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SQE - FLK1 > Property Practice > Flashcards

Property Practice Flashcards

1
Q

When does a legally binding agreement to transfer an interest in land arise?

A

Once contracts are EXCHANGED, neither party can withdraw without incurring liability for breach of contract

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2
Q

What are the usual terms of the buyer’s deposit on exchange of contracts?

A
  1. 10% of the purchase price
  2. Paid to buyer’s solicitor’s client account in cleared funds
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3
Q

What key documents do the seller (3) and buyer’s solicitors (2) respectively prepare?

A

Seller: (1) Sale contract (2) Proof of mortgage discharge (3) completion statement

Buyer: (1) Purchase deed (2) Mortgage deed

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4
Q

What are two situations where a solicitor’s acting for both lender and borrower may raise an issue of conflict?

A

Facts about B’s financial position or issues with the underlying title come to light and B is not willing to disclose these

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5
Q

3 precautions to take when advising a couple that is mortgaging their jointly held house?

A
  1. Advise wife to take independent legal advice
  2. In the husband’s absence
  3. Ask independent solicitor to produce an Etridge letter to the bank’s solicitor (advising on nature and consequences of the mortgage)
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6
Q

What are two risks associated with a true contract race?

A
  1. Seller’s solicitor must inform all buyers immediately of the seller’s intention to enter into a contract race
  2. One or all prospective buyers may withdraw from the transaction to avoid the risk that the property may be sold to someone else
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7
Q

3 precautions to note when giving a solicitor’s undertaking?

A
  1. Should state agreed timescale (otherwise default is a reasonable time)
  2. Only give on matters within your control
  3. Obtain client’s written express and irrevocable authority
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8
Q

What is a mortgage guarantee policy? Who pays?

A

If: (1) B defaults and (2) L repossesses and sells the property, the policy will pay any shortfall to the lender

B usually pays (especially if LTV is high)

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9
Q

What is an offset mortgage?

A

Interest on B’s savings account with L is OFFSET AGAINST LOAN so that B pays less interest while retaining liquidity

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10
Q

What is the main disadvantage of a repayment mortgage?

A

Monthly payments usually higher than interest-only mortgage because they include both capital and interest

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11
Q

What are the two disadvantages of an endowment mortgage?

A
  1. Risk that the endowment benefit may not be enough to pay off the full loan
  2. Monthly payments may be higher than repayment mortgage due to the insurance premiums
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12
Q

What is the main difference between RICS Level 1 surveys, and the Level 2 and 3 surveys?

A

RICS Level 1 survey is limited to VISIBLE SERVICES and EVIDENT SIGNIFICANT DEFACTS, and will not identify repair or maintenance issues

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13
Q

When is VAT payable on residential or commercial property transactions?

A

Generally NOT payable, but owner may opt to tax by serving: (1) written notice on HMRC; (2) within 30 days of waiving the exemption; (3) making all subsequent supplies VAT-chargeable.

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14
Q

When can a VAT option to tax be revoked?

A

Cannot be revoked for 20 years

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15
Q

When will rent paid under a commercial lease be VAT-inclusive?

A

Only where: (1) lessor waives exemption BEFORE granting lease; and (2) the lease is silent on this.

If lessor waives exemption AFTER lease is granted, VAT will be payable in addition to rent

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16
Q

Assuming the owner has not waived exemption, when does the sale of a commercial property become a VAT-chargeable supply?

A

Sale of a freehold commercial property under 3 years old at the time of the sale.

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17
Q

What must a seller of residential property take note of if he wants to charge VAT on the sale price?

A

Must add SPECIAL CONDITION as the SCS provide that the price is inclusive of VAT even where seller waives exemption between exchange and completion

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18
Q

What is the general position on VAT in the CSC?

A

That the purchase is VAT-exclusive where: (1) Seller warrants that property is a chargeable supply and (2) Buyer will pay VAT to seller on completion once a VAT invoice is received

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19
Q

When is the date of disposal of a property for CGT purposes?

A

When contracts are exchanged

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20
Q

4 deductions the seller may make on any CGT-chargeable gain?

A
  1. Costs of acquisition
  2. Costs of alterations and improvements
  3. Costs of the sale
  4. Annual exempt allowance
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21
Q

Deadline for CGT on residential property?

