PLP (+ Land) Flashcards
choice of survey
x1/3:
1 – basic (min mortgage)
2 – homebuyer (<150 years)
3 – full structural (listed + >alterations/renovations)
Basic valuation — essential minimum if a mortgage is being taken. It will identify any major obvious defects that would cause concern to a lender, but does not provide detail.
Homebuyer report — much more detailed, and suitable for most properties in reasonable condition aged less than 150 years.
Full structural survey — suitable for any property, but especially suitable where the property is listed, has had extensive renovations or where extensive alterations are planned. It is the most expensive option.
!!! A buyer’s solicitor should always read the survey: standard homebuyer report has a section that is designed to bring certain issues to the solicitor’s attention for legal investigation.
Taxation
The taxes most relevant to property transactions are
Stamp Duty Land Tax (Land Transaction Tax in Wales) (SDLT & LTT)
Capital Gains Tax (CGT)
Value Added Tax (VAT)
CGT by individuals (not companies) who make a profit on sale of an asset: not main homes, but for second properties or properties that are let out
caveat emptor
It is for the buyer to identify any problems before exchange of contracts
Limited exceptions to this principle eg misrepresentation
In common law, if the seller (or its agent) has made a false statement that has induced the buyer to enter the contract, the buyer has an action in misrepresentation.
In practice, a buyer would be more likely to rely on the standard conditions usually incorporated into the contract. These do not require that the buyer to prove that they have relied on the statement to enter into the contract, and focus more on the difference in value.
pre-exchange
S solicitor (draft contract/replies to SE: standard enquiries) –> B solicitor –> report on title (x4 investigate title, searches, review SE + add Es?) to buyer who decides
Pre-exchange process: most work
Once solicitors have agreed to act, seller’s solicitor gives buyer’s solicitor title/draft contract and replies to standard enquiries
If seller has not yet completed replies to enquiries, then they may be sent later
Buyer’s solicitor then
investigates the title
undertakes searches
reviews the standard replies to enquiries
raises additional enquiries as necessary
Buyer’s solicitor completed investigations: report on title to buyer who decides if to proceed
exchange and completion
Assuming all is well, seller/buyer exchange contracts through solicitors
= Both legally obliged to complete sale/purchase of property
The contract sets out the completion date
Completion is the date on which the property and money changes hands
But legally title in property does not pass until new owner is registered at Land Registry
The post-completion stage is therefore an important part of the transaction
title investigation: registered land
buyer vs seller
The seller’s solicitor deduces title: responsible for providing proof of title.
The buyer’s solicitor investigates title.
registered title
B sol investigate x3: extent, able, burden/benefit
registered title = official copies + title plan (+ ext docs)
A registered title is much easier to deal with than an unregistered title
On first registration, Land Registry’s has investigated unregistered documents and the registered title is presented in a clear, comprehensive and concise manner.
Investigating title means:
- checking that the seller is able to sell the property;
- identifying the extent of the property; and
- any rights that benefit or burden the property.
These may affect buyer’s intended use of property and/or value of property on open market.
Often registered title comprises only official copies and title plan
-If covenants/easements, abstracted to official copies = no need to refer to external docs
- But if many rights in an external doc/complicated plan Land Registry refers separate doc
– Eg would be an old conveyance, a deed of covenant or a deed of easement
–If Land Registry refer an external doc, keep copy of doc and a copy can be ordered
the official copies
The official copies are divided into x3:
the property register
the proprietorship register
the charges register
The Property Register
States whether property x5 (F/L? post plan right excl)
is freehold or leasehold
gives postal address or a description of property
refers to title plan (usually land edged red)
sets out rights BENEFITS property
exclusions to properly
For a house, often no rights appear but no cause for concern — many self-contained: access from road/pavement = adopted highway (ie, maintained by local authority/usable by public)
If searches/enquiries reveal otherwise, should be an appropriate right of way in property register, and if not, this could be a problem.
Similar for connections to public water supplies/drains: if no benefit (apparent from a water/drainage search), should be a right to private pipes/drains connect with public services
The Property Register – Rights that benefit the property
x4: adequate, maintain, BR, adopt
adequate: not for just living but building
maintain: contribution by (future) owner
register burden: index map? R L: right on charges register? no: no effect/ UnR: caution against first R)
adoption: risk of local authority
If a right is shown on property register, then buyer’s solicitor needs to have in mind the following 4 issues:
- Adequacy — eg if you intend to build a house, then you might think that a right of way for a car will be sufficient. But what about building the house? You will need heavy vehicles such as cement mixers to be able to access the site.
- Maintenance — owner of land subject to a private right can demand a contribution to maintenance of subject of that right, whether that be a road or an underground pipe or cable. Replies to standard enquiries will help, but additional enquiries may be needed.
- Burden registered — if the land affected by the right is registered, and the right does not appear on the charges register of that land, then it will not affect the land.
An index map search will show whether the owner’s land is registered, and then official copies can be ordered to see if the right is entered on the charges register.
