PLP Flashcards
Caveat emptor definition?
It’s the job of the buyer to make the relevant enquiring when purchasing property
What are the exceptions to the general rule for caveat emptor?
- Misrepresentation:
This entitles a party to rescission - Latent defects:
Defects not discoverable on reasonable inspection of the property
What’s the difference between joint tenancy and tenancy in common (when it comes to wills)?
Joint Tenancy:
Not suitable if you want to leave your property share in your will.
SURVIVORSHIP APPLIES
Tenants in Common
Preferable when someone wants to leave their share in their will
What document determines how the property is to be held, and where can you get it?
The Trust Deed from the Land Registry
When deducing the title to property:
1. Who does this?
2. What documents are deduced?
The seller’s solicitor deduces title.
Two documents to be deduced:
1. Land Registry Official Copies
2. Land Registry Title Plan
What are the official copies, and who checks them?
- Property register
Describes property and attached rights BENEFITTING the land - Proprietorship register
Gives name of the registered proprietor, address and the class of titles affecting ownership - Charges register
Easements, covenants etc - BURDENING the land
The buyer’s solicitor checks the official copies.
What’s on the proprietorship register?
Gives the registered proprietor’s name and the class of titles and entries affecting ownership
What’s class of title, and what register can it be found on?
E.g. title absolute / qualified title / possessory title. Usually there is title absolute, in which case the solicitor doesn’t have to do anything.
Class of title is found on the proprietorship register.
Who can be a registered proprietor, and on what register can you find them?
The registered proprietor may be a company, person, LLP, up to a maximum of 4 people.
The registered proprietor is found on the proprietorship register.
What needs to happen when deducing title in unregistered land?
Compulsory first registration
Where is the title shown in unregistered land?
The epitome of title (a schedule of the title deeds and documents)
Where are the charges shown in unregistered land?
A series of documents
When do you conduct a land charges search?
When investigating unregistered title.
Where do you conduct a land charges search, and what do you need to search for?
Search name & period in the charges department registers.
Where can you find information about mortgages on unregistered land? What about easements/covenants?
Mortgages should be listed on the epitome of title, and should include a vacating receipt.
Same applies for any easements/covenants.
What are the rules re covenants on unregistered land?
Positive covenants can only bind unregistered land where there’s a chain of indemnity
Negative covenants only bind unregistered land where there is a class D(ii) land charge
What is the report on title?
The report on title is the report generated by the buyer’s solicitor after raising title enquiries.
How should the report on title be communicated to the client?
The report on title should be communicated to the client in plain English.
What are the standard searches?
Standard searches are ALWAYS required.
- Local search
a. Local authority enquiries (CON 29)
b. **Optional enquiries for specific properties (CON29O)
c. Local land charges search (LLC1)
2) Drainage and water searches
- Desktop environmental search
- Chancel repair liability
What extra searches are required in these cases:
- Unregistered land
- Any land subject to mineral rights (registered or unregistered land)
- Seller is a company
- Land charges search (unregistered land)
- Search of index map
- Companies search
Name the optional searches that you might do depending on the circumstances?
- Highways search
- Mining searches
a. Coal Mining
b. Cheshire salt search
c. Tin, clay and limestone - Environmental searches
a. Environmental phase I survey
b. Environmental phase II survey
c. Flood search - Miscellaneous searches
a. Utility providers
b. Railways
c. Waterways
How do you do searches?
Through NLIS - National Land Information Service
This is an online portal - an intermediary between solicitors and institutions (e.g. thames water property searches)
Solicitor registers with a ‘channel provider’
What is Form CON29 & what does it reveal?
It’s a standard search - ALWAYS required.
It’s standard enquiries of the local authority.
What does it reveal? -
- It reveals information about the property and its immediate surroundings
- The local authority gives replies based on its records to matters like:
a. Planning
b. Building regulations
c. Roads
d. Public rights of way
What is Form CON29O & what does it reveal?
It’s a standard search - optional enquiries.
It reveals information about:
1. Common land (land for common use) / village green
2. Road proposals for private bodies
3. Areas of outstanding natural beauty / national parks
4. Pipelines
5. Noise abatement zones
What is Form LLC1 & what does it reveal?
It’s a standard search - ALWAYS required.
It reveals information about the local land charges (the local authority must keep a register of this)
This is stuff like:
1. Payment of money (e.g. bring road to adoptable standard)
2. Stuff affecting the use of the property (e.g. a listed building status, Article 4 directions)
What is
1. Form CON29DW
2. CommercialDW enquiries
& what do they reveal?
It’s a standard search - ALWAYS required.
- Form CON29DW - drainage and water search for residential property, submitted to relevant water company (e.g. thames water)
- CommercialDW enquiries - drainage and water search for commercial property, submitted to relevant water company
These reveal:
1. Whether foul water from property drains to public sewer
2. Whether property is connected to a mains water supply
Desktop environmental search:
- What is it?
- What happens if it’s not done properly?
- What does it reveal?
