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SQE2 Revision - Megan's Flashcards > Property 3 > Flashcards

Property 3 Flashcards

1
Q

What are the key steps of Stage 1: Pre-Market?

A
  • Estate agent markets the property (usually before solicitor is involved)* Seller provides buyer with valid Mandatory Energy Performance Certificate* If Commercial: Heads of Terms are negotiated* If Commercial and existing lease exists: Assignment of lease is dealt with (consent, licence to assign, security)
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2
Q

When an offer has been made to a seller of a residential property and accepted, what does the estate agent do?

A

Send out a memorandum of sale to all parties detailing the property, the price agreed, and the solicitors being used by the parties.

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3
Q

What is an EPC?

A

An Energy Performance Certificate which the seller must provide to the buyer. * It contains information about a property’s energy use and typical energy costs, plus recommendations about how to reduce energy use and save money. * It gives a property an energy efficiency rating from ‘A’ (most efficient) to ‘G’ (least efficient) * It is valid for 10 years. * There is an online EPC register where most EPCs can be viewed.

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4
Q

If a new EPC is needed, when should it be ordered?

A

It should be ordered (usually by the estate agent) before the property is marketed for sale or to rent.

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5
Q

What type of building does not require an EPC?

A

A listed building

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6
Q

When might a seller not need to obtain an EPC for a non-listed building?

A

If they still have a valid EPC (i.e. less than 10 years old)

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7
Q

At the beginning of a commercial transaction (leasehold if no existing lease exists or freehold) what additional steps are required in Stage 1?

A
  • Often, a commercial estate agent will negotiate the “heads of terms” (i.e. agreed terms) between the landlord of the commercial premises and the prospective tenant according to the Code for Leasing Business Premises* The heads of terms are the commercial equivalent of the memorandum of sale in a residential conveyancing transaction.
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8
Q

What is the Code for Leasing Business Premises?

A

A code produced by the Royal Institution of Chartered Surveyors (the professional body for surveyors) * It sets out best practice for landlords when negotiating the terms of a commercial lease with a tenant. * It provides that landlords must make offers in writing which include clear terms regarding matters such as the rent and length of the term, any rights to break the lease, rent review arrangements, rights to assign, and repairing obligations.

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9
Q

At the beginning of a commercial leasehold transaction where there is an existing lease what additional steps are required in Stage 1?

A
  • Consent of landlord/a licence to assign may be required (specific requirements will be set out in existing lease)* Landlord may require extra security
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10
Q

What 2 things will a landlord generally need to be satisfied that the incoming tenant is of good standing and will be able to afford the rent?

A
  • References to demonstrate that they have the means to pay the rent and, if they have rented property before, that they have paid their rent on time and been a good tenant. * Bank references or business accounts for the last three years.
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11
Q

What is a licence to assign and who drafts it?

A
  • It is a document containing the landlord’s agreement to the new tenant which sets out the landlord’s conditions. * The landlord’s solicitor will draft it* This document will be signed by all parties (landlord, tenant, and incoming tenant) to create privity of contract between them. * It is usually paid for by outgoing tenant and their solicitor will give an underaking to the landlord solicitor to meet the fees
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12
Q

What are the three forms of extra security a landlord may require?

A
  • Rent deposit* Guarantor* Authorised Guarantee Agreement
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13
Q

What is a rent deposit?

A
  • An extra sum (typically 3 months’ rent) to be paid on completion which is held in a deposit account and can be used by the landlord in the event of default by the tenant * It is returned if no default when the lease ends/is assigned* Detailed terms are often contained in a rent deposit deed.
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14
Q

What is a guarantor?

A
  • A person who guarantees the rental payments in the event of default by the tenant. * This may be a requirement if the landlord has any doubts about the tenant’s ability to pay the rent or if the tenant is a limited company.* On the grant of a new lease, the guarantor could be an additional party to the lease which the landlord and tenant are entering into. * On the assignment of an existing lease, the guarantor and the landlord will enter into a separate deed of guarantee.
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15
Q

What is an AGA?

