Property Practice Flashcards
What constitutes development under planning law?
- Operational development
- Building/engineering/mining - Material change of use
What are the ‘Use Classes Order’?
- B2 = general industrial
- B3 = storage and distribution
- C = residential uses
- E = commercial/business and service
- F = Local community and learning
- Sui generis = only one of its kind
What 4 enforcement powers do the LPA have?
- Enforcement notice
- Served on the owner/occupier/person having interest in land
- Becomes effective 28 days after service
- Must specify alleged breach and steps to be taken to remedy breach - Stop notice
- Stops activities in breach of planning control before enforcement takes place
- Must be served first/before enforcement notice - Breach of condition notice
- Breach of condition attached to planning permission
- No right of appeal - Injunction
- Must be expedient and necessary
Failure to comply with any of these enforcement methods is punishable by fine
What are the 4 requirements for a good root of title?
- Deal with/shows who owns the entire estate interest
- Contain a recognisable description of the relevant land
- Do nothing to cast doubt on seller’s title
- Be at least 15 years old
What should the epitome of title focus on?
- Chain of ownership
- Description of the land
- Stamp duty
- Incumbrances
- Execution
- Land charge searches
What are the searches and enquiries that are relevant to every property?
- Survey and personal inspection
- Local search
- Water and drainage search
- Pre-contract enquiries of seller
- Environmental searches
- Flood search
For unregistered land, an index map search and central land charges search should also be carried out
What are some of the key conditions contained in the Standard Conditions of Sale/Standard Property Conditions?
- Specific incumbrances = specifies any right which will survive the transfer of land
- Seller’s solicitor should always set these out in the contract to avoid being liable for misrepresentation
- Property will not be sold subject to a mortgage, but it will need to be removed from the specific incumbrances - Title guarantee :
a) Full = owns entire legal/equitable interest
b) Limited = seller has limited knowledge of the property
c) No title = eg: appointed following insolvency - Contract rate = rate of interest that will be charged if party is late in completing
- Usually be what the Law Society’s interest rate is
What are the 3 possibilities for VAT in a contract?
- Price is exclusive of VAT and will be added on top
- Commercial building within 3 years of construction
- Old building where seller has the option to tax - Price is inclusive of VAT
- Price is exclusive of VAT, but VAT can be added on top in unlikely event that the law changes
What are the Law Society Formulae for exchange of contract?
Formula A = One solicitor holds both parts of a contract duly signed
- Undertaking that solicitor holding both parts sends the client’s part to the other side by 1st class/DX/by hand
- Undertaking that buyer’s solicitor send seller’s solicitor a banker’s draft/client account cheque for the agreed deposit
Formula B = each solicitor holds their own client’s signed part of the contract
- Send money via banker’s draft/cheque
- If you want to send the money electronically, need to make a variation to Formula B
Formula C = where there is a chain of transaction, the aim of this formula is to synchronise it
What are the steps for preparing to exchange contracts?
- Report to client
- Report to lender
- Ensure deposit funds are available
- Check mortgage offer is in place and that client has sufficient funds to complete
- Ensure arrangements are in place for insurance immediately following exchange
- Contracts signed
- Completion date
What pre-completion searches should be conducted for registered and unregistered land?
Registered
- Form OS1 (whole property) OS2 (sale of part)
- Reveals any new entires made from the date which the official copies were produced
- Gives a priority period of 30 working days from date of search result
Unregistered
- Form K15 (results on K18)
- Priority period of 15 working days
How do you check the solvency of a buyer?
Individual and regsitered land: do a bankruptcy only search on form K16 at the Land Charges Department
Individual and unregistered land: add buyer’s name to K15 form to check their solvency
Company: do a company search at CH
Should be conducted twice:
1. Pre-contract
2. Just before completion
In ensuring the finances are in order for completion, what would the buyer’s and lender’s solicitor expect to receive?
Lender:
1. Certificate of title confirming property is adequate security
2. Solvency search against borrowers
3. Clear OS1R in name of lender
4. Executed, but not completed, mortgage deed
Buyer:
1. Mortgage advance from lender
2. Balance of purchase price from buyer client
How is completion conducted in person?
