🏡 Property: Contract Flashcards
Who drafts the contract?
Sellers solicitor, then sent to buyers solicitor as part as initial pre contract package
What is the contract and what is its purpose?
- Is an agreement to transfer land at later stage (normally bc buyers financing arrangements/practical aspects not finalised)
- Provides parties with certainty as to:
-Nature/extent of prop
-Financial terms
-Timetable for completion
- Either party cant pull out
Types of contract
a. Draft in firms style
b. Pre printed
Sections of pre printed contract?
1. Front page
□ info on parties, prop and terms of sale
□ Registered-title number and class of title for
□ Unregistered-insert root of title
2. Middle-standard conditions (to govern transaction unless contrary agreed)
3. Back page-special conditions (specifically drafted for this transaction)
What are the 2 types of standard conditions?
○ Standard Conditions of sale (SC)-all residential/some simple commercial
○ Standard Commercial Property Conditions(SCPC)-high value commercial
What are the 2 parts of the SCPC
Part 1 always applies
Part 2-applies if have special condition incorporating them
SC/SCPC on specified encumbrances
SC
Prop sold free of encumbrances other than those:
1. Specified in contract
2. Discoverable by inspection before date of contact
3. Seller doesn’t/couldn’t reasonably know abt
4. Public requirements
5. Mortgages buyer knows about
6. Entries made before date of contract in any public register EXCEPT at Land Registry, Land Charges Department, Companies House
SCPC:
matters, other than mortgages, disclosed or which would have been disclosed by the searches and enquiries which a prudent buyer would have made before entering into the contract
Effect of non disclosure incumbrance in contract?
might result in the buyer having a right to rescind the contract and/or claim damages.
What should the buyers sol check regarding specified encumbrances in the contract?
Ensure sellers mortgage not inc in list of incumbrances
SC/SCPC on title guarantee
seller sells with full title
What should you do if the seller isnt selling with full title guarantee
Amend SC/SCPC with special condition
Types of title guarantee
FULL: If own entire legal and equitable title, pass prop free of all incumbrances other than ones don’t know/couldn’t reasonably have known about (Best to have 1 seller with full)
LIMITED: Selling land and I havent incumbered or /anyone else incumbered since I owned, but cant promise about before. (Where seller has limited knowledge of property ie. Executor/trustee/banks selling through repossession)
NO TITLE GUARANTEE: Eg. Where seller is person appointed following insolvency of owner
What is the seller impliedly covenanting in the transfer if they sell with full/limited title guarantee?
- They have the right to dispose of the land
- They will do all they reasonably can to transfer title
- For leasehold-the lease is subsisting at time of disposal and theres no breach of covenant making lease liable to forfeiture
ALSO for FULL:
4. Land is disposed free from incumbrances other than those the seller doesn’t know/couldn’t reasonably know about
EXCLUDING
1. Things sale expressly made subject to
2.. Things buyer knows about at time of sale
3. Things on registers of title at time of sale
What is the contract rate and what is it charged on?
Rate of interest charged if party late in completing
Charged on purchase price (LESS deposit if it’s the buyer in default)
SC/SCPC on contract rate
Law Soc interest rate=currently 4% above base lending rate of Barclays (5%)
SC/SCPC on how much the deposit is
10% of purchase price
SC/SCPC on how the deposit is held
Stakeholder=sellers sol cant hand over until completion but in SC seller can use as deposit on related purchase of house for seller
SC/SCPC on how the deposit is paid
SC- electronically/by cheque drawn on conveyancers client acc
SCPC-can be paid electronically only
Both-must come from acc in name of a conveyancers at a clearing bank
SC/SCPC on what happens with the deposit if the buyer fails to complete
seller may forfeit and keep deposit
Ways for a deposit to be held
- Stakeholder=sellers sol cant release until completion but in SC seller can use as deposit on related purchase of house for seller
- Agent=deposit can be released to seller after exchange and can be used for any purpose
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What may you need special conditions dealing with?
- App of 2nd trustee
- Seller to obtain/pay for restrictive cov insurance
- Disclosing a defect in title
- Selling with limited/no title guarantee
- Deposit of less than 10%/to be held as agent not stakeholder
- Payment of VAT
- Removal of fixtures
- Inc. of indemnity cov to protect seller once lost physical possession (where seller original covenantor/has given indemnity cov)
When does risk of damage to the property pass to the buyer and the effect of this?
- Passes on exchange
- So must complete even if prop damaged/destroyed before completion
- So buyer should get insurance from exchange
SC/SCPC on insurance
seller under no obligation to insure freehold prop UNLESS required by special condition
What happens where theres 2 insurance policies in place on the same property?
Theres a danger buyers insurer will reduce proceeds bc another policy exists, if this happens, SC/SCPC provide purchase price reduced accordingly