A

2 months of disposal completion date

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22
Q

When does a transfer of land not count as a disposal for CGT purposes?

A

RULE OF 20:
1. Price is 20,000 or less
2. Proceeds are less than 20% of land’s total value
3. Total proceeds of all land disposals in the same year are < 20,000

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23
Q

Describe Principal Private Residence relief.

A

No CGT liability incurrred if:
1. Sale is of individual’s principal private dwelling house
2. Together with grounds or a garden of up to half a hectare

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24
Q

How is Principal Private Residence relief treated when a seller has multiple homes?

A
  1. Seller must nominate his main residence
  2. Within 2 years of the date on which he first had the particular combination of residences
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25
Q

2 situations when will PPR relief be reduced?

A
  1. Seller has not lived in the dwelling house as his only or main residence throughout the whole period of ownership
  2. Any part of the dwelling house was used exclusively for business purposes
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26
Q

In assessing a seller’s PPR entitlement, what five periods of ownership may be disregarded?

A
  1. Last 9 months (always qualifies for relief)
  2. First 12 months if not occupied because they were unable to sell their old home or needed to carry out refurbishment
  3. Temporary periods of absence < 3 years in total
  4. Working outside the UK as an employee
  5. Periods under 4 years during which Seller was prevented from residence because of his conditions of employment
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27
Q

What is lettings relief?

A

When a property qualifying for PPR relief was let out as residential accommodation with shared occupation, the owner will get:
1. PPR relief during the ownership period when it was owner’s main residence + 9 months
2. Additional lettings relief capped at the lower of the existing PPR and 40,000

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28
Q

How is PPR treated between spouses or civil partners?

A

If they are not separated, couple can have only one main residence between them. Must nominate jointly beginning from the date of marriage or registration as civil partners

A separate couple may have different main residences and separate PPR

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29
Q

When, how and why must SDLT be paid?

A
  1. Within 14 days of substantial completion
  2. Notify transaction to HMRC using SDLT1, then wait for HMRC to issue SDLT5
  3. HMLR will not accept an application to register title without SDLT5
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30
Q

What 4 categories of property transactions do NOT attract SDLT?

A
  1. Freehold transactions with total chargeable consideration < 40,000 GBP
  2. Gratuitous transactions where no money or other type of payment changes hands
  3. Grant or assignment of a lease < 7 years where the consideration is below the relevant SDLT threshold
  4. Grant or assignment of a lease > 7 years where the premium is < 40,000 and the annual rent is < 1,000
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31
Q

How do you calculate the chargeable consideration on a property transaction?

A

Must include:
1. Both monetary and non-monetary payment (e.g. including commitment to do work or services) for the land and fixtures
2. VAT

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32
Q

Assumption of liability for existing debt is chargeable consideration for SDLT. What conclusion follows from this proposition?

A

If equity in a mortgaged property is transferred between owners, the chargeable consideration is calculated on the amount of mortgage assumed by the new owner

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33
Q

What is the tax-free allowance for SDLT purposes?

A

Purchase price up to 250,000 GBP

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34
Q

What is the extent of SDLT first-time buyer relief?

A

0% up to 425,000
5% on the portion from 425,000 to 625,000

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35
Q

What is the scope and extent of ABSD?

A

Scope - transaction results in buyer (or buyer’s spouse - even if registered in one spouse’s name) having more than one residential property anywhere in the world

Extent - 3% on top of standard rates for any subsequent additional property UNLESS their share is worth < 40,000 GBP

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36
Q

What is the deadline for paying Land Transaction Tax for land in Wales?

A

30 days of substantial completion

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37
Q

Two differences between LTT and SDLT for purchase of residential properties?

A
  1. The LTT tax-free band is only for properties up to 225,000 GBP (not 250,000)
  2. There is no first-time buyer’s relief from GTT
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38
Q

Who bears the obligation to deduce title and for registered land, what accompanying obligations does this entail?

A

The Seller.

Seller’s solicitor must send proof of Seller’s title comprising: (1) official copy of the Register (2) title plan and (3) all official filed documents (i.e. all registered docs affecting title)

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39
Q

When is title officially deduced under the LawSoc Conveyancing Protocol?

A

When the seller’s solicitor sends the CONTRACT BUNDLE to the buyer’s solicitor

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40
Q

In unregistered land, what is the complication when obtaining the documents needed to deduce title? How is this usually addressed?

