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FLK 2 Property Law > Key elements and structure of freehold property transactions > Flashcards

Key elements and structure of freehold property transactions Flashcards

1
Q

What is conveyancing?

A

the process of transfer of title (ownership) to property between the seller (transferor) and buyer (transferee)

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2
Q

the parties are usually free to withdraw from a conveyancing transaction before exchange of contracts

true or false

A

true

until exchange of contracts, the parties are usually free to withdraw from a conveyancing transaction - they will not usually be liable for wasted time and costs

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3
Q

completion is when the parties become committed to enter into a property transaction.

true or false

A

false

exchange of contracts is when the parties become committed to enter into a property transaction and complete on the agreed completion date

completion is when the actual legal transfer takes place

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4
Q

exchange of contracts is when the purchase monies are paid over, and the buyer receives the keys to the property

true or false

A

false

exchange of contracts is when the deposit monies are usually paid, with the balance purchase monies and keys being handed over on completion

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5
Q

is freehold ownership of land capable of lasting indefinitely?

A

yes - it’s the closest thing to absolute ownership of land in england and wales

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6
Q

what are the two key stages in a typical property transaction?

A

1) exchange of contracts
2) completion

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7
Q

when is deposit paid?

A

on exchange of contracts- usually 10% of the purchase price

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8
Q

when do parties become bound to complete on the transaction on the agreed completion date?

A

through the exchange of contracts

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9
Q

what kind of interest does the buyer gain in the property under a constructive trust?

A

equitable interest

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10
Q

are parties usually free to withdraw from the transaction until exchange of contracts?

A

yes, as it remains ‘subject to contract’

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11
Q

when are the keys handed over and transfer deed completed?

A

upon completion when the balance purchase price is paid

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12
Q

what else happens on completion apart from the balance purchase price being paid, keys handed over and transfer deed completed?

A
  • buyer becomes entitled to apply to become registered as the proprietor and gains legal ownership (subject to registration at LR)
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13
Q

in the case of land with registered title, when does the legal transfer technically take place?

A

until it’s registered at LR

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14
Q

In the case of land with unregistered title, when does the legal transfer take place?

A

on completion

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15
Q

what will happen if the title for unregistered land isn’t registered within two months of completion?

A

it will become void

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16
Q

PRACTICE EXAMPLE

Jasper has agreed to sell a property to Laurits. Contratcs haven’t been exchanged, but Laurits decided to withdraw from the transaction.

How would you advise Jesper?

A

Laurits should be free to withdraw from the transaction, without penalty before contracts are exchanged. Laurits will not be liable to Jesper for wasted time and costs in the conveyancing process.

once contracts are exchanged, the parties will be committed to complete, the transaction will no longer be merely subject to contract, and there will be remedies in the event of a delay or failure to complete

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17
Q

what does the sellers solicitor do at the pre contract stage?

A
  • carries out an investigation of title
  • undertakes a deduction of title for BS
  • provide a draft contract and supporting docs
  • replies to standard pre contract enquiries
  • respond to any additional pre-contract enquiries and requisitions on title raised by BS
  • deal with any proposals to amend the draft contract, produce clean copies for sigs and request a redemption statement from any mortgagees
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18
Q

what does the buyers solicitor do at the pre-contract stage?

A
  • carries out investigation of title under the principle of caveat emptor
  • raises pre contract searches and enquiries
  • check, approve and may amend draft contract
  • carry out and review results of standard pre contract searches and enquiries of seller and third parties
  • raise any additional enquiries and requisitions on title
  • reports to buyer (and possibly mortgagee) and arranges for contract to be signed by buyer
  • obtains deposit in readiness for EOC
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19
Q

PRE CONTRACT

A

both solicitors arrange for contract to be signed and BS reports to their client (and possibly mortgagee) and obtains deposit in readiness for EOC

buyer is usually advised to insure the property from EOC

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20
Q

what is investigation of title?

A

the process whereby the title to the property is checked/examined to ensure the seller is entitled to sell and title is good and marketable, with all necessary rights and with no materially adverse incumbrances (eg easements/covenants burdening the property)

these could have an impact on use, value, enjoyment, marketability and the security of the property for lending purposes

the SS will complete this process in order to deduce title and pre-empt requisitions on title that may be raised by the BS

BS will also undertake the process as part of the principle of caveat emptor

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21
Q

what is deduction of title?