If the affected land isn’t registered, then a caution against first registration should be lodged so that the burden can be registered at the time of first registration. - Adoption – with private roads, ensure to investigate/advise client on risk that local authority adopts road as required to contribute to bringing road up to adoptable standard
The Property Register – Exclusions from the property
Exclusions from the property
Eg the rights to minerals beneath the property may belong to someone else.
Other rights may be hunting or fishing rights. Such rights must always be reported to the buyer but may not be an issue in many cases.
The Proprietorship Register
The proprietorship register contains
the class of title (absolute? land registry)
registered proprietor (company n? >1? JT/TIC?)
and if applicable, restrictions and the indemnity covenant.
Class of title: Ideally, this will be title absolute as it is the best class of title available.
The class of title is decided by the Land Registry. It depends on how good the owner’s evidence of title is at first registration.
Registered proprietor: The owner’s full name and address is shown.
If the registered proprietor is a company, then the registered company number should also be shown. This is important, as a company’s name can change, but the number remains the same during the lifetime of the company.
If there is more than one registered proprietor, as is the case here, then there is no issue as long as all the registered proprietors sign the contract and execute the transfer. However, if one of them has died, then the buyer’s solicitor needs to know whether they held as beneficial joint tenants or tenants in common.
The Proprietorship Register – Restrictions:
Example 1:
B: Proprietorship register
This register specifies the class of title and identifies the owner. It contains any entries that affect the right of disposal.
Title absolute
1. (1 July 2005) Proprietor(s): DEAN FISHER and TANYA FISHER of 22 Simpson Street, Redminster, RD2 8QP
2. (1 July 2005) RESTRICTION: no disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.
Here we can see the tenancy in common restriction, so we can assume that Dean Fisher and Tanya Fisher hold the property as beneficial tenants in common.
No problem if both of them execute the transfer, but if one of them has died, then a second trustee will need to be appointed on the transfer so that the beneficial interest can be overreached, and the restriction removed and death certificate of the deceased person to know legal title has passed by survivorship to registered proprietor who is executing transfer.
If this restriction were not present, then we can assume that they hold as beneficial joint tenants = just the death certificate and we do not need to have a second trustee appointed.
The Proprietorship Register – Restrictions:
Example 2:
B: Proprietorship register
This register specifies the class of title and identifies the owner. It
contains any entries that affect the right of disposal.
Title absolute
(1 July 2005) Proprietor(s): DEAN FISHER and TANYA FISHER of 22 Simpson Street, Redminster, RD2 8QP
(1 July 2005) RESTRICTION: Except under an order of the Registrar no disposition by the proprietor of the land is to be registered without the consent of the proprietor of the charge dated 17 June 2005 in favour of Redminster Building Society referred to in the Charges Register.
Note that this is a different restriction. This has nothing to do with co-ownership, but is a restriction against the owner dealing with the land without the consent of the mortgage lender (here Redminster Building Society). This is separate from the registration of the charge.
The Proprietorship Register –Example:
B: Proprietorship register
This register specifies the class of title and identifies the owner.
It contains any entries that affect the right of disposal.
Title absolute
(1 July 2005) Proprietor(s): DEAN FISHER and TANYA FISHER of 22 Simpson Street, Redminster, RD2 8QP.
….
(1 July 2005) The Transfer to the Proprietors contains a covenant to observe and perform the covenants referred to in the charges register and of indemnity in respect thereof.
on register if current owner gave IC
Indemnity covenant: If the current owner of the land gave an indemnity covenant when they bought the property, this will be noted on the proprietorship register.
If the buyer’s solicitor sees this, they will know that under the standard conditions their client will be required to give a similar indemnity covenant to the seller. It also means that their client will be bound by the positive covenants that the original covenator gave (whether the seller or an owner further back in time).
The Charges Register
On the charges register you may find
- charges
- restrictive and positive covenants that burden the property
- registered leases
- and easements over the property
Although there will always be entries on the other two registers (property and proprietorship), occasionally you will come across official copies where the charges register is empty. This is not a mistake, but means that it is not affected by any of these rights or interests.
Charges or mortgages are registered on the charges register, although as we have already seen, usually this is accompanied by a restriction on the proprietorship register.
The Charges Register – Example:
C: Charges register
This register contains any charges and other matters that affect the land.
(1 July 2005) REGISTERED CHARGE dated 17 June 2005 registered on 1 July 2005 to secure the monies including the further advances therein mentioned.
(1 July 2005) Proprietor: Redminster Building Society of 28 High Street, Redminster RD6 9AR.
This is a typical entry for a legal charge on the charges register. As a legal charge is a property interest, the chargee is described as a proprietor of the charge.
The point to remember with legal charges is to ensure that the seller is agreeing to release it on completion. This should be covered in both the contract and pre-completion undertakings.
With both restrictive covenants and positive covenants, it is those that burden the property that are registered in the charges register. If the property has the benefit of restrictive or positive covenants, then they appear in the property register.
This is an example of an entry where restrictive covenants are contained in the charges register.
The Charges Register – Example:
C: Charges register
This register contains any charges and other matters that affect the land.
