Property

Question 1

A seller and buyer agreed on the sale and purchase of a property. The parties exchanged contracts using the Contract Incorporating the Standard Conditions of Sale (5th edition – 2018 revision) unamended. Between exchange of contracts and completion, there was a severe storm that destroyed the property. Neither the buyer nor the seller had insurance on the property in place between exchange and completion. The buyer is now refusing to complete.

Is the buyer bound to proceed with the purchase?

Answer 1

Yes, because risk in the property passes to the buyer on exchange of contracts.

Feedback:

(B) The buyer is contractually bound to proceed with the purchase because under the standard conditions of sale, risk in the property passes to the buyer on exchange of contracts. This means that if the property is destroyed or damaged between exchange and completion, the buyer must still proceed with the purchase. (A) is incorrect because the standard conditions do not require the seller to insure the property between exchange and completion. There is no requirement on the buyer to insure the property during this time, either, though given that risk passes to the buyer on exchange, it would be prudent for the buyer to do so. In practice, most properties are insured by both the seller and the buyer between exchange and completion. (C) is incorrect because title to the property does not pass on exchange. If the land is unregistered, title passes on completion; if the land is registered, title passes when the purchase is registered. (D) is incorrect because it is irrelevant that the property is not in the same condition as it was on exchange, because, as explained above, risk passed to the buyer on exchange. (E) is incorrect because, as explained above, risk in the property passes to the buyer on exchange (not on completion).

Question 2

A man is purchasing a property which has a large annex in the back garden. The Property Information Form indicates the annex was built three years ago by the current seller. The property is in a conservation area. The seller did not obtain planning permission to build the annex.

Can the local authority take enforcement action against the buyer after the purchase completes?

Answer 2

Yes, planning permission would have been required and the local authority can take enforcement action against the current owner of a property, even if the work was carried out by a previous owner.

Feedback:

(B) Yes, the local authority can take enforcement action against the current owner even if a previous owner has breached the planning rules. The property is in a conservation area so planning permission would have been required, the work was only done three years ago, and so the local authority have one more year to take enforcement action (they have a total of four years in which to do so). (A) is incorrect. The local authority can take enforcement action against a current owner. (C) is incorrect because it talks about building regulation rather than planning permission. Building regulations are a series of statutory standards in place to ensure that new buildings and constructions are built soundly. Building regulations are linked to building work but are separate from planning permissions. (D) is incorrect. The one-year enforcement period relates to lack of building regulation consent and not to lack of planning consent. (E) is incorrect because the enforcement period is four years and not two.

Question 3

A solicitor’s client is selling a property. The client and the buyer have agreed a 10% deposit on exchange of contracts. The solicitor suggests to the client that the deposit be held as agent for the seller.

Under this agreement, which solicitor will hold the funds and what is the consequence of the deposit being held by a solicitor as agent for the seller?

Answer 3

The seller’s solicitor will hold the deposit and may pay over the deposit to the seller immediately after exchange.

Feedback:

(A) If a buyer and seller agree that a deposit will be held by a solicitor as agent, it means that the buyer’s deposit will be held by the seller’s solicitor and may be paid over to the seller immediately after exchange has taken place. This may occur, for example, when the buyer is buying a new build property. It presents a risk to the buyer because if the seller spends the money between exchange and completion, the buyer may have difficulty recovering the deposit in the event of the seller’s default. Thus, the standard conditions of sale provide that on exchange of contracts, the buyer’s deposit is held by the seller’s solicitor as stakeholder (meaning the deposit will be paid to the seller only on completion). (B) is incorrect because, as explained above, when the deposit is held as agent it may be paid over the seller immediately after exchange. (C) is incorrect because this answer choice describes the consequence when the deposit is held as stakeholder, not as agent. (D) and (E) are incorrect because the buyer’s solicitor does not hold the deposit after exchange; the seller’s solicitor does.

Question 4

A woman is purchasing a residential property. Her solicitor is reviewing the contract package. The woman asks her solicitor to confirm that the property is connected to the public water supply.

How will the woman’s solicitor find out the information which is of interest to their client?

Answer 4

The drainage and water search.

Feedback:

(D) The drainage and water search is an enquiry sent to the local water company to determine whether the property is connected to a public foul drainage system and the public water supply. Such a search is carried out on every purchase, whether the property is commercial or residential. (A) is incorrect because the drainage and water search is not part of the local search. There are two parts to a local search: a search of local registrations that might burden the land and enquiries to the local authority regarding information with respect to issues including roads, public rights of way, and planning. The local search may also include additional, optional enquiries. (B) is incorrect because there is no such thing as a ‘water search’; the relevant search is known as a ‘drainage and water search’. (C) is incorrect because an environmental search is an electronic database search that a solicitor may perform from their office to determine whether the property is likely to have been contaminated by hazardous wastes in the past (because if it was, the buyer could be liable for clean-up costs in the future). (E) is incorrect because a commons registration search is an optional search which is performed when the property appears to abut common land or a town or village green to determine whether use of the property is restricted or burdened by its proximity to public land.