It’s a standard search - ALWAYS required.
- What is it?
a. Uses historical records to check whether the property has been used for contaminative land uses
b. Finds information on whether notices have been served (registered contamination) - What happens if it’s not done properly?
Owner liable for costs of cleaning up contaminated land even if not responsible - What does it reveal?
a. Likelihood of flooding, subsidence
b. Industrial land uses within 250m of property
What’s a chancel repair search? What can you get to cover the risk?
It’s a standard search - ALWAYS required.
If there’s a pre-Reformation church there.
Repair of church roof responsibility
Church can sue for repairs
Get indemnity insurance to cover risk of this
What’s a highway search? What kind of property is it used for, and what does it reveal?
This is an optional search.
Usually only for commercial properties.
Reveals:
1. Whether there are rights of access if the property doesn’t abut the highway
2. Boundary between private land and public highway
What is a coal mining search? When is it carried out? What does it reveal?
An optional search - only carried out if in an area affected by coal mining (these areas are listed in the gazette)
Reveals:
1. Risk of subsidence
2. Whether compensation has already been paid (as no future compensation can be paid)
What is a Cheshire salt search? When is it carried out?
Optional search - only if the property is in Cheshire.
What is an Environmental Phase 1 Survey?
Optional search - carried out dependent on level of risk
More detailed than desktop search
Includes site inspection
What is an Environmental Phase 2 Survey?
Optional search - carried out dependent on level of risk
Carried out if Phase 1 study indicates risk of contamination
Involves soil/water samples being tested for contamination
When is a flood search carried out?
Optional search
Only carried out if property has been known to flood in the past
When do you carry out a utility providers search & what does it reveal?
Carried out if a property is a new development
It reveals if the property has utility connections
When do you carry out a railway search & who is the appropriate body to go to?
Carried out where railway/proposed railway passes near property
Go to the relevant railway company to ask about ACCESS RIGHTS on property
When is a waterways search carried out and what does it reveal?
Carried out where property has a waterway (e.g. river or canal) passing through / next to it
Reveals:
1. Whether the tenant is liable for maintaining it
2. Liability for flooding
3. Drainage and fishing rights
What does CPSE stand for?
Commercial Property Standard Enquiries
What are the 3 pre-contract enquiries for commercial property?
- CPSE1
= Standard replies - CPSE2
= For commercial tenancies
E.g. someone purchasing an office block on an industrial estate - CPSE3
= For grant of a new lease
E.g. for a tenant on an industrial estate
What are the 4 pre-contract enquiries for residential property? Which ones are always used?
These 4 forms are standard forms in which protocol?
- Form TA6 - ALWAYS USED
= Property information form
Contains info about boundaries, alterations, work done, neighbour disputes, occupiers, utility providers, location of utility meters - Form TA10 - ALWAYS USED
= Fittings and contents form
Outlines items that are INCLUDED or NOT INCLUDED in the sale, such as curtains, light fittings, carpets, etc. - Form TA7
= Leasehold information form
Where property is a long leasehold
E.g. flat on 99 year lease - Form TA8
= New home information form
For property newly built
These are the standard forms if parties adopt the LAW SOCIETY CONVEYANCING PROTOCOL
Searches relating to specific titles/sellers
- Which search shows the extent of registered titles/unregistered land within the area being searched?
- What’s the name of the searchable map of registered titles?
- What’s the search carried out against full names of sellers and previous owners in the epitome of title?
- Search Index Map (SIM)
- MapSearch
- Central Land Charge Search (Form K15)
Searches relating to specific titles/sellers
What search for bankruptcy, and when is it carried out?
Form K16
Only carried out against seller if transaction is not at full market value
Carried out against buyer taking a mortgage
What does a companies search show and when is it carried out?
If seller is a cy: check that cy is in existence, not gone into liquidation or been dissolved
Shows security interests the cy has given
What’s the Law Society Conveyancing Protocol?
For residential conveyancing transactions only
NOT APPROPRIATE FOR NEWLYBUILDS
It’s voluntary, but mandatory for solicitors part of the Law Society’s Conveyancing Quality Scheme
What are the standard enquiries under the Law Society Conveyancing Protocol?
Buyer’s solicitor:
- Only make enquiries essential to client’s BI - can’t just make enquiries indiscriminately if not part of the protocol
- Can’t seek seller’s opinion rather than fact
Seller’s solicitor:
- Must confirm and update replies to enquiries if sent less than 2 months previous
- Doesn’t have to deal with enquiries that don’t comply with the protocol
What happens if a party breaches the Law Society Conveyancing Protocol?
- Give Law Society an explanation
- Could be removed from CQS
When is planning permission needed?
Planning permission is needed for all development (building works or change of use) on land.
Unless:
- Works only affect the INTERIOR of the building
- Work doesn’t MATERIALLY AFFECT the EXTERNAL APPEARANCE of the building
- Changes of use are within the SAME USE CLASS
Examples of use classes?
