PROPERTY Flashcards
FREEHOLD COMMERCIAL PROPERTY
Entry on the Proprietorship Register:
‘The Transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.’
Best advice the buyer’s solicitor should now give to the buyer?
SCPC => sale of commercial property - means that if the seller gave such an indemnity covenant, the buyer will have to give an indemnity covenant when they purchase the property, to continue the chain of indemnity.
However, buyer’s indemnity covenant will be given in the transfer at completion and not in the contract.
1) ‘observe and perform’ = positive covenant
2) charge register = burdened land
3) SCPC
4) current stage = title investigation
5) entry indicates = indemnity covenant
covenant to observe and perform
POSITIVE COVENANT
Sale of commercial property under SCPC, indemnity covenant
Best advice:
The buyer wil need to give the seller an indemnity covenant at completion if the Standard Commercial Property Conditions are incorporated into the contract.
Latest stage to withdraw from transaction
pre-exchange
Client intent letter covers
Procedure to refuse legal services or its bill, legal ombudsman, costs, timeline, contact details of the team who will work with them
who deduces and who investigates the title
- Seller’s solicitor will deduce the title.
- Buyer’s solicitor will investigate the title.
Good root of title
(UNREGISTERED PROPERTIES)
- dated more than 15 years ago
- deals with both legal and beneficial title
- adequately describes the extent of the property/title
- does not cast doubt on seller’s title
Conveyance of property will be best root of title
Restrictive covenant entries
- if burden: charges register
- if benefit: properietorship register
When there is a right of way granted on the property; what must be considered?
MARA
1- maintenance
(contribution and costs of maintenance)
2- adoption
(is it public road/highway, adopted directly by the local authority - if so don’t worry abt the registration)
3- registration
(is it properly registered, check SL’s charges register)
4- adequacy
(adequate for use)
Lender’s entries: mortgaged land
1- restriction in the Proprietorship register (against dealings)
2- charge in the Charges register
Trust of Land: beneficiaries’ entiries
Restriction in the Proprietorship register against dealings
- TiC
- overreaching must occur
Epitome of title contains a conveyance by deed dated Jan 1976 and contains: restrictive covenant (restrictive covenant of ‘use’).
Is the buyer bound?
Buyer will be bound IF the restrictive covenant is registered as D(ii) land charge against the name of the original covenantor.
- restrive convenant enforcement
- Epitome = unregistred title
- Good title
(bcs conveyance deed dated more than 15 years ago, deals with B&E title, does not cast doubt in the seller’s title)
Enforcement of restrictive covenant and easement for uncertain term over UNREGISTERED land
Created post 1926:
MUST be protected:
- by a ‘Land Charge’ at the charges registry against the name of the grantor OR
- (for positive covenant) there must be a ‘chain’ of indemnity covenant.
Entries
Restrictive covenant - D(ii)
Easement for uncertain term - D(iii)
Enforcement of ‘estate contract’ over UNREGISTERED land
MUST be protected by a ‘Land Charge’ at the charges registry ‘against’ the name of the grantor.
Land charge - C(iv)
Puisne Mortgage
Second legal mortgage over unregistered land.
Must be entered as charge: C(i) land charge.
Change of use:
Must obtain PLANNING PERMISSION
Best advice for a buyer who will use the property in breach of use covenant
(restrictive covenant):
Obtain restrictive covenant insurance policy (at the buyer’s cost)
Restrictive Covenant breaches - remedies to be sought by the buyer
1- future breach by the buyer
= insurance to cover future breaches of the buyer (at buyer’s costs)
[this will not be available if PWB is contacted/alerted of the breach]
[upper tribunal is not available for positive covenants - & last resort for restrictive]
2- past breaches by the seller
= ask for indemnity and insurance at seller’s costs (solicitor must request this to protect client’s interest)
3- future breaches by the seller
= restrictive covenant indemnity policy
Change of use within the same class
does NOT require planning permission.
(but building regulations could still be needed)
(eg. class E for commercial, business and services. Shop and resto are both in class E.)
(still needs building regulations approval for carry out significant internal/external building works)
When is a planning permission required?
- change of use class
- external building works (which requires also building regulation approval)
When is a planning permission NOT required?
1- building works affecting only the interior of the building,
2- building works that do not materially affect the external appearance of the building; or
3- changes of use that are in the same class.
Unregistered freehold property purchase - property benefits from a right of way granted by deed over neighbouring land.
What search should be carried out by buyer’s solicitor?
SIM search
Right of way is benefitted by the unregistered property.
SIM search informs you whether or not neighbouring land is registered.
- If that land is unregistered, easement by deed is validly created and legal interest binds the world.
- If that land is registered, it must be entered as a charge in the land registry to be enforceable.
Search to see whether a public footpath crosses a registered freehold:
Standard enquiries of the local authority for public right of way
CON29 = local authority standard enquiries will tell whether any public right of way abuts or crosses the property
Commercial property by a river in Cheshire including surrounding open agricultural land.
Property is in an area where historic pumping of brine took place.
Solicitor already received:
- CPSE,
- local authority search
- highways search,
- draining search,
- chancel repair,
- index map search,
What other searches should the solicitor carry out?
