Property 6: Stage 2 Funding the Purchase

Question 1

What must buyers solicitor do for a cash purchase?

Answer 1

Applies to any cash that is being used (need not be pure cash purchase)

1. source of funds check
   - good practice that it has been in UK bank account for last 3-6 months
2. Source of Wealth
   - best practice that client provides documentary evidence

Question 2

What must a solicitor do if client is dealing with mortgage? (either buyer or seller)?

Answer 2

1. Can only give generic advice
   - eg. Can’t say if mortgage offer is good etc.

Question 3

What are the types of mortgages?

Answer 3

1. Repayment
   - repay capital and interest in instalments
2. Interest Only
   - only pays interest in instalments
   - repays capital at end
3. Endowment / pension
   - combined with life insurance policy/pension
   - pay monty premiums with intention that they will be able to pay mortgage at end of term with life insurance polity
4. Shaia Compiant
   - sharia compliant

Question 4

Can a solicitor act for buyer and lender of mortgage?

Answer 4

Only if:
- lender is institutional and acting in ordinary course of business

• standard certificate of title is provided
• there is no conflict of interest / risk of one

Commercial
- normal for lender to use own solicitor

Question 5

What might be a conflict of interest between buyer and lender?

Answer 5

Lender lending on understanding that it is for house but buyer intends to use it for business

Buyer does not want you to disclose material facts to lender

Question 6

What is best practice for solicitors acting for lender?

Answer 6

Given in lenders instructions governed by Mortgage Lenders Handbook

1. solicitor be careful in fraud prevention
   - witness signing of security docs
   - that seller is legally represented
   - funds send to sellers soliciotrs account
   - price discrepencies
   - source of funds/wealth
2. title issues
   - discrepencies between lender and other valuation
   - lender named as applicant in pre-completion search
   - not release mortgage funds unless sufficent funds to pay tax and registration fees

Question 7

What is certificate of title?

Answer 7

Must be given before lender releases funds

Buyer solicitor must confirm clear certificate of title confirming that:
- title is good and marketable
- very important to have checked for title defects in order to give this

Question 8

When must clear certificate of title be given?

Answer 8

Will be specified by lender
- often 5-7 working days
- important to be on time so funds are released on time

Question 9

What must solicitors be wary of if buyer is receiving funds from private sources?

Answer 9

• must do source of funds and source of wealth checks
• must report use of private funds to any mortgage lender
• cannot act for buyer and provider of private funds

Question 10

What must be discovered and disclosed to lender by buyers solicitor?

Answer 10

• must report use of private funds to any mortgage lender
• if any adult who is not mortgagor will live at home

Question 11

What will a lender require if a non-owning occupier will live in property after completion?

Answer 11

They must sign waiver/consent form to ensure they do not acquire any rights in property

Question 12

Can a solicitor act for a non-owning occupier (who will occupy after completion)?

Answer 12

Cannot act for buyer AND non-owning occupier as conflict of interest

Question 13

When can mortgage complete and how is it perfected?

Answer 13

Can only complete after completion of property (otherwise no security)

Perfected by registration
- unregistered land (2 months - first registration)

Question 14

When does mortgage have to be perfected?

Answer 14

Must be registered:
- unregistered land - 2 months

• company borrower/client - with CH 21 days