- Learning + non-residential institutions
- Hotels
- Food + drink
- Sui generis –> miscellaneous; theatres, pubs + night clubs
Is it ever possible to develop without planning permission?
Yes, certain development without planning permitted is allowed by GPDO - General Permitted Development Order
e.g. decking
Is it possible to exclude/amend a GPDO? What if you’re not sure about the work?
Yes, by an Article 4 Direction
- Then need planning permission
- So, make local enquiry to see if GPDO has been excluded
If unsure about the work, apply for a certificate of lawfulness.
This confirms whether the work 1) constitutes ‘development’
2) falls within GPDO
What’s a certificate of lawfulness in the context of GPDO?
This confirms whether the work
1) constitutes ‘development’
2) falls within GPDO
When are extra permissions needed for development, over and above planning permission?
For listed buildings - ones with special architectural or historic interest
Grade I: are buildings of exceptional interest (e.g. Tower Bridge)
Grade II*: particularly important buildings of more than special interest (e.g. Battersea Power Station)
Grade II: of special interest (e.g. Adelphi Hotel)
Listed building consent required to demolish, alter or extend a building
Separate requirement from planning permission
Some GPDO matters don’t apply to listed buildings
What’s a conservation area?
Areas of special historic or architectural interest - need to preserve/enhance the character/appearance of it
England & Wales:
1. Planning permission needed to demolish an unlisted building within a conservation area
2. Consent needed to cut trees
Just England:
Also GPDO restricted
What do building regulations apply to?
Applies to ‘building work’. includes:
- Erecting or extending a building
- Installing something controlled under Building Regulations (e.g. windows, boilers) –> usually pertain to health and safety issues such as stairways, water supplies etc
- Where there is a material change of use of the whole building
Name 3 ways you can get consent / approval for building regulations.
- Building regulations consent
= this is different from planning permission - Building regulations certificate of compliance
= can get this issued by a building control inspector, who will issue after inspecting the work - Self certification scheme
E.g. if the window installer is registered with the window installation body, they will automatically comply
What is a breach of planning / building permission?
- Development taken place without planning permission
- Condition / limitation of planning permission has been breached
Who is enforcement against for breaches of planning permission?
The current land owner, not the person who caused the breach
So buyer’s solicitor must check for breaches of planning control!
What are the enforcement options when a planning permission has been breached?
- Enforcement notice
- Stop notice
- Injunction
How does an enforcement notice remedy a breach of planning permission? How much notice is required?
What happens if this notice is passed?
LA gives 28 days notice that:
- Land must be restored to the condition it was in before the unauthorised development
- Must comply with conditions / limitations imposed by planning permission
After 28 days:
land owner fined
LA enters land to carry out work, recovering expenses from land owner
How does a stop notice remedy a breach of planning permission?
Only done after serving enforcement notice
Specified activity (unauthorised use) must stop immediately
Though:
LA can’t prohibit use as a dwelling house or any activity that has been carried out for more than 4 years
What kind of injunction will be granted to remedy a breach of planning permission?
Prohibitory injunction
When must the LA bring a claim for breaches to planning permission?
4 years
- Building works, starting with the date on which the building works were “substantially completed”
- Change of use to single dwelling house - starts with the date the use was begun
10 years
- Every other change of use
- Breach of planning permission (10 years from start of breach)
NOTE: the court can allow for enforcement beyond the limitation
When is a planning enforcement order used, and when does the time limit start?
When a breach of planning control was deliberately concealed, LA applies to court for a planning enforcement order
Then the time limits start from when it wasn’t concealed anymore
What are the enforcement options when a building permission has been breached?
- Prosecution
- Enforcement notice
- Injunction
What are the conditions for the LA prosecuting for breach of building regulations?
- How long after discovering breach does LA have?
- Who is prosecuted?
- What sanction can be imposed?
- What’s the time limit for prosecution after completion of the building work?
- 6 months
- The person responsible for the breach (builder, installer, main contractor)
- Unlimited fines
- Up to 2 years after completion
What are the conditions for the LA prosecuting for breach of building regulations?
- What’s the time limit for serving an enforcement notice after completion of the building work?
- How does the enforcement notice work?
- One year
- 28 days to alter/remove work, or LA can do it at land owner’s expense
How long does the LA have to apply to court for an injunction after discovering breach of building regulation?
No time limit, if the work is unsafe
To prevent liability in planning law / building regulations, what should the buyer’s solicitor do?
Check compliance with planning law and building regulations in:
1. Local search
2. Seller’s replies to enquiries
3. Buyer’s survey
If the buyer’s solicitor discovers a breach in planning law / building regulations, what are their options?
- Withdraw from transaction
Very drastic, not necessary unless issue is central to the purchase
- Obtain indemnity insurance (usually at seller’s expense) for breaches of planning or building regulations
- Note: only covers financial loss for enforcement
- For breaches of building regs, buyer should be advised of health and safety risk - policy doesn’t cover claims for personal injury or death
- Invite seller to regularise matters before completion
- Either by removing/altering work, or further paperwork
- This may need to be a term of the contract on exchange
If a breach in planning law / building regulations is discovered, what can the seller do in some circumstances?
