Property Practice Flashcards
What would happen if a seller mislead the buyer with answers to enquiries?
Potential misrepresentation claim
What are the pre-contract steps the solicitor needs to carry out for buyer (resi)
- Take instructions
- Investigate title of property (make sure seller entitled to sell)
- Review draft contract (seller provides a ‘pre-contract’ pack of docs
- Queries on title (usually prohibited after exhcange “requisitions”);
- Searches / surveys / enquiries
- Report results to client - pre-exchange report
- Exchange contracts (pay deposit)
What are the pre-completion steps the solicitor needs to carry out for buyer (resi)
- Ensure mortgage ready for completion
- Draft ransfer deed signed & ready for completion
- Pre-completion searches - ensuring contarct info correct and title can be reg to client
- Complete and pay over balance
What are the post completion steps for the seller and buyer’s solicitor
Seller:
1. Ensure mortgage paid and seller off titled (usually give undertaking)
Buyer:
1. Stamp duty paid
2. Buyer reg on title
3. Buyer reg on mortgage
4. Reort on title/cert of tile to lender
What is the Law Society Conveyancing Protocol?
Designed to standardise resi conveyancing. Use standard docs “TransAction” and follow set instructions.
Must used the Protocol to be part of the CQS (Law Society’s Conveyancing Quality Scheme). To be on approved list of lawyer’s resi lenders will use need to be on it.
What does it mean when a seller’s solicitor deduces title to buyer’s?
Seller’s lawyer investigates title and produces evidence of title for buyer. This is deducing title.
Who drafts the contract?
Who drafts transfer deed?
Seller’s solicitor
Buyer’s solicitor
Can solicitor act for seller and buyer?
Joint buyers?
Borrow and lender? TEST
Seller and buyer:
Acting for buyer and seller is governed by paragraph 6.2 in The Code of Conduct which states **
that, subject to certain exceptions, a solicitor cannot act for both parties if there is a conflict of interest or a significant risk of such a conflict**.
Exceptions (can act if conflict):
1. Substantially common interest DOES NOT APPLY TO PROPERTY;
2. Competition for same objective - maybe 2 buyers competing for same property? NOT BUYER AND SELLER
Joint buyers:
- yes but may need to advise seperately about equitable interests (especially if not married).
Borrower and lender:
- Yes unless conflict or sig risk:
1. High risk if not standard mortgage of private residence; or
2. Standard mortgage but not using approved certificate of title for lender
How to act for 2 parties under the ‘substantially common interest’ exception? TEST
Doesn’t apply to seller and buyer
- Informed consent of both parties
- In writing
- Effective safeguards in place to protect confidential info
- Solicitor satisfied that it is reasonable to act for both.
Etridge guidelines?
What if solicitor thinks it is glaringly obvious the wife (who is now their client has advising them) is being “grieviously wronged”?
different solicitor for husband and wife
Undue inflluence, lender can give loan if solicitor advising the spouse has done. so properly. Be provided with relevant docs from lender with consent, see wife seperately, take instructions, advise , if have instructions to inform lender she has been properly advised.
Decline to act.
1 will do - costs.
What is an undertaking, what are a solicitors duties in relation to one? TEST
An undertaking is a statement made** by or on behalf of a solicitor**, or the firm, to someone who reasonably places reliance on it, that the solicitor or firm will do something, cause something to be done, or will not do something.
Perform all undertakings and do so in agreed timsescalen (or reasonable time if not agreed). Solicitor personally liable if breach and also conduct issue.
How to advise client on costs (inc disbursements and incidental costs)? TEST
solicitor is obliged to do is to provide the client with the best possible information about the likely overall cost of their matter, at the beginning and at appropriate points
throughout the transaction.
Can solicitor advise on mortgage
Redulated activity - FSMA.
- mortgage with individual and first legal charge over prop intended least 40% occupation by borrower or immediate fam
- can give generic advice, cant arrange or advise
- s327 exemption, can carry out the regulated activity if incidental to services but must comply with the SRA Financial Services (Scope) Rules and SRA Financial Services (Conduct of Business) Rules.
- Can’t recommend client enters into reg mortgage unless just endorcing advice client received. REfer them to someoen regulated by the FCA
SDLT rates for companies and individuals.