…
3. (01 April 1975) A Transfer of the land in this title and other land dated 8 March 1975 made between (1) Miles McQueen (2) Andrew Essex contains restrictive covenants.
NOTE: Copy filed under XX123155.
In this case, the Land Registry has not extracted the covenants to the register, but instead referred to the transfer that is filed under the title number shown. The seller’s solicitor should provide this copy when deducing title.
How should we approach covenants that we find?
First identify whether it is positive or restrictive. As you will have seen, the hand in pocket test is a good start. If you were to comply with the covenant would you need to spend time, money or energy? If the answer is yes, then it is likely a positive covenant.
If a restrictive covenant is registered in the charges register then you should assume that it binds the property.
If it is a positive covenant, then look for the indemnity covenant in the proprietorship register.
If there is no indemnity covenant, you can ignore the positive covenant.
If there is an indemnity covenant, you should assume that it binds the property.
What to do if the covenant does bind the property?
already breached? if so, seller gives indemnity policy at their expenses
affect value/buyer’s use?
if no, proceed
if yes, insurance (>risk + publicised planning permission)
if no insurance, person with benefit consent
if no consent, Lands Tribunal (Upper Chamber) only for RESTRICTIVE covenants
- expensive/time consuming
- alternative: reduction in price or withdraw
charges register – leases
> 7 years
Leases of more than seven years granted out of the property will be registered in the charges register against the property. Whether or not these will come as a surprise will depend on the nature of the property, but they should always be reported.
The freehold of a block of flats, may be subject to numerous long leases and these will be set out as a schedule of leases in the charges register.
You may also find non-residential leases, such as for a mobile telecoms antenna, electrical substation or advertising hoarding.
charges register – easements
Easements burdening the property appear in the charges register, and should be reported.
A right of way over the property, for example, may restrict the development of the property.
For a house, most buyers want privacy, and will definitely want to know if the neighbours can, for example, wheel their bins across the end of the garden.
What is an unregistered title?
Unlike a registered title, where it is clear that the title is comprised in the official copies, title plan, and any documents referred to by the official copies, an unregistered title is not so tidy.
The deeds for an unregistered property may go back many years, but much of what is contained in the deeds packet will not be needed. The seller’s solicitor’s job is to sift through this and decide what is relevant.
Once this is done, the seller’s solicitor prepares the epitome of title, which is a schedule of these deeds and documents accompanied by copies of them.
Unregistered Land – Root of title
ABCD
adequate described property (scale plan or postal)
be dated >15 years ago
casts no doubt on seller’s title (power of attorney?)
deals: both legal/beneficial title (assumed unless only one is mentioned)
The first document to identify is the root of title. This is the particular conveyance that will be used to show good title to the property.
The buyer’s solicitor checks that the root of title meets the requirements:
The requirements are set out in s 44 of the Law of Property Act 1925: ABCD
1) Adequately describes the land being conveyed
This will usually be a scale plan, but sometimes just the postal address will be sufficient (for example, a street of houses all of identical footprint, most of which have been registered).
2) Be dated more than 15 years ago
This should always be the case now, as compulsory registration has existed for more than 15 years. Ideally it will be a transfer for value (ie, a purchase) rather than a gift. This is because on a transfer for value, the buyer’s solicitor can be assumed to have investigated title a further 15 years at that point. This means that the root of title is effectively a guarantee of 30 years of title.
3) Casts no doubt on the seller’s title
An example would be where a conveyance is executed under a power of attorney, and it is not clear whether there was a valid power of attorney. The buyer’s solicitor would need to see the power of attorney.
4) Deals with both the legal and beneficial title to the property
This sounds daunting, but in practice it is usually simple. If the deed does not expressly deal with legal title only or beneficial title only, then it is assumed to cover both.
Unregistered Land – The chain of title
A good root of title will satisfy the requirements of s 44 of LPA 1925, but if the person to whom the property was transferred in the conveyance is not the most recent owner, it is not sufficient. A chain of title will be needed, with each subsequent conveyance to establish title to the current owner (the seller).
Unregistered Land – documents to include
Any document under which a seller was empowered to sign a conveyance. For example, if the seller was an executor, we would need to see the grant of representation. If the seller was an attorney, we would need to see the power of attorney.
If a property has passed to a surviving co-owner by survivorship, then we would need to see the deceased owner’s death certificate.
If any owner mortgaged the property following the date of the root of title, then these mortgage deeds should be included. Hopefully they will have been discharged. This will be clear if the relevant mortgage deed has a vacating receipt attached. This confirms that the lender has been repaid in full.
Unregistered land – Documents that are not needed:
· Documents that only affect the beneficial interest (such as declarations of trust)
· Expired leases
· Old land charges searches are not required, but the seller’s solicitor will often provide them as they will be helpful to the buyer’s solicitor.
· There are various documents such as planning permissions, old searches, correspondence, etc that are not needed. These may, however, be relevant to replies to enquiries.
Investigating unregistered title
The buyer’s solicitor investigates unregistered title by checking the epitome of title and its copy documents.