In some circumstances, seller may be able to obtain:
- Retrospective planning permission for development
- Regularisation certificate for works that didn’t have building regulations approval but otherwise comply
2 types of property contracts?
- Residential contracts
- Commercial contracts
What are the contents of a residential contract?
Standard form residential contract contains Standard Conditions of Sale (SCS).
These are MANDATORY if the Law Society Conveyancing Protocol is adopted.
What are the contents of a commercial property contract?
Standard commercial property conditions (SCPC)
Can you amend the SCS and SCPC?
Yes, both can be amended.
You can have things excluded / supplemented with special conditions done in tick boxes
BUT - if the seller’s solicitor is following the Law Society Conveyancing Protocol, they may only add other special conditions if they are absolutely necessary for the purposes of the transaction.
Does the SRA prohibit solicitors from acting for both the buyer and the lender? Why?
No.
The test is whether there’s a substantially common interest: both want a property that has sufficient value + marketability to repay the loan + easy to resell
There’s normally no negotiations: high street lender has standard non-negotiable mortgage terms + there’s standard instructions
What’s a facility letter?
The commercial equivalent of a mortgage letter
(both set out terms and conditions of the loan)
What’s the certificate of title (in the context of acting for a lender in a commercial transaction)?
Solicitor certifies to the lender that the property is satisfactory for lending purposes.
What’s the mortgage offer (in the context of acting for a lender in a commercial transaction)? What’s it subject to?
Formal offer by the lender to lend
Subject to the lender being satisfied with the transaction and the security
What 3 things does a solicitor do when acting for the lender in commercial transactions?
- Specify searches + enquiries needed, obtain them from buyer’s solicitors
- Draft legal charge and other security documents
- Draft certificate of title/ask buyer’s solicitor for it
What’s a legal charge / mortgage deed (in the context of acting for a lender in a commercial transaction)?
Creates the security interest - registered at Land Registry
The security is a charge by way of legal mortgage - gives the lender the right to repossess
What is the prescriptive format of the certificate for title of commercial property?
Follows the City of London Law Society (CLLS) Certificate of Title
Lender relies on solicitor’s certificate, and can sue if there are any material errors or omissions
What are the requirements for a contract for land?
- Be in writing
- Incorporate all terms to which the parties have expressly agreed
- Be signed by each property
Can you transfer the land if a contract isn’t a deed?
No
Are there any property transactions where a contract isn’t needed?
Yes.
- A gift of property between family members
- Land of low value
E.g. neighbour sells the other a few feet at the end of a garden
Completion date and time - is time of the essence?
No - until a party serves notice to complete.
This means that if a party fails to complete by the specified completion date and time (the defaulting party)
the other (non defaulting party) can claim damages for the breach, but cannot yet walk away from the transaction.
BUT after serving notice to complete, if contract not performed by specified time, non-defaulting party can walk away AND claim damages for the breach.
What are two encumbrances that the seller must disclose?
- Latent encumbrances
= rights burdening the property that’s not apparent on inspection
E.g. covenants and easements - Defects in title
Issues that case doubt on the seller’s ownership of the property / the rights that affect it
E.g. if a deed containing covenants had been lost
What’s the completion date and time for property transaction?
This is usually set by the parties.
BUT, if not set my parties, SCS and SCPC says -
20 working days after the date of the contract at 2pm.
Seller’s solicitor must receive money before 2pm.
What’s the contract rate?
Sets the interest that’s payable by the defaulting party for the delayed completion.
What’s the deposit for a property transaction?
Both SCS and SCPC require the buyer to pay 10% DEPOSIT on exchange.
This can be varied by special condition (making it lower or higher).
What is the effect if the parties vary the standard 10% deposit and make it LOWER?
If buyer doesn’t complete on time + seller serves notice to complete:
The buyer must IMMEDIATELY pay the balance of the 10% deposit
(unless this was also amended by special condition)
Where does the deposit need to be paid?
SCS: 2 options
- Paid by cheque from the solicitor’s client account (NOT a cheque from the buyer)
- Can be paid electronically
SCPC: 1 option
- MUST be paid electronically
Who can hold the deposit?
The deposit may be held by the seller’s solicitor as stakeholder or agent -
- As a stakeholder: seller’s solicitor must keep deposit safe, can’t pay to seller til completion
- As an agent: seller may demand deposit immediately after exchange
What does the SCS and SCPC say about holding the deposit?
Both SCS and SCPC provide for the deposit to be held as stakeholder.
BUT! There’s an exception.
Exception: residential seller might need deposit for related transaction, then can use deposit for that transaction
What’s the VAT on
1) Residential property
2) Commercial property
1) Residential property
Exempt from VAT
2) Commercial property
Normal rate of 20% on purchase price
BUT! exceptions for commercial property:
- No VAT to pay on property over 3 years old if seller has not made an option to tax
- So parties should amend SCPC with a special condition
What happens to risk and insurance after contracts are exchanged?