Question 5

A solicitor is acting for a man who is selling his property. The solicitor learns that the man’s property is in mortgage to a bank and that the man still owes approximately £16,000 on the mortgage. Title to the property is unregistered.

How will the man’s solicitor obtain evidence of the title to the land?

Answer 5

The solicitor will request the title deeds from the bank and will give an undertaking not to release them pending redemption of the mortgage.

Feedback:

(E) To obtain evidence of title, the solicitor will request the title deeds from the bank and will give an undertaking not to release them pending redemption of the mortgage. As title to the land is unregistered, the bank will hold the unregistered title deeds as security for the loan. There is money outstanding on the mortgage, so the bank will require an undertaking for safekeeping of the title deeds until the mortgage is paid off out of the sale proceeds. (A) is incorrect. The solicitor will not be in a position to apply for voluntary first registration without first obtaining the title deeds from the bank. (B) is incorrect. Asking the lender to provide a photocopy of the deeds is not usual conveyancing procedure. (C) is incorrect. It is the undertaking which protects the bank’s interest. A C(i) land charge protects a second or subsequent charge, which is not relevant in this case. (D) is incorrect. The title is unregistered, accordingly there is currently no register of title available.

Question 6

A woman is buying a retail shop unit and has instructed a solicitor on the purchase. The seller’s replies to enquiries confirm that the seller expanded the unit four years ago by building a small storage room at the rear of the shop. The seller was unable to produce evidence that planning permission was obtained, and neither could they provide a building regulations completion certificate.

The woman’s solicitor tells the woman that there is some evidence that some of the work was not in compliance with building regulations. However, the solicitor is satisfied that the expansion to the building fell within the permitted development rules and so the local authority would have no ground to bring an enforcement action with respect to the additional room.

Is the solicitor correct?

Answer 6

No, because although the local authority has only 12 months to take enforcement action for noncompliance with building regulations, they may seek an injunction to force compliance at any time.

Feedback:

(E) The solicitor is incorrect because even if planning permission is not required for building work, a building regulations completion certificate must be obtained from the local authority to confirm that the work has been carried out satisfactorily. Although the local authority has only 12 months in which to bring an enforcement action based on the failure to obtain a certificate, it may seek an injunction to force an owner to bring the property up to standards (if the work was not up to standards) at any time if the work is deemed to be dangerous. (B), (C), and (D) are incorrect because they each state the wrong time period for an enforcement action (it is 12 months and not two years). (B) is also incorrect in that it fails to take into account that an injunction could be issued to enforce compliance. (A) also is incorrect for that reason as well. And (C) has the additional problem that an injunction may be sought at any time.

Question 7

A buyer and seller are ready to exchange contracts for the sale and purchase of a property. Their solicitors have agreed to use the Contract Incorporating the Standard Conditions of Sale (5th edition - 2018 revision), unamended. The solicitors also agree to use the Law Society formulae for exchanging contracts by telephone. The buyer’s solicitor has indicated that she will be going on holiday in two weeks and has limited time available before then. She suggests an exchange using Formula A and the seller’s solicitor agrees.

How will the solicitors effect exchange of contracts?

Answer 7

Prior to exchange, the buyer’s solicitor will send the contract signed by the buyer to the seller’s solicitor, along with the deposit. The seller’s solicitor will confirm both contracts are the same over the telephone, insert the exchange and completion dates in both, and send the part signed by the seller to the buyer’s solicitor.

Feedback:

(A) Formula A is used when the solicitors think it is prudent for one solicitor to hold both contracts on exchange. Here, the buyer’s solicitor has limited availability, so under Formula A, the buyer’s solicitor will send the contract signed by the buyer to the seller’s solicitor, along with the deposit. The seller’s solicitor will confirm both contracts are the same over the telephone, insert the exchange date in both, and send the part signed by the seller to the buyer’s solicitor. (B) is incorrect because it describes a Formula B exchange - where each solicitor holds their own client’s part of the contract, confirms they are the same, and then sends it. Since the buyer’s solicitor will have limited time here, the facts provide that the solicitors did not agree this type of exchange. (C) is incorrect both because it describes a Formula B exchange, as just explained (where each solicitor holds their own client’s contract), and because under the unamended Standard Conditions of Sale, the seller’s solicitor will hold the deposit funds. (D) is incorrect because none of the formulae for exchange require both solicitors to send their client’s contract to the other solicitor before effecting exchange of contracts. (E) is incorrect because whilst it generally describes a Formula A exchange, as with the previous choice, under the unamended Standard Conditions of Sale, the seller’s solicitor will hold the deposit.