A
  • As a condition of giving consent to an assignment, a landlord can require the outgoing tenant to enter into a written obligaton called an ‘Authorised Guarantee Agreement’ in which the outgoing tenant will act as guarantor for their immediate successor in title. * A commercial lease may include a provision requiring the tenant to provide an AGA on assignment. * The inclusion of the AGA is a matter of negotiation between the landlord and the tenant.
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16
Q

What are the main tasks of the seller’s solicitor in the pre-contract stage?

A
  • Investigating the seller’s title to ensure they are entitled to sell the property* Ensuring the seller’s duty of disclosure is complied with in the contract for sale* Preparing the contract package and sending it to the buyer’s solicitor
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17
Q

What are the 4 steps involved in the investigation of title by the seller’s solicitor?

A
  • Obtaining title deeds of property being sold (method depends on if registered or unregistered)* Remedying any defects in the title * Obtaining confirmation of the title plan* Deducing title (i.e. sending a copy to the buyer’s solicitor)
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18
Q

How does the seller’s solicitor obtain a copy of the title deeds if the property is registered?

A
  • Download an official copy of the register of title, title plan, and any additional available documents mentioned on the register from the HMLR Portal. * The seller’s solicitor will also check the charges register of the seller’s title to establish whether the seller has any mortgages over the property.
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19
Q

How does the seller’s solicitor obtain a copy of the title deeds if the property is unregistered?

A

Locate the title deeds. If the property is in mortgage, the lender will hold the title deeds. The seller’s solicitor will write to the lender to obtain the deeds and give an undertaking not to part with the deeds until such time as the mortgage is redeemed out of the sale proceeds on completion.

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20
Q

What is required of the seller’s solicitor under the Law Society Conveyancing Protocol in relation to defects of title?

A

Take care of them as part of their investigation of the seller’s title rather than waiting for the buyer’s solicitor to raise it as an enquiry e.g. missing documents or name discrepancies

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21
Q

How does the seller’s solicitor obtain confirmation of the title plan?

A

The seller’s solicitor should send the title plan to the seller. The title plan is a map showing the location of the property being sold and a red outline of the land included in the title. The seller should confirm that the property outlined on the plan represents the full extent of the land being sold.

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22
Q

What is the scope of the seller’s duty of disclosure?

A

The seller is under a limited duty of disclosure in relation to the contract for sale. In the contract, the seller:* must disclose latent defects and latent burdens on the land (known as encumbrances). This does not extend to physical defects in the property e.g. rotted timber within walls) due to doctrine of ‘caveat emptor’* need not disclose patent defects or encumbrances.Note: the seller has a much greater obligation to disclose when filling out the Property Information Form and in their responses to the buyer’s pre-contract enquiries. If the seller makes any misrepresentation on the form or in their responses, they may be sued by the buyer for misrepresentation.

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23
Q

What is the difference between latent and patent defects and encumbrances?

A
  • Latent: things that would not be apparent from an inspection of the property, e.g. an underground easement for a pipeline or a restrictive covenant. * Patent: things which would be revealed by an inspection, e.g. a visible right-of-way over the land (for example, one from a road to the property behind the property being sold).
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24
Q

What is the consequence of a breach of the seller’s duty of disclosure?

A

The buyer may have the right to withdraw from the contract after exchange and claim damages for losses.

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25
Q

What defects are not covered by the duty to disclose latent defects?

A

Physical defects in the property (e.g., rotted timbers within walls, stain indicating presence of a leaking pipe) It is the buyer’s responsibility to inspect the property for physical defects. Caveat emptor is the reason the buyer’s solicitor will advise the buyer to have a survey of the property carried out.

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26
Q

While the seller has no duty to disclose patent defects, it the seller tries to cover up a patent defect, what are the consequences?

A

This amounts to wilful deceit, and the seller could be sued by the buyer in tort. Examples: painting over cracks in the wall.

27
Q

What 5 things are included in the contract package for a freehold property?

