
buyer reduces the price at the last minute). This is what lies behind much of the criticism of
the conveyancing system in England and Wales.
So, in this situation, the client cannot force the buyer of the flat to proceed, but she is not
obliged to accept the price reduction (so options A and D are wrong). Nor can she sue
him for wasted costs. Similarly, the client cannot be forced to complete the purchase of the
house (option A is also wrong for this reason), or be sued by the seller of the house for
wasted costs. The client may not have known anything about the state of the wiring, but in
any event, she is not obliged to tell the buyer of the flat anything about it because of the
principle of ‘caveat emptor’ (option D is also wrong for this reason). Therefore, she is not
obliged to reimburse the buyer of the flat for his wasted costs and option E is wrong.
Question 2
A solicitor acts for the buyer of a new- build flat from a residential development company
(‘the seller’) and has a received a pre- contract package from the seller’s solicitor. The
estate agent acting for the seller has told the buyer that there is another person interested
in buying the flat and that this other person viewed it yesterday. The estate agent has also
told the buyer that the seller has instructed its solicitor to send a pre- contract package to
this other person. Neither the solicitor nor the buyer has heard anything from the seller or
its solicitor about this yet.
Which of the following statements best describes the position of the seller’s solicitor
having received the seller’s instruction to send a pre- contract package to the other
person interested in buying the flat?
A The seller’s solicitor does not need to say anything to the buyer’s solicitor. It does not
matter that there is another person interested in buying the flat as it was the estate
agent that allowed them to view the flat, not the seller or the seller’s solicitor.
B The seller’s solicitor has already breached The Code of Conduct by failing to inform the
buyer’s solicitor that another interested person viewed the flat yesterday.
C The seller’s solicitor will probably breach The Code of Conduct if, having obtained
their client’s consent to the disclosure, they fail to inform the buyer’s solicitor that a pre-
contract package is being sent to another interested person.
D The seller’s solicitor should disclose to the buyer’s solicitor that they are sending a pre-
contract package to the other interested person, even if their client does not agree to
this disclosure.
E The seller’s solicitor must immediately cease to act for the seller.
Answer
Option C is correct.
Once the solicitor receives the instruction from the seller to send the additional pre- contract
package, then the obligation not to mislead described in paragraph 1.4 of The Code of
Conduct is relevant. However, the seller’s solicitor also has a duty of confidentiality to the
seller client in paragraph 6.3; they cannot disclose the contract race to prospective buyers
without their seller client’s consent, so option D is wrong.
Option B is not the best answer as a mere viewing may never result in an offer for the flat.
Option A is not the best answer as the duty not to mislead arises regardless of how the
other person was introduced to the property.
It is only when the seller refuses to consent to the disclosure that the seller’s solicitor must
decline to act, so option E is not the best answer. So long as the seller consents to the
disclosure, and that disclosure is made, then the contract race can proceed.
Question 3
A solicitor is acting for the buyer of a freehold property. The pre- contract searches and
enquiries have revealed that the designated planning use for the property is use as offices
within use class E of the Town and Country Planning (Use Classes) Order 1987. Following
completion, the buyer wishes to open a wine bar at the property, which is a sui generis use.
Investigation of title has not revealed any restrictive covenants related to use of the property.
Does the buyer need to apply for express planning permission in order to be able to
use the property as a wine bar?
A No, because there is nothing on the title restricting the use of the property.
B No, because a change of use never constitutes development.
C No, because whilst the proposal constitutes a material change of use, planning
permission is automatically granted under the Town and Country Planning (General
Permitted Development) Order 2015 (‘GPDO’).
D Yes, because any change of use requires express planning permission.
E Yes, because the proposal constitutes development and will not be covered by
the GPDO.
Answer
Option E is correct.
Planning permission is a separate issue to restrictive covenants on title, so option A is wrong.
Planning permission is required for any activity which constitutes ‘development.’ Under s 55 of
the Town and Country Planning Act 1990, ‘development’ includes the making of any material
change in the use of any buildings or other land. A change between a use within use class E
and a sui generis use is a material change of use, so option B is not the best answer.
Express planning permission is therefore required, unless planning permission is automatically
granted under the GPDO. This change of use will not be covered by the GPDO as it is a
change of use from use class E to a sui generis use; therefore planning permission is not
automatically granted and express planning permission will be required, so option C is not
the best answer.
Option D is not the best answer because a ‘material’ change of use will constitute
development.
A client has entered into a contract to sell her house.
After exchange of contracts, the client seeks advice about whether she may keep the light fitting in the sitting room. This is held to the ceiling by three small screws and was made by the client’s late father.
The light fitting is not mentioned in the contract.
May the client remove the light fitting before completion?
A. No, because the light fitting is likely to be a fixture due to the high degree of attachment.
B. No, because the removal constitutes a breach of an implied term of the contract as the room will be unlit when the new owners move in.
C. No, because any item within a property is permanently part of the land and must not be removed.
D. Yes, because the light fitting is likely to be a chattel due to the slight degree of attachment.
E. Yes, because any item with sentimental value is always removable.
D - Yes, because the light fitting is likely to be a chattel due to the slight degree of attachment.
