Property Practice Flashcards
What is a headlease?
Lease granted by a freeholder to a tenant
What is an under lease?
Leases granted by the tenant to an undertenant
What is the situation when a buyer does not agree with a term within an existing lease?
The seller must negotiate with the landlord to enter into a deed of variation
What is a deed of variation?
An agreement between the landlord and tenant varying the terms of the lease
What are prescribed clauses?
Summary of the lease terms and are in standard form
What is an example of an unacceptable covenant in a lease?
Absolute prohibition against assignment
What is the difference between the rent payments in a residential and commercial lease?
The rent in a commercial lease will typically be much higher
What is the difference between consent to assignment of a lease in a residential and commercial transaction?
The landlord in a commercial lease can reject assignment if they believe the incoming tenant will be unable to pay the rent
Can a landlord review the rent of a lease during the term?
Not unless there are provisions for doing so in the lease
What are the first steps a solicitor will do in a conveyancing transaction?
Take instructions from client in a questionnaire
Send client care letter
Due diligence checks
Obtain ID documents
Advise buyer to have a survey of the property
What is capital gains tax?
A tax on the profits made where a taxpayer disposes of an asset that has increased in value
If Capital Gains Tax is payable what is the process?
A residential property return must be submitted to HRMC and any tax due paid within 30 days of completion
What is Private Residential Relief?
Capital Gains Tax is not payable in most residential conveyancing transactions
When will a party be entitled to relief of Private Residential Relief?
- The dwelling is their main residence
- They have not been absent during their period of ownership other than for job-related accommodation
- Grounds or garden are not greater than 0.5 hectares
No part of their home has been used exclusively for business purposes during their ownership
What is an undertaking?
A professionally binding promise given orally or in writing and may be given by anyone at a solicitors firm.
What are the consequences of a solicitor failing to comply with an undertaking?
The recipient can seek to enforce if reliance was placed on the undertaking and there could be sanctions by the SRA
What are the confidentiality issues in conveyancing?
A solicitor has duty to keep the details of the clients confidential and you are liasing with third parties
What is the protocol?
A statement of best practice for residential conveyancing transactions introduced by the Law Society
When would the protocol not be used?
A commercial or new build transaction
What is an EPC?
A document containing information about a property’s energy use and typical energy costs
How long is an EPC valid?
10 years
When would an EPC not be required?
For a listed building
What is the stage of negotiations the head of terms?
Commercial equivalent of the memorandum of sale of a residential transaction
What is the code for leasing business premises?
Produced by the Royal Institution of Chartered Surveyors and sets out best practice of landlords when negotiating the terms of a commercial lease with a tenant
What is a licence to assign?
An agreement between the landlord, tenant and incoming tenant confirming the rights and covenants in the lease can pass
Who will be responsible for the fees for drafting the licence to assign?
The outgoing tenant
What can landlords request as extra security for the the lease?
Rent Deposit
Guarantor
Authorised Guarantee Agreement
What is an authorised guarantee agreement?
A written obligation in which the outgoing tenant will act as guarantor for their immediate successor in title
What is the process of obtaining the title deeds?
Registered - download from HMLR
Unregistered - obtain from client or mortgage lender
What will a mortgagee require before releasing the original title deeds?
An undertaking from the sellers solicitor confirming the deeds will not be released until the mortgage has been redeemed
What is the process of remedying defects in the title?
The seller’s solicitor must inspect the title and ensure the seller is able to sell the title and remedy any defects
What must the sellers solicitor obtain regarding the title plan?
Send a copy to the seller and request confirmation this shows the full extent of land being sold
What is the process of deducing title?
Seller’s solicitor will send a copy of the title to the buyers solicitor
What are latent defects?
Things that would not be apparent from inspection of the property
What are patent defects?
Things which would be revealed by inspection
What is the effect if a seller breaches their duty of disclosure?
The buyer may have the right to withdraw from the contract after exchange and claim damages for losses
What is caveat emptor?
Buyer beware. It is the buyer’s responsibility to inspect the property for physical defects
What is the sellers duty to disclose?
They do not have a duty to disclose however do have a duty not to cover up a patent defect which would amount to wilful deceit
What will be included within a contract pack for a residential freehold property?
Draft contract, in duplicate PIF FFC Register, plan and other documents Guarantees and planning permissions
What will be included in a draft contract pack for the grant of a new lease?
Draft contract Draft lease Freehold title PIF Replies to Standard Pre-Contract Enquiries Planning Permission and Building regulations Service Charge budget Details of any management company
What will be included in a draft contract pack for a leasehold transaction?