A
  • The draft contract in duplicate (the seller will sign one copy and the buyer the other)* The Property Information Form completed by seller* The Fittings and Contents Form completed by seller* A copy of the title, any relevant documents, and title plan* Any guarantees or copy planning permissions.
28
Q

If a new lease is for a term of over 7 years and registrable, what must the landlord do?

A

Deduce title to enable the tenant to register the lease with title absolute.

29
Q

What 8 things must be included in the contract package for the grant of a new lease?

A
  • The draft contract with the draft lease annexed to it* The seller’s freehold title* The Property Information Form * Replies to standard pre-contract enquiries (dealing with such issues as boundaries, disputes, services supplied to the flat)* If a newly built block, a copy of the planning permission and building regulations consent* If the building is less than 10 years old, a new build warranty* If a new build development, a service charge budget* If applicable, details of any management company that has the responsibility for maintaining the common parts of the development.
30
Q

What 7 things must be included in the contract package for the assignment of an existing lease?

A
  • A copy of the outgoing tenant’s leasehold register of title* A copy of the existing lease* A Property Information Form * A Leasehold Information Form* Copies of the last three years’ service charge accounts (if any)* A copy of the landlord’s freehold register of title* If the property is less than 10 years old, a copy of any new build warranty, planning permissions, and building regulations consent.
31
Q

If a landlord’s consent is not obtained by three working days before completion, what right does the buyer have?

A

The right to rescind the contract

32
Q

If the incoming buyer is buying with a mortgage, is good leasehold title likely to be acceptable?

A

No, title absolute is generally required. The buyer’s solicitor should therefore insist on requiring the landlord to produce a copy of the freehold title so that prior to the exchange the outgoing seller’s solicitor can apply to HMLR to upgrade the good leasehold title to absolute leasehold title.

33
Q

What form of contract is typically used in freehold or leasehold residential transactions and what are the three parts to it?

A

The Contract Incorporating the Standard Conditions of Sale, which is produced by the Law Society.It is divided into:* The particulars of sale* The standard conditions of sale and* The special conditions of sale.Any issue agreed between the seller and the buyer must be included in the contract for the issue to be legally binding.

34
Q

What form of contract is typically used in freehold or leasehold commercial transactions and what are the two parts to it?

A

Tthe Standard Commercial Property Conditions (‘SCPC’) will be used. The SCPC is divided into two parts: * Part one: Contains general conditions covering issues such as service of notices, encumbrances, VAT, title, risk, insurance, completion, and remedies. These will apply unless they are expressly excluded. * Part two: Contains provisions that will apply only if expressly incorporated. This part includes more detail on VAT, transfer of a business as a going concern, and taxation allowances.

35
Q

How does the SCPC differ from the Contract Incorporating the Standard Conditions of Sale?

A
  • Contract Incorporating the Standard Conditions of Sale: residential* Standard Commercial Property Conditions: CommercialThe SCPC require the same basic information but are more detailed and address commercial issues such as if the property is being sold subject to existing leases, or if the business being transferred is a going concern.
36
Q

What are the 9 key things included in the Particulars of Sale in the Contract Incorporating the Standard Conditions of Sale?

A

They are set out on the front page of the contract, like a cover sheet. They include the following key transaction details: * the date* the names of the parties* the names of the parties’ solicitors* the details of the property (including whether it is freehold or leasehold)* any specified encumbrances* the title guarantee (full or limited)* the completion date* the purchase price * the contents price (i.e. the price being paid for any items in or on the property not included in the purchase price).

37
Q

What are the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale?

A

The ‘small print’ in the middle of the contract. They cover such issues as: * formation of the contract * service of notices* matters subject to which the property is sold* physical condition of the property* the right of the buyer to occupy the premises between exchange and completion* VAT* Deposit* Proof of Title amd Title Guarantee* Indemnity Covenant* Risk and insurance* details regarding completion* remedies for late completion or no completion.

38
Q

What is the position on VAT in the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale?

A

The purchase price and the contents price include any VAT.