A

Mortgagee usually holds the title deeds and documents.

Seller’s solicitor will provide undertaking to: (1) hold title deeds to lender’s order (2) return them on demand and (3) not release them until the mortgage is redeemed

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41
Q

What is the Epitome of Title? What is its purpose?

A

A CHRONOLOGICAL LIST of all the deeds and documents which comprise the Seller’s title, together with PHOTOCOPIES of each document referred to in the Epitome

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42
Q

What 3 documents must be provided in order to deduce title in unregistered land? What documents are not required?

A
  1. Land Charges search results against the seller and any other appropriate names
  2. Official copy of index map
  3. Epitome of Title

Pre-root documents and expired leases generally need not be included.

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43
Q

What is the ideal root of title and why?

A

Either a CONVEYANCE ON SALE or a CHARGE (MORTGAGE), as the seller’s solicitor at the time would have investigated the title going back at least 15 YEARS from when the current seller purchased the land

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44
Q

What document will be a poor root of title and why?

A

Any deed where the land was transferred for LITTLE OR NO VALUE, as the solicitors acting for the new owner will not usually have investigated the title properly

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45
Q

4 criteria for a good root of title?

A
  1. At least 15 YEARS OLD at the date of exchange
  2. Deal with the WHOLE LEGAL AND EQUITABLE OWNERSHIP
  3. Contain an ADEQUATE PROPERTY DESCRIPTION
  4. Nothing that CASTS DOUBT on the title
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46
Q

What are 3 exceptional cases where pre-Root documents need to be included in the Epitome of title?

A
  1. POA under which any deed was executed
  2. Where the property is sold subject to any right created pre-Root
  3. Any document creating a limitation or trust by which the property is disposed of
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47
Q

What are the two purposes of the buyer’s investigation of title? How does the buyer accomplish this?

A

Ensure
1. Good and marketable title
2. Free from unknown or unacceptable encumbrances

By performing REQUISITIONS on title and conducting PRE-CONTRACT ENQUIRIES

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48
Q

What is the general rule surrounding timing of requisitions on title?

A

Must be raised BEFORE EXCHANGE - requisitions cannot be raised if the title that included the defect was deduced prior to exchange

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49
Q

What 3 formalities does buyer’s solicitor need to pay special attention to when investigating title?

A
  1. All documents PASSING TITLE must be properly executed as DEEDS
  2. Confirm that no event triggering compulsory registration has occurred - otherwise must insist that Seller becomes RP
  3. Properly delivered to and stamped by the Revenue
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50
Q

What are the two exceptional circumstances where a BUYER of property needs to execute the deed of transfer?

A
  1. Buyer is entering into obligations
  2. Buyer is a co-owner declaring a trust
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51
Q

What is the effect of failing to register an interest as a Land Charge over unregistered land?

A

Will not bind a BFP for value unless it is an overriding legal interest

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52
Q

What 2 documents must buyer request with respect to seller’s existing mortgage, on completion?

A
  1. Solicitor’s undertaking to redeem the charges and provide evidence of discharge on or before completion
  2. Provide a vacating receipt endorsed by the lender on the original mortgage deed
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53
Q

How can the buyer’s solicitor determine if a joint tenancy over an unregistered property has previously been severed?

A

LP(JT) provides that a surviving JT will automatically be assumed to be solely and beneficially entitled to transfer the property where:
1. The Conveyance states that the survivor is the beneficial owner
2. No memorandum of severance has been endorsed on the Conveyance transferring the property to the surviving JT
3. Neither JT has been declared bankrupt based on a Land Charges search

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54
Q

How should the buyer’s solicitor deal with a property held as a tenancy in common (e.g. because there is a memorandum of severance endorsed on the Conveyance to Sellers)?

A

Ensure a SECOND TRUSTEE is appointed to ensure that any beneficial interests will be overreached on completion

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55
Q

What is the risk for the buyer when purchasing a property owned only by one spouse?

A

That the non-owning spouse will register his/her right against the matrimonial home before completion - this right cannot be removed by overreaching.

Make the spouse sign SPECIAL CONDITION 7 confirming that they: (1) will vacate the property on completion (2) consent to the sale and (3) will release the property from any interest they have registered against it

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56
Q

What documents must a buyer’s solicitor request when purchasing property from the PR of a deceased person?