Draft contract in duplicate Freehold OCES Leasehold OCEs Lease PIF 3 years' service charge accounts Service charge budget for coming year Buildings Insurance Details of Management Company Any new build warranty, planning permissions and building regulations consent if less than 10 years
If a title is registered, what form will be used to transfer the title of the property?
TR1
What will be the process if an under lease is to be granted?
The lease will be checked to ensure underletting is permitted and then the existing tenant will request consent from the landlord in the form of Licence to Underlet
What is the standard contract used in residential transactions?
Law Society - Contract Incorporating the Standard Conditions on Sale
What are the requirements for the contract in a conveyancing transaction?
Must be in writing and incorporate all agreed terms for the issues to be legally binding
What are the 3 parts of a residential contract?
- Particulars of sale
- Standard Conditions of sale
- Special conditions of sale
What contract is used on a commercial transaction?
Standard Commercial Property Conditions
What are the 2 parts of a commercial contract?
Part 1
Part 2
What is contained in part 1 of a commercial contract?
General conditions covering issues such as service of notice, encumbrances, VAT, title, risk, insurance, completion and remedies
What is contained in part 2 of a commercial contract?
Contains provisions that apply only if expressly incorporated. This is more details on VAT, transfer of a business as a going concern and taxation allowances
What are the particulars of sale?
Set out on the front page of the contract including the key transaction details; the date, parties, details of the property, specified encumbrances, title guarantee, completion date, purchase price and contents price
What are the key standard conditions of sale?
‘Small print of the contract’ - covers issues such as formation of the contract, service of notices, matters subject to which the property is sold, physical condition of the property, right of the buyer to occupy the premises between exchange and completion, details regarding completion and remedies for late completion or no completion
What deposit does the standard conditions of sale require the buyer to provide on exchange?
10%
Does a buyer have to provide a 10% deposit on exchange?
No, they can negotiate a lower deposit prior to exchange however the buyer will always be liable for the full 10% should the matter not proceed after exchange
What is deposit held as stakeholder?
The buyer’s deposit is held in the seller’s solicitors client account on behalf of both parties and not paid to the seller until completion
What is deposit held as agent?
Allows the seller’s solicitor to pay over the buyer’s deposit to the seller immediately after exchange has taken place
What is full title guarantee?
Seller is entitled to sell the property
Seller will do all in their power to transfer the purported title to the buyer
The seller is selling the property free from all charges or encumbrances other than those disclosed in the contract
What is limited title guarantee?
The seller merely warrants that the seller has not created any charges or granted any rights during their period of ownership that have not been disclosed in the title
What is no title guarantee?
Where the seller has no knowledge of the property at all
Who is responsible for insuring the property between exchange and completion?
Neither party however it would be advisable for the buyer to insure the property
If a completion date is not inserted into a contract, when will this take place?
20 working days after exchange
What time must the buyer provide completion funds by on the date of completion?
2pm
What happens if completion funds are received after the contractual time?
They are deemed received the following working day and therefore interest is payable on the outstanding balance
What happens if the seller is unable to vacate the property on completion?
No penalty will be due
What are the special conditions that are assumed for most conveyancing transactions?
Whether the property is sold without vacant possession
Whether the time for completion has been amended
Whether there are any occupiers at the property
Is the buyer able to rely on the responses given in the PIF?
Yes
What information is covered in the PIF?
Position of boundaries Disputes with neighbours at the property Building works and/or alterations by the seller to the property Any notices received by the seller about the property Any guarantees or warranties Property insurance details Flooding at the property Anyone exercising informal rights over the property Any services that cross the property Parking arrangements for the property Occupiers of the property Utilities the property is connected to
How must any non-owning occupiers be dealt with at the property?
Must agree to sign the contract confirming they will leave the property upon completion
What is the FFC?
A list of items that are included and excluded from the sale price
What happens if a seller takes any items marked as included on the FFC?
The buyer can sue
What are the 4 sections of a title register?
Header Section
Property Register
Proprietor Register
Charges Register
What is included within the header section of the title register?
Title number
Edition date
Date and time of official copy
Land Registry office that deals with that title
What is included within the property register?
Postal address and reference to the title plan
Specified legal estate (freehold / leasehold)
Any rights benefitting the property
If leasehold, basic details about the lease
What is included in the proprietorship register?
Specifies the class of title held Name of current holder of the legal estate Any restrictions affecting the title
What is included in the charges register?
Details of any encumbrances of the land
What is compulsory registration?
If there has been any triggering event since December 1990, the sellers solicitor must register the title
What is the purpose of the pre-contract searches?