39
Q

What is the required deposit under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale?

A

10% of the purchase price. Even if the parties agree a lesser amount, if the buyer breaches the contract, they are liable for 10%.

40
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, for what purposes may the seller use the deposit received from the buyer?

A
  • If the seller has a related purchase of a property for their residence in England and Wales, they can use the deposit received on their sale towards the deposit required on that related purchase transaction. * Note that the deposit may not be used for a related purchase that is not in England and Wales or that will not be used as the party’s residence e.g. a buy to let purchase
41
Q

A has agreed to purchase a property at 3 High Street from B for £120,000. The property will serve as A’s new residence and thus he needs a £12,000 deposit. To facilitate the purchase, A is selling his current residence at 78 Uplands Way to C for £80,000. C has deposited £8,000 with his solicitor. For what purposes can A use the deposit from C?

A

A may use the £8,000 as part of his £12,000 deposit for the purchase of the 3 High Street property.

42
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, who holds the buyer’s deposit on exchange of contracts?

A

The seller’s solicitor as stakeholder.

43
Q

What is the difference between holding a deposit as stakeholder and as agent?

A
  • Stakeholder: the seller’s solicitor holds it in their firm’s client account on behalf of both parties. The deposit cannot be paid over to the seller until completion. * Agent: allows the seller’s solicitor to pay over the buyer’s deposit to the seller immediately after exchange has taken place (difficult to recover if seller defaults before completion). An amendment to the standard conditions may be requested if the buyer is buying a new build property.
44
Q

What are the three types of title guarantee?

A

Full title guaranteeLimited title guaranteeNo title guarantee

45
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, what title guarantee must a seller have?

A

Full title guarantee

46
Q

What 3 things are guaranteed when the seller has ‘full title guarantee’ and when is it typically given?

A
  • The seller is entitled to sell the property* They will, at their own cost, do all in their power to transfer the purported title to the buyer and * The seller is selling the property free from all charges or encumbrances other than those disclosed in the contract. The buyer is entitled to rely on these promises after completion. This type of title guarantee is generally given by a seller who owns the full legal and equitable interest and has lived on the property.
47
Q

What is guaranteed when the seller has ‘limited title guarantee’ and when is it typically given?

A

Seller merely warrants that the seller has not created any charges or granted any rights during their period of ownership that have not been disclosed in the contract. This type of guarantee is typically given by a seller with less knowledge or involvement with the property (e.g., a PR).

48
Q

When is land typically conveyed without any title guarantee?

A

When the seller has no knowledge of the property at all (e.g. a mortgagee in possession or someone disposing of the property by way of gift)

49
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, what is required of a buyer if the contract discloses relating to the property that will bind the buyer?

A

To agree to perform the obligation and to indemnify the seller if the buyer breaches the obligation in the future. This provision is included in the transfer document and is called an ‘indemnity covenant’. Example: to maintain a fence for the benefit of the owner of the property next door.

50
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, who is required to insure the property and when is risk passed?

A
  • Risk passes to the buyer on exchange of contracts. Even if the property is destroyed or damaged between exchange and completion, the buyer must still go ahead with the purchase. * Seller does not have to insure the property between exchange and completion. In practice, however, most properties are insured by both the seller and the buyer between exchange of contracts and completion.
51
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, if no completion date is inserted in the contract, when will completion take place?

A

20 working days after exchange

52
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, by what time on the completion date are funds required to be supplied by the buyer?

A

2pm on the day of completion

53
Q

Under the Key Standard Conditions of Sale in the Contract Incorporating the Standard Conditions of Sale, what are the consequences of the buyer failing to supply funds by 2pm on the completion date?

A

Completion is treated as taking place on the next working day, rendering the buyer liable to pay interest at the rate specified in the contract for late completion (the “contract rate”). * This applies even if the buyer actually moves into the property on the agreed completion date. * However, no penalty is due if the buyer was ready and willing to provide the funds, but the seller failed to vacate the premises as agreed.

