Intro To Freehold Transactions

Question 1

Why does a client need a property solicitor?

Answer 1

Land and buildings are often the most valuable assets an individual or company will buy. There are risks of losing money through the conveyancing process and problems with the property.

Question 2

What are common client concerns when engaging a property solicitor?

Answer 2

Clients often think about how long the process will take and how much it will cost.

Question 3

What are the buyer’s aims when acting for the buyer?

Answer 3

Ensure that the seller has the right to sell the property, the physical condition of the property is adequate, identify all rights the property enjoys, the property is free from security interests, the contract reflects agreed terms, and there are sufficient funds to finance the purchase.

Question 4

What are the lender’s aims in a freehold transaction?

Answer 4

The lender wants to ensure the property is marketable and its value is sufficient to cover losses if the buyer does not repay the mortgage.

Question 5

What are the seller’s aims in a freehold transaction?

Answer 5

The seller wants to sell the property and receive payment as soon as possible, while ensuring the contract reflects agreed terms and transferring legal ownership to the buyer.

Question 6

What are the three distinct stages of the conveyancing process?

Answer 6

Pre-exchange, Pre-completion, and Post completion.

Question 7

What happens during the Pre-exchange stage?

Answer 7

The buyer decides to buy the property, agrees on a price, a surveyor surveys the property, and the buyer’s solicitor investigates and reports on the title.

Question 8

What occurs during the Exchange stage?

Answer 8

The seller and buyer enter into a contract, the buyer pays a deposit, and both parties cannot withdraw without serious financial consequences.

Question 9

What happens during the Completion stage?

Answer 9

The buyer’s solicitors send the purchase price to the seller’s solicitors, the seller’s solicitors send necessary paperwork, and the buyer receives the keys.

Question 10

What is the principle of caveat emptor?

Answer 10

Caveat emptor translates to ‘buyer beware’, meaning the buyer takes the property as they find it and must investigate thoroughly before exchange.

Question 11

What information is needed to investigate a property?

Answer 11

Information comes from the title to the property, seller’s replies to enquiries, searches from various bodies, and a survey of the property.

Question 12

What was the outcome of Hardy v Griffiths [2014] EWHC 3947 (Ch)?

Answer 12

The buyers had to pay the full deposit as they failed to complete, and the court applied the principle of caveat emptor, stating it was the buyer’s responsibility to discover physical defects.

Question 13

What should be addressed when taking instructions from a client?

Answer 13

Consider the Energy Performance Certificate, likely timescale and costs, co-ownership, surveys, and tax.

Question 14

What is an Energy Performance Certificate (EPC)?

Answer 14

An EPC reports on the energy efficiency rating of a property and must be provided by the seller before marketing.

Question 15

What are the likely timescale and costs for a property transaction?

Answer 15

The average residential sale may take around six to eight weeks, while commercial matters may require tighter timelines.

Question 16

What is co-ownership in property transactions?

Answer 16

Co-ownership involves having two or more owners, considering both legal and beneficial ownership.

Question 17

What types of residential mortgages are there?

Answer 17

Capital repayment mortgage, interest only mortgage, and endowment mortgage.

Question 18

What is Capital Gains Tax (CGT)?

Answer 18

CGT is a tax on the profit when selling certain assets, including land and buildings, that have increased in value.

Question 19

What are the sources of finance for funding a property purchase?

Answer 19

Funding usually comes from the buyer’s own resources, a mortgage loan, or proceeds of any related sale.

Question 20

What is the equity in property?

Answer 20

Equity is the value of the property that is not required for the mortgage.

Question 21

What is an endowment mortgage?

Answer 21

An endowment mortgage is an interest-only mortgage topped up with a payment invested in an endowment policy, intended to repay the capital at the end of the term.

Many endowment mortgages have not performed as expected, leaving borrowers with a shortfall.

Question 22

How is funding for a property purchase typically obtained?

Answer 22

Funding usually comes from the purchaser and a lender.

Question 23

What types of lenders are typically involved in residential transactions?

Answer 23

Residential transactions typically involve funding from a high street bank or building society.

Question 24

What are some ways to raise finance for commercial property?

Answer 24

Commercial property finance can be raised from traditional lenders as well as through more complex methods like equity finance.

Question 25

What are the different types of mortgage loans available?

Answer 25

Different types of mortgage loans include capital repayment and interest-only.

Question 26

What conduct issues must be considered when accepting instructions in property transactions?

Answer 26

Consider if you can provide a competent and timely service, if you are authorized to act, if there is a conflict of interest, and your duty of confidentiality and disclosure.

Question 27

What is the rule in CCS 6.2 regarding conflict of interest?

Answer 27

You do not act in relation to a matter if you have a conflict of interest unless certain conditions are met, including informed consent from all clients.

The conditions include effective safeguards for confidential information and ensuring it is reasonable to act for all clients.

Question 28

What is the definition of ‘substantially common interest’ (SCI)?

Answer 28

‘Substantially common interest’ (SCI) refers to a situation where there is a clear common purpose between clients and a strong consensus on how to achieve it.

Question 29

What conditions must be met when SCI or CFSO applies?

Answer 29

The conditions include: (i) informed consent from all clients, (ii) effective safeguards for confidential information, and (iii) ensuring it is reasonable to act for all clients.