- Desktop environmental search (in every conveyance);
- waterways search (bcs riverside);
- Cheshire salt search (Cheshire and brine)
- commons registration search (necessary for open land, agricultural open, and town/village green)
A farmer built a new cattle shed over ten years ago.
The farmer did not seek planning permission (as would be required), but instead ‘deliberately concealed’ it with bales of hay until last week.
What action might the local authority take against the farmer?
The local authority CAN apply for a planning enforcement order.
(does not have to)
Time limit does not start to run until the deliberate concealment is removed.
If the buyer intends to undertake a significant extension to the property following completion.
and
The seller told the buyer during a viewing of the property that an application for planning permission to build a similar extension was refused by the local authority two years ago.
Which search / enquiry would you undertake to confirm the position
If buyer wants to make significant building works and similar application for building works was refused. Formal confirmation is needed from the local authority.
=> You must conduct CON29 (local authority search).
CON29 shows: all PP applications (granted, issued, refused and pending)
(bcs LLC1 search only shows planning permissions that have been granted with conditions)
The buyer of a commercial property instructs the solicitor that the seller and the buyer have agreed between them that the ‘seller will carry out some repairs to the roof before the completion’ date.
The buyer’s solicitor should draft a ‘special condition in the contract’ specifying that the seller must carry out these repairs before the completion date to the ‘reasonable satisfaction’ of the buyer.
- special conditions
- in the contract
- drafted by buyer’s solicitor
- before completion
- to reasonable satisfaction of the buyer
Special conditions in contract
Special conditions are required to deal with specific matters agreed between the parties.
Caveat emptor would mean that in the absence of a special condition, the responsibility for the repairs would fall to the buyer.
When contracts are exchanged, the burden of risk passes to the buyer. So, it is important to draft it in the contract.
ALSO
Estate contract: requires contract signed by both parties and incorporates all agreed terms.
(eg. If the promise to repair not incorporated in the contract, promise would not be binding)
A VAT-registered business is selling a freehold commercial building to a bank.
The seller has exercised the option to tax the building.
The bank makes only exempt supplies for VAT purposes in the course of its business.
Position as to VAT chargeable in respect of the sale?
The sale wil be subject to VAT at 20% which wil be irrecoverable by the bank.
The option to tax a commercial building made by a VAT registered business seller means VAT is chargeable on the sale at 20%.
The bank only makes exempt supplies so the bank cannot recover the VAT it paid (input VAT) by offsetting it against output VAT it charges on goods and services it supplies since the bank cannot charge output VAT.
Banks and financial institutions are exempt supplies for VAT purposes (VAT is not chargeable on the goods and services it supplies).
If there is a restriction as to equitable interest in the Proprietorship register (trust of land), what should the buyer (B’s solicitor) do?
THEY MUST OVERREACH
(restriction triggers overreaching bcs it indicates tenancy in common)
They need to ensure another trustee is appointed to pay the purchase money to, so the restriction will not apply.
Between exchange and completion, the contract incorporates SCPC. The storage area to the rear of the property was destroyed by fire last night.
What is the correct advice to the buyer?
Under SCPC, the risk of the property passes to the buyer from the date of the contract, which is exchange.
Buyer should have put in place insurance from the exchange.
If there is no insurance, the seller is no longer responsible for the property.
The cost of repair is at buyer’s cost.
Post-completion steps to protect lender’s charge, borrower is a company:
(bank-mortgage)
Register the charge at Companies House within 21 days of the creation of the charge, and
at the Land Registry within 30 working days of the OS1 search
Registered land purchase - priority research forms
OS1 - whole of land/property
OS2 - part of land
Gives 30 working days priority period, the buyer must submit the application to register the transfer.
Pre-completion search to register within 30 working days
Unregistered land purchase - priority research
Land Charges Search of the Land Charges Registry.
Gives priority period of 15 working days,
it is only necessary to complete the purchase.
(deed only - not registration application).
Assignment - priority search
(pre-completion)
OS1 - assignment
(whole/part of property)
Assignment Post-completion steps
Assignee’s solicitor:
- arrange to submit and pay appropriate SDLT (England) and LTT (Wales).
- register assignment.
- send formal notice of assignment to L’s S.
Subletting - priority search
(pre-completion)
OS1 - underletting of whole
OS2 - underletting of part
Following an assignment or underletting, tenant will be required to give the Landlord (____)
FORMAL NOTICE within a month of completion of transaction.
PURCHASE - When should SDLT and LTT be paid? How much to pay?
SDLT (England) - within 14 days of completion
- residential
> up to £250k no SDLT needs to be paid
> First time buyers discount (relief) if the purchase price imax £625k; no SDLT for the first £425k of the purchase price
> second properties, additional 3% - non-residential
> up to first £150k, no STDL (second rent after consuming 150k)
LTT (Wales) - within 21 days period starting the day after the creation of the charge
>
residential properties: no relief for first time buyers Up to £225k no LTT is payable
When to register charge for a mortgage given to a company and which is on fixed charge over the property
Register the charge at Companies House within 21 days of the creation of the charge, and
at the Land Registry within 30 working days of the OS1 search.
For purchase of an ‘unregistered’ freehold property by a company from a woman, funded by a loan by the bank.
Between exchange and completion.
What searches the buyer’s solicitor must carry out?
A Central Land Charges Search on Form K15 against the woman’s name for the period of her ownership.
