🏡Property: Due Diligence Flashcards
Who deduces title and who investigates title?
Deduces: sellers solicitor
Investigates: buyers solicitor
Who drafts the contract and who drafts the transfer deed
Contract: sellers solicitor
Transfer deed: buyer
Who does the pre contract searches
buyers solicitor
Who drafts the transfer/mortgage deed?
buyers solicitor
Who does the pre completion searches
buyers solicitor
Can you act for buyer and seller?
Probs not-high risk of conflict (esp if difference in bargaining power/negotiation needed)
Substantially common interest doesn’t apply to a property purchase
Can you act for joint buyers
- Usually acceptable as long as can comply with para 6.2
- Might need to advice residential buyers separately abt how they want to hold equitable interest in prop
Can you act for borrow and lender?
Yes if para 6.2 complied with-can UNLESS conflict/significant risk of conflict
Risk of conflict will be high where:
1. Non sandard mortgage of prop to be used as borrowers priv residence
(eg. Not one provided in the normal course of the lender’s activities, where a significant part of the lender’s activities consists of lending and the mortgage is on standard terms)
- Standard mortgage but don’t use the approved certificate of title
EXCEPTIONS
* Substantially common interest
* Both clients given informed written consent
* Effective safeguards in place
* Sol satisfied reasonable to act for both
Can you act for joint borrowers?
Yes if comply with 6.2 and consider Etridge guidelines
What is a contract race and are they allowed?
Where pre-contract package sent to multiple buyers who compete to be ready to exchange 1st
Allowed as long as all prospective buyers know they’re engaged in race
What info must a sol give client re finances?
Best possible info abt likely overall cost of matter, at the beginning and at appropriate points throughout the transaction.
=make sure to explain SDLT/ LTT, Land Registry fees and search fees.
What are the restrictions on a solicitor providing financial advice?
Must be authorised under FSMA 2000 to carry out a regulated activity relating to a regulated mortgage contract
What is a regulated mortgage contract?
- borrower is an individual
- lender takes a first legal charge over property in UK
- at least 40% of prop intended for occupation by the borrower/ immediate family member
What is/isnt a regulated activity?
- Arranging or advising on a regulated mortgage contract (ie a specific mortgage product)
- NOT giving generic advice (eg. differences between types of mortgage, arranging execution of a mortgage chosen independently by the client or on the advice of an authorised person)
If doing a regulated activity and firm not authorised, how else can it be carried out?
Sol can still arrange or advise on a regulated mortgage contract by relying on the s 327 exemption for professional firms.
S237 EXEMPTION: solicitors can carry out regulated activities if they are incidental to the provision by the firm of professional services, ie services regulated by the SRA.
What are the types of mortgage
- Repayment-pay loan+interest at lenders standard variable rate, fixed for a set period, % above BoE base rate
- Interest only-monthly payments lower but will still owe whole amount at end
-
Other types-
□ Bank buys prop and resells to buyer at higher price, buyer pays excess over years
□ Bank buys and leases to buyer for rent then transfers to buyer at end of lease
Who pays what property tax?
Residential
* SDLT/LTT
* Possibly CGT
Commercial
* SDLT (no concession for first-time buyers) or LTT
* VAT
* Corporation Tax (Payable on income and capital profits (ie. Rent/sold for more than purchase price))
What was payable before SDLT and whats the difference
- Pre 1/10/2003: Stamp Duty which was a tax on documents
- SDLT is a tax on property transactions
What is Stamp Duty Land Tax (SDLT) payable on?
‘Land’ which includes fixtures NOT chattels
How is SDLT paid
Form SDLT1 to HMRC and via bank transfer
Time limit for paying SDLT/LTT
SDLT: 14d completion
LTT: 30d completion
Rates of SDLT including for 1st time buyers
RESIDENTIAL FREEHOLD
First time buyers relief if:
1. Intend to occupy prop as main residence
3. Purchase price >£625k
Then:
0% up to £425k
5% on portion from £425,001-£625K
Non first time buyers
Up to £250k=0%
£250k-£925k=5%
£925k-£1.5mill=10%
The remainder=12%
NON RESIDENTIAL/MIXED USE FREEHOLD
Up to £150k=0%
£150k-£250k=2%
Exceeding £250=5%
Does LTT have relief for 1st time buyers
No
Rates of LTT
RESIDENTIAL
Up to £225k=0%
£225k-£400k=6%
£400k-£750k=7.5%
£750k-£1.5 mill=10%
The remainder=12%
NON RESIDENTIAL/MIXED USE
Up to £225k=0%
£225k-£250k=1%
£250k-£1mill=5%
Exceeding £1mill=6%
Higher rates if buying second prop or not uk resident