When must SDLT be paid?
Resi freehold (relief for first time buyers):
- £250,000 = 0%
- £250,000.01 = £925k = 5%
- £925,000.01 - £1,500,00 = 10%
- £1,500,000.01 = 12%
Price on land and fixtures not chattels - take off carpets etc
Non-resi or mixed used freehold:
- £150k - 0
- up t £250k - 2%
- Over £250k - 5%
Pay in 14 days of completion - if not prop won’t be registered
Land transaction tax rates for resi and non resi.
When must it be paid?
Resi freehold (NO relief for first time buyers):
- up to £225k - 0%
- Up to £400k - 6%
- Up to £750k - 7.5%
- Up to £1.5mil - 10%
- Remainder - 12%
Non-resi or mixed:
- up to £225k - 0%
- Up to £250k - 1%
- Up to £1mil - 5%
- Exceeds £1mil - 6%
Pay in 30 days!
What is CGT taxt and when is it used in property?
Pay tax on gains made on chargeable assets. Private residential relief - when sell an individual’s dwelling house** used as only or main residence** don’t have to pay CGT. TEST:
- Occupied prop as main residence throughout ownership;
- Have more than 1 residence? Can choose which applies and make electrion to HMRC;
- Absences that are allowed:
(a) employee who live abroad or in service accom as part of jon. - If garden is bigger than 0.5 hectares excess is chargeable as CGT (unless can hsow extra is necessary for the reasonable enjoyment of the land.
- Relief lost for any part of house used exclusively as business.
Need to ask:
1. have you lived in house continually throughout ownership;
2. have you lived anywhere else aswell (other residences);
3. Is your garden over 0.5 hectares;
4. is nay of the house used as business
What is VAT? What is a taxable person? What is the VAT period? What is output and input tax?
- Tax on chargeable supplies made by taxable people in course of business
- Earning over £85k thena uto or can opt in
- 3 months
- Output - what you cahrge on your supplies. Input, this is where you pay VAT on supplies. If you are a taxable person you can deduct your input tax from your output and pay the net over to HMRC
Different types of VAT and rates?
- Standard - 20%
- Reduced - 5% e.g some construction, domestic duel supplies
- Zero rated - still taxable just at 0%
- Exempt - no VAT but supplier of land has option to tax.
Tax in property transactions
Resi:
- Newbuilds = 0 rated
- Indivudal sells to indivudal = not in course of business
Commercial:
- New freehold (up to 3 years) - standard rated
- Old freehold - option to tax
- Grant of lease - option to tax
Option to tax if company that can recover input tax from building work etc. But don’t if buyer when sell will be a ‘VAT sensitive’ buye. Often financial e.g insurer. Consider if you are in the city of london.
If VAT on building, part of SDLT consideration so “tax on tax”.
What does it mean that ‘planning permission and conditions run with the land’?
It will affect all current and future owners. Buyer needs to make sure complied with.
What is the s55 Town and County Planning Act definition of Development?
What does not constitute development?
(1) Building, engineering, mining or other operations in, on,over or under the land; OR
(2) Making material changes to the use of any building on land.
(Think - actually building or minding or changing the category of use).
What is not development:
1. Only effects the inside of the property
2. Doesn’t materially effet appearence of building - think burglar alarm;
3. Change of use to same class doesn’t count.
Whats the planning persmission situation for:
- Change of use in same class
- Change of use in different class
- Change of use between sui generis class
How long do you have to implement planning permission and what if you don’t?
- No planning permission
- Need planning permission
- Need planning permission
Usually PP will specify time to implement but usually don’t need to finish. If fon’t may lose it!
- Planning authroity may issues a completion notice if don’t think you will complete in a reasonable time and permission will cease if you don’t complete by that date. These are rare/
Sui generis = ‘class of its own’
Sui generis = adverse consquences for area, bingo hall, takeaway, pib
What doesn’t need express planning permission?
What if you don’t know if your work falls into a a GDPO?
GDPO under Town & County Planning Act. IF issue Article 4 Direction can be excluded. check for these” carried out during local searches before exchange of contract
GDPOs include, extensions of dwellings under certain size, painting house or installing CCTV.
Can apply for certificate of lawfulness of proposed use or development to confirm if in GDPO.