Question 8

A solicitor is preparing for completion for a client on a purchase transaction with a registered title. The solicitor has already submitted their certificate of title to the mortgage lender.

Which of the following describes the searches which the solicitor will need to carry out?

Answer 8

An official search with priority and a bankruptcy search.

Feedback:

(E) The solicitor will need to carry out an official search with priority and a bankruptcy search. After exchange and before completion, the buyer’s solicitor must carry out pre-completion searches to ensure the buyer is protected against undisclosed third-party rights. When title is registered (which is provided in the facts), the solicitor will need to do an official search with priority. The facts also indicate that the buyer will be getting a mortgage (as the solicitor submitted a certificate of title to the lender, and that is the document requesting drawdown of mortgage funds). Therefore, the solicitor should repeat the bankruptcy search to ensure the mortgage lender will still be willing to provide funds. (A) and (B) are incorrect as a full land charges search is required when the title is unregistered, and here, title is registered. (A) is also incorrect along with (C) and (D) because local searches, drainage and water searches and environmental searches are pre-contract searches.

Question 9

A woman is buying a residential property. The solicitors for the seller and the buyer are using the Law Society’s Conveyancing Protocol. The solicitors are now preparing for completion.

If the solicitors do not agree otherwise, what method will be used to complete the transaction?

Answer 9

Completion will be by post.

Feedback:

The Law Society’s Conveyancing Protocol provides that completion will be by post in compliance with the Code for Completion by Post unless the solicitors agree otherwise.

Question 10

A limited company has instructed a solicitor to act on the acquisition of a lease of shop premises. The limited company is funding the purchase with a mortgage. The company’s solicitor has received the mortgage offer. The company is taking an assignment of an existing lease which has a residue of 21 years and an unregistered title.

When must the solicitor register the mortgage charge at Companies House?

Answer 10

Within 21 days after completion.

Feedback:

If a limited company is borrowing money, it is necessary to register the charge at Companies House within 21 days. Thus, the remaining answers are incorrect.

Question 11

A well-known artist entered into a contract for the purchase of a property which the artist fell in love with. The artist had been looking for a suitable property to buy for a number of years. The property that they have contracted to purchase is in a secluded location by the sea and is perfect for their paintings. The property also has an outhouse in the garden which can be used as a studio. The artist heard that the seller had received a much higher offer to buy the property from someone else, but the artist was not concerned because they had already exchanged contracts with the seller. The artist was therefore very upset when the seller failed to complete on the contractually agreed date.

Which of the following is the most suitable remedy for the buyer?

Answer 11

The buyer should apply to the court for specific performance.

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(D) The buyer should seek specific performance. This is an equitable remedy in which the court orders a party to perform as agreed in a contract. Because the artist loves the property, and it’s perfect for their paintings, no other remedy will give the buyer what they want – this particular property. (A) is close to correct, as an order for specific performance is more or less a specific type of injunction (specifically, a positive injunction requiring a party to a contract to perform), but specific performance is a better answer because it is more specific to the situation. (B), (C), and (E) would not get the buyer what they want (the property) and so are not good options.

Question 12

A landlord has been having trouble finding tenants for a building owned by the landlord. A consultant has suggested that the landlord should tear the building down because a hotel chain is interested in acquiring vacant property in the area. The building’s sole tenant is the owner of a clothing shop that takes up most of the first floor of the building. The tenant’s 15-year lease will expire in seven months. The landlord has their solicitor immediately serve a section 25 notice on the tenant, indicating a desire to end the tenancy at the end of the lease term.

Although a similar space is currently available at a similar rent in the building next door, the tenant is upset because they have been in business in the building for over 14 years and they have always complied with the obligations of their lease.

What remedy, if any, will be available to the tenant under these circumstances?

Answer 12

No remedy will be available because suitable alternative premises are available.

Feedback:

(E) The tenant would not have any remedy available here because suitable alternative premises are available. Under the Landlord and Tenant Act 1954 (Part II), a tenant under a commercial lease has the right to remain in tenancy after the term of the lease expires unless the landlord serves a section 25 notice indicating a statutory ground for terminating the tenancy six to 12 months before the end of the lease term. One such ground is that the landlord desires to demolish the premises (making (C) incorrect). Other grounds include breaches of obligations under the lease by the tenant; the availability of suitable, alternative premises for the tenant; and the landlord’s desire to reconstruct or move into the premises. Generally, if the ground serving as the basis for termination is not the fault of the tenant, the tenant is entitled to statutory compensation. However, compensation is not available if suitable alternative premises are available. Here, the ground is not the tenant’s fault, but suitable alternative premises are available next door. Thus, (D) is incorrect. Note that the fact that the tenant has always complied with lease obligations (A) is not a ground for denying termination of the tenancy (but breach of obligations would be a fault ground for denying statutory compensation). (B) is incorrect – though it states the correct outcome – because the rationale is incorrect: the security of tenure provisions are designed to take effect – and protect tenants – when the term of the lease ends. Thus, the fact that the lease term ended is not a ground for denying a remedy.