A
  1. Certified copy of the Grant of Representation (Grant of Probate or Grant of Letters of Administration)
  2. Assent of registered title transferring the legal estate from the PRs to the beneficiaries (
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57
Q

3 situations where an assent of property would not be appropriate? How should this be dealt with?

A
  1. Only part of the property was transferred
  2. Property no longer registered in the deceased’s name (was already transferred to executors or trustees)
  3. Transfer involved consideration

A transfer deed must be used instead (TR1 or TP1).

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58
Q

What special rule applies to a sale by a PR?

A

If a Grant of Representation appoints a sole PR, he can give a valid receipt of capital monies and thereby overreach the beneficial interests

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59
Q

What precaution must be taken by the buyer when the current or past owner of the property is in breach of a restrictive covenant?

A
  1. Ask seller to RECTIFY breach OR
  2. If rectification not possible, insist that the seller provides INDEMNITY INSURANCE on completion and insert special condition that seller either pays premium or buyer receives an allowance for the premium on completion OR
  3. Ask seller to obtain a WAIVER OR CONSENT from the covenantee in the form of a deed
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60
Q

How can sellers ensure that positive covenants continue to new owners?

A
  1. Use a TITLE RESTRICTION to ensure a NEW COVENANT is obtained from the buyer, permitting direct enforcement against new owner
  2. Secure an INDEMNITY COVENANT from the buyer
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61
Q

What is the most prominent exception to the principle of caveat emptor?

A

Seller warrants that there are no latent defects of title (i.e. unascertainable through visual examination).

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62
Q

What is the difference between the Leasehold Property Enquiries Form and the Buyers Leasehold Information Summary Form?

A
  1. Leasehold Property Enquiries Form is to elicit detailed information about the leasehold property
  2. Buyers Leasehold Information Summary Form is to summarise the main expenses associated with the leasehold property
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63
Q

What is the main difference between pre-contract searches and HMLR searches?

A

Pre-contract searches do not have a priority period. To mitigate the risk that new entries will be made after the search is performed, pre-contract searches must be NO MORE THAN SIX MONTHS OLD at completion

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64
Q

Under the SCS, when does risk in the property pass to the buyer? Implication of this?

A

On exchange of contracts.

Buyer must still complete the purchase when it is damaged or destroyed between exchange and completioon, and should therefore insure the property from exchange onwards.

65
Q

In the event the seller is exceptionally obliged to insure the property even after exchange, what 2 associated obligations does this entail for the seller? What about the buyer?

A
  1. Maintain policy until completion and allow buyer to inspect the terms of the insurance policy
  2. To transfer any insurance payment (or assign any right to such payment) to the buyer if property is damaged between exchange and completion

Buyer must pay Seller a PROPORTIONATE part of the premium paid between exchange and completion

66
Q

What do the SCS and CSC state with respect to incumbrances?

A

The Seller sells the property FREE FROM ALL INCUMBRANCES other than those listed in the contract (so if the property is subject to any incumbrances not covered by the conditions, this is a breach of contract by the Sellers)

67
Q

3 provisions with respect to timing of completion under the SCS / CSC?

A
  1. Latest completion time is 2 PM on the day of completion
  2. Time is NOT OF THE ESSENCE unless: (i) notice to complete is served or (ii) seller adds a special condition
  3. If no completion date is provided, the completion will be 20 WORKING DAYS AFTER EXCHANGE
68
Q

What is included in the “purchase price” for SDLT and deposit calculation purposes?

A

Amount payable for LAND and FIXTURES (excludes prices of fittings)

69
Q

How is the buyer’s deposit usually held under the SCS, once paid? Any exceptions?

A

By seller’s solicitor as STAKEHOLDER - the deposit and any INTEREST on it can only be released on completion unless there is a chain transaction.

Chain transaction - Seller may use buyer’s deposit to fund the deposit on his new purchase, without the buyer’s consent

70
Q

Why is it rare for the buyer to pay the deposit to seller’s solicitor as agent?

A

It can be paid over to the Seller immediately, exposing B to insolvency risk, etc.

71
Q

What 3 covenants for title are implied where the Seller gives a full title guarantee?