The buyer’s solicitor will want to ensure that the seller is entitled to sell the property, and identify any issues that could affect the value of the property or the buyer’s use of the property.
These are the same issues that the buyer’s solicitor will want to investigate for registered property, but the difference is that the buyer’s solicitor needs to analyse the documents rather than relying on official copies.
Index map search
It is worth checking that the land is actually unregistered, or that neighbouring registered titles do not encroach on its boundaries. It will also reveal a caution against first registration, which may indicate that someone believes they have a claim in the property.
Unregistered Land – Validly executed
X6
clear, signed, witness, (sealed), delivered + STAMPEd
Each deed will need to have been validly executed. This is complicated a little by the fact that the execution needs to comply with the law as it was then. As most unregistered deeds will be dated before 1 July 1990, when the Law of Property (Miscellaneous Provisions) Act 1989 came into effect, this means the following:
· Clear on its face that it is a deed
· Signed as a deed and witnessed
· Sealed
· Delivered as a deed – this usually takes place by inserting the date
Unregistered Land – stamped
The deed should also be correctly stamped. This indicates that the correct Stamp Duty was paid on the deed. Deeds after 1931 should have a “Particulars Delivered” stamp which confirms that they have been properly stamped.
If there is any doubt, the buyer’s solicitor may need to check the Stamp Duty rates that were in force at the particular time.
Unregistered Land – Issues arising
Similar issues may arise with unregistered land as with registered land.
The principles of co-ownership, and the passing of beneficial title by survivorship, apply equally to unregistered land.
Instead of looking for a Form A restriction (registered land only), however, you would need to look through the deeds to see if it states whether co-owners hold as beneficial joint tenants or tenants in common. It is also possible that there is a notice of severance or declaration of trust that changes the beneficial title.
Having established, however, that you are dealing with a surviving sole owner, the principles are similar. For a surviving beneficial joint tenant, you will need to see the death certificate of the deceased joint tenant. For a surviving tenant in common, you will additionally need a trustee to be appointed, just as you would with a registered title.
Unregistered Land – Land charges
Land Charges Dept of Land registry
search against individual (not property)
can rely on previous search
With unregistered land, certain rights against a property will be registered at the Land Charges Department of the Land Registry. This is a separate register and does not apply to registered land.
The land charges registers are searchable by individual or company name, rather than the property address.
It is therefore a case of searching against previous owners for the period of their ownership, and identifying whether any charges have been registered against them. If so, then further investigation may be required.
As searches are for a period of ownership, a search against a previous owner will not need updating. If the seller’s solicitor provides a search, say, for the person who owned the property between 1980 and 1985, you can rely on that.
Unregistered Land – Mortgages
same as registered BUT
first mortgage not registered at land charges dept as mortgagee holds deeds!
so check both deeds and land charges dept
As with registered title, mortgages are not usually a matter of concern, but the buyer’s solicitor will need to check that they will be discharged on completion.
If the mortgage has already been repaid in full, there should be a vacating receipt attached to it. If this is the case, then the mortgage need not concern the buyer.
However, if not, then as with registered title, the buyer’s solicitor should elicit from enquiries that the seller intends to repay it, and make sure that this is covered by both the contract and replies to requisitions on title.
Note that a first mortgage is not registered at the land charges registry. This is because a first mortgagee of unregistered land will hold the deeds. This gives them protection that the property cannot be sold without their knowledge.
A lender on a second or third mortgage, ie, ranking below the first mortgage, will not have this advantage, as only one lender can hold the deeds! Instead, they would register their mortgage with the land charges register.
It is important therefore to check both the deeds and the land charges register for mortgages.
Rights benefiting and burdening unregistered land
Unlike in a registered title, where rights are neatly set out in the register, or in documents that are referred to, in an unregistered land, a variety of rights can appear in different deeds at different times.
The root of title should refer to any documents that contain covenants or easements. However, if there is any pre-root document that is not referred to in the root of title, then the seller’s solicitor is not required to provide that document, even if it may contain covenants or easements. This may seem an odd rule, but in practice, the root of title will cover the major issues.
Unregistered Land – Covenants
-ve bind if registered as d(ii) land charge
+ve not registrable as land charge: B sol checks deeds (as with R if chain of IC broken, ignore)
Covenants present similar issues for unregistered land. Restrictive covenants will only bind the property if they are registered as a d(ii) land charge.
Positive covenants are not registrable as land charges, and instead the buyer’s solicitor must check the deeds for positive covenants. However, as with registered land, if the chain of indemnity covenants has been broken, then the positive covenant can be ignored by the buyer’s solicitor.
Unregistered Land – Unknown covenants
If a deed is known to have contained covenants and is missing, then this is a title issue. It should be raised with the seller, and if necessary, indemnity insurance will be needed. It is always a matter to be reported to the buyer and possibly the lender.
Unregistered Land –Other interests
There are other interests, such as easements and leases, and these should be apparent from the deeds.