How does the Local Authority Agency find out if there is a breach of planning permission?
A Local planning authority can exercise right of entry or serve planning contravention notice which requires you to provide further information. May then go on to take action.
What action can the LPA take in respect of a breach of planning permission
- Enforcement notice (rectify breach)
* Serve on owner, occupier and any other person with interest
* Effective 28 days after service
* Notice will set out breach and the steps that must be taken to rectify the breach and the timescales
* Can be issued for any type of planning breach and expedient to issue notice
* Anyone with interest can appeal
* In wales, LPA can serve enforcement warning notice where breach of planning control and a reasonable prospect PP would be granted if app was made - Stop notice (stops activity for 28 days whilst above notice kicks in)
* Temp lasts 28 days
* Use in conjunction with above, not on own
* Bridges gap and suspends the activities which are in breach for 28 days whilst enforcement notice takes effect
* LPA can get injunction in rare circumstances - Breach of a condition notice (like enforcement notice but for conditions)
* Similar to enforcement notice but only used when the conditions attached to permission are brerached.
* No appeal - Injunction
* Discreionary re,edy
* Actual or anticipated rbeach of planning control
* Must show option is expedient and necessary.
Time limit for enforcement
- Operational development with no planning permission (altering the physical or functional characteristics of land or buildings e.g building, engineering, mining) - 4 years;
- Change of use to a single dwelling house - 4 years; or
- 10 years for other breaches e.g - material change of use or breach of planning permission / conditions
Can be fined for not actioning planning notice
Shortest limits are ‘normal’ development with no planning & change of sue to single dwelling. All other rebaches 10 inc breach of permission.
What are Building Regs, are they the same as Planning Control?
Relate to health and saftey - controls material, construction methods etc. Consider at the same time as planning. If don’t nee planning will still need to apply for building regulation consent. Buildign control deals with this. Once satisfied, Building Control will issue a certificate of compliance.
In some trades you can self-certify for example, plumbing, installing windows.
What are the enforcement options and time limits for a breach of building regulations? How to check that building regs have been complied with?
- Proceedings - limitation period of 2 years from completion
- Enforcement notice - within 1 year of completion to require alteration
- Injunction - no time limit fi the work is unsafe. This is why buyer’s should get a structural survey.
Compliance - carry out a CON29 search which is part of the local search and will show details of any building regulations consents and certificates granted. If no consents granted, buyer can ask the seller to obtain a regularisation certificate from the local authority. This will tell the owener what needs to happen to bring it up to scratch.
Can get insurance but usually only overs compliance and regulations costs if LPA bring a claim. NOT personal injury or business interruption caused be a defective building.
Listed building grades, what does this include?
Grade 1, Grade 2(little start) or Grade 2. Includes: building, any objct or structure fixed to building or within curtilage of building and forms part of land and has been sicne 1 July 1948.
Need Listed Buildign Consent to demolish, alter or extent (in addition to PP). Maybe even for internal alterations. Classes of development under GDPO do not apply to listed buildings so need express PP.
What is a conservaton area?
Character or appeareance of area desirable to maintain or enhance - broader than listed. Features recognised as part of character. Difficult to make changes - 6 weels notice to LPA for work to a tree.
More planning permission needed e.g for external building.
First steps of transaction?
TAKE INSTRUCTIONS! Check what has been agreed at marketing stage, check buyer has been provided with an Energy Performance Certificate. Seller must make one availible in 7 days of request and in any event within 28 days (free of charge) of marketing for sale
Investigation of title to a freehold reg land?
What is found on the official copy?
- Seller’s solicitor needs to obtain offical copies & title plan from land reg
- For seller to deduce title, needs to give buyer official copies less than 6 months old
- Buyer will find out if there are overriding interests that affect the property (searches & enquiries)
- On official copies, edition date is last date updated (probs last sale) search from date is is date of official copies
- Buyer to inspect official copies looking for any incumbrances, rights that effect the land (albeit it benefitting the land or any obligations), title defects, notices/restrictions etc
Property register
* Things benefitting property such as easements or rights, or if these come with obligations
* May show things that usually come with land like right to light or air are excluded from title
Proprietorship
* Owners/class of title:
(a) Absolute title: best clss, registered proprietor has vested title subject only to entries on register, overriding interests or if P is trustee then minor interest that have notice of (like benes under trust)
(b) Possessory title: Not based on documents, based on occupation. Lost title deeds, got property through adverse possession (which is squatters rights). Risk someone can challenge ownership as the property will be subject to any covenants or rights affecting the property. Without the title deeds you cannot know what these are.