Solicitor visits the other’s office
All parts of the transfer should have been executed in anticipation
Buyer’s solicitor will arrange for completion money to be sent electronically
Seller’s solicitor will hand over title documents and other documents relating to the property; release the keys
How is completion conducted by post?
Seller’s solicitor will do whatever the buyer’s solicitor would have done if they attended in person
Buyer’s solicitor will set out, in writing, what the seller’s solicitor should do as their agent
Once the seller’s solicitor has received the completion money, they will carry out the buyer’s solicitor’s instructions
Documents which would have been handed over to the buyer should be sent by 1st class/DX
What are the 3 ways in which a lender will discharge the seller’s mortgage?
- Complete DS1 and send to seller’s solicitor to send to the buyer’s solicitor
- Submit an e-DS1 through the Land Registry portal
- Use Electronic Discharge and send a message to Land Registry which automatically removes charge from register
What are the time limits for paying/registering SDLT/LTT and a charge at CH?
SDLT = within 14 days of completion
LTT = within 30 days of completion
- Failure to do so means the transfer of the property to the buyer will not be registered at the Land Registry
- Will also attract penalities and interest
Registration of charge at CH = lender’s solicitor should register within 21 days
- Otherwise, charge will be void
When is contractual compensation available and what is the calculation for it?
SCs: buyer and seller can pay compensation
SCPCs: only the buyer can pay compensation
Calculation:
1. Purchase price - deposit
2. Calculate contract rate
3. Divide by 365 to find out daily rate
4. Times by number of days in default
When can a notice to complete be served and what is the effect of it?
Can only be served after the contractual completion time on contractual completion date
Party serving must be ready, willing and able to complete
Once notice is served, the other party has 10 working days to complete, starting from the day after service
- Failure to complete within this time means that the non-defaulting party can rescind the contract
- Defaulting party was buyer = seller can forfeit deposit
- Defaulting party was seller = seller must repay buyer deposit
- Can also claim damages for loss suffered
What are the professional conduct issues in a property transaction?
Acting for seller and buyer = not possible; high risk of conflict of interest and substantially common interest does not apply
Acting for joint buyers = possible; may want to advise separately if they are holding equitable interest in property differently
Acting for borrower and lender = possible unless (a) mortgage is not standard (b) mortgage is standard but you do not use the approved certificate of title
Acting for joint borrowers = usually fine; unless one party agrees to mortgage home as security for a business loan
What are the 3 types of mortgages?
Repayment = monthly payments of original amount borrowed plus interest
Interest-only = monthly payments of interest; at the end of mortgage, borrower still owes lender whole of original amount borrowed
Sharia complaint = bank buys the property, sells to the buyer for a higher price and the buyer repays the excess
When is SDLT relief offered?
To first time buyers if it is their main residence and worth less than £625,000
- Pay nothing on first £425,000 and pay 5% on anything above that
It is possible to save on SDLT through valuable chattels as long as apportioning is fair
Must be submitted to HMRC within 14 days of completion
When does private residence relief (CGT) apply and what are the exceptions?
If the property being sold was their only/main residence and they occupied the residence throughout ownership
Exceptions (period of absences that are allowed):
1. If the owner is an employee and has to live abroad
2. Living in service accommodation as part of their job
If the garden is more than 0.5 hectares, the seller has to prove to HMRC that the extra garden was necessary for reasonable enjoyment of their home, otherwise the ‘gain on excess’ is chargeable to CGT
Define a ‘new commercial property’ and the tax implications of this
Within 3 years from completion of the building
Means the seller has no choice but to charge the buyer VAT
When does a seller have an option to tax?
- Sale of greenfield site
- Sale of an old freehold building
- Grant of lease
When does the standard rate of VAT apply?
20%
1. Supply of construction services
2. Professional services
3. Sale of a new freehold building
Define absolute, qualified and fully qualified leasehold covenants
Absolute = tenant cannot carry out stated action
Qualified = tenant can carry out stated action only if they obtain L’s consent first
Fully qualified = can carry out stated action if they obtain L’s consent first, but L cannot withhold consent unreasonably
How can a tenant make an alteration to the property despite there being an absolute leasehold covenant?