Purpose and scope of searches and enquiries
The principle of caveat emptor (buyer beware) means that it is incumbent on the buyer (and therefore their solicitor) to inform themselves of any issues affecting the property. Searches and enquiries are an essential part of this.
The buyer’s solicitor carries out pre-contract searches and enquiries. In contrast to title investigation, which is generally limited to the title that is provided, there is almost no limit to the searches and enquiries that can be raised.
Although there are standard searches and enquiries that should be raised in every transaction, when it comes to additional searches and enquiries, this is a matter for the buyer’s solicitor’s judgment.
We will look at the standard searches first and then the optional searches.
standard searches
x6
Drainage and water search
Desktop environmental search
Chancel repair search
Title searches
Local search (x2)
the local search comprises two parts
a search of the local land charges register LLC1; and
· the local authority’s replies to enquiries CON29.
It is possible to order the component parts of the search separately, but usually you will need both anyway.
Knowing which matters are covered by the LLC1 and CON29 is good to know for multiple choice questions (less critical in real life, where you would read the whole search).
LLC1
x6
debt by local authority
successful planning permission
planning enforcement notice
art 4 (disapply GDPO)
conservation + listed
miscellaneous
LLC1 shows matters that have been entered on the local land charges register affecting the property. These include:
· debts against the property for work that the local authority has carried out – for example, to repair or demolish dangerous buildings or clean properties that are a risk to public health;
· planning permissions that have been granted (but not planning applications that have been refused);
· planning enforcement notices;
· Article 4 directions (which you will remember disapply or modify the General Permitted Development Order);
· conservation areas and listed building designations; and
· tree preservation orders and other miscellaneous charges that you can research if and when they come up in practice.
CON29
overlap w/ LLC1
x5
planning consent granted, pending, refused
building regulation approval
adopted roads
land for public purpose
contamination (not replacing environment search)
There is some overlap between the LLC1 and the CON29 replies to enquiries. The CON29 replies show planning consents granted, but also show applications which are pending or refused and building regulations approvals.
The CON29 replies include many matters but some important ones are:
· details of adopted roads and pavements and public rights of way;
· land that is required for public purposes – this means that it may be compulsorily acquired by the local authority in future;
· information about contaminated land insofar as the local authority are aware, but this is limited and does not replace an environmental search.
Drainage and water search
The drainage and water search checks whether the property is connected to a public sewer and water supply.
Form CON29DW for residential property
Form CommercialDW for commercial property
Desktop environmental search
contamination likely?
flood risk?
Land contamination should be considered a potential issue in all property transactions. This is because an owner may have to pay the costs of cleaning up contaminated land, whether or not they were responsible for the contamination. The CON29 replies will indicate if the local authority has served a notice requiring such remediation, but will not confirm that the property is free from contamination.
The desktop environmental search is so-called because it is computer generated from existing records, and nobody actually gets up to visit the site.
A desktop environmental search will advise if the property is likely or not to be contaminated based on historic maps and records. It would therefore not pick up contamination which would not be recorded, such as illegal dumping of waste.
The desktop environmental search result also identifies the risk of flooding. Note that the drainage and water search does not contain information about flooding.
Chancel repair search
if risk = insurance
Chancel repair is the historic right of a parish church to claim contributions to the cost to the repair of the church chancel, which is the area near the altar.
If the search reveals a risk of chancel repair liability, it is usually possible to insure against it.
The parish church should register its interest, and if a sale for value takes place without it being registered, then they can no longer claim. However, there are some twists to this rule, and so the search remains a standard search and is likely to do so for some time to come.
Title searches
index map search + land charges search
There are also searches that relate to the title, and so are a bit different from the other pre-contract searches.
One is the index map search. This is not needed if only a single registered title is being acquired, as the register can be taken as conclusive. However, an index map search will be needed for unregistered title, or a number of titles, or where there is an exception of mineral rights. In these cases, the index map search is used to check all of the registered titles within the boundaries searched.
The other is the land charges search (don’t confuse this with the local land charges LLC1 search), which again forms part of the investigation of title, and should be carried out against the seller and previous owners in the chain of title. However, often the seller will provide previous land charges searches, and these can be relied upon as to previous owners, meaning that only the current owner needs to be included in the buyer’s solicitor’s search.
Optional enquiries (CON29O)
There are further optional enquiries that can be raised in the local search (CON29O). These are usually not necessary for residential properties, but are often relevant in a commercial context.
For example, if there is open land, it is important to raise enquiry 22, which asks about commons and village greens. These are land over which the public has rights, and may not be developed.
This search can be carried out as an optional enquiry to the local search, but search providers also offer standalone commons registration searches. Either is fine.
There are various other optional enquiries, but we do not need to look at them in detail for the purposes of this course.
Highways search (CON29R)
optional search
Another search related to the local search is the highways search (CON29R). The local search (CON29) will identify that the roads listed are adopted. This is usually fine for residential purposes, where it will usually be clear that the house abuts the public highway. However, for land for development and other commercial property, it is important to get a highways search. This provides a plan that can be used to check that the public highway abuts the boundary of the property. If there is a gap, then further investigation will be needed to ascertain what private rights are in place.