(c) Qualified title: there is a specific defect in the title that cannot be overlooked. E.g title depended on a transaction found to be in breach of trust. Will be registered as qualified to preserve the beneficiaries interest.
* Indemnity chains
* Restrictions on owners abilities to sell (notices & restrictions (e.g for lenders)
Charges reg
- Incumbrances
- Covenants, easements, charges over land, leases, notices registered by third parties claiming an interest
How to investigate title to freehold unreg land?
How does seller deduce title?
- Check if it is registered or subject to application for first reg. Check for caution against first reg (warns of interests in land) e.g easement. Use Index Map search at the Land Registry on Form SIM with a plan of the property to check these.
- If not reg, seller provides copies of the title deeds. If Sale of whole, give over on completion. If sale of part just cert copies.
- On completion, when receive the oriignals, check they are the same as the copies - Verification of title this is called.
Deduction of title:
1. Obtain paper deeds from client (conveyances, mortgages, assents etc). Or from mortgage company
2. Find good root of title - most recent doc (pref conveyance - must be at least 15 years. Conveyance will have checked back 15 years so technically 30). Can ignore all other docs accept where root refers to third party right created in previous conveyance. Then may need conveyance as buyer is entitled to call for it as will probs be binding.
3. Create epitome of title which is schedule of all docs from and inc root until present day. COpies of docs attached.
4. Check each title deed in EoT for:
(a) Chain of ownership (no one should be missing - unbroken chain. May be dif person if someone died If so need grant of probate)
(b) Description of land - shouldnt have changed unless sale of part?
(c) Stamp duties - use to pay on conveying docs prior to Dec 2003, now pay on transaction. Used to be embossed stamp.
(d) Incumbrances - Easements usually - EXCEPTING AND RESERVING as previous owneris reserving a right, SUBJECT TO often introducing incumbrane such as obligation to pay road
(e) Execution - most need to be deeds i.e (a) be in writing; (b) clear on face its a deed; (c) signature by person granting interest and witness who attest sig and (d) delivered as a deed (“this document has been executed as a deed and has been delivered and takes effect from the date stated at the beginning”). Buyer only executes or trasnfer or reg land, co-oweners always will or indemnty. Only sign if making declaration about natue
(f) Land charge searches - some incumbrances are only binding if registered at land charge against estate owner. Most common ones:
(a) C(iv) - estate contract
(b) D(ii) - restrictive covenant
(c) D(iii) - Equitable easement
(d) F - Home right
Solicitor should therefore carry out a land charges search against every estate owner in epitome of title to see if they have and charges registered (even if ownership predates root) Search for years of ownership using K15 and if in doubt as to ownership years, search back to 1926 when land reg system introduced.Lender not estate owner! No need to search them. if someone died and personal reps give assent, neeed to seach personal reps too!!!!
Requirements for good root of title.
How to know if conveyance deals with legal & equitable interests?
s44 LPA 1925:
1. Showns who owns whole interest (legal and equitable);
2. Shows recognisable description of land;
3. Casts no doubt on sellers title; and
2. At least 15 years old
Best: conveyance or elgal mortgage (doubel guarantee - 30 years). If none, deed of gift or assent although unlikely ot have titled investigation.
Legal and equitable, look for paragraph:
‘WHEREAS’ stating that the Vendor (seller) is ‘seised of the property … for an estate in fee simple and is selling the same to the Purchaser’ (buyer). The conveyance should also state that the Vendor conveys the
land as ‘beneficial owner … unto the Purchaser.
Estate in fee simple = legal, Beneficial owner = equitable
Halsall v Brizell - the doctrine of mutual burden and benefit
This doctrine dictates that a person who wishes to take advantage of a service/facility which benefits their land must also comply with any corresponding obligation. For example, to contribute towards the cost of providing and/or maintaining the service or facility – Halsall v Brizell [1957] Ch 169.