Once contracts are exchanged, the risk PASSES TO THE BUYER!
So, if property is damaged / destroyed between exchange and completion, the buyer must still complete
When should the buyer obtain insurance for the property?
Buyer should obtain insurance BEFORE EXCHANGE to insure property from date of exchange
UNLESS: both parties agree that seller continues to insure by special condition (might need to tell lender about this)
Name 6 special conditions in BOTH the SCS and SCPS
- Parties can amend title guarantee from full (default) to limited by changing the front page
- Parties to specify included and excluded content (e.g. including chattels)
- Tick whether there’s vacant possession or if there are leases/tenancies
- Parties can agree on a different time for completion
- Can’t rely on representations, but can’t be fraudulent or reckless
- For adults who live at the property besides the seller - need to reveal occupiers, seller’s solicitor gets them to sign to give buyer vacant possession (so no overriding interests)
What is a limited title guarantee?
Seller covenants that no third party rights have been created over the period of the seller’s ownership
Do fixtures and chattels automatically pass to the buyer?
Only fixtures pass automatically to buyer.
Chattels need to be expressly included
Name 3 extra special conditions in ONLY the SCPS
- Parties can specify that the deposit and balance of purchase price will come from an account other than the buyer’s solicitor’s client account (ONLY where buyer = trusted e.g. financial institution)
- Specific terms of the transfer (e.g. where seller wants to reserve rights through covenants and easements)
- Options to tick for:
- VAT treatment
- Capital allowances (tax for machinery)
- Rights of residential tenants in a property
What does it mean i a VAT registered business sells property that is a standard rated supply?
It must charge VAT on the purchase price.
This VAT on the land it sells is OUTPUT TAX.
If the business had to pay VAT in connection with the property, then it can offset that input tax against the output tax
VAT treatment for different types of property -
What kinds of property are:
1. Exempt supplies?
2. Standard-rated supplies?
3. Zero-rated supplies?
- Exempt supplies?
a. Residential property (except for newly constructed property)
b. OR commercial property (over 3 years old) + seller HAS NOT opted to tax - Standard-rated supplies?
a. Newly constructed COMMERCIAL property (less than 3 years old)
b. OR older commercial property + the seller HAS opted to tax - Zero-rated supplies?
a. Newly constructed residential property – buyer does not pay VAT (because output is taxable), seller can recover its input from HMRC
What is the tax effect if the seller opts to tax property that’s over 3 years old?
- The subsequent sale of that property is standard-rated.
- Any tenants of the property would also have to pay VAT on their rent
What kinds of buildings can avail of the the option to tax?
For older commercial buildings (+3 years)
What enquiry asks whether an option to tax has been made?
CPSE 1
What is the default position re VAT in SCPC?
Default position is that property = standard-rated (Standard Condition 2)
BUT there are tickboxes to override the above if the property is exempt from VAT (Special Condition A1) (old commercial property)
OR for transactions treated as a transfer of a going concern (Special Condition A2)
What are the consequences of failure to complete?
It’ll be whatever is set out in the contract, but possible consequences are:
Where completion is DELAYED:
- An obligation to pay interest FOR EACH DAY’S DELAY
Rate = in contract terms. If no rate specified in contract, use law society’s rate
Where completion DOESN’T TAKE PLACE AT ALL:
- Common law damages
- Less common; not cost effective to do proceedings
- Rescission
- Contract is set aside
NOTE - ALL ONLY AVAILABLE AFTER NOTICE IS SERVED TO MAKE TIME OF THE ESSENCE!
- May be payable when notice is served that time is of the essence –> parties must complete within 10 days (excluding the day on which notice is given!)
How do the parties’ losses differ pre-exchange and post-exchange?
Before exchange, parties losses are limited to whatever expenses they have incurred before
After exchange, parties are committed, will have financial loss
Buyer’s checklist before exchange?
- Check have received all search results, replies to enquiries, survey
- Make sure buyer’s insurance is in place
- Has cleared funds from buyer for deposit
- Lender’s solicitor has approved draft certificate of title
- Send contract to buyer for signature
- Obtain instructions on proposed completion date
- Obtain authority from buyer to exchange contracts
Seller’s checklist before exchange
- Obtain redemption figure (amount needed to fully pay loan) from lender to check that proceeds of sale will cover it
- Reply to any outstanding enquiries
- Prepare engrossments (final versions) of the contract and send one copy to the seller for signature, and the other to the buyer’s solicitor
- Obtain seller’s authority to exchange contracts
Solicitors carry out exchange according to…
Law Society Formula B
What happens in the phone call during exchange? (Formula B)
- Solicitors identify blanks in contract & agree what to insert in them
- Agree to handwritten amendments / special conditions
- Agree and write in the completion date in the appropriate space
In exchange, what are the post-phone call undertakings (according to Law Society Formula B)?
