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