The doctrine has two pre-conditions as set out in Thamesmead Town Ltd v Allotey (2000) 79 P & CR 557:
(i) The burden must be ‘relevant to the exercise of the rights which enable the benefit to be obtained’. There must be a clear correlation between the benefit and the linked burden; and
(ii) The covenantor’s successors in title must have the opportunity to elect whether to take the benefit (and accept the related burden) or to renounce it (and escape the related burden).
This is not a direct method of enforcement of a positive covenant. It enables the owner of the benefited land to prevent the exercise of the rights if the costs of maintenance have not been paid.
Issues that may be revealed on investigation of title - easements and mines and minerals exceptions.
- Easements
* Halsall v Brizell, any contributions? Have these been paid? Is the easement sufficient for needs? - Mines and minerals exceptions and reservations
* Excepted/reserved mines and minerals:“There is excepted from the registration the mines and minerals underneath the property together with ancillary powers of working thereof.” Not just taking minerals but can also come onto land to take them. Property register in reg land, coneyance itself in unreg.
* Exception means seller does not own mine sor minerals and cannot transfer them, encroachment onto them will be trespass.
* Enquiries:May indicate mining in area so enquiries should be made about ground stabiiltity and subsidence
* All interests in coal are now vested in Coal Authority. Check Index Map search (reg or unreg) to see if the mines and minerals are registered under a different title. If so you can identify the owner of the mines and minerals to see if there are any associated rights.
Issues that may be revealed on investigation of title - declarations as to rights of air and light
- Declarations as to rights of light and air
Sometimes a landowner will sell off a part of their land (‘Part A’) and retain the other part (‘Part B’) for their own purposes. In order to preserve the right to develop Part B in the future, they may have declared in the transfer of Part A that Part A does not enjoy the benefit of any rights of light and air over Part B.
Enquiries: enquiries about the extent and location of the adjoining land owned by the Vendor should be made and the buyer will need to be informed and asked whether this reservation of rights to light and air causes concern given the likelyhood of development.
Issues that may be revealed on investigation of title - declarations as to co-ownership
3.Co-ownership
In registered land, it can be assumed that the equitable interest is held as a joint tenancy unless a restriction appears in the Proprietorship register in the following terms:
RESTRICTION: No disposition by a sole proprietor of the registered estate (except
a trust corporation) under which capital money arises is to be registered unless
authorised by an order of the court.
* In unregistered land, the conveyance to joint buyers will state whether the equitable interest is to be held as joint tenants or tenants in common
* If joint owners, but being sold by one, find out why. Are they dead? Seek death certificate.
* In registered land, the buyer can assume that the equitable joint tenancy was not ‘severed’ (turned into a tenancy in common) prior to the death of the deceased co-owner in the absence of the restriction in the Proprietorship register.
* Presume not severd in unreg if three conditions of Law of Proprty Joint Tenancts Act met:
(1) No written record of severance on conveyance to joint tenants
(2) No bankruptcy proceedings registered against either tenant at Land Charges Registry
(3) Trasnfer by surviving joint owner contains a stateemnt saying that the survivor is soley and beneficailly entiled
* if co ownership was Tenants in Common will need second trustee appointed to overeach interest. Provided the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of it. Obvs not needed with joint tenants as suvivorship.
* Or deceased co owners interst may have passed to co owener through will or intestacy. Prove by showing certifed copies of grant of probate nd assent from PRS to sruvivor.
Issues that may be revealed on investigation of title - restrictive & pos covs, unknown covs, mortgages
- Restrictive covs
* Unreg land, post 1925 only binding if registered as Land Charge D(ii) against name of OG covenantor
* ASk person who owns cov for release
* Restrictive cov insurance (only if they don’t know)
* Apply to** Upper Tribunal (Lands Chamber)** obselete or no practical benefit of substantial value (or is contrary to public interest). May not be quick or cost effective. - Pos covs
Chain of indemnity, will need to give equivalent indemnity. buyer will be liable to the seller in contract if they do not observe and perform the positive covenant. Provision for this must be made in the contract - Unknown covs
* Sometimes a property is subject to covenants, but the nature of those covenants and the wording of them is unknown. Often this is because they were contained in an earlier deed which has since been lost. Will be clear in reg land that deets not availible on first reg.In unreg may be clear on face.