Can serve a notice on the landlord detailing their proposals
Landlord has 3 months to object
If they object, tenant has the right to apply to the court for authorisation
Court will authorise the alteration if improvements:
1. Add to the letting value of the property
2. Are reasonable and suitable to character of the property; and
3. Do not diminish the value of any other property of the landlord
If court authorise alterations, T may claim compensation at the end of term for any improvements that have added to the letting value
- Rare due to time and costs of application
Who does the RICS Code for leasing business premises apply to? What does the Code stipulate?
Mandatory code that RICS surveyors must comply with
- Lease negotiations must be approached in a constructive and collaborative manner
- Any party not represented by RICS member/other property professional must be advised on the existence of the code and must be recommended to obtain professional advice
- Transaction terms must be recorded in writing and must summarise specified details as a minimum
Can only depart from other best practice statements with justifiable good reason
For an underlease, when is a deduction of freehold title required?
If the headlease is registered with absolute leasehold title, there is no need to see the title to the freehold
If the headlease is unregistered, the undertenant is entitled to call for headlease and all subsequent assignments under which the headlease has been held for the last 15 years
If the freehold which the headlease is under is registered, can inspect the freehold on the open register
After completion, when must a lease be registered by?
Only applies to leases for a term which exceeds 7 years
Unregistered = 2 months
- An application for first registration
Registered = application must be made within the priority period conferred by OSR1 search result
Define a Jervis v Harris clause
Self-help remedy where L can enter property to check compliance with T’s repair covenant
If there is a breach, L can serve notice specifying works required to remedy breach
If T fails to carry out work/does not do so diligently, L may enter, carry out works and recover costs from T as debt
What are the ways in which a lease can be terminated at common law?
Effluxion of time
Notice to quit
Surrender = T yields up lease to L who accepts surrender; L and T must agree to do this
Merger = T acquires immediate reversion to lease
What type of lease falls under the LTA 1954?
- A tenancy (not mere licence)
- Of a property which is occupied (at least of part) by the tenant
- For business purposes
Fixed-term tenancies for less than 6 months, tenancies for agricultural holdings, farm business and mining leases are expressly excluded from the scope of the Act
Assignment: what is the effect of s 19(1)(a) LTA 1927?
Implies into any qualified covenant that consent for assignment cannot be unreasonably withheld
Assigning/underletting: what is the effect of s 1 LTA 1988?
When the tenant has requested the landlord’s consent to assign in writing, the landlord must within a reasonable time (28 days):
a) Give or withhold consent
b) Serve on the tenant written notice of its decision specifying conditions/reasons for giving/withholding consent
What does the effect of a licence to assign have?
It is a document by which the Landlord will consent to the assignment
Signed by the Landlord, Tenant and Assignee
If there is no licence, then there is only privity of estate between Landlord and Assignee
New lease = assignor will normally give an AGA to L
- Make sure it is for the term of the assignment and not for the term of the lease
- To compensate for the lack of PoC the landlord now has due to the assignment
Old lease = assignee will give a direct covenant to the landlord to observe and perform the covenants until the end of the lease
Normal for the tenant to pay for the landlord’s expenses in dealing with the application to assign
What are the 4 types of rent review? Define them
- Fixed increase = rent increases by predetermined amounts
- Index-linked = rent is linked to an external index
- Tenant’s receipts/turnover = rent is linked to the tenant’s receipts/success from their use of the property
- Open market rent review = rent is adjusted by reference to the open market value of the premises at the time of review
List the common assumptions for rent reviews that are both reasonable and unreasonable in the eyes of the tenant
Reasonable:
- Tenant has complied with repair/decoration covenants (otherwise it would artificially depress the rent)
- The property is available with vacant possession
- Tenant has complied with all obligations under the lease
Unreasonable:
- That landlord has complied with its obligations (if not, this might artificially inflate the rent)
- That the premises are suitable for any prospective tenant
List the common disregards for rent review that are both reasonable and unreasonable in the eyes of the tenant
Reasonable:
- Any goodwill built up by the tenant (would artificially increase the rent)
- Any voluntary improvements made by the tenant (otherwise tenant would effectively be paying twice)
Unreasonable:
- Absolute prohibition on alienation (would artificially increase the rent)
- Any rent review provisions contained in the lease (tenant-friendly leases are worth more)
What remedies are available for breach of covenant to repair?