A

the process where the SS provides to the BS proof/evidence of the sellers title/ownership

consists of either copy title deeds (for unregistered land) or official copies of registers of title (for registered land)

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22
Q

what are pre-contract searches and enquiries?

A

standard pre contract enquiries are made of the SS to ascertain further info about the property that should be known by the seller

pre contract searches are made of third parties (eg LA and local water authority) to ascertain important info about the property that’s held by third parties

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23
Q

what are requisitions on title?

A

additional enquiries of the SS as part of investigation of title and results of pre-contract searches and enquiries

specific qs about an issue that require a solution

buyer is generally not entitled to raise further requisitions on title after contracts have been exchanged

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24
Q

EXAM WARNING

A

pre contract requisitions on title must be distinguished from completion info and undertakings, which form part of pre-completion rather than pre-contract procedure

candidates often confuse or conflate the two, probably because the former used to be known as completion information and requisitions on title

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25
Q

What does caveat emptor mean?

A

‘let the buyer beware’

the onus is on the buyer to investigate title fully and find out as much as possible about the property, so they’re aware of any problems and issues

seller only has a limited duty of disclosure as part of the conveyancing process

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26
Q

what is the next main stage after exchange of contracts?

A

pre completion

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27
Q

what does the BS do at the pre completion stage?

A
  • prepares draft transfer deed for approval by the SS
  • prepare mortgage deed for execution by buyer
  • carry out pre-completion searches and enquiries of SS and third parties
  • submit certificate of title/report on title to lender and request mortgage advance
  • request balance due from client in order to complete
  • deal with any amendments to transfer deed requested by SS, producing a clean copy for execution
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28
Q

what does the SS do at the pre completion stage?

A
  • approves transfer deed and requests clean copy incorporating any proposed amendments
  • respond to buyers completion info and undertakings form (includes an undertaking to discharge any pre-existing mortgages)
  • arranges for clean copy transfer deed to be executed by seller
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29
Q

what’s the next main stage following completion?

A

post completion

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30
Q

What does the SS do at the post-completion stage?

A
  • discharges any existing mortgages
  • provides BS with proof of discharge
  • pay EA costs (if authorised by seller) & account to their client
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31
Q

What does BS do at post-completion stage?

A
  • deals with SDLT or LTT submission return and payment
  • deal with registration at HMLR & sometimes CH
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32
Q

taking instructions - what’s required in all cases?

A
  • full details of buyer and seller
  • EA details
  • details for sol acting for other side
  • property address and tenure (freehold/leasehold)
  • agreed purchase price and deposit
  • details of any fixtures to be removed, or fittings to be included
  • anticipated/proposed completion date
  • details of any related sale/purchase, where synchronisation will be required
  • position as regards the EPC
  • details of who’s in occupation
  • details of existing use and past alterations and additions
  • consider conduct issues for a full consideration of key conduct and ethical issues in property practice
  • verify clients id
  • advice on costs, funds required on acc and anticipated disbursements (bank transfer fees, search fees, sdlt) HMLR fees
  • produce formal engagement letter
  • non residential properties: ascertain VAT position
  • details of any other terms agreed between the parties
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33
Q

do fixtures and fittings pass on completion?

A

only fixtures pass on completion, fittings don’t

so it’s important to contract out of the general rules by specifying any fixtures that are to be removed (with damage made good) and any fittings that are to remain

34
Q

taking instructions - for the seller

A
  • details of agreed EA commission/costs
  • details of any existing mortgages including approx balance due, account number and location of any title deeds (for unregistered land)
  • ask client to complete standard property info forms
  • for co owned property, ascertain whether equitable interest is JT or TIC
  • advise on liability for CGT or corporation tax on capital gains for companies
35
Q

taking instructions - for the buyer

A
  • details of any proposed mortgage and if required, generic advice on the options
  • position concerning the age of the property, property survey and advice on types of survey
  • details of proposed use and proposed alterations and additions
  • situation of the property.. is it near to industrial premises, open land or a watercourse?
  • advise on co ownership and the holding of the equitable interest, depending on circumstances, an express declaration of trust and the making of wills should be advised
  • advice on potential future liability for CGT or corporation tax on capital gains for companies
36
Q

what is meant by synchronisation?