* Safeest to assume covs are restrictive and willl be binding. Consider factors for deadling with problematic restrictive covs like insurance. The seller should take care to disclose this defect in title in the contract so that the buyer cannot object to it and use it as a reason not to complete the purchase - Mortgages
* In unregistered land, a mortgage will appear as one of the title deeds listed in the epitome of title. A buyer will only be concerned with a mortgage that has not been discharged (paid off): a mortgage that has been discharged will have, usually on the back page, a ‘vacating receipt’ in the following terms: R E C E I P T
NATIONAL MIDLAND BANK LIMITED hereby acknowledges to have received from [THE BORROWER] all monies intended to be secured by the written deed.
* I fmortgage on prop buyer will want this discharged upon completion, check contract states it will be and get undetaking that solicitor will discharge
Issues that may be revealed on investigation of title - leases, Notices (reg) and home rights
- Leases
* The existence of a lease will be a problem to a buyer who is expecting the property to be sold with vacant possession
* Over 7 years needs to be reg in reg land or trasnfer of prevously unreg lease with more than 7 years left. However, also third party itnerest that should be reg agains landlord title (notices in charge reg of landlord). Protected and will appear as notices in Charge reg, If they are so protected by the date when the transfer of the property to the buyer is registered, they will bind the buyer. If a lease for a term of more than seven years is not so registered, it will not bind the buyer - may be overriding interest if in occupation.
* Look at land manual for rules on overriding interests
* In unregistered land, a legal lease (other than a parol lease for three years or less) will have been created by deed and should be one of the title deeds scheduled in the epitome of title - Notices
* Only reg land.
* A notice is an entry in the Charges register in respect of the burden of an interest affecting a
registered estate or charge.
* Can be agreed or unilateral
* Entry of notice does not mean it is valid! Notice itself gives no rights - just warning
* Ask seller what it is, make seller deal with it. Get seller to get noticed cancelled with Land Reg - Home Rights
* statutory right created under the Family Law Act 1996 for a non-owning spouse or civil partner to occupy the matrimonial home.
* NOT AN INTEREST IN LAND
* Will bind buyer if protected by notice in cahrges reg or Class F land charge in unreg
* If home right, seller should obtain from the non-owner occupier a release of all rights in property and agreement to vacate prior to completion. Dealt with in contract.
Searches and equiries relevant to every party?
- Survery
- Local search (only prop itself and not the adjoining land. If like the view of a field opposite make specific enquiries about development)
* Local land charges search (LLC1) - planning consent, tree pres orders, conservation orders, restrcitions on land by local authority
* Standard enquiries of local authority (CON29) - planning permission, art 4 direction,liability for roab repair and land contamination
* Optional enquiries (CON290) - more depending where house is, environmental / pollution notices, rights over commmon land - Water & drainage
* Usually water company
* Liability for maintaining drains and sewers
* If not connected to public sewer will have to maintain at own cost - Pre-contract enquiries to seller
* any disputes
* Compliance with covs
* Planning permissions - Environmental searches
* Cost implications of cleanng contmainated sites
* Desktop survey (is prop at risk), if yes then physical survery. Maybe get insurance - Flood search
* Prop close to river / coady
* Surfact level flooding
* If risk identified then get specific report (like environmental above)
* Insurance?
Searches and equiries relevant to only some parties?
- Chanel repair searches
- The owners of certain properties in a Church of England parish where there has been a medieval church with a vicar could be liable to pay the cost of repairing the chancel of the parish church.
- used to be overriding but not anymore (October 2013 lost), binds buyer if the previous trasnfer was pre oct 13 (reg prop)
- Non reg: binding if mentioned in title needs or protected by caution lodge before first reg. Consider the registration gap it can be lodge after completion prior to the first reg being registered.
- Insurance - Mining searches
- All prop in coal mining area
- You can check if the property is in a coal mining area by lookng at Coal Authority’s interactive map viewer
- A coal mining search of the Coal Authority, on a** CON29M form**, will confirm if the property is in an area
where mining has taken place in the past or is likely to take place in the future
- Subsidence? If paid once may not pay out again - Canal and river trust search
- If the property is adjacent to a river or a canal, the buyer needs to be made aware of any liability for repairs to the maintenance of the waterways, banks and tow paths, as well as whether the property has been affected by flooding in the past. ASk canal and river trust. - Commons search
- common rights - Railways
- Maintain boundry features?
