Preparation for and exchange of contracts Flashcards
What is full title guarantee?
Seller owns the whole legal/equitable interest in the property AND covenants that the property is free from all charges, incumbrances and third-party rights other than those they could be reasonably expected to know about.
What is limited title guarantee?
Seller does not own the whole legal/equitable interest e.g. sale by trustee/PR.
Seller covenants that they have not charged/incumbered the property/granted any third-party rights etc…
What is no title guarantee?
Seller has no knowledge at all about the property and is simply disposing of it in a professional capacity.
What happens if the buyer fails to complete?
The seller may forfeit and keep the deposit and any accrued interest.
What happens if the seller is in default?
Buyer may demand repayment of deposit with accrued interest.
What penalty will the buyer face in the event of late completion?
The buyer will pay interest on the purchase price minus the deposit paid.
What is the standard time for completion?
2pm under the SCs - can be amended.
What is the standard time for completion?
2pm under the SCs - can be amended.
What is the position for holding a deposit under the SCs?
Deposit held by seller’s solicitor as stakeholder until completion. On completion, deposit will be released to seller with accrued interest.
What is the impact of exchange on insurance/risk?
The risk of damage to/destruction of the property passes to the buyer on exchange of contracts.
The buyer is bound to complete regardless of damage/destruction.
Buyer should put buildings insurance ‘on risk’.
What is the VAT position on a residential property transaction?
Residential properties are VAT exempt.
What is the VAT position on a new commercial property (completed up to 3 years ago)?
Automatically standard rated.
Purchase price is exclusive of VAT.
VAT is payable at the standard rate on top of the purchase price.
What is the VAT position on an old commercial property (completed over 3 years ago)?
Exempt from VAT, unless an option to tax has been exercised by the seller.
If option to tax is exercised: VAT should be paid.
Option to tax not exercised: VAT not payable.
What is the VAT position on an old commercial property (completed over 3 years ago)?
Exempt from VAT, unless an option to tax has been exercised by the seller.
If option to tax is exercised: VAT should be paid.
Option to tax not exercised: VAT not payable.
What is the purpose of a certificate of title?
A document addressed to the lender confirming that it is safe to lend. It also confirms that the charge will be registered and the buyer’s title to the property will be good and marketable.
