Legal Drafting (Property) Flashcards
When drafting the contract date, what should be includeed?
This needs to be left blank as it is added when the contracts are exchanged.
Often a post-it note printed “Do not date” is stuck here t
In your drafting exercise, you should add “to be inserted on exchange”
If a property being sold has an occupier (in addition to the seller - for example, an adult daughter) how should they be treated contractually?
Any adult or entity in occupation of a property, and who is not the seller, should sign the contract, or make a written declaration which they sign and to which the contract should refer, that
- a) they agree to vacate on or before completion and
- b) they release any right(s) they may have in the property or any chattels in it.
You should include a clause to cover these points. Consequently, you should include them as a third party (Occupier)
What is the contract rate?
The “Contract Rate” is used to work out how much compensation is payable if completion happens after the Completion Date as a result of the Buyer being at fault.
It should not be too high as it risks being found unenforceable as a penalty - 5% is a commercially acceptable upper limit for the seller’s solicitor to include in the first draft of the contract.
If the contract rate is left blank, what happens?
If this was left blank, the SCS provide for the Law Society’s interest rate to be paid which is currently 4% above Barclays Bank’s interest rate. (Law Society interest rate)
If the contract is drafted such that the seller has to insure after exchange what obligation does SCS 5.1.2 impose?
Obligations on the seller to maintain the policy and to cancel it on completion.
What deposit is anticipated by the SCS?
How can this be amended in a contract?
The SCS anticipate a deposit of 10% and if that is not the case, SCS 2.2.1 needs amending.
In the standard form SCS, for example, this wording is used to vary a standard condition “Condition [X ] shall take eect as if the [amount] specified in it was [ X]%”.
How is title deduced according to the SCS?
How can this be altered?
The SCS work on the basis of title being deduced to the buyer after exchange.
If title has been deduced before exchange you expressly exclude SCS 4.1, 4.2 and 4.3.1.
Provide an example of an occupiers consent clause
The Occupier agrees with the Seller and Buyer, in consideration of their entering into the contract, that the Occupier concurs in the sale of the Property on the terms of this contract, undertakes to vacate the Property on or before the Completion Date and releases the Property and any included fixtures and contents from any right or interest that the Occupier might have.
What is the best way to alter the completion time from the SCSs 2pm default?
“Conditions 6.1.2 and 6.1.3 shall take effect as if the time specified in them were [ X] rather than 2.00 pm”.
You are drafting a TR1 Deed
The property is unregistered
What do you insert in panel 2 ‘property’?
Describe the property as it was set out in the root of title document and if only part of the property is being sold, refer to a plan.
You are drafting a TR1 Deed
The property is registered
What do you insert in panel 2 ‘property’?
Insert the address of the Property as written in the Property Register
You are drafting a TR1 Deed
What do you insert in panel 3 ‘date’?
The TR1 is not to be dated yet as it is a draft version.
The TR1 will be dated on the actual completion day.
You are drafting a TR1 Deed
What do you insert in panel 4 ‘name of transferor’ if you are instructed to act on the purchase of a property which was originally co-owned by two individuals and one of the co-owners passes away.
It was jointly owned.
If the co-owners were joint tenants, then the surviving joint tenant would be able to sell the property on their own according to the rule of survivorship.
Accordingly, their name alone will be stated in this panel.
You are drafting a TR1 Deed
What do you insert in panel 4 ‘name of transferor’ if you are instructed to act on the purchase of a property which was originally co-owned by two individuals and one of the co-owners passes away.
It was owned as tenancy in common.
If the co-owners were tenants in common, then the surviving tenant in common would need to appoint a second trustee.
This would mean inserting the name of the surviving tenant in common and the second trustee
You are drafting a TR1 Deed
What do you insert in panel 8 ‘purchase price’ if you tick the monetary consideration box?
The purchase price paid in** both words and figures** must be entered into this panel.
You should also specify whether the price is inclusive or exclusive of VAT.
If exclusive of VAT, you should have add the words, “plus VAT of [insert the amount of VAT payable]” after the purchase price.
You are drafting a TR1 Deed
The purchase price is exclusive of VAT.
How do you record this?
If exclusive of VAT, you should have add the words, “plus VAT of [insert the amount of VAT payable]” after the purchase price in panel 8.
You are drafting a TR1 Deed
The purchase price is inclusive of VAT.
How do you record this?
If inclusive of VAT, you should have add the words, “inclusive of VAT” after the purchase price in panel 8.
You are drafting a TR1 Deed
The property is sold by a bank which has re-possessed the property
What title gurantee do you give in panel 9?
Limited Title Guarantee
This is because the property is sold sold by a party who was not the registered owner
You are drafting a TR1 Deed
The property is sold by a Personal Representative
What title gurantee do you give in panel 9?
Limited Title Guarantee
This is because the property is sold sold by a party who was not the registered owner
You are drafting a TR1 Deed
The charges register shows a positive covenant and chain of indemnity. The SCPC is incorporated.
