Property Law 4 - Exchange

Question 1

What is the purpose of a certificate of title for the lender?

Answer 1

Solicitor certifies that the title to the property is satisfactory for lending purposes

Question 2

What conditions must a contract for land satisfy under s2 LPA 1989?

Answer 2

• be in writing
• incorporate all the terms which the parties have expressly agreed.
• be signed by, or on behalf or, each party to the contract.

Question 3

What are special conditions in a property contract?

Answer 3

Special conditions may be used in both residential and commercial property contracts to add or amend the standard conditions.

Question 4

What are the standard conditions for residential property relating to incumbrances?

Answer 4

The seller needs to disclose any incumbrances registered at:
- Land Registry
- Land charges Registry
- Companies House

If they don’t, the seller is in breach

Question 5

What are the standard conditions for commercial property relating to incumbrances?

Answer 5

The buyer is deemed to buy the property subject to any incumbrancers which would be revealed by a prudent buyer’s searches and enquiries.

Question 6

When would a full title guarantee be used?

Answer 6

This is the default - it means the property is free of all incumbrances other than those disclosed in the contract, and those which it didn’t and couldn’t reasonably have known about.

Question 7

When would a limited title guarantee be used?

Answer 7

Given by sellers with little knowledge of the property. It means that no incumbrances have been created over the property during the seller’s period of ownership.

Question 8

What does ‘No title guarantee’ mean?

Answer 8

The seller does not guarantee the seller’s right to sell the property, or that the property is free from incumbrancers.

Question 9

What is the default completion date?

Answer 9

28 days after the date of the contract

Question 10

What is the default completion time of the day and what does this mean?

Answer 10

• 2pm

Money must be received by the seller’s solicitor before 2pm

Question 11

What is the default remedy if completion time is missed?

Answer 11

The other party can claim damages, but cannot walk away from the transaction.

If the party serves a ‘notice to complete’ then time is of the essence and if the contract is not performed by a specific time the non-defaulting party can walk away and claim damages.

Question 12

What is the default deposit and who pays

Answer 12

10% and paid by the solls
- domestic, cheque or electronically
- commercial - just electronically.

Question 13

What is the difference between holding a deposit as a stakeholder and agent?

Answer 13

• Stakeholder, solls must not give deposit to seller until completion (standard)
• Agent, seller can demand the deposit immediately after exchange

Question 14

Who holds the risk after contracts are exchanged?

Answer 14

The buyer, therefore buyer should insure from the date of exchange

Question 15

When is VAT due?

Answer 15

VAT is charged on any taxable supply, namely the supply of certain goods or services by a taxable person in the course of business.

Question 16

What’s the difference between output and input tax?

Answer 16

Output tax is charged on a business’ outputs (sales).

Input tax is paid on a business’ inputs (purchases).

Question 17

What are the different rates of VAT on property?

Answer 17

Exempt supplies - Residential property, except for newly constructed property & commercial property over 3 years old with no opt to tax.

Standard-rated supplies (20%) - newly constructed commercial property

Zero-rated supplies - newly constructed residential property (buyer doesn’t pay VAT but seller can reclaim).

Question 18

Who drafts the contract for sale?

Answer 18

The seller’s solicitor

Question 19

What undertaking are imposed on solicitors under Formula B?

Answer 19

• to hold the signed contract to the other solicitor’s order (i.e. held on behalf of the other side).
• to post the signed contract to the other sols by 1st class post, DX, or hand delivery.
• the buyer’s sols to send the deposit in the form specified by the contract

Question 20

What situation does Formula A cover?

Answer 20

Where the same sols holds contracts for both buyer and seller

Question 21

What situation does Formula C cover?

Answer 21

Chain transactions (but not often used)