A
  1. Seller has the RIGHT TO DISPOSE of the property
  2. Seller will do ALL HE REASONABLY CAN AT HIS OWN COST to overcome any PROBLEMS OR DEFECTS IN TITLE that prevent B from being registered with the same type of title S had before completion
  3. Property is sold FREE FROM INCUMBRANCES, CHARGES AND OTHER 3P RIGHTS save for those S does not and could not reasonably be expected to know about and those referred to in the contract
72
Q

What is the main difference where Seller sells with limited title guarantee?

A

Seller does not promise to sell free from known incumbrances. Instead, S promises that: (1) since the last disposition for value (2) he has not personall incumbered the land in any way and (3) is not aware of anyone else having incumbered the land

73
Q

What is the main difference in the treatment of fixtures vs fittings in the SCS?

A

Seller must not remove fixtures between exchange and completion. Seller MUST remove fittings on or before completion.

Special conditions needed to modify this posiiton.

74
Q

Two precautions buyer’s solicitor should take to ensure buyer is not inadvertently bound by someone’s occupation rights?

A
  1. Make any non-owning spouse or civil partner party to the contract
  2. Ensure purchase price is paid to at least two trustees (or a sole PR or trust corporation) to overreach any beneficial interests
75
Q

3 checklist items for Seller’s solicitor prior to exchange of contracts?

A
  1. Arrange for redemption statements by existing mortgagees
  2. Synchronise chain transactions by ensuring that sale completes prior to any subsequent purchase
  3. Obtain signed authority from client before exchange
76
Q

3 checklist items for Buyer’s solicitor prior to exchange of contracts?

A
  1. Complete all TITLE INVESTIGATION (including searches, enquiries and survey) and send client REPORT ON TITLE
  2. Confirm that MORTGAGE ARRANGEMENTS will be sufficient to puchase property on completion
  3. Receive deposit amount in CLEARED FUNDS before exchanging contracts
77
Q

What are the three methods of exchanging a contract?

A
  1. In person
  2. By post
  3. By telephone
78
Q

When will an exchange of contracts by post be completed?

A

Postal rule: when the seller’s solicitor posts the seller’s signed part of the contract

79
Q

What are the 3 final steps when solicitors exchange contracts by telephone?

A
  1. Agree completion date and time
  2. Insert date and time of exchange
  3. Prepare a file memorandum that records the details of exchange
80
Q

What is the defining feature of Formula A? Any relevant undertakings?

A

Seller’s solicitor holds both the buyer and seller’s signed part contracts and is responsible for dating the documents

  1. S undertakes to send S’ part-signed contract to buyer that same day
  2. B undertakes to forward cheque for deposit, if not previously sent
81
Q

What is the defining feature of Formula B? Any relevant undertakings?

A

Each solicitor holds their clients own signed part-contract and respectively date that part when exchange is agreed.

  1. Each party undertakes to send their client’s part contract to the other that same day
  2. B undertakes to forward cheque for deposit, if not previously sent
82
Q

What is the defining feature of Formula C?

A

Used for chain transactions to synchronise the two related sales and purchases.

83
Q

The contract becomes binding on exchange. What are 2 implications for the seller?

A
  1. Seller holds legal interest on trust for Buyer as beneficial owner
  2. S has duty to take reasonable care of the property and will be liable for negligent damage UNLESS buyer wants to occupy property prior to completion
84
Q

How do you protect an estate contract in unregistered and registered land?

A

Unregistered land - register Class C(iv) Land Charge

Registered land - agreed or unilateral notice

85
Q

What is the main risk for the seller if the buyer requests to occupy the property before completion?

A

Court order will be needed to evict a residential occupier, even if he is only occupying as a licensee

86
Q

What is the effect on a transaction if the Seller dies between exchange and completion?

A

Contract remains enforceable against the surviving co-owner and/or the PRs of the deceased (in the latter case, a Grant of Representation will be needed)

87
Q

What is the effect on a transaction if the Buyer dies between exchange and completion (2 points)?

A
  1. The surviving co-buyer and/or the PRs of the deceased have a contractual duty to complete the purchase.
  2. Mortgage offer usually will be withdrawn or at least amended - likely to result in failure of transaction and an action for breach of contract
88
Q

What 2 outcomes are likely to follow if B becomes bankrupt between exchange and completion? What can Seller do to speed things up?

