Property 8

Question 1

What three things are crucial before being ready to exchange contracts?

Answer 1

• Final go ahead from the buyer (after consideration of report, title plan, search results etc). Failure to do this could result in a negligence claim* Confirmation that the buyer can fund the transaction * Agreed contract with seller’s solicitor

Question 2

When must transactions be synchronised?

Answer 2

Synchronisation is essential when the client has a related sale and purchase of a house. This means that the solicitor must ensure that both transactions: * Exchange on the same day and * Have the same completion date. Otherwise the client could be left with two houses or none at all.

Question 3

If a solicitor fails to synchronise transactions when necessary, what could the consequences be for the solicitor?

Answer 3

A negligence claim against the solicitor

Question 4

What is the effect of exchange of contracts in a freehold transaction?

Answer 4

• Seller is legally bound to sell the property (could be sued by buyer for losses)* Buyer is legally bound to buy the property (could lose 10% deposit)

Question 5

What is the effect of exchange of contracts in a leasehold transaction?

Answer 5

If the conveyance is for a new lease, the contract will provide that:* the buyer agrees to take a lease in the form of the agreed draft, and * the landlord agrees to grant the lease in the form of the agreed draft. Contracts are exchanged, and after this the form of lease cannot be changed except by mutual agreement of the parties, usually by executing a new lease agreement.

Question 6

The seller agrees to pay for an indemnity insurance policy and to leave specified contents at the property on completion. This is not reflected in contract on exchange. Are the provisions binding?

Answer 6

No. But note that the aggrieved party might have a claim against their solicitor if they can show that they instructed their solicitor to add the clause to the contract and the solicitor did not.

Question 7

What are three methods of exchange?

Answer 7

1. Person2. Post3. Phone (most common)

Question 8

At what point does exchange happen when the parties exchange in person?

Answer 8

At the point they agree face-to-face that exchange has happened.This has the advantage of certainty but is rare due to time and distance constraints.

Question 9

At what point does exchange happen when the parties exchange by post?

Answer 9

Exchange takes place when the seller’s part is posted to the buyer’s solicitor.This method is never used in practice now due to the lack of certainty associated with it.

Question 10

At what point does exchange happen when the parties exchange by phone?

Answer 10

The solicitors go through the contracts, insert the completion date and the date of the conversation (the exchange date) and exchange takes place at that point. This is the most common method of exchange and will follow the Law Society formulae for exchange.

Question 11

What are the Law Society’s Formulae for exchange of contracts?

Answer 11

A required list of steps that the solicitors must take during the exchange telephone conversation.* It stipulates that the solicitors must keep a memorandum (file note) of the exchange conversation. * There are three formulae, and the one used depends on who holds the signed contract and whether there is a chain of transactions.

Question 12

When is Formula A used for exchange and what is a quick way to remember this?

Answer 12

When one solicitor holds both signed parts of the contract.Remembered because one solicitor is Away and the other is doing All the work

Question 13

How does Formula A work?

Answer 13

One solicitor (usually seller’s) holds both signed parts of the contract. * The buyer’s solicitor will have sent the buyer’s signed contract and deposit cheque to seller’s solicitor in advance. * The seller’s solicitor will confirm that both parts are the same during the telephone call and agrees to insert the date of exchange and completion into both contracts. * On exchange, the solicitor who holds both parts of the contract will send the contract signed by their client to the other solicitor.

Question 14

When is Formula B used for exchange and what is a quick way to remember this?

Answer 14

When each solicitor hold their own client’s part of the contract.Remembered because Both solicitors are working.

Question 15

How does Formula B work?

Answer 15

Each solicitor holds their own client’s signed part of the contract, and the buyer’s solictor has cleared funds for deposit. * The solicitors will confirm that the versions are the same, date their part and insert the completion date and * Once exchange has taken place, each will send their client’s signed part of the contract to the other and the buyer’s solicitor will send the agreed deposit to the seller’s solicitor

Question 16

When is Formula C used for exchange?

Answer 16

When there is a Chain of transactions

Question 17

How does Formula C work?

Answer 17

When there is a chain of transactions and deposit monies are to be sent directly to another firm further up the chain. * This formula relies heavily on undertakings. * Exchange happens in two stages and two phone calls.* The first call confirms that the solicitors are ready to exchange* The second call confirms the actual exchange of contracts.

Question 18

What 5 pieces of information must be included on the Memorandum of Exchange?

Answer 18

• The solicitors’ names* The date and time of exchange* The exchange formula used (including any agreed variations to the formula)* The completion date and * The amount of any deposit paid

Question 19

What duty of care does the seller have after exchange takes place?

Answer 19

To keep the property in the same condition it was in at the date of exchange

Question 20

What must the buyer do if the Standard Conditions of Sale apply unamended?

Answer 20

Insure the property from the time of exchange (as risk passes on exchange)

Question 21

If there is likely to be more than a couple of weeks between exchange and completion, how is the interest in a sale contract protected after exchange, where land is (1) registered and (2) unregistered?

Answer 21

Registered: Unilateral notice placed on the seller’s charges registerUnregistered: C(iv) estate contract land registered against the seller’s full nameBoth are removed upon completion.

Question 22

In what type of situation is it likely an estate contract will be registered?

Answer 22

If the buyer is purchasing a new build property from a builder-developer and there will be a long time between exchange and completion

Question 23

How is a contract varied after exchange?

Answer 23

• Both parties must exchange contracts again with the variation included in the new contract, or ensure that any variation of the original contract is in writing and signed by the party to be charged.* They cannot vary the contract simply by a conversation, letter, or exchange of emails.

Question 24

Can the parties agree a new completion date over email?

Answer 24

No, this will amount to a variation of the contract.