Question 13

A solicitor is acting for the buyer of a property with an unregistered title. The solicitor has carried out a precompletion search, namely a full land charges search, against the full name of the seller.

What priority period is conferred by the full land charges search result?

Answer 13

15 working days.

Feedback:

Hide question 13 feedback
(C) If title is unregistered, a full land charges search against the full name of the seller confers a priority period of 15 working days; that is, the buyer will be protected against (have priority over) applications for land charges against the owner’s name made during the 15-day period if the transaction completes within the 15-day period. (A) is incorrect as 30 working days is the priority period during which the purchase must be completed and registered following an official search with priority, which is carried out in a registered title transaction. (B) is incorrect as 14 days is the deadline for submission of the Stamp Duty Land Tax return following completion of a purchase. (D) is incorrect, as two months is the time frame within which an application for first registration application must be made to Her Majesty’s Land Registry following the purchase of an unregistered title. (E) is incorrect because, as explained above, the full land charges search result confers a 15 working day priority period.

Question 14

A trainee solicitor working in a conveyancing department carries out a land registry search against the whole of a title with priority (OS1) as part of their preparations for completion on a client’s purchase. The paralegal notes the expiry of the priority period on the firm’s case management system.

What must happen within this priority period?

Answer 14

The transaction must complete and be registered at Her Majesty’s Land Registry.

Feedback:

(A) The transaction must complete and be registered at Her Majesty’s Land Registry; otherwise, intervening interests in the land may become effective against the buyer (that is, they will lose their priority). The question makes it clear that this is a registered title, so the priority period is 30 working days. Within that period, the transaction must complete and be registered. Do not confuse this with the full land charges search in the unregistered system, which has a 15-working-day priority period within which the transaction must complete (and registration must be completed within two months). (B) is incorrect as the stamp duty tax is not controlled by the priority period; stamp duty land tax must be paid within 14 days of completion. (C) is incorrect because the contracts usually will have already been exchanged; the search with priority is a pre-completion search. (D) is the rule that applies to a search with priority under the unregistered system. (E) is incorrect because, as explained above, the transaction must complete and be registered within the priority period (not exchange and be registered).

Question 15

A solicitor is acting for a buyer with respect to the purchase of a residential house. The property is registered. The parties have exchanged contracts, and the buyer will need to obtain a mortgage. The solicitor has asked their trainee to carry out the necessary pre-completion searches.

Which of the following searches should the trainee carry out?

Answer 15

An official search with priority and a bankruptcy search.

Feedback:

(E) As contracts have been exchanged and the property is registered, the trainee should carry out an official search with priority and a bankruptcy search. After contracts are exchanged, the buyer’s solicitor will carry out an official search with priority to ensure there are no new charges against the property and to gain the benefit of the 30 working day priority period during which no new charges can take effect. A solicitor for the buyer will also repeat the bankruptcy search whenever the buyer needs to obtain a mortgage to ensure there has been no new bankruptcy filings with respect to the buyer so that the lender will still be willing to lend to the buyer. All of the other choices include a search that is relevant only to land that is not registered: (A), (B), and (D) are incorrect because they each include a full land charges search, which is required only if the title is unregistered. (D) is also incorrect because a drainage and water search is one of the pre-contract (rather than pre-completion searches). We are in the pre-completion stage of the conveyance because contracts have been exchanged. (C) is wrong for a similar reason – a local search is a pre-contract search.

Question 16

A man attended a solicitor’s office with a document granting the man a right of way over his neighbour’s property, title to which is unregistered. After examining the document, the solicitor concluded that it created a legal easement.

What must the solicitor do to protect the man’s legal easement?

Answer 16

Nothing, as legal easements on unregistered land bind the world and do not require any further steps for protection.

Feedback:

(A) The solicitor need not do anything because under the unregistered land system, legal interests bind subsequent purchasers of land encumbered by the legal interests whether or not the purchaser has notice of the legal interest. (D) would be correct if the solicitor concluded that the document did not create a legal easement. In the unregistered land system, an equitable easement (such as a right of way) must be registered as a land charge to be effective against subsequent purchasers. (B) is incorrect both because the interest is an easement and not a covenant and because, as explained above, the man need not take any action to further protect the legal easement. (C) and (E) are incorrect because a property will have a charges register or a property register only if it is in the registered system, and the facts indicate the property here is unregistered.

