Property 2 Flashcards
What are the 4 main preliminary matters covered during Stage 1?
- Solicitor taking instructions from client * Surveying advice* Tax advice (CGT)* Professional Conduct issues (Undertakings, Confidentiality, Conflicts of Interest and Co-ownership advice)
What are the four key tasks of a solicitor when taking instructions on a property transaction?
- Take instructions to obtain the essential information regarding their client’s matter (via interview/sending a checklist for the client to complete and return)* Send a client care letter to their client setting out the level of service to be provided and the costs, in accordance with the Code of Conduct* Obtain appropriate identification documentation (e.g. a passport, driving licence, or utility bill to satisfy themselves that the client is legitimate* Carry out appropriate due diligence checks (e.g. to see where large sums of money from the client might have come from in accordance with anti-money laundering requirements)
What should the buyer’s solicitor advise them to do at the beginning of any transaction whether freehold, leasehold, commercial or residential?
To have a surveyor carry out a physical inspection of the property to determine whether there are any structural defects or problems which might affect the value of the property.If any defects are found, this may result in a reduced offer or the buyer’s withdrawal from the transaction.
What tax advice must a solicitor give at the start of a property transaction?
Whether CGT could be due on the sale (usually will advise clients to take detailed accountacy advice)* CGT is payable by the seller, they must submit a tax return and the tax to HMRC within 60 days of the completion date. * A return is not required if no CGT is payable (won’t usually be in residential transactions because of Private Residence Relief exemption).
What are the 4 key professional conduct issues relevant to conveyancing
- Undertakings * Confidentiality * Conflicts of Interest* Giving Co-ownership advice
What is an undertaking?
A promise enforceable against the solicitor and the solicitor’s firm arising whenever a solicitor or member of the firm says that they will do somethingExamples:* Seller’s solicitor undertakes not to release the title deeds to anyone until such time as they’re in a position to redeem the seller’s mortgage on completion* Immediately on exchange, both solicitors undertake to send their own clients part of the contract to the other. * Buyer’s solicitor undertakes to send the seller’s solicitor the buyer’s 10% deposit towards the purchase price. * Seller’s solicitor undertakes to the buyer’s solicitor to redeem the seller’s mortgage after the sale proceeds on completion
If an estate agent or mortgage broker telephones a solicitor to try to establish the progress that has been made in relation to a transaction, what must the solicitor ensure they have before discussing the case?
The client’s authority to discuss the transaction (i.e. they are not in breach of confidentiality obligations)
If the buyer needs a mortgage to fund their purchase, and the buyer’s solicitor acts for the buyer’s lender, do they still owe a duty of confidentiality to the buyer regarding discussions with the lender?
Yes. * The lender becomes a client of the firm. The lender will expect the buyer’s solicitor to report to them any issue which might affect the value of the property or which might affect the lender’s decision to lend. * The buyer’s solicitor also must have the consent of their buyer client to report such issues to the lender. If the buyer instructs a solicitor not to disclose a certain issue to the lender (e.g. buyer has lost their job), the solicitor must cease acting for the lender. The duty of confidentiality to the buyer is paramount.
What are the key situations in which a conflict of interest can arise in a property transaction?
Buyer and Seller: cannot act for both in same transaction. Other potential conflicts of interest: cannot act for both due to possibility of conflict arising* Two sellers who cannot agree on how the sale proceeds should be divided e.g. divorcing couple* Two buyers who cannot agree on how they should co-own the property e.g. unequal contributions* Someone is gifting a deposit to the buyer of a property e.g. parents
Where a solicitor is acting for more than one seller or buyer, what must they do to prevent fraud and guard against conflicts of interest
Ensure that they are instructed by each of the clients.Note: Once joint instructions are taken and identification requirements are satisfied, the clients can agree one of them will take the lead on giving instructions and the solicitor can accept this.
A husband and wife own a property and want to instruct a firm to act on the sale. The husband gives instructions and brings the identification documents into the firm for himself and his wife. Can the solicitor proceed on this basis?
No, this is not sufficient. The solicitor must ensure that they obtain instructions from the wife as well.
When acting for more than one buyer of a property, what advice must the buyer’s solicitor give?
At the beginning of the transaction and when reporting to clients before exchange: * The legal estate can be held only as joint tenants by a maximum of four people* The beneficial interest can be held as joint tenants or tenants in common. * If the buyers contribute unequally, they should be advised to hold the beneficial interest as tenants in common, to enter a declaration of trust and to make/update their will
What is the Law Society Conveyancing Protocol?
A statement of best practice for residential conveyancing introduced by the Law Society. * It provides a set of steps for each stage of a transaction whether freehold or leasehold, where mortgage lenders are involved and where solicitor acts for both lender and client* It helps to standardise residential conveyancing and make it more efficient. * Note, it cannot account for every possible variation and it is always up to the solicitor to decide what is required to act in the best interest of their client.
What types of transaction is the Law Society Conveyancing Protocol not to be used for?
The purchase of new build homes or commercial property.