A

synchronisation is imperative where a client has a related sale and purchase

37
Q

what does synchronisation involve?

A

making sure the contracts on the sale are exchanged at the same time as contracts on the purchase, with the same completion date

in the residential context, it ensures the client doesn’t end up without somewhere to live, or being committed to buy another property without someone being committed to purchase their existing property

38
Q

is synchronisation easier or more difficult for new build properties?

A

difficult

39
Q

What is an EPC?

A

Energy Performance Certificate

a certificate produced by an accredited energy assessor, which details the property’s energy use, costs and efficiency, based on an official rating from A (most efficient) to G (least efficient)

provides recommendations to improve the energy efficiency rating

40
Q

how long is an EPC valid for?

A

for a period of 10 years

41
Q

who must the EPC be made available by?

A

usually the seller, without charge, before or within 7 days of marketing and, in any event, within 28 days

42
Q

are listed properties excepted from the requirement for an EPC?

A

yes

for newbuild properties, a predicted energy assessment must usually be produced, with a full EPC, following construction

43
Q

sources of finance - what will the lender usually require?

A

the loan to be secured by a first legal mortgage over the property.

44
Q

is it common to act for the buyer/borrower and lender in most straightforward residential property transactions?

A

yes

45
Q

NOTE

A

when acting for both parties, a sol will have two clients and the needs of both of them will need to be satisfied

eg both parties will be keen to ensure that adverse matters don’t affect the value of the property, its use, enjoyment, marketability and value for secured lending purposes

46
Q

you may only give generic advice concerning the main types of mortgege.

true or false?

A

true

under the financial services and markets act 2000

47
Q

what are the two main typeof mortgage

A
  • repayment mortgage
  • interest only mortgage
48
Q

what is a repayment mortgage?

A
  • usually monthly payments of interest & capital
  • interest rate may be variable, fixed or tracked
  • as interest and capital are repaid, the full amount will be repaid by the end of the mortgage term
49
Q

what is the key advantage of a repayment mortgage?

A

although monthly repayments will be higher, the buyer will be mortgage free at the end of the term

50
Q

what is an interest only mortgage?

A

usually monthly payments of interest only

  • interest may be variable, fixed or tracked
51
Q

interest only mortgage - will the full amount be repaid by the end of the mortgage term?

A

no - as only interest is repaid , the capital will remain outstanding

52
Q

what is the key advantage of interest only mortgage?

A

monthly repayments will be lower, however, if the buyer wishes to keep the property, they will need to find another way to repay the capital (eg from savings or an investment)

53
Q

should a buyer be advised on whether to commission a survey of the property before exchange of contracts?

A

yes

54
Q

what is a survey?

A

a professionally produced report following an inspection of the property

55
Q

what are the three main types of survey?

A

1) basic valuation
2) full structural survey
3) homebuyers valuation and report/survey

56
Q

note

A

for sqe1 you should be able to advise on which type of survey would be most appropriate in given circumstances

57
Q

what will the need for a survey of the property by a qualifies surveyor depend on?

A
  • its age (eg property is more than 100 years old)
  • value
  • whether it’s been extended/altered in the past
  • whether buyer has plans for extensions/structural alterations
  • whether it’s of non standard construction
  • whether it’s in a former mining area or one that’s affected by subsidence
58
Q

note

A

the structural condition of the property can have an impact on its stability, value, use, enjoyment, marketability and its value for secured lending purposes

59
Q

if defects are discovered, can a buyer choose to withdraw from the transaction, require completion of works, or seek a reduction in the purchase price?

A

yes

60
Q

do adverse matters and any reduction in the purchase price need to be reported to the buyers mortgagee?