Question 17

(A) The solicitor need not do anything because under the unregistered land system, legal interests bind subsequent purchasers of land encumbered by the legal interests whether or not the purchaser has notice of the legal interest. (D) would be correct if the solicitor concluded that the document did not create a legal easement. In the unregistered land system, an equitable easement (such as a right of way) must be registered as a land charge to be effective against subsequent purchasers. (B) is incorrect both because the interest is an easement and not a covenant and because, as explained above, the man need not take any action to further protect the legal easement. (C) and (E) are incorrect because a property will have a charges register or a property register only if it is in the registered system, and the facts indicate the property here is unregistered.

Answer 17

The company’s solicitor should insist that the freehold title is produced so that the company can secure absolute leasehold title.

Feedback:

(C) The company’s solicitor should insist that the freehold title is produced so that the company can secure absolute leasehold title. Her Majesty’s Land Registry (‘HMLR’) will award an absolute leasehold title only when it has inspected all superior leasehold titles and the freehold title. Here, the company wishes to obtain the best class of title that can be awarded, which is leasehold title absolute. To do so, the freehold title must be produced. If the freehold title is not produced upon first registration of the leasehold title, HMLR will only grant good leasehold title. (A) is incorrect because a lease that is granted for seven years or more is substantively registrable in its own right, so registration of the lease will be required and a class of title will be awarded upon registration depending on the contents of the documents examined by HMLR. (B) is incorrect because, as explained above, absolute leasehold title will be awarded only when HMLR has inspected the freehold title. (D) is incorrect because if the freehold title is produced, HMLR will award absolute leasehold title, not good leasehold title. (E) is incorrect because without production of the freehold title, HMLR will award good leasehold title. While the company could upgrade the class of title at a later date, the company wishes to obtain the best class of title that can be awarded upon registration of the leasehold, which is title absolute.

Question 18

A landowner grants a right of way to a grantee in a legal deed of easement. Title to the dominant and servient tenements is registered.

How will the right benefitting the grantee’s land be reflected on the grantee’s register of title?

Answer 18

It will appear on the Property Register.

Feedback:

(C) Legal easements are ones which have been created by deed. The benefit of a legal easement must appear as a notice on the Property Register of the dominant tenement (that is, the land that is benefitted by the easement). The Property Register indicates whether the title is freehold or leasehold, the address of the property, and details of any rights which benefit the land. Here, the grantee owns the dominant tenement, since their land is benefitted by the right of way. Thus, the easement will appear on the grantee’s Property Register. (A) is incorrect because a restriction on the Proprietorship Register is not the appropriate method of protection. The Proprietorship Register indicates the current legal owners of the property. (B) and (D) are incorrect because these are the forms used to register an agreed notice (AN1) and a unilateral notice (UN1), which are not relevant here. A notice is an entry in the register in respect of the burden of an interest affecting a registered estate or charge. (E) is incorrect because a right which burdens a title appears on the Charges Register. The burden of the easement will appear on the landowner’s Charges Register.

Question 19

A man wishes to borrow money to invest in his business. His bank lends him the money and grants a mortgage by deed. The bank agrees to take a second legal charge over the man’s home which will rank behind a charge in favour of the man’s Building Society. The title to the property is registered.

Which of the following best describes how the interest of the bank should be protected?

Answer 19

The bank should register a second charge on the charges register of the title.

Feedback:

(A) The bank should protect its interest by registering a second charge on the charges register of the title. The charges register indicates any encumbrances which affect land, for example, covenants or mortgages. If title to land is registered, as here, a mortgagee will register their charge and it will appear on the charges register. (B) is incorrect because this is how the bank would protect their charge if the title were unregistered (a C(i) puisne mortgage). Here, title is registered and so the bank should register a second charge on the charges register. (C) is incorrect because, as explained above, the charge will appear on the charges register. The property register denotes the address of the property, whether the title is freehold or leasehold, and any rights benefitting the property. (D) is incorrect because the bank does not have an equitable mortgage. An equitable mortgage may arise if a mortgage is not secured by a deed. (E) is incorrect because no such automatic charge will arise under statute. As explained above, the bank must protect their interest by registering a second charge on the charges register.

Question 20

A married couple purchased their matrimonial home in 2002. They were registered as joint proprietors. There is a Form A restriction on the register of title. The wife died in 2019 and the legal estate was transferred into the husband’s sole name following her death. The husband wishes to sell the property and has found a buyer. The Form A restriction remains on the register of title.

Which of the following best describes how the buyer’s position should be protected in relation to his purchase?

Answer 20

The buyer should ensure that a second trustee is appointed to overreach the beneficial interest.