- Hold the other party’s signed contract (i.e. buyer’s signed part belongs to seller) [FORMULA A]
- Post the signed contract to the other solicitor that day by:
- FIRST CLASS POST
- DX
- Hand delivery - Buyer’s solicitor sends deposit in the form of payment specified by the contract
What do the parties do after exchange?
- All parties’ solicitors prepare a memorandum of exchange with the key contract terms for the file
- Parties make arrangements for completion by:
a. Submitting certificate of title to lender
b. Requesting the mortgage funds in time for completion
Does the buyer still have interest in the property after exchange?
YES!
Buyer holds an EQUITABLE INTEREST in the property
- Could be protected by a notice on the register
- This is only necessary if there is going to be a long time until completion (e.g. a contract where completion is dependent upon the property being built)
Buyer’s solicitor’s checklist before completion
- Draft the transfer deed
- Get approval from seller’s solicitor, then get buyer to sign it if it contains indemnity covenants
- Send requisitions on title to seller’s solicitor
- Carry out pre-completion searches
- Send certificate of title to lender and request loan advance in time for completion
- Send the buyer a statement of money to complete the purchase
- SDLT form approved by client
Buyer’s solicitor’s checklist before completion
- Approve transfer deed drafted by the buyer’s solicitor
- Arrange for transfer to be executed by seller
- Reply to requisitions on title
- Request a redemption statement from the seller’s lender
- In a residential sale, ask the seller or agent to take final meter readings
What forms do you need to transfer land?
A) Registered land
B) Unregistered land
A) Registered land
Land registry forms MUST be used:
- TR1: the most common. This transfers the WHOLE of a freehold or leasehold title
TP1: transfer of PART only of a registered title
TR5: transfer of a PORTFOLIO of registered titles (and may include unregistered titles) - when lots of properties being transferred at once
B) Unregistered land
TR1: can be used for unregistered land too
But can also just transfer in conveyance
TR1 transferor requirements - what is needed if…
- If the seller’s name is different from when they bought the property?
- If a second trustee was appointed for a sole surviving tenancy in common?
- If the transferor is a company?
- If one tenant in common died?
- If the seller’s name is different from when they bought the property?
= need a marriage certificate - If a second trustee was appointed for a sole surviving tenancy in common?
= need details of trustee - If the transferor is a company?
= need company’s registered number - If one tenant in common died?
= need death certificate
Who needs to sign the transfer deed if there’s only 1 surviving TiC left after the other dies?
- The survivor
- One trustee
- Buyer
When transferring land according to TR1, how many transferees?
Max 4 people/companies
Who executes the TR1?
Always the transferor.
If the transferor is an individual:
- Signed in presence of independent witness
- Transfer = delivered when it’s dated
If the transferor is a company:
- Few different options - check company policy
Options;
a. Cy seal + 2 drs
b. Cy seal + 1 dr + 1 cy sec
c. Signed by 2 drs
d. Signed by 1 dr + 1 cy sec
e. Signed by 1 dr + independent witness
f. Signed by senior employee authorised under a PoA
What’s the engrossment?
The final transfer deed
What is a priority period (in the context of search with priority?
AND
1. What is the priority period for registered land?
2. What is the priority period for unregistered land?
As long as buyer’s solicitor applies for registration within this period, buyer’s transfer takes priority over ANY INTERVENING APPLICATIONS
- What is the priority period for registered land?
= 30 WORKING DAYS - What is the priority period for unregistered land?
= 15 WORKING DAYS
What’s the purpose of the pre-completion searches?
Protect and defend the title of the property, as outlined in the contract.
What are the pre-completion searches in registered land? What effect do they have?
OS1 = search of whole registered title
OS2 = search of part of registered title
Confers a priority period of 30 working days (buyer can take priority if registered within this period)
What is the pre-completion searches in unregistered land? What effect does it have?
K15 = land charges search of land charges registry
Confers a priority period of 15 working days (buyer can take priority if registered within this period)
When do you do a bankruptcy search? What’s the form? Is there a priority period?
You do this search AGAINST THE BUYER to protect the LENDER –> so only when acting for lender
Form = Form K16
What happens if buyer fails to complete on time + seller serves notice to complete?
- The buyer must IMMEDIATELY pay the balance of the 10% deposit
(unless this was amended by special condition)
- Parties
What’s the law society code for completion by post no estoppel?
- BS uses REASONABLE ENDEAVOURS to collect enough funds from the buyer & any mortgage lender, in good time to send to the seller’s solicitor on completion date
- SS undertakes to have the seller’s authority to RECEIVE PURCHASE MONEY on completion, & have the authority of the proprietor of each charge to receive the sum intended to repay it
- BS SENDS balance of payment price to SS. SS reports to BS that funds have been received
- SS completes upon being aware of the receipt of completion monies. SS handwrites the date on the TR1 - which operates as delivery so the deed is completed.
- SS calls estate agent to release keys, send money to lender.