- Can’t carry out certain work near line?
- ASk seller can’t ask netowrk rail - Highways
- The replies to enquiry 2 of the CON29 form in the local search will provide certain information
about the roads adjoining the property but not verges and pave,ents - Unreg land searches
- An Index Map Search (‘SIM’) and a Land Charges Department search against the seller and
previous estate owners will be necessary in any purchase of unregistered land - Co Search
- Where the seller is a company, the buyer’s solicitor should carry out a company search at
Companies House. This will confirm whether the seller has the capacity to enter into the
contract, confirm the identity of the current officers of the company (to check the documents
are signed by the right people) and to see if there are any fixed or floating charges secured
on the property that will need to be discharged on completion. Repeat just before completion for solvency checks.
Where the property is unregistered land, company searches should also be carried out
against any corporate estate owners revealed in the epitome of title
- Bankruptcy/insolvency search
A solicitor acting for a lender should make a search against the borrower (who may also be their buyer client) to ensure that there are no bankruptcy or insolvency proceedings affecting them. Just before completiom and sometimes before exchange. Individual K16 at land charges department in plymouth. If co, co search
What are open contract rules?
Implied terms:
- The Standard Conditions of Sale (5th edition – 2018 Revision) (residential transactions and some simple commercial transactions, for example those involving properties which are empty, )
with a straightforward title and a relatively low price - The Standard Commercial Property Conditions (3rd edition – 2018 Revision) - more provs for management of occupational leases
Parts of the SC/CP
- Front page - particulars 9heck against proprioter reg or title deeds for unreg)
- Standard conditions, part 1 apply auto but part 2 only applies if included (shorter)
- Back is special conditions
How to define the property in reg and unreg land on part 1 of the contract for sale?
Is it necessary to specify in the contract all the burdens on the property?
Reg = class & title e.g LM6042 (Absolute title)
Unreg = root: “56 Blackhorse Drive, Dorking, Surrey RH4 5JS more particularly delineated and edged red on a plan annexed to a Conveyance dated 25 May 1955 between (1) Mark Phillip and (2) Simon Andrew (“The Conveyance”)
Yes under “specified incumbrances” e.g restrictive covs. If these are not specified, the seller could be in breach of SC 3.1.1, which says that the seller sells free of all incumbrances other than those specified in the contract or of a type listed in SC 3.1.2. The SCPCs have equivalent
conditions in SCPC 4.1.1 and SCPC 4.1.2. Non-disclosure of an incumbrance burdening the property might result in the buyer having a right to rescind the contract and/or claim damages.
Some solicitors don’t class positive covs as incumbranes as don’t run with land. Mortgage not included as will be discharged.
What are the 3 title guarantees a seller can sell with and what do they mean?
Full title guarantee - more implied covs, seller will be impliedly covenanting in the transfer of the property that:
- They have the right to dispose of the land
- They will do all they reasonably can to transfer the title
- In the case of leasehold land, the lease is subsisting at the time of disposal and there is no breach of covenant making the lease liable to forfeiture.
- land is disposed free from incumbrances other than those the seller does not know about and could not reasonably know about. Law Prop Misc act limits scope (limits ones buyer knows about., and matters entered on rigsiters of title).
Limited title guarantee - usually trustees or personal reps
the seller has not incumbered the property and is not aware that anyone else has done so since the last disposition for value (so a seller who purchased the land for value will only be covenanting that incumbrances have not been created since they acquired the property)
- No title guarantee
Right to dispose, all reasonably can to transfer, lease subsisting and no breach for forfeiture, no incumbranes other than what seller knows or should reasonably know about
What is the Law Society’s interest rate? What is stakeholder/agent, % of deposit? How to pay for deposit for each contract?
4% above base rate, if the parties are happy to use this rate, it is not
necessary to fill in the gap on the front page of the contract.
Stakeholder = can’t hand over until completion (deposit), accept SC lets the solicitor hand over as a deposit on another house.
Agent = This means that the deposit can be released to the seller
immediately after exchange and can be used by the seller for any purpose whatsoever.