Feedback:

(D) The buyer should protect his position by ensuring that a second trustee is appointed to overreach the wife’s beneficial interest. A buyer may take free of a beneficiary’s interest under a trust through overreaching by paying the purchase money to a minimum of two trustees. Here, the Form A restriction protects the wife’s beneficial interest in the property. Since the legal estate is held in the husband’s sole name, the buyer must ensure that a second trustee is appointed so that he can overreach the wife’s beneficial interest to purchase the property free of it. (A) is incorrect as the Form A restriction will not automatically be removed upon registration by the buyer. The buyer could request, for example, that the husband arrange for removal of the restriction prior to exchange of contracts. But as explained above, the buyer should overreach the wife’s interest to ensure he purchases free of it. (B) is incorrect because although the husband is the sole surviving joint tenant of the legal estate, the buyer still must ensure that he takes free of the wife’s beneficial interest. (C) is incorrect because, as explained above, overreaching is necessary to ensure the buyer purchases free of the wife’s interest. Although it may be that the wife’s personal representative signs the sale contract and joins in the sale, this alone does not protect the buyer’s position. (E) is an incorrect use of the term ‘override’ which is not relevant in this context.

Question 21

An unmarried couple consult their solicitor about buying a house together. They tell their solicitor that one party is going to contribute 75% of the purchase price. The other party will contribute the remaining 25%.

Which of the following best describes the advice that the solicitor will give as to the legal and equitable interests of the parties in the property?

Answer 21

They should hold the legal estate as joint tenants on trust for themselves as beneficial tenants in common in the shares in which they contributed to the purchase price.

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(C) The couple should hold the legal estate as joint tenants on trust for themselves as beneficial tenants in common in the shares in which they contributed to the purchase price. Co-owners must own the legal estate as joint tenants, but the beneficial interest may be held as joint tenants or tenants in common. A tenancy in common is appropriate when the parties, as here, contributed in unequal portions to the purchase price. (A) is incorrect because while it correctly states that the legal estate will be held as joint tenants, a joint tenancy of the beneficial interest is not appropriate as the couple has contributed to the purchase price in unequal shares. (B) is incorrect because a tenancy in common in equal shares will not be appropriate as the parties are contributing in unequal shares to the purchase price. (D) and (E) are not correct as the legal estate can only be held as joint tenants.

Question 22

A tenant granted a sublease of his rented premises to a subtenant. The tenant later surrendered his head lease. The subtenant is worried about the impact of the surrender of the head lease.

Will the subtenant have to vacate the premises due to surrender of the head lease?

Answer 22

No, because the subtenant will be able to stay on the terms of his sublease and will become the tenant of the head landlord.

Feedback:

(D) The subtenant will not have to vacate the premises because he will be able to stay on the terms of his sublease and become the tenant of the head landlord. Surrender of a head lease has no major effect on a subtenant. If a head lease is ended by surrender, the sublease will not come to an end. The subtenant will become the tenant of the head landlord on the terms of the sublease and will have to pay rent due under the sublease to the head landlord. (A) is incorrect because, as explained above, the sublease does not come to an end when a head lease is ended by surrender. (B) is incorrect because the subtenant enjoys no right to demand such a new lease. (C) is incorrect because the subtenant does not have to take on the obligations in the head lease – he stays in the premises on the terms of his sublease. (E) is incorrect because frustration is not relevant here. The doctrine of frustration brings to an end a party’s obligations under a contract if an event occurs due to the fault of neither party rendering the contract impossible to perform.

Question 23

A man has driven over his neighbour’s driveway to gain access to the public highway for the last 25 years. The title to the man’s land does not contain reference to the use of his neighbour’s driveway. Every couple of years, the man has asked his neighbour if it is okay to continue to do so in the interests of being neighbourly and friendly. The man has made a contribution to the upkeep of the neighbour’s driveway two or three times during the period of his use and has made intermittent payments to the neighbour over the years as a goodwill gesture. The neighbour recently died and his son has told the man that he can no longer use the driveway.

Which of the following statements best describes the man’s legal position?

Answer 23

The man has no legal right to use the driveway and has not acquired a right to use it by prescription.

Feedback:

(E) The man has no legal right to use the driveway and has not acquired a right to use it by prescription. The man’s title does not contain a right-of-way and so he has no legal right-of-way. A prescriptive right of use arises by a use as of right for more than 20 years. The man has used the driveway for more than 20 years, but not as of right, which means without permission. Here, the facts make clear that the man regularly sought permission and has made payment. Therefore, no prescriptive right arose and (A) is incorrect. (B) is incorrect for the same reason – the right-of-way being discussed would be an easement and it can be granted expressly, implied under certain circumstances not applicable here, or gained through prescription, using the same rules just discussed (used as of right for at least 20 years). The man’s title does not include an easement and he did not meet the requirements for prescription. (C) is incorrect, as nothing in the facts gives the man a right to demand a deed of easement, though he may request one. (D) is incorrect. A right-of-way would be acquired by prescription. A licence is a personal right to do something on land of another, which is not relevant to this question.

Question 24

A year ago, a bank lent money to a property owner for the purchase of their house. The bank has a first legal charge registered on the charges register of title to the property. The property owner is one month in arrears with their mortgage payments. The contractual date set to redeem the mortgage has passed. The bank now has a more aggressive policy towards default by their borrowers. Last month, the bank sent a letter to the property owner indicating that they will immediately commence possession proceedings due to the property owner’s default.