Mining searches
optional search
A coal mining search should be carried out if the property falls within a coal mining area. There is a gazetteer of areas that are affected, and with online search providers, they will indicate at the time of ordering whether the coal mining search is required.
This search is important to ascertain the risk of subsidence from coal mining.
Other areas of the country are affected by specific types of mining:
· a brine subsidence search is needed in certain areas of Cheshire;
· a tin mining search may be needed in Cornwall or Devon.
Waterways search
optional search
If the property has a river or other waterway running through it or next to it, then a waterways search with the Canal and River Trust should be carried out to enquire about any obligation to maintain the banks of the river or waterway.
Note that a waterways search does not provide information about flooding.
Flood search
option search
The desktop environmental search provides flooding information, but if this is an issue, then a specific flood search can be carried out, which gives more detailed information on the risk of flooding.
Further environmental investigation
optional search
As we have seen, the desktop environmental search is limited in its scope, as it examines historic records and maps. Where contamination is likely to be an issue, whether revealed by the desktop search or by other information (such as replies to enquiries), then environmental surveys should be undertaken.
There are two categories:
· a Phase 1 survey involves a site inspection, and if this indicates possible contamination, then:
· a Phase 2 survey is carried out, which involves taking soil and water samples to test for actual contamination.
Railways searches
optional search
There is no standard railway search with NetWork Rail.
Searches can be made with Transport for London (TfL) about Crossrail and other TfL transport schemes
Other utilities searches
optional search
For development sites, or newly built property, further utilities searches, such as electricity, gas and telecommunications may be needed.
Planning and building regulations
The buyer’s solicitor should consider if there have been any:
· building works or alterations at the property; or
· a change of use.
This may be apparent from the seller’s replies to enquiries or the buyer’s survey.
The buyer’s solicitor should check the searches for any necessary consents, and if they haven’t been obtained, then consider whether enforcement action is still a risk.
If works or alterations have been carried out by the seller, the two types of consents the buyer’s solicitor needs to think about are planning permission and buildings regulations approval.
Planning permission
Planning permission is needed for development. This includes building works and demolition, but excludes works which only affect the interior of the building.
Permitted development
Some development will be permitted under a General Permitted Development Order. When considering historic development, refer to the GPDO that was in force at that time, not now. If the work falls within that GPDO then planning permission would not have been needed, provided that the GPDO was not disapplied.
Building regulations
Building regulations ensure that building work complies with standards of structural soundness, safety, environmental protection, etc.
External or internal building works require building regulations approval, whether or not planning permission is needed.
Building regulations approval is a two step process:
1. Full plans and specifications must be submitted to the building control department of the local authority for approval.
2. After completing the works, building control inspect the work and issue a certificate of compliance.
Changes of use
pp not needed within same class
sui generis (no category) = dev
!! BR not needed for pure change of use but needed if works (but will need pp)
GDPO can allow certain changes between categories
If replies to enquiries or the survey indicate that the property has been subject to a change of use, then the buyer’s solicitor needs to think about planning permission.
Property uses are classified under the Town and Country Planning (Use Classes) Order 1987, as amended in September 2020. However, again, looking at historic changes of use, you would need to refer to the Order as it stood at the relevant time.
Use classes are grouped by capital letter, such as E, and then subdivided. This used to be by number, eg A1, A2, B1, etc, but confusingly the modern use classes adopt lettering, so E(a), E(b), etc.
The main thing to remember is that changes within the same use class, ie, uses sharing the same capital letter, do not require planning permission.
Note also, that there are sui generis uses, which do not fall into any use class. Any change to or from these sui generis uses will be considered development.
The GPDO allows for certain changes of use between different use classes.
Building regulations are not needed for a pure change of use. Usually, however, a change of use will also necessitate building works or alterations, in which case building regulations approval will be needed.
Article 4 directions
If looking at ‘permitted development’, then remember that local planning authorities can disapply parts of the GPDO by making an Article 4 Direction.
The LLC1 part of the local search will show if there is an Article 4 Direction in place, and when it took effect, which could be important for historic development.
If an Article 4 Direction had disapplied the GPDO as to the particular permitted development under consideration, then planning permission would have been needed.
You are more likely to find an Article 4 direction has been made in a conservation area.
Conservation area
If the local planning authority consider an area of special architectural or historical interest, they can designate it a conservation area. This helps preserve the character and appearance of the area.
The local search will identify if the property falls within a conservation area. (In most cases, this will be the LLC1 result, but before a certain date, it would appear on the CON29 result. All you need to know is that it will be somewhere in the local search.)
It is likely that there will be extra planning controls in place in a conservation area, particularly an Article 4 Direction.
It may also be that planning permissions that are granted will be subject to stricter conditions, such as the colour and type of bricks that are used to extend a property.
Checking for planning permissions and building regulations approval
Having considered whether any development has taken place, and whether it would have necessitated planning permission or building regulations approval, the buyer’s solicitor next needs to check whether such consents have been obtained.