Deposit 10% for both
Ho wto pay for SC:
1. Cheque drawn down on lawyers client account; or
2. Electronic.
How to pay for SCPC?
1. Electronic only
Common special conditions?
- whether the sale includes any contents or excludes any fixtures (special condition 3)
- whether the property is to be sold with vacant possession or subject to leases or tenancies (special condition 4).
- 5 will only be relevant where the time for completion has been altered by agreement and should be deleted if the parties have agreed that completion should take place by 2pm on the agreed day
Others to consider including in written
- the appointment of a second trustee for the purposes of the transfer (see 2.5.4)
- arranging for the seller to obtain or pay for a restrictive covenant insurance policy (see 2.5.5)
- disclosing a defect in title (eg see 2.5.7)
- the seller selling with limited or no title guarantee (see 4.4.2 above)
- a deposit of less than 10% and/or for the deposit to be held as agent rather than stakeholder (see 4.4.4 above)
- the payment of VAT (see 4.4.7 below)
- the removal of fixtures by the seller (see example below)
- the inclusion of an indemnity covenant in the transfer to protect the seller from liability once they have lost physical possession of the property (see 2.5.6). (this is covered by SC 4.6.4 there is no need to expressly
insert a special condition )
SC 5 and SCPC 8 provide that the seller is under no obligation to insure a freehold property unless required to do so by a special condition (after exchange)!. Where there are two policies in place on the same
property, there is a danger that when a claim is made, the buyer’s insurer will reduce the proceeds because another policy exists. SC 5.1.5 and SCPC 8.2.4(b) therefore provide that if this happens and the buyer is unable to recover the full amount of the proceeds, the purchase price is reduced accordingly
VAT?
Why contract terms to use for VAT in SC / SCPC?
SC: VAT is not normally chargeable in residential transactions. The seller’s
solicitor will usually choose to incorporate the SC, which provide in SC 1.4 that the purchase price and the contents price are inclusive of any VAT (because it is expected that no VAT will be charged or paid).
SCPC:
- Price exc VAT so VAT will be added on top - if new commercial building or old opting to tax etc
- Price inc VAT and can’t add on top - e.g old commerical no opt to tax (this is risk for seller - what if law changes and they need to now charge VAT but can’t?_
* 3. The purchase price is exclusive of VAT, so VAT can be added on top in the unlikely event that the law changes to make an exempt supply chargeable at the standard rate, but the seller is contractually obliged not to opt to tax. If building is not standard rated (e.g old commericial and does not opt to ta)
After valuation and lender happy house is good security for loan, what will they send?
What does lender need to satsify themselves?
Do solicitors in commericla also act for lender?
Resi: Mortgage offer
Commercial: Commitment letter with a term sheet attached followed by a facility agreement containing the detailed terms of the lending arrangement.
- Lender is creditworthy
- Property is good secuirty for loan
Some mortgages can be pulled after exchange!!!!
Mortgages are legal if made by deed and completed by registration. This is important to a lender as a mortgage made by deed
has implied into it a power of sale under s 101 of the Law of Property Act 1925, although a
mortgage deed will usually have an express power.
No not usually but even where the lender is separately represented, it is common for the buyer’s solicitor to report to the lender on the results of the title investigation and the pre-contract searches and enquiries. The lender needs to know the borrower will have good title to the property just as much as the buyer, because it wants to know it can sell the property in the future if it needs to enforce the security. The buyer’s solicitor will be asked to **prepare a certificate of title **to disclose to the lender any problems with the property. Why says that the property has good and marketable title. Resi, form approved by Law Society and UK Finance. In commcerical use Certificate of title produced by City of London Law Society.
Should a conflict of interest or instructions
arise between the instructions of the buyer and the requirements of the lender the solicitor
will be unable to proceed to purchase using the mortgage lender’s funds until the conflict of
interest is resolved to the lender’s satisfaction
What can sign contract electronically?
Both solicitors need to ensure that their client has signed their copy of the contract.
In many cases a client will sign in ‘wet ink’, although a 2019 Law Commission report concluded that an electronic signature can lawfully be used to execute a document provided:
- the person signing the document intends to authenticate it; and
- any execution formalities are satisfied.
A solicitor can sign the contract on their client’s behalf if they have the client’s express authority to do so.