Is the bank entitled to take possession proceedings?

Answer 24

No, because the power of sale is not exercisable.

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(B) The bank is not entitled to take possession proceedings because the power of sale is not exercisable. The power of sale arises when the contractual date to redeem the mortgage has passed. However, the power of sale becomes exercisable only if one or more of the following is satisfied: (1) interest payments are more than two months in arrears; (2) there has been a written request for repayment of the capital and three months have passed without payment; or (3) there is a breach of some other term of the mortgage. Here, the contractual date set to redeem the mortgage has passed, but the power of sale has not yet become exercisable as none of the relevant conditions have been satisfied. The interest payments are not more than two months in arrears, the bank has not sent a written request for repayment, and no other breach is provided in the facts. (A) is incorrect because, as explained above, the power of sale has arisen but it must also be exercisable, which is not the case here. (C) is incorrect because even if the bank’s notice is interpreted as a request for repayment, three months must have passed without payment for the power of sale to become exercisable, which is not the case here. (D) is incorrect because, as explained above, the power of sale has arisen but has not become exercisable. (E) is incorrect because the power of sale must be exercisable for the bank to take possession proceedings; the bank’s own policies do not change or alter that requirement.

Question 25

The title to Blackacre is registered at Her Majesty’s Land Registry. There are three registered charges on the charges register: the first registered in July 2011, the second registered in August 2014, and the third registered in November 2016. All three charges are residential mortgages using standard mortgage deeds. The registered proprietor has stopped making payments to the lender with the second charge but has kept up his payments on the other two mortgages.

Which of the following best describes the position of the second lender?

Answer 25

It can take possession proceedings but will have to discharge the mortgage in favour of the first lender out of the sale proceeds before it can pay off its own mortgage.

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(D) The lender with the second charge may take possession proceedings but will have to discharge the mortgage in favour of the first lender out of the sale proceeds before it can pay off its own mortgage. When a legal mortgage is entered on the register of title, it will have priority over any interest whose priority is not protected when the mortgage is registered. Here, the mortgages have priority in order of their registration on the register of title. Thus, due to the doctrine of priority of mortgages, the second lender must pay off the prior charge of the first lender out of the sale proceeds first. (A) is incorrect because the second lender may take possession proceedings without notifying or allowing the first lender to do so first. However, as explained above, the second lender must discharge the first lender’s mortgage out of the sale proceeds before paying off its own mortgage.(B) is incorrect because, as explained above, the second lender cannot pay itself first out of the sale proceeds due to the doctrine of priority of mortgages. (C) is incorrect because the second lender needs to satisfy only the first lender’s mortgage out of the sale proceeds before its own. The third lender’s mortgage ranks behind the second lender’s in priority. If there are any sale proceeds left once the first lender and the second lender have been paid off, this will be paid to the third – but the second lender does not have to pay them out of the proceeds first. (E) is incorrect because, as explained above, priority of mortgages requires that the sale proceeds are applied in the order that the charges were registered, with the first lender being first in line.

Question 26

A woman owns a large piece of land. She sells half of the land to a man. The transfer includes a covenant that neither the man nor any of his successors in title will use the land as anything other than a private dwelling. Two years later, the woman leases her remaining land to a tenant. Six months later, the man opens a furniture shop on his land.

Can the tenant enforce the covenant against the man?

Answer 26

No, because the tenant does not hold the same legal estate as the woman holds.

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(D) The tenant will not be able to enforce the covenant against the man because the tenant does not hold the same legal estate as the woman holds when the covenant was made. The benefit of a covenant will be enforceable by a covenantee’s successors in title as long as: (1) the covenant touches and concerns the land of the covenantee; (2) the covenant was intended to run with the legal estate held by the covenantee; (3) at the time the covenant was made, the covenantee held the legal estate in the land to be benefitted; and (4) the assignee of the original covenantee now holds the legal estate. Here, the tenant does not hold the legal estate of the original covenantee (the woman) because the tenant did not succeed the woman with respect to fee simple ownership. The tenant holds merely a leasehold interest, which is insufficient to enforce the benefit of the covenant against the man. (A) and (B) are incorrect because, as explained above, the tenant is not a successor in title to the woman and therefore cannot enforce the benefit of the covenant against the man. It is irrelevant that the tenant is seeking to enforce against the original covenantor, because the tenant is not entitled to enforce the benefit against the man. (C) is incorrect because the tenant is not a successor in title to the woman and therefore will not be able to enforce the covenant regardless of whether the action is at law or in equity. (E) is incorrect because the covenant does ‘touch and concern the land,’ since it is related to how the land can be used. This is one of the requirements for a successor in title to enforce the benefit of a covenant, but, as explained above, the tenant is not a successor in title and so cannot enforce the covenant.