54
Q

What are the Special Conditions in the Contract Incorporating the Standard Conditions of Sale?

A

A section on the last page of the contract. Special conditions are those specific to the particular transaction. Despite being specific to a transaction, some of these conditions are assumed to be applicable for most transactions, and so are pre-printed on the contract (solicitor indicates whether they apply or not)

55
Q

What are three pre-printed Special Conditions in the Contract Incorporating the Standard Conditions of Sale?

A
  • Whether the property being sold will be vacant on completion or whether there will be a tenant in situ (in which case the tenancy agreement subject to which the property is being sold will be inserted)* Whether a different time for completion has been agreed (a time prior to 2pm is often desired by the parties if their purchase is part of a long chain of transactions)* Whether there are any occupiers on the property, such as the seller’s relative (in which case they will need to confirm their relinquishment of any rights on completion).
56
Q

What 12 pieces of information feature on the Property Information Form?

A
  • The position of the property’s boundaries* Any disputes with neighbours about the property* Any building work and/or alterations by the seller to the property* Any notices received by the seller about the property* Any guarantees or warranties* The seller’s property insurance details* Any flooding of the property* Anyone exercising any informal rights over the property (these should be included in the contract); * Any services that cross the property (e.g. pipes and wires serving neighbouring property) * Parking arrangements for the property* Occupiers of the property* Utilities the property is connected to (e.g. gas, water, electricity, foul drainage).
57
Q

What is required of a non-owning occupier of the property to be sold?

A

If there is a non-owning occupier (e.g. a parent/adult child), there should be:* a special condition in the contract, and * the non-owning occupier would need to sign the contract to relinquish any rights they have so that they are bound to vacate the property on completion. If you are acting for the seller you must not act for the non-owning occupier, they should have independant legal advice

58
Q

What is the Fittings and Contents Form?

A

It lists the items which are at the property and included in the sale price and those which are excluded from the sale price. This list is annexed to, and forms part of, the contract. * The seller could be sued for taking any items listed as ‘included’ on the form. * If the buyer has agreed to purchase any items from the seller over and above the sale price of the property, this sum will be indicated on the Particulars of Sale (next to “contents price”) and the items that the buyer is purchasing will be listed and included in the contract.

59
Q

What are the two main purposes of investigating title?

A
  • Check that the buyer will receive good title when the buyer’s solicitor makes the application for registration after completion and * Identify if there are any issues with the title that may adversely affect the buyer’s future plans for the property.
60
Q

What does the seller’s solicitor have to do if the seller tells them that they have a mortgage on their property (or the solicitor discovers a mortgage during their investigation), and why?

A

Ask the lender for an indicative redemption figure to ensure that the sale proceeds will be sufficient to redeem the existing mortgage on completion. This is because the seller’s solicitor will give an undertaking (for which the solicitor is personally liable) to redeem any mortgages out of the sale proceeds on completion.

61
Q

What is a ‘requisition on title’?

A

Questions asked by the buyer’s solicitor if there are any issues with the title that require resolutionThis is often done as part of the process of raising pre-contract enquiries. The buyer’s solicitor will require all of their enquiries to be resolved before advising their client to proceed to exchange of contracts.

62
Q

What should a buyer’s solicitor do if they discover defects in the title that can’t be remedied?

A
  • Raise it with the seller’s solicitor* Request that the seller’s solicitor provide a draft indemnity insurance policy * Confirm that the seller will pay the cost of the policy and * Include this agreement as a special condition in the contract.
63
Q

What is the best way to deal with defects in title?

A

Enter into a deed of variation or deed of rectification to put the problem right once and for all.

64
Q

What is indemnity insurance?

A

Indemnity insurance may be purchased to cover future losses that might arise from the defect in title. * Policies may cover specific title issues, such as an undisclosed covenant, a missing deed in the chain of title, a breach of a covenant, or adverse possession. * The buyer must ensure this insurance is covered by a provision in the special conditions in order to be enforceable

SQE2 Revision - Megan's Flashcards (80 decks)

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