A

yes - in all circumstances, adverse matters and any reduction in the purchase price must be reported to the buyers mortgagee, who may withdraw, be willing to offer less, or make a retention from the advance

ie retain part of the money until works are carried out

61
Q

what is a basic valuation survey

A
  • most basic form of survey
  • doesn’t assess the physical state and condition of the property in any detail
  • commissioned by a lender as a min requirement to ascertain the market value of the property and its value for secured lending purposese
62
Q

what is the basic purpose of the basic valuation survey?

A

to assure the lender that the property will be worth sufficiently more than its security so that the lender will get its money back in the event of the exercise of its power of sale

simple and cheap but of limited value to a buyer

63
Q

what is a full structural survey?

A
  • most comprehensive form of survey
  • contains a detailed assessment of the physical state and condition of the property
64
Q

which is the most expensive type of survey?

A

full structural survey (although its important to be aware of any limitations within the report)

65
Q

full structural survey

A

the reassurance of a full structural survey may be worth the expense, especially if the property is old, particularly valuable, or there have been past or proposed alterations

it may be used to re-negotiate the purchase price if adverse matters are revealed and the results and any reduction in purchase price must also be reported to the lender

66
Q

what is a homebuyers valuation and report/survey?

A

the detail of a homebuyers valuation and report/survey lies somewhere between a basic valuation and a full structural survey

it will refer to the need for repairs/maintenance, but it’s important to appreciate the very real limitations attached to this type of survey

example - physical inspection may have been limited to exposed and accessible areas…although it’s a compromise, its value to a buyer may be affected depending on these limitations

67
Q

PRACTICE EXAMPLE

Lill is buying a victorian terraced house with the aid of a mortgage.

which type of survey would you recommend in these circumstances?

A

mortgagee will probably insist on a basic valuation

lill should be informed of the limitations of this and that its general purpose will be to give the mortgagee assurance as to the value of the property as security.

lill should be advised to commission a more comprehensive survey and given the age of the property (more than 100 years), a full structural survey should be recommended

lill should also be warned of the limitations of a homebuyers valuation and report

68
Q

REVISION TIP

A

for new build or newly converted properties, a lender will usually undertake a basic valuation and a further survey will not usually be appropriate (particularly when property has yet to be constructed) instead, the developer should provide a structural defects insurance policy

69
Q

What is a structural defects insurance policy?

A

typically covers defects in design and construction for a period of ten years

  • national house building control, through its ‘buildmark’ scheme provides the most common type of policy, although other products are available
70
Q

structural defects insurance policy

who is responsible for remedying defects for the first two years?

A

(initial liability period)

the builder is responsible for remedying defects

71
Q

structural defects insurance policy

who is responsible for structural defects in the final eight years?

A

structural liability period

the national house building control is responsible for remedying defects

72
Q

structural defects insurance policy

A

the cover includes resolution processes as well as protection in the event of the developers insolvency and for environmental liability

73
Q

note

A

for the purposes of sqe1 you need to be aware of the basic nature of the cover and that having it in place, for properties under ten years old, is a requirement of most lenders

74
Q

what does the law society conveyancing protocol set out to do?

A

sets out to standardise the residential conveyancing process, making it more transparent and efficient and improving the experience for all involved

75
Q

what does the law society conveyancing protocol provide?

A

provides a standard set of steps/instructions to follow when acting in the sale and/or purchase of a freehold or leasehold residential property as a home for an owner/occupier

also provides standard forms to be used as part of the conveyancing process
(eg property information form and completion information and undertakings form

76
Q

are the protocol forms used often even if the protocol isn’t expressly adopted?

A

yes

77
Q

does the law society conveyancing protocol usually apply on the sale of newbuild properties?

A

no

78
Q

what is the most recent version of the law society conveyancing protocol?

A

2019

79
Q

is it compulsory for all law firms for to adopt the protocol?

A

no, it’s recommended for all but only compulsory for those that are part of the law societys conveyancing quality scheme

80
Q

Law Society’s Conveyancing Quality Scheme

A

provides for members that are accredited as part of the scheme, a recognised quality standard for residential conveyancing practices

  • aims to improve consumer confidence by including a client service charter and mandatory training and enforcement procedures - membership is often a prerequisite to act for major lenders

FLK 2 Property Law (10 decks)

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