Question 27

Five friends buy a property together. They are all over 18. They each contribute £50,000 towards the purchase price of the property. When they buy the property, they make no agreement as to co-ownership.

Which of the following statements best describes how the legal estate will be held?

Answer 27

The first four friends named in the transfer deed will hold the legal estate as joint tenants on trust for all of them.

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(D) The first four of the friends named in the transfer deed will hold the legal estate as joint tenants on trust for all of them. A legal estate may be held by a maximum of four joint tenants. Under the Trusts of Land and Appointment of Trustees Act 1996 (‘TLATA’), if more than four people buy land together, the first four who are over age 18 will be held to be holding the land as joint tenants on trust for all of the buyers. (A) is incorrect because there can be no more than four joint tenants under TLATA. (B) is incorrect because, as explained above, under TLATA and the circumstances here (five purchasers), the first four will be held to hold as joint tenants and not the first two. (C) is incorrect because no more than four can hold the legal estate and further, the legal estate must be held on a joint tenancy. (E) is incorrect because it is not what happens if the parties do not agree. The friends were free to make such an arrangement, but the facts indicate they did not. Therefore, the default provisions of TLATA apply.

Question 28

Two parties buy a property together. Their solicitor advises them to hold the beneficial interest as tenants in common.

Which of the following best describes the way their beneficial interest would be protected on the register of title?

Answer 28

As a restriction in the proprietorship register.

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(B) The parties’ beneficial interest as tenants in common will be protected on the register of title by a restriction in the proprietorship register. A restriction is used to prevent any dealing with the land otherwise than in accordance with the terms of the restriction. When property is owned as tenants in common, there will be a standard form of restriction (a ‘Form A’ restriction) in the proprietorship register in the following format: “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.” (A) is incorrect because a restriction protects an interest arising under a trust but it does not appear on the charges register. (C) and (D) are incorrect because a notice is an entry in respect of the burden of an interest affecting a registered estate or charge, which is not appropriate here. (E) is incorrect because a restriction appears on the proprietorship register, not the property register.

Question 29

A buyer is purchasing a freehold property from two sellers (a husband and wife), who are the registered proprietors. The buyer is concerned because the husband’s mother lives at the property, but she is not on the register of title. The buyer believes the husband’s mother may have contributed to the original purchase of the property.

Which of the following best describes the legal position regarding the mother’s interest?

Answer 29

If the buyer pays the purchase money to the two sellers, any interest of the mother will be overreached.

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(D) If the buyer pays the purchase money to the two sellers, any interest of the mother will be overreached. A buyer may take free of a beneficiary’s interest under a trust through a legal process called overreaching. The purchase money is paid to all the trustees (subject to a minimum of two trustees). Such a payment transfers the interest of the beneficiary from the land and attaches it to the money. Here, there are two trustees, the husband and wife, who are the registered proprietors entitled to sell the property. The mother is likely to have a beneficial interest as she has contributed to the purchase price. Through overreaching, the buyer can take the property free of the mother’s behind-the-scenes interest. (A) is incorrect because even if the legal estate is held by certain parties, there could be behind-the-scenes co-owners who may have a claim on the property. A bona fide purchaser may still take property subject to such interests. To take free of a beneficiary’s interest, as explained above, the buyer must use the legal process of overreaching. (B) is incorrect because the mother’s interest will be overreached, not overridden. (C) is incorrect because the mother’s mere agreement does not mean the buyer will take free of her interest. Such an agreement is helpful evidence of the mother’s intention to move out, but does not provide sufficient legal protection for the buyer. The buyer must still overreach to take free of the mother’s interest. (E) is incorrect because it is the holders of the legal estate – the registered proprietors – who are entitled to sell the property. Those with a beneficial interest (such as the mother, who contributed to the purchase price) will not sell the property but may be entitled to money when the property is sold.

Question 30

A tenant leases shop premises and wants to sell his leasehold interest to a friend. The tenant consults his solicitor and is told that the lease contains a qualified covenant against assignment.

What is the legal effect of this covenant?

Answer 30

The landlord can withhold his consent to assignment only if it is reasonable to do so.

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(A) The effect of the qualified covenant is that the landlord can withhold consent to an assignment only if it is reasonable to do so. A qualified covenant against assignment means that the covenant is imposed subject to conditions (such as that the tenant may not assign unless the landlord has given consent, and/or unless certain conditions have been met). In such cases statute implies that the landlord cannot unreasonably withhold his consent. (B) is incorrect because, as explained above, in the case of a qualified covenant the landlord’s consent may not be unreasonably withheld. (C), (D), and (E) are incorrect because these are not legal conditions that apply to qualified covenants and the landlord’s ability to withhold consent. A landlord might, however, consider factors such as whether an incoming tenant is creditworthy in deciding whether or not to grant consent.