For planning permissions, the LLC1 is the best place to check, as this shows planning permissions that have been obtained. The CON29 also shows planning permissions that have been refused.
Building regulations approvals are not shown in the LLC1, so you will need to look in the CON29.
Enforcement deadlines
Planning permission deadlines: 4/10 yrs v conceal
4 years for:
· Building works carried out without planning permission; or
· Change of use to a single dwelling house.
10 years for:
· Any other change of use; or
· A breach of a condition to a planning permission.
NB The local authority can take enforcement action after these deadlines if the breach has been deliberately concealed.
Building regulations deadlines: 2 yrs, 12 m, 6m
There are time limits on the local authority’s statutory powers to take enforcement action:
· 6 months after discovering a breach to prosecute a person responsible for the works for up to two years from the date of completion of the works
· 12 months to serve an enforcement notice.
There is no time limit on their seeking an injunction through the courts.
It is likely that the local authority will only be inclined to pursue the most serious breaches of building regulations through the courts, but the risk should not be ignored.
Case law has confirmed that a solicitor who does not take all reasonable steps to obtain copies of building regulations approvals and certificates may be found negligent.
Options if time limits for enforcement have not expired
If there is still a risk of enforcement action for planning issues then the options are:
· An indemnity policy to cover the financial losses caused by enforcement — this should be provided at the cost of the seller
· Retrospective planning permission
· Compliance with a condition (if this is the breach)
These may be made conditions of the contract.
For building regulations breaches, the options are:
· An indemnity policy to cover the financial losses by enforcement.
· A regularisation certificate and remedying any non-compliant work.
For minor or trivial breaches, an indemnity policy may be considered sufficient. However, it should always be borne in mind that work that does not comply with building regulations may not be safe. Indemnity policies do not cover the risk of a structure collapsing or personal injury or death.
The local authority’s enforcement options
x4:
P enforcement N (restore)
stop N (stop further breach)
breach of condition N (comply)
injunction
There are various remedies available to the local authority for a breach of planning permission or a planning permission condition:
· A planning enforcement notice requires that the land be restored to the condition it was in before the unauthorised development took place.
· A stop notice can only be served with an enforcement notice and prohibits the carrying out of further activities in breach of planning control.
· A breach of condition notice is similar to a planning enforcement notice but requires compliance with conditions imposed by a planning permission.
· The local authority can also seek an injunction from the court if they consider it necessary.
Essential features of a contract – Standard conditions
majority of residential contracts: Standard Conditions of Sale
commercial contracts: Standard Commercial Property Conditions.
features x5
property address
the parties
the deposit
- Both 10% deposit by default
- If buyer is giving a 5% (= short deposit), standard conditions provide a full 10% deposit if buyer delays completion.
title guarantee
- full title guarantee: seller guarantees their right to sell the property, and that it is free of all encumbrances (rights against the property) other than those disclosed in the contract, or which the seller didn’t and couldn’t have known about.
- Limited title guarantee is similar but just means that no such encumbrances have been created during the seller’s period of ownership.
- No title guarantee means that the seller does not give any guarantee that the property is free of encumbrances or even that the seller has the right to sell the property. This is a risk for a buyer, although insurance is available.
-Generally, most sellers will give full title guarantee, and this is the default of both sets of standard conditions. An executor selling a property that they are not familiar with will sell with limited guarantee.
-An administrator or liquidator will offer no title guarantee.
-Don’t confuse the title guarantee with the class of title in the Land Registry official copies. The title guarantee is a contractual guarantee given by the seller. The class of title (such as title absolute or possessory title) is the Land Registry’s guarantee as to the quality of title. Both are important.
completion date and time
- If the completion date is left blank, then both sets of standard conditions of sale provide for completion in 20working days. It would be rare for this provision to be used in practice.
- Related to the completion date is the completion time, which is 2 pm by default under both sets of standard conditions. If there are no related transactions, this can be left. However, if the money being used for the purchase is coming from a related sale, then the times must be staggered to allow for the money to be forwarded.
risk at exchange
We have seen that for both sets of standard conditions, risk passes to the buyer at exchange. This seems strange, as if the property is damaged or destroyed before completion, the buyer must still pay the full purchase price and complete. Why?
Think of a chain transaction. If the seller of that property is using the money to buy a property, and the seller of that property is buying a further property, etc, then imagine what would happen if the buyer could simply refuse to complete. It would mean that every transaction in the chain above the seller would also be unable to complete, and create a mess for all of the parties involved.
By contrast, although it is inconvenient for the buyer to buy a property that is damaged or destroyed, provided the buyer has insurance (as they should have), then they will suffer inconvenience, but not financial loss. All the other parties in the chain are unaffected.
Special conditions
The standard templates for the residential and commercial contract provide proforma special conditions that can easily be amended as required. These cover the most common amendments.
More complicated special conditions can be drafted for almost any situation. Examples might be if the seller has agreed to provide or pay for an indemnity policy, or the parties have agreed to keep the transaction confidential. In a commercial transaction, they may go into detail about such matters as rents payable by occupational tenants, the treatment of employees such as caretakers, transfer of service agreements for lifts and air conditioning.