- Specific performance: positive covenants; only available if other remedies are inadequate
- Damages:
a) s 18 LTA 1927: limits damages to the amount L’s reversion has diminished in value because of disrepair
b) For leases over 7 years , with more than 3 years left, notice must be served on T and must explain T’s right to counter-serve within 28 days - if T counter-serves, L cannot do anything without leave of court (LP(R)A 1938) - Self-help/Jervis v Harris clause:
- L can enter property and check T’s compliance with covenant
- If there is a breach, L can serve notice specifying works required to remedy breach and if T fails to carry out works, L can carry out works and recover costs from T as debt
- Avoids notice requirements of damages - Forfeiture
- L must serve s 146 notice on T (EXCEPT for non-payment of rent):
a) Specifying breach
b) Requiring breach to be remedied within a reasonable time if it is capable to remedy
c) Requiring T to pay compensation for breach
- If T does not comply with notice, L can forfeit by (a) peaceable rentry (b) court order
- If lease was for more than 7 years and has more than 3 years left, LP(R)A 1938 applies
Explain a s 25 notice under LTA 1954
Enables L to terminate a fixed-term/periodic tenancy
Notice must be served on T no more than 12 months and no less than 6 months before end of lease
T must apply to the court before the expiry of a s 25 notice to safeguard their position
Explain a s 26 notice under LTA 1954
Notice served by T to bring current tenancy to an end and request a new tenancy
Notice must state the date which T wants the new tenancy to start and proposals for tenancy
Same time limits as s 25 notice
If L wishes to oppose new tenancy, must serve a counter-notice within 2 months of being served s 26 notice, stating s 30 grounds
T must apply to court for new lease before commencement date on notice
What are the landlord’s grounds for opposing renewal of a lease under s 30?
Discretionary:
a) T’s failure to repair
b) T’s persistent delay in paying rent
c) T’s substantial breach of other obligations
e) L wants to let whole
Mandatory:
d) L has offered alternative accommodation
f) L intends to demolish/reconstruct and could not reasonably do so without obtaining possession
g) L intends to occupy for its own business/residence
If the landlord purchases the property with the tenant already in the property, cannot use ground (g) until the landlord has owned the property for 5 years ending with the expiry of the current tenancy
=> Cannot serve notice stating s 30 ground until the property has been owned by the landlord for 5 years
When is compensation available for T when L opposes renewal of a lease?
If L successfully opposes grant of new lease on grounds:
- Let as whole
- Demolish/reconstruct
- Occupy for own business/residence purposes
Amount is rateable value (unless T/predecessors of same business have been in occupation for 14 years, where it is twice the rateable value)
Any agreement excluding/restricting the payment of compensation is void if tenant has been in occupation for 5 years or more
In relation to incumbrances, what does the buyer take the property subject to?
Take the property subject to incumbrances of which they are actually aware or those which would have been discoverable on inspection
=> The buyer takes ownership subject to anything, except mortgages, that would have been revealed by searches made by a prudent buyer
What is needed for a contract of sale?
Needs to be:
- In writing
- Containing all the agreed terms
- Signed by all the parties
Usually comprise of:
a) Particulars of sale = gives a clear and concise description of the property and whether or not it is a freehold or a leasehold
b) Standard conditions of sale
c) Special conditions of sale = vary/supplement the special conditions or deal with matters specific to that transactions
Under the SCPC without amendment, what does this mean regarding the deposit?
- Deposit will be 10% of the purchase price
- To be paid by electronic means
- Held by the seller’s solicitor as a stakeholder
Use of a deposit fund in a related purchase is NOT permitted under the SCPCs (is permitted under the SCs)
Explain the effect of s 19 LTA 1927
This implies a term into a qualified covenant that consent will not be unreasonably withheld
=> It updates the qualified covenant to a fully qualified covenant
This only applies to covenants in relation to:
- Assignment/underletting
- Reversion/alterations
Explain when an ‘agreement for lease’ is useful
This is useful where there is going to be a delay between agreeing the lease and actually granting it
Relevant if the tenant only wants to enter the lease conditional on an event
- eg: acquiring planning permission
The agreed form of the lease should be attached to the agreement with an obligation that the tenant will take the lease as agreed on completion
On the grant of a lease, what is SDLT/LTT chargeable on?