A
  1. TiB likely will disclaim the transaction as onerous (since mortgage offer will be revoked)
  2. Buyer’s deposit will be forfeited

Seller can serve a NOTICE TO COMPLETE on the TiB, giving TiB 28 days to disclaim the contract or lose the right to do so

89
Q

What are the 3 ways a company can execute a deed?

A
  1. Affix company seal
  2. Two authorised signatories
  3. Director signs in the presence of a witness
90
Q

What is the timeline for negotiation of the transfer deed under the SCS and CSC?

A
  1. B must send draft transfer to Seller 12 working days before completion
  2. S must approve or revise draft within 4 working days of receipt
  3. B must provide engrossment at least 5 working days before completion
91
Q

What is a completion statement and who prepares it?

A

Document outlining all the FINANCIAL TRANSACTIONS that took place leading up to the COMPLETION OF THE SALE

Seller’s solicitor prepares a completion statement for buyer’s solicitor, who then prepares a completion statement for his client.

92
Q

What is an apportionment? Common example?

A

A SHARED expense between Seller and Buyer.

Common example is ground rent on leasehold property - either Seller paid in advance and is reimbursed pro-rata, or failed to pay and buyer will get an allowance after paying on seller’s behalf

93
Q

What 2 documents must the seller’s solicitor obtain from the lender’s solicitor prior to completion?

A
  1. A REDEMPTION STATEMENT (stating the figure required to redeem lender’s charge, with a daily interest rate for each day completion is delayed)
  2. Lender’s solicitor’s undertaking that on receipt of redemption monies, lender’s solicitors will: (a) pay lender the amount required to redeem mortgage and (b) pass the Seller the form of discharge
94
Q

What 5 pieces of information are covered by the standard-form pre-completion enquiries?

A
  1. Vacant possession
  2. Title documents that seller’s solicitor will provide on completion
  3. Logistics of completion (location, etc.)
  4. Money (balance sum, apportionments, etc)
  5. Mortgages and charges and whether seller undertakes to discharge them
95
Q

What 5 searches should be performed by the buyer’s solicitor pre-completion?

A
  1. Bankruptcy search against the buyer
  2. Land Registry search
  3. Company search
  4. Land Charges Registry search (form k15)
  5. Physical inspection
96
Q

What is the advantage to the lender if the buyer’s solicitor carries out a bankruptcy search against the buyer?

A

15 working day priority period to complete the purchase and mortgage - during which the lender’s charge will be FREE OF ANY INSOLVENCY-RELATED ENTRIES in the Land Charges Registry

97
Q

What form is used to conduct a HMLR search against Registered Land?

A

Either an Official Search of Whole with Prority or an Official Search of Part with Priority

98
Q

Explain the length and effect of the priority period conferrred by a HMLR search.

A

Buyer gets a 30 business day (real time) priority period from the date of the search results - Register is frozen and third parties cannot register anything against the title during the period PROVIDED APPLICANT APPLIES FOR REGISTRATION OF THE TRANSACTION WITHIN 30 DAYS

99
Q

What should buyer’s solicitor do if it turns out completion + registration cannot be completed within the 30 day HMLR search priority period?

A

Submit a new search. But there is risk that third-party applications made before the date of the new search will bind the buyer.

100
Q

What is the point of carrying out a companies search and when should it be performed?

A

To uncover any CHARGES or INSOLVENCY PROCEEDINGS registered against a seller or landlord. Should be carried out prior to exchange and on the morning of completion

101
Q

What is the priority period conferred by a Land Charges search against unregistered land? Effect of registering outside this period?

A

15 business days

If registration does not occur within 15 business days of the search, then any new registered entries between the search date and the completion date will bind the buyer

102
Q

What is the deadline to register the transaction with HMLR?

A

Within two monts of completion - otherwise transfer becomes void.

For registered land legal title only passes ON REGISTRATION

103
Q

What formality must be followed to change the completion date after exchange has already occurred?

A

Further exchange of signed contracts, referring to the original contract and the subsequent variation

104
Q

When will completion be treated as occurring on the next working day?

A

If Seller fails to vacate property or Buyer fails to send completion money to his solicitor in cleared funds, by the completion time

105
Q

What additional document must the buyer’s solicitor obtain if the counterparty is a company subject to a floating charge?