Value added tax
There are different types of VAT treatment depending on the type of property.
Residential:
– exempt (VAT on legal services)
–unless new
—-taxable but zero rated
—- seller does not charge VAT on sale price but can recover VAT incurred constructing property
Commercial
– newly: standard-rated and VAT must be paid on the purchase price.
– over 3 years old: exempt unless owner opts tax. If owner opts, then VAT on sale price at 20%.
Standard Conditions: purchase price inclusive of VAT.
Option to tax affects all the owner’s dealings with the property. So, if they have occupational tenants, then they must charge VAT on the rent.
Previous owners’ option to tax does not affect the buyer after completion. If the buyer wishes to continue to charge VAT on the occupational rents, they must submit a fresh option to tax.
Exchange of contracts
Law Society Formula B
telephone exchange
solicitors confirm hold signed contracts
solicitors confirm key details
first class post of DX that evening
if not that evening tell other solicitor
Law Society Formula B is the most common method of telephone exchange, and involves the solicitors giving each other undertakings that allow the telephone conversation to be the point of exchange.
Each solicitor confirms that they are holding their client’s signed contract, and then confirm to each other the key details inserted in the contract. Formula B provides that each will send the contract either in first class post or document exchange that evening. If either solicitor thinks that they will be unable to get their signed contract in that evening’s post, for example because of a secretarial backlog, they should tell the other solicitor.
Pre-completion
The pre-completion stage is concerned with both seller and buyer’s solicitors ensuring that everything is in place for completion to take place smoothly.
Whereas in the pre-exchange stage, the buyer’s solicitor may find serious problems that would prevent the transaction proceeding, generally the pre-completion stage is more procedural. However, it is no less important.
The issues that need to be addressed are:
· The transfer deed
· Pre-completion searches
· Replies to requisitions
The transfer deed
drafted by buyer (traditionally) or seller (usually)
checked by both
executed by seller!
buyer executes if x3: IC for +ve; buyer cov or ease; any other obligation by buyer
The tradition of the buyer’s solicitor drafting the transfer persists in both sets of standard conditions, but these days sometimes the seller’s solicitor will draft the transfer, perhaps even at the same time as the contract. The seller’s solicitor will also want to draft the transfer if selling plots on a newly developed estate to ensure that they are consistent.
Whether it is buyer’s solicitor or seller’s solicitor who drafts the transfer, the other of them will need to approve it.
Once approved, the seller will always need to execute. The buyer will need to execute if:
· There is an indemnity covenant to observe positive covenants
· The buyer is giving covenants or easements over the property
· The buyer is agreeing to any other obligations
Pre-completion searches
Unlike pre-contract searches, where it is normal to expect some adverse entries, pre-completion searches are a check and in the vast majority of cases will come back clear.
OS1 search
Land charges search (K15)
Bankruptcy search (K16)
Company search
pre competion search: OS1 search
R: OS1 at land registry
from date of official copies from seller
confirm no changes from official copies
OS1 gives priority period of 30 working days
- if register within then priority over previous apps within period even if apps before B’s app
no extension! reapply but no priority between apps
For registered land, an OS1 search is carried out at the Land Registry. This search is carried out from the date of the official copies provided by the seller’s solicitor, and confirms that there are no changes to those official copies. The search offers a priority period of 30 working days. Provided that the buyer’s application for registration is made within that window, it will take priority over any other application, even if it dates before the buyer’s application.
OS1 searches cannot be extended. If the registration application is not submitted within the priority period, priority is lost. A new OS1 search can be obtained, but it will not take priority over applications made before it.
pre competion search: Land charges search (K15)
unregistered
against full name(s) of seller(s)
15 working days priority
For unregistered land, a land charges search is carried out against the full name or names of the seller. This identifies any adverse matters against the seller that affect the property. If it is clear, then again, it offers priority to the buyer against any applications made within the priority window. However, the priority window is half that of the OS1 search, being 15 working days.
pre competion search: Bankruptcy search (K16)
if B sol for mortgage lender
bankruptcy search against B before completing
protects loan from claim by trustee in bankruptcy
15 working days
If the buyer’s solicitor also acts for the buyer’s mortgage lender, then the buyer’s solicitor will need to carry out a bankruptcy search against the buyer before completing. This protects the mortgage lender against the mortgage advance being claimed by a trustee in bankruptcy. Like the land charges search, this confers priority of 15 working days.
Requisitions on title
re completion
procedural matters: keys, meter readings
seller undertaking re mortgage
Requisitions on title traditionally were a document in which the buyer’s solicitor would raise any issues that arose from the investigation of title.
However, they now contain procedural matters regarding completion, such as the location of keys and meter readings. Importantly, however, they contain the seller’s solicitor’s confirmation that they will adopt the Law Society Code for Completion by Post and undertake to discharge mortgages affecting the property. The replies to requisitions must therefore be checked to ensure that all appropriate undertakings have been given.