To gather practical information about the property so the buyer can make an informed decision as to whether to purchase the property
What are the main searches carried out in every transaction?
Local Search
Water and Drainage Search
Environmental Search
What are the 3 parts of the local authority search?
Local Land Charges
Enquiries of Local Authority
Option Enquiries of Local Authority
What is included within the Local Land Charges?
Reveals whether there are any registrations made against the property which would burden the property.
What are the most common land charges that appear on the local land charges register?
General and Specific Financial Charges - reveal whether local authority owed money
Planning Charges - planning agreements and entries against the property
Listed Building Charges
What is included within the enquiries of the local authority?
Adoption of roads
Public rights of way
Planning
Proposed rail or road schemes
Outstanding planning or enforcement schemes
Whether property is in conservation area
Whether property is subject to compulsory order
What are option enquiries of local authority?
Only provided if requested for a further fee
Any road proposals have been made by private bodies
Any major gas pipelines
Property is a house in multiple occupation
Environmental pollution notices served
The property abuts common land and town or village green
What is revealed within the water and drainage search?
Whether the property is connected to public water supply and foul drainage
If sewer not connected, enquiries will be raised of the seller’s solicitor
What will be revealed within the environmental search?
Any contamination issues due to current or former use of the land
What are the transaction specific pre contract searches that can be undertaken?
Search of Index Map
Bankruptcy Search
Company Search
What is revealed within the Search of Index Map?
Whether the property is partially or fully registered
What is revealed within the bankruptcy search?
Reveal any pending or actual bankruptcy ordered against the buyers
What is revealed within the Company Search?
Reveals whether the property is subject to any winding up or liquidation proceedings and whether the company is authorised to deal in the sale or purchase of land.
What are the location specific searches that can be carried out?
Common Land and Town or Village Green
Coal Mining Search
Chancel Liability Search
What is revealed within a Common Land and Town or Village Green search?
Reveals whether the property abuts or is adjacent to land that has been designated common land or a town or village green.
What is revealed within a coal mining search?
Reveals whether there is any such work within the locality of the property
What is revealed within a chancel liability search?
Whether there is an obligation to contribute towards the upkeep of a church
What is the Commercial Property Standard Enquiries?
The commercial equivalent of a PIF - a range of pre-printed enquiries that a tenant’s or buyer’s solicitor will send to the other side solicitors for completion and return
What is the purpose of planning permissions?
Restrict development of land to ensure that uncontrolled building does not take place
What are the 2 types of planning permissions?
Deemed Permission
Express Permission
What are the 2 types of deemed permission?
Town & Country Planning (General Permitted Development) Order 1995
Article 4 Direction
What is a Town and Country Planning (General Permitted Development) Order?
Allows certain types of development without the need for express consent
What is an Article 4 Direction?
A local authority can exclude locations, such as a conservation area which means the permitted rights do not apply to properties in this area
What are the 2 types of express permission?
Outline
Detailed
What is outline planning permission?
Broad permission as to the principle of development on the land in question and gives consent to ‘reserved matters’.
If there are reserved matters within a planning permission, how long does an applicant have to make a full application?
3 years
What is detailed planning permission?
Will allow the development to commence usually subject to planning conditions.
After planning permissions are granted, how long does an applicant have to start the works?
3 years
What happens if a development fails to comply with planning permissions?
Enforcement action can be taken against the owner
If a previous owner breaches planning permissions, who is liable?
The new owner
What is the enforcement period for unauthorised works?
4 years
What is the effect of a property being listed on planning permissions?
Cannot be demolished, extended or altered without consent of the local authority
What is the enforcement action for works undertaken on a listed building?
There is none
What is the purpose of building control?
A department within the local authority that is concerned with ensuring health and safety standards are met when construction takes place
What is the enforcement period for building regulations?
12 months
What are the 2 ways to fund a purchase?
Mortgage
Cash
What checks is a solicitor required to undertake on a clients cash to purchase the property?
Confirmation the money has been in a UK bank account for 3-6 months and where the funds have been accumulated
Can a solicitor give advice about mortgages to a client?
Only general advice. They will need to advise the client to obtain independent advice
What are the 5 types of mortgages?
Repayment Interest-Only Endowment Pension Sharia Compliant
What is a repayment mortgage?
Borrower repays capital and interest and both capital and interest are included in the monthly repayment amount
What is an interest-only mortgage?
Borrower repays only interest for the term of the loan and then repays the capital sum at the end of the term
What is an endowment mortgage?
A mortgage combined with a life insurance policy
What is a pension linked mortgage?
