Property 3 - Preparation for exchange Flashcards
Legal interest passes on completion
Contract
Only to transfer land at selected date.
Standard Conditions
Standard Conditions of Sale
Standard Commercial Property Conditions
Key conditions
Seller solicitor will have obtained information about buyer, price, deposit, fixtures and fittings
Registered - need to state title number and class of title (found in proprietorship).
Unregistered by referencer to root of title
Necessary to specify encumbrances.
If not in breach of SC 3.1.1
SC 3.1.2
those specified in contract. those discoverable by inspection, those seller does not and could not reasonably now about, public requirements
SC 3.1.1 -
other than mortgages which buyer knows about,
entries made before date of contract in public register, except those at Land Registry, Land Charges Department and Companies House.
SCPS 4.1.2 -
matters other than mortgages disclosed ir would have been disclosed by searches and enquiries which a prudent buyer would have made before entering into the contract.
If not included must include all encumbrances. Buyer may be able to rescind contract and claim damages.
Property register also checked.
Title guarantee
Full - own entire legal and equitable title
Limited - limited knowledge of property
With both impliedly covenanting;
they have right to dispose of land
do all they reasonably can to transfer title
in leasehold the lease is subsiting at time of disposal and no breach of covenant making lease liable for forfeiture.
Full title - free from encumbrances other than those seller does not know about and could not reasonably know about.
Contract rate
Interest charged if late on completing
- Law Society’s rate from time to time in force. 4% above Barclays. - already in SCs.
Deposit
By buyer to seller.
SC 7.4 or SCPC 10.5 seller may forfeit and keep deposit if fail to complete.
SC 2.2 and SCPC 3.2 - deposit of 10% of purchase price, paid to seller’s solicitor as stakeholder. Cannot hand over until completion.
Deposit paid on exchange.
SC - electronic or conveyancer client account
SCPC - electronic only.
Matters covered by special conditions
Contents or excludes fixtures (SC3)
Vacant possession of subject to leases or tenancies (SC4)
SC(5) - time for completion alerted. 2pm on agreed day.
SC(6) - not relying on representations made
SC(7) - non-owning adult occupier, releasing rights.
May need
-appointment of second trustee for purposes of transfer
-restrictive covenant insurance
- disclosing defect in title
-limited or no title guarantee
-deposit of less than 10%
-removal of fixtures
-inclusion of indemnity covenant in transfer to protect seller from liability once lost physical possession.
SC4.6.4 and SCPC 7.6.5 - indemnity for positive chain (covenantee may sue seller).
Do not need to insert but may do so as a reminder.
Insurance and risk
Risk passes to buyer on exchange.
Insurance must be adequate for lender.
SC 5.1.3 and SCPC 8.1.2 switch onus on seller to insure prior to completion handing over policy on completion.
SC 5.1.5 and SCPC 8.2.4(b) - two insurance policies, purchase price falls due to reduced payout.
VAT
SC 1.4
Inclusive of VAT
SCPC 2 - exclusive of VAT and added on top (three year construction or opting in to remover for older).
SC 1.4 - supply standard rated - supplier have to account to HMRC through purchase price.
Good for VAT sensitive buyers
SCPC part 2 -
exclusive, can be added on top.
Does not have input tax to recover so does not opt to tax. not willing to take risk that turns exempt into Vat sensitive.
Will have right to charge (seller to buyer) if change in law.
Lender
Up to 95% of value of property.
Mortgage offer
Simple commercial loan
Commitment letter wit term sheet attached.
Can act even if risk of conflict , substantial common interest and all safeguards in place.
Buyer solicitor will be asked for certificate of title to disclose to lender any problems.
Certificate confirms
-no legal problems
-who will own the property
-the completion date when funds are needed.
Commercial need more detailed - produced by City of London Law Society.
-pre-contract enquiries
Series of statements.
Given prior to completion of loan.
Report to client
Pre-contract report - searches, investigation, terms of contract and mortgage offer.
Steps before exchange
Report to client
Report to lender
Ensure deposit funds available
Check mortgage offer and sufficient funds
Ensure arrangements for insurance.
Contract signed by both solicitors. Cans sign on behalf if have express authority
Completion date discussed.
Exchange
Contact must be in writing, must incorporate all agreed terms, must be contained in one document, or in each copy of contract and must be signed by parties.
Law society formula A - both parts of contract duly signed. Undertake that will send on day by first class post. Buyer undertake to send to other side draft or cheque for agreed deposit with clients signed part
Law B - each signs their own, same da y send signed part by first class, will also send cheque for deposit.
C- Usually when chain transaction.
Time of phone call - file note made;
date and time. formula used, completion date, deposit to be paid, identifies of solicitors.
Consequences of exchange -
None may withdraw without liability.
Seller holds legal but holds beneficial interest for buyer.
Buyer may occupy as licensee SC 5.2.2
Seller continues to pay community charges or business rates.
