Preperation For And Exchange Of Contracts

Question 1

Standard conditions of sale

Answer 1

Seller solicitor needs to incorporate ‘standard conditions’ in the contract.

Used for all residential transactions.

Can be used for some simple commercial transactions e.g properties which are empty with a straight forward title and a relatively low price.

Question 2

Standard commercial property conditions

Answer 2

More suitable for use with high value commercial properties and contain more detailed provisions for the management of occupational leases with which the property is being sold.

Question 3

Specified incumbrances- what must you specify in this section?

Answer 3

All the burdens on the property in the contract.

Question 4

When should a seller sell with full title guarantee?

Answer 4

If they own the entire legal and equitable title to the property.

Question 5

When should a seller sell with limited title guarantee?

Answer 5

When the seller has limited knowledge of the property e.g. where the seller is an executor or trustee.

Question 6

When will a seller insist that no title guarantee is given at all?

Answer 6

Where the seller is a person appointed following the insolvency of the owner.

Question 7

What does contract rate mean?

Answer 7

Rate of interest that will be charged if a party is late in completing.

Will be charged on the purchase price.

Question 8

Stakeholder

Answer 8

The deposit is paid to the sellers solicitor as ‘stakeholder’, which means that the sellers solicitor cannot hand it over to the seller until completion.

However, the seller can use the deposit on a related purchase of a house for the seller.

Question 9

What does it mean when deposit is held as agent?

Answer 9

Deposit can be released to the seller immediately after exchange and can be used by the seller for any purpose whatsoever.

Question 10

What is the preparation for an exchange of contracts?

Answer 10

(A) report to client - buyer solicitor should notify the buyer about the results of title, searches, enquiries, terms of contract and mortgage offer.
(B) buyer solicitor will also need to report to lender so they know the property is good security.
(C) ensure deposit funds are available.
(D) ensure arrangements are in place for insurance immediately following exchange as the risk passes to buyer on exchange.
(E) contract signed and completion date.

Question 11

Should the seller make the purchase price inclusive of VAT?

Answer 11

A seller should never be advised to do this.
Insurance company is VAT sensitive - so if the buyer has insurance, the seller may not be able to recover VAT it has to pay on the purchase price.