The loan is linked to a personal pension policy
What are sharia compliant mortgages?
A mortgage which addresses the concerns of some Muslim clients about payment of interest
How will the mortgage lender ensure the property represents good security?
Carry out a valuation report
Why is there no conflict between a buyer and lender?
Because they have a common interest to acquire a good and marketable title
What happens if a conflict arises during a transaction?
The solicitor should cease acting
What is private source funding?
Buyer can obtain funds from an alternative source such as a gift from family member
What is a solicitors responsibility regarding gifted funds?
Carry out due diligence on the funds
Ensure there is no legal or equitable charge in exchange for the sum
What are the 2 functions of a certificate of title?
Confirms to the lender the title is good and marketable
Requests the release of mortgage advance
What is the requirement of occupiers on completion?
The lender will require them to sign a waiver/consent on completion confirming they will not acquire any rights to the property during their occupation
What is the process of perfecting the mortgage?
Registering the lenders charge on completion
What is the time limit for registering a mortgage on completion of a registered title?
30 working days
What is the time limit for registering a mortgage on completion of unregistered land?
2 months
What is the time limit for registering the mortgage on completion of a business transaction?
21 days at Companies House
What are the 3 methods of exchange?
Person
Post
Phone
What is the process of exchange in person?
Solicitors can meet and exchange contract in person
What is the process of exchanging contracts in the post?
Each solicitor posts their client’s signed part of the contract to the other. Exchange takes place when the seller’s part is posted to the buyer’s solicitor
What is the process of exchange over the phone?
Solicitors have a telephone conversation with each other, go through the contracts, insert the completion date and the date of the conversation
What are the 3 formulae for exchange?
A
B
C
What is formula A for exchange?
Where one solicitor holds both signed parts of the contract alongside the buyer’s deposit cheque. The party holding both contracts, posts their clients contract to the other side after exchange
What is formula B for exchange?
Where each solicitor holds their own client’s signed party of the contract and the buyer’s solicitor has cleared funds for the deposit
What is formula C for exchange?
Where there is a chain transaction and deposit monies are to be sent director to another firm up the chain
What is the memorandum of exchange?
A note by each solicitor of: Names Date and time of exchange Formula used Completion date Amount of deposit paid
What must happen if the terms of the contract are to be varied after exchange?
The parties must re-exchange with the new terms therein
What are a sellers solicitors duties pre-completion?
Prepare a completion statement
Complete the TA13
Obtain seller’s signature on TR1
What are a buyer’s solicitors duties pre-completion?
Receive and check TA13 Carry out pre-completion searches Prepare completion statement Request mortgage funds Sign TR1 Licence to Assign Service Charge Apportionments
What are the 3 methods of completion?
Personal Attendance
By Agent
By Post
What is the method of completion by personal attendance?
Buyers solicitor attends the seller’s solicitors office in person and the solicitor takes physical possession of the deeds
What is the method of completion by agent?
Buyer’s solicitor appoints a local firm to attend to completion at the seller’s solicitors office
What is the method of completion by post?
Seller’s solicitor acts as the buyer’s agent upon completion and posts all the relevant deeds and documents to the buyer after completion has taken place
What is the code for completion by post?
Relies on undertakings by both solicitors.
When is title passed for unregistered land?
Completion
When is title passed for registered land?
When the purchaser is registered at the Land Registry
What is the effect of a merger clause in the standard terms of condition?
Contract merges with the purchase deed meaning the purchaser can no longer sue on contract terms unless the contract states clauses will not merge on completion
What is a non-merger clause?”
Standard conditions contain a standard non-merger clause stating completion will not cancel liability to perform any outstanding obligation under the contract
What are the seller’s solicitors post completion duties?
Confirm completion to client
Discharge any mortgages
Pay any estate agents
Close file
What are the buyer’s solicitors duties post-completion?
Confirm completion to client Registration of any company charge Payment of SDLT Registration at HMLR Apply for share in Man Co Service notice on landlord
When must a SDLT return be submitted?
14 days after completion
What is notice to complete?
A document that may be served by the innocent party requiring the defaulting party to complete. The defaulting party then has 10 working days to complete
What can happy when notice to complete is not complied with and the buyer is the defaulting party?
Seller can rescind and retain buyers deposit
Property can be resold
Damages can be claimed
What can happy when notice to complete is not complied with and the seller is the defaulting party?
Contract can be rescinded
Reclaim their deposit monies with interest at the contract rate
Damages can be claimed
What remedies for breach are available before completion?
Specific performance
Damages
Rescission
What remedies for breach are available after completion?
Damages