What must you do in panel 11?
If the property is burdened by a positive covenant and the transferor gave an indemnity, if SCPCs were incorporated into the sale contract then the transferee must covenant in the TR1 to indemnify the transferor against liability for any future breach of that obligation and covenant to perform it from the date of the TR1
This indemnity covenant should be inserted in panel 11
You are drafting a TR1 Deed
When must the transferor execute?
A TR1 will always need to be executed by the transferor
You are drafting a TR1 Deed
When must the transferee execute?
The transferee must also execute if there:
(a) Are transferee’s covenants or declarations or applications in the TR1; or
(b) If there is more than one transferee and panel 10 of the TR1 has been completed.
You are drafting a TR1 Deed for a company.
What is the default company execution clause?
Executed as a deed by (name of company) acting by [a director and its secretary] or [two directors]
Signature of Director:…………………………..
Signature of [Secretary/[Director]: ………………………..
Formula: Signature of Director; Signature of Director or Secretary
You are drafting a TR1 Deed for a company.
What execution clause should you use if there is only one director available?
Executed as a deed by (name of Company) acting by a director
In the presence of:
Signature of Director:……………………….
Signature of witness::……………………….
Name (in BLOCK CAPITALS)::……………………….
Address::……………………….
Formula: Signature of Director; Witness signature; Witness name; Witness Address
You are drafting a TR1 Deed for a company.
What execution clause should you use if your client is an individual?
Signed as a deed by (full name of individual) in the presence of
Signature:……………
Signature of witness::……………
Name (in BLOCK CAPITALS)::……………
Address::……………
Formula: Signature of Transferor; Witness signature; Witness name; Witness Address
You are drafting a land contract.
What should you do with the date section?
This should be left blank until exchange, when it will be inserted.
You are drafting a land contract.
Who should be included in the section entitled ‘seller’?
Names those who will be on the legal title.
Remember, there is a space only for a maximum of 4 names here, regardless of how many people own the land in equity
Under the SCS and SCPC, what title guarantee is given as default?
Full title guarantee will be given unless:
- Front page is amended and under SCS
- Special conditions are added in SCPC
Under the SCS and SCPC, what is the default position for completion?
20 working days after date of contract
2pm.
Time NOT of the essence until notice to complete is served
You are considering the issue of VAT whilst drafting a contract for an exchange of property.
The property is residential
Is VAT payable?
Usually an exempt supply or a zero rated supply
=
No VAT is payable by the buyer
You are considering the issue of VAT whilst drafting a contract for an exchange of property.
What is the default VAT position under the SCS used for residential properties?
Under SCS, the purchase price is inclusive of VAT
Buyer doesn’t need to worry about the possibility of VAT on top of the purchase price
Note, this differs for SCPC
You are considering the issue of VAT whilst drafting a contract for an exchange of property.
What is the default VAT position under the SCPC used for commercial properties?
SCPC default position is a standard rated supply (20%) payable on top of purchase price.
If an exception applies, parties should amend SCPC with a special condition.
You are considering the issue of VAT whilst drafting a contract for an exchange of property.
The property is commercial
Is VAT payable?
VAT always needs to be considered with commercial property
(A) Property less than 3 years old: Subject to VAT
(b) Property is 3+ years old and seller has NOT made an option to tax: No VAT.
(c) Property is 3+ years old and seller HAS made an option to tax: Subject to VAT
You are drafting a contract for the sale of property.
What is the obligation regarding chains of indemnity under the SCS and SCPC?
If the chain is unbroken, then the seller can require the buyer to give an indemnity covenant and continue the chain. Both SCS and SCPC make this an obligation of the contract.
However, if the seller did not give an indemnity covenant, then this obligation does not apply.
The parties may want to agree the wording and set this out in a special condition.
Provide an example of an assignment clause in a deed of assignment.
In consideration of the Premium paid by the Assignee to the Assignor the Assignor assigns the Property to the Assignee for the unexpired residue of the term granted by the Lease subject to the payment of the Rent and the Lease Obligations.
Think:
(1) In cosnideration of the premium….
(2) Unexpired residue of the term
(3) Subject to payment and obligations
Provide an example of an indemnity clause in a deed of assignment.
The Assignee covenants that the Assignee will from the date of this deed until the end of the term granted by the Lease pay the Rent and observe and perform the Lease Obligations and keep the Assignor indemnified against all proceedings, costs, claims and expenses arising because of any failure to do so.
Think
(1) Indemnify and keep indemnified
(2) Aginsts costs, claims and expenses
(3) Until end of term
Provide an example of a entire clause in a deed of assignment.
This deed constitutes the whole agreement between the parties and supersedes all previous discussions, correspondence, negotiations, arrangements, understandings and agreements between them relating to its subject matter.
Think:
(1) Whole agreement
(2) Supersedes previous disccussions, negotiations