For a non-residential leasehold, SDLT/LTT is chargeable on the VAT inclusive amount of the premium and rent
If the VAT inclusive amount of the premium is:
a) SDLT = less than £150,000
b) LTT = less than £225,000
Then VAT will only be charged on the rent and not the premium
What is a s 27 notice under the LTA 1954?
Notice served by the tenant on the landlord to end their fixed-term tenancy
Notice must be served at least 3 months before the date on which the tenant wishes to leave, so long as that notice does not expire beyond the contractual expiry date
How can a landlord contract a lease out of the LTA 1954?
- Give notice to the Occupier, warning them the lease is to be contracted out
- Occupier should make a declaration that they have received the notice and agree
- The lease should be granted at least 14 days after the Occupier received the notice
What principle are common law damages assessed on for late completion?
Under contractual principles:
- Putting claimant in position they would have been in had the contract been performed properly
- Losses flowing naturally from the breach as well as reasonably foreseeable consequential losses
The fact that contractual compensation has been awarded does not prevent the award of damages for extra losses
- The contractual compensation will be deducted from the damages
Who are the parties in a licence to sub/underlet and what are the key provisions of this licence?
Made between the Landlord, tenant and sub-tenant
Where the landlord gives their consent to the underletting
Key provisions are:
- The consent of the landlord to grant the underlease
- Undertenant to provide a direct covenant to observe and perform the covenants in both the headlease (apart from the covenant to pay) and the underlease
=> Creating privity of contract between HL and UT - Headtenant should pay the landlord’s costs in connection with the licence
What are the time limits for the enforcement of planning permission?
- Building works = 4 years of the works being substantially completed
- Change of use = 10 years, unless the change is used to a dwelling house in which case it is 4 years
- Breach of a condition = 10 years
- Concealed breaches = no time limit
Failure to take action in this time means that the LPA cannot take any further action in respect of the delay
What is the difference between zero-rated and exempt supplies for VAT?
Zero-rated = still taxable supplies but charged at a zero rate
- Person can still claim output VAT even when they pay no input VAT
Exempt = no VAT is due or can be reclaimed
- Eg: insurance, savings accounts, charity events, museum fees, lottery tickets etc.
What pre-contract searches and enquiries need to be made when granting a lease?
L’s solicitor should provide T’s solicitor with:
- Draft agreement to lease (if applicable)
- The draft lease
- Any relevant planning consents
- Evidence of the freehold title to the property
- Evidence of the lender’s consent to grant the lease (if applicable)
T’s solicitor should carry out usual searches and enquiries that would be done for a freehold transaction
What are the pre-completion formalities for granting a lease?
2 documents need to be prepared:
- Lease = executed by landlord
- Needs to be legal => needs to be a deed: signed, witnessed and delivered - Counterpart = executed by tenant
Need to agree apportioned amount of rent that will be due on completion
- Rent from completion to the next rent payment date
What will the landlord and tenant expect to receive on completion?
Landlord:
- Counterpart of lease
- Any premium for the grant of lease (less deposit paid on exchange)
- Apportioned sum of rent due
Tenant:
- Lease
- Certified copy of freehold title deeds (if land is unregistered)
- Certified copy of lender’s consent in granting the lease
If the parties cannot agree the term of a new lease under LTA 1954, what will the court decide?
- The lease will apply to the same premises
- The lease will be for a term of less than 15 years
- The lease will take into account any assumptions or disregards in determining the rent
- The lease will take effect 3 months after court proceedings are finally disposed of
What are the key differences for LTT?
No relief is offered for first-time buyers
Higher rates apply if the purchaser already owns a property or if they are a non-UK resident
LTT has to be paid to HMRC within 30 days of completion
Define building regulations control
Concerned with health and safety aspect of buildings as well as the materials and construction methods used
Work will be inspected by a building control officer who will issue a certificate of compliance
Failure to comply with buildings regulation control leaves one open to liability
- LPA can pursue an action within 2 years of the work being completed