- BS calls + sends letter to client that completion is done
- ASAP after completion, but latest end of working day following completion (not the same day), seller’s solicitor undertakes to send written confirmation that completion has taken place
How do you calculate interest for delayed completion?
(price - deposit) x (interest rate/100) x (1/365)
Remedies available to buyer after failure/delay to complete?
Can rescind contract.
On doing so, can:
1. Forfeit the deposit & any interest accrued
2. Resell the property & any contents included
3. Claim contractual damages
Remedies available to seller after failure/delay to complete?
Can rescind contract.
On doing so, can:
1. Demand return of deposit & any interest accrued
2. Claim contractual damages or even SP
What’s the difference between Stamp Duty Land Tax (SDLT) and Land Transaction Tax (LTT)
SDLT:
1. Depends on the purchase price
2. Submitted + paid within 14 days
3. SDLT5 certificate given as proof
LTT:
1. Depends on the purchase price
2. Submitted + paid within 30 days
3. WRA certificate given as proof
What happens with SDLT / LTT with buying second properties?
An additional rate of 3% is paid SDLT / LTT when a purchaser is buying a second home.
What happens if you don’t pay tax on time?
Penalties & interest
Within what time limit do charges given by companies need to be registered at Companies House? What happens if not? What do you do if you miss the deadline?
21 days of creation of the charge
OTHERWISE; charge is void against liquidator/administrator, and lender is not protected.
If deadline is missed, apply to court to allow filing
What do you need for a Land Registry application for registered title?
LR form AP1.
This sets out the details of the application and the documents provided.
Documents required:
1) transfer deed (e.g. TR1)
2) SDLT5 or WRA certificate to prove payment of SDLT or LTT
3) Form DS1 to discharge the seller’s mortgage if appropriate
4) Mortgage deed in favour of the buyer’s lender
5) If appropriate, certificate of registration of charge at CH
6) Other documents as appropriate (e.g. death cert for deceased JT if seller is surviving beneficial JT)
What do you need for a Land Registry application for registered title?
Form FR1 used
FR1, unlike AP1, doesn’t have a box where the enclosures are listed. Instead, they are listed on a separate form DL
The following documents are included:
1) Numbers 1 - 6 from above
2) the epitome of title and the deeds and documents referred to in it
3) Land Charges searches for the seller and previous owners in the chain of title
Is there a situation where you can’t submit a land registry application online?
Yes.
You can’t do online registration for first registration.
Application must be by post or DX instead.
Send certified copies of the transfer and mortgage deed.
What are the land registry deadlines for registered vs unregistered land? What happens if the deadline is not complied with?
Registered land
= No deadlines (aside from OS1 search)
Unregistered land
= Deadline is 2 months from completion.
- If not complied with, transaction void
- Then, application must be made to the Land Registrar to extend the period
When is capital gains tax payable?
CGT is charged on all gains made in the relevant tax year (6 April - 5 April)
Tax is payable on or before 31 January following the tax year in which the disposal occurs
There are penalties and interest for late payment
When is the principal private residence exemption available?
If this applies, CGT NOT payable on the sale of the home
Available IF:
- You have ONE home and you have lived in it as your main home all the time you have owned it (but certain periods of absence are disregarded)
- You have not let part of it out (but allowed to have a single lodger)
- You have not used part of it for business only (but exception for duality of user - basically WFH w/ no office)
- The grounds, including all buildings (house, garden, grounds) are less than 5,000 square metres in total
- You did not buy it to make a gain.
What periods of absence are disregarded for the principal private residence exemption
(for the requirement that you’ve lived in the home all the time you’ve owned it)
The following periods of absence are disregarded:
- The last 9 months of ownership
- The first 12 months of ownership (to facilitate the sale of another property)
- Any period(s) not exceeding 3 years in total throughout the period of ownership
- Any period(s) where owner was employed working outside the UK
- Any period(s) not exceeding 4 years in total where owner was required by their conditions of employment to live elsewhere
What is capital gains tax?
- Chargeable disposal
= sale - Of a chargeable asset
= lifetime gift - By a chargeable person
= UK taxpayers - Which gives rise to a chargeable gain
= increase in asset value
Code for leasing business premises: who does it apply to?
Written by the Royal Institution of Chartered Surveyors (RICS)
Usually applies to firms/developers that are RICS regulated
Code for leasing business premises: how does it work?
Divided into the following:
- Mandatory requirements
= MUST be followed and adopted by RICS members - Good practice
= MUST be followed and adopted by RICS members,
UNLESS there are exceptional justifications for departing from them
Types of repairing covenant?
- Full repairing obligation
= requires tenant to repair whole property (survey should be sought) - Qualified repairing obligation
= limited in scope; not an FRI lease
What’s an FRI lease?
Tenants pick up costs for property, landlord receives rent
What does covenant strength mean?
Whether tenant has:
1. The means to comply with obligations
2. Assets the landlord can recover breaches against
Long established cy generally has good covenant strength.
