PP 1 - Introduction to Freehold Transactions Flashcards
What are a solicitor’s aims when acting for a buyer in a freehold transaction?
- Verify seller’s legal right to sell
- Confirm physical condition and value
- Identify property rights (easements, rights of way)
- Identify third-party rights (covenants, leases)
- Identify security interests (mortgages)
- Ensure contract reflects agreed terms
- Confirm sufficient funds available
- Verify planning/building regs compliance
- Investigate environmental risks
What are a solicitor’s aims when acting for a lender?
- Confirm property is marketable
- Ensure property value covers loan
- Ensure mortgage documents are valid
- Confirm insurability of property
- Identify discrepancies in borrower’s finances
- Identify legal risks (e.g., compulsory purchase)
What are a solicitor’s aims when acting for a seller?
- Contract reflects agreed terms
- Provide buyer’s solicitor with documents
- Coordinate sale timing
- Ensure correct legal transfer
- Repay mortgage and transfer funds to seller
- Disclose latent defects or encumbrances
What happens in the pre-exchange stage of a freehold transaction?
- Agree price
- Buyer arranges survey
- Legal title investigated
- Buyer may renegotiate or withdraw
- Check if leasehold or freehold
- Seller provides TA6 and TA10 forms
This stage is crucial for identifying any issues before contracts are exchanged.
What happens at exchange of contracts?
- Legal contract entered
- 10% deposit paid
- Binding commitment
- Buyer arranges building insurance
- Check for special conditions
- Deposit held in client account
What happens pre-completion?
- Prepare/approve purchase deed
- Conduct final searches & requisitions
- Order mortgage funds
- Ensure all documents are ready
What happens at completion?
- Buyer pays balance
- Seller transfers documents
- Buyer receives keys
- Title transfers
- Confirm apportionments
- Coordinate chain-linked transactions
What are post-completion tasks?
- Repay seller’s mortgage
- Pay SDLT or LTT
- Register buyer as owner
- Register mortgage charge (if any)
What is the principle of caveat emptor?
Buyer must investigate property. Seller doesn’t have to disclose defects unless:
* Buyer makes specific enquiries
* There is a latent defect or title issue
* Seller misrepresents
What are common sources of misrepresentation in property transactions?
- Estate agent statements
- Seller’s replies to enquiries
- Verbal/written seller statements
- Misstating disputes, property size, or objections
What are remedies for misrepresentation?
- Compensation (contractual)
- Misdescription claim
- Misrepresentation Act 1967 claim
What is a latent encumbrance or title defect?
- Latent encumbrance: hidden restriction not visible on inspection
- Title defect: legal issue affecting ownership
- Must be disclosed if known or reasonably knowable
What did the Hardy case confirm about caveat emptor?
- Sellers don’t need to disclose physical defects
- Buyers should arrange surveys
- Misrep claims fail if buyer didn’t rely on seller’s statements
What are typical timescales and costs in property transactions?
- Residential: 6–8 weeks
- Commercial: may be faster
- Costs: fixed (residential), time-based (commercial)
What is the difference between legal and beneficial ownership in co-ownership?
- Legal: Max 4 owners, joint tenancy only
- Beneficial: No max, can be joint tenants or tenants in common
What are key features of joint tenancy vs tenants in common?
- Joint tenancy: right of survivorship, equal shares
- Tenants in common: defined shares, no survivorship
The choice between these forms of ownership impacts inheritance and property rights.
How is co-ownership recorded?
In a declaration of trust, signed and noted on TR1 Land Registry form
Proper documentation is crucial for establishing co-ownership rights.
What are the types of property surveys?
- Basic Valuation (for lenders)
- Homebuyer Report (more detailed)
- Full Structural Survey (older/complex properties)
What are key tax considerations for buyers?
- SDLT (or LTT in Wales)
- CGT on profit from sales (PRR may apply)
- VAT (rare for residential, possible in commercial)
What funds does a buyer need to cover in a property transaction?
- Deposit (10%)
- Completion balance
- Extras (if agreed)
- SDLT
- Solicitors’ fees and disbursements
What are common residential finance options?
Buyer’s own money
Sale proceeds
Mortgages:
* Capital repayment
* Interest-only
* Endowment (now obsolete)
What are common commercial finance options?
- Syndicate lenders
- Equity finance
- Development finance (for purchase/build/renovation)
- May include lender step-in rights