If no covenant strength, landlord may require:
1. A guarantor
2. Or a rent deposit (usually 3-6 months rent).
If tenant falls behind rent/other obligations, landlord uses this
What are the three essential components of a lease?
- Right of exclusive possession
- For a determinate term
- Less than which the grantor has himself in the land
What are the formalities for a legal lease?
- MUST be created by deed if over 3 years
- Tenancy of 3 years or under may be created in writing, or even orally
What’s the reversion of a lease?
The interest that the landlord holds subject to the lease.
At the end of the lease term, the property reverts to the landlord
Calculating the expiry of a lease term - what do these mean:
- From and including [DATE]
- From [DATE]
- From and including [DATE]
- begins on [DATE]
- expires the DAY BEFORE that day of the following year - From [DATE]
- begins the DAY AFTER [DATE]
- expires on [DATE] the following year
How does a break clause in a lease work?
Either only a landlord break, only a tenant break, or mutual break
1. Can specify a date (e.g. 5th anniversary of commencement date)
2. Or rolling break (e.g. any time after the 5th anniversary of the commencement date)
Without break clause, neither landlord nor tenant can bring the lease to an end before fixed term
What are the two main categories of rent?
- Short lease with market rent
- usually commercial leases
- aka rack rent
- premium not usually charged - Long lease with ground rent
- e.g. only £150 per year
- usually residential leases
- first person to buy the property will pay a premium (e.g. £200k) to landlord for grant of lease
How is rent usually expressed in a commercial FRI lease?
A yearly figure, but payable quarterly.
Rent divided equally for each quarter even though the days in each aren’t split exactly the same
Rent usually due in advance, lease says whether there’s VAT or not
If parties start part-way through a quarter, the quarter will be apportioned so tenant only pays the appropriate portion of rent
What are:
- The traditional quarter days
- The modern quarter days
- The traditional quarter days
25 December
25 March
24 June
29 September - The modern quarter days
1 January
1 April
1 July
1 October
What types of rent review are there?
- Stepped rent
= lease sets out increasing rent - Index-linked rent
= rent increased with agreed measure of inflation (e.g. retail prices index) - Turnover rent
= calculated based on tenant’s turnover at property (usually w shops) - Open market rent review
= normally 1 every 5 years, and normally upwards only rent review
–> New rent will be recorded in a rent review memorandum
What factors are considered for assessing the value of a property for open market rent review?
- Rent payable for comparable premises (similar size and location)
- Terms of the hypothetical lease
What’s the procedure for the investigating title, searches and enquiries stage of granting a lease?
- Landlord’s solicitor must deduce their title and ability to grant a lease which the tenant’s solicitor must investigate
- CPSE 1 and CPSE 3 enquiries should both be raised
- OS1 and OS2 should also be carried out as appropriate. Where the lease is not registrable, an OS3 may be carried out.
Repair and insurance - who is responsible?
- With commercial leases
- With lease of a whole
- With commercial leases
- Commercial tenants almost always of repair of demise - With lease of a whole
- In a lease of a whole, the tenant will be responsible for their respective part
What is the rule if a lease is silent on alterations?
A tenant will be free to alter the premises as long as this does not reduce the value of the premises.
What if a lease contains a qualified covenant against alterations?
S19(2) LTA 1927 converts this to a fully qualified covenant.
Where a tenant secures such permission, they will normally have to pay the landlord’s associated costs?
What if the landlord has included an absolute covenant?
In this case, s3 LTA 1927 may be engaged.
The process:
- Tenant serves notice on landlord, indicating its intention to carry out improvements
- If the landlord objects, the tenant may apply to the court for permission which will be granted if:
a) adds to letting value
b) changes are reasonable and suitable to the character of the property
c) will not diminish value of any other property belonging to the landlord
If the landlord does not respond within 3 MONTHS, the tenant can carry out the work.
What’s the general rule if the lease is silent on change of use?
The tenant is free to use the premises for whichever purpose they please.
Will statute convert a qualified covenant into a fully qualified covenant for change of use?
NO!
What is the rule for landlords after giving consent to the change of use?
Under s19(3) LTA 1927, the landlord may NOT increase rent or charge a lump sum,
UNLESS structural changes would be required.
Who’s liable for breaches of leases?
Old leases (PRE 1 JAN 1996)
- o.g. tenant always liable for breaches of subsequent tenants
New leases (POST 1 JAN 1996)
- changes from LCTA 1995
a. Abolition of privity
- tenants generally released
- landlord apply for discharge from tenant
- if tenant denies, landlord can apply to court
[DOESN’T APPLY TO COVENANTS EXPRESSED PERSONALLY TO OG PARTIES]
b. The benefit & burden
- now automatically runs to the new assignee & reversioner
[DOESN’T APPLY TO COVENANTS EXPRESSED PERSONALLY TO OG PARTIES]
c. Authorised guarantee agreement
- many landlords will make it a condition of assignment that the outgoing tenant provides authorised guarantee agreement
- this enables landlord to recover from the original tenant