A

A letter of NON-CRYSTALLISATION from each floating chargeholder, confirming that the floating charge has not crystallised into a fixed charge

106
Q

When does actual completion occur?

A

When the seller’s solicitor DATES THE ENGROSSED TR1 upon RECEIPT OF THE BALANCE SUM from the buyer’s solicitor

107
Q

What is the effect of completion on the contract for sale at common law? Why is this no longer relevant?

A

Effect is to EXTINGUISH contract for sale, which MERGES WITH THE PURCHASE DEED

Rarely relevant because SCS contain an express non-merger clause which retains the buyer’s right to sue on the contract for sale

108
Q

What 3 key undertakings does Seller’s solicitor make prior to completion, with respect to authority under the LawSoc Code for Completion by Post?

A

He has: (1) seller’s authority to receive the purchase money and (2) mortgagee’s authority to receive the sum required to discharge their mortgages and (3) that the seller is, at the point of completion, entitled to convey such title as the contract states will be conferred

109
Q

Under the LawSoc Code for Completion by Post, what 3 key steps does the seller’s solicitor agree to take post-completion?

A
  1. Hold the documents (discharges, title deeds etc) to order of buyer’s solicitor
  2. Confirm that completion has occurred to the buyer’s solicitor ASAP
  3. Authorise release of the keys to the buyer
110
Q

What are the two deadlines the buyer’s solicitor must keep in mind when registering the buyer’s title post-completion?

A
  1. Must do within the 30 day priority period to prevent any 3rd parties from registering an interest against the buyer’s title
  2. Must do within 2 months of completion or the transfer will be boid at law
111
Q

What is a key difference between SCS and CSC when it comes to compensation for delayed completion?

A

SCS requires the defaulting party to COMPENSATE the innocent party for EACH DAY completion is delayed

CSC only entitles the SELLER to claim compensation, whereas the buyer will need to sue for breach of contract

112
Q

What is the default contract rate under the SCS and CSC?

How is that rate applied differently between buyer and seller?

A

4% above the base rate of Barclays Bank plc

If buyer is in default, compensation is calculated on the purchase price of the property less any deposit.

If seller is in default, compensation is calculated on the whole of the purchase price.

113
Q

Is compensation for delayed completion in addition to damages for breach of contract?

A

No - damages usually will be reduced by any contractual compensation paid.

114
Q

What are the two consequences of serving a notice to complete?

A
  1. Makes time of the essence and gives 10 working days to complete (failing which there is a repudiatory breach)
  2. On a residential purchase, buyer must pay full deposit if earlier deposit was less than 10%
115
Q

When can a buyer apply for specific performance of the sale contract?

A

As soon as it becomes apparent that the seller has no intention of completing on the agreed date - even if the completion date has not yet been reached or a notice to complete has not yet been served

116
Q

What are the 4 bases on which an innocent party may rescind the contract in a conveyancing transaction?

A
  1. Contractual right of rescission for delayed completion
  2. Statutory / common law right to rescind for misrepresentation
  3. Breach of a condition / fundamental term
  4. Equitable remedy of rescission - applies even AFTER COMPLETION
117
Q

What formal requirements are needed when a landlord consents to an assignment or sub-letting?

A
  1. Licence to assign / sub-let
  2. In writing
  3. In the form of a deed

N.B. the licence will not be effective until completed

118
Q

What charges is a landlord entitled to demand for consenting to an assignment or sub-letting (2 points)

A

A reasonable sum for the legal and administrative fees incurred in dealing with the application for consent

No fine or premium can be demanded UNLESS lease expressly provides otherwise

119
Q

What is the main difference between an assignment of a lease granted before 1 January 1996 and one granted afterwards?

A

Old lease - Usually requires assignee to enter into DIRECT COVENANT with the landlord and execute the deed of assignment along with the head tenant

New lease - For commercial leases, Authorised Guarantee Agreement should be provided if reasonably required by the landlord

120
Q

How does an assignor protect himself from liability for an assignee’s breach of the lease terms?

A

Require a personal indemnity for any breaches of the lease

121
Q

What are the 3 most common conditions of a landlord’s consent to a sub-lease?

A
  1. That the sub-tenant must enter into a direct covenant with the landlord
  2. That the sub-lease is opted out of the security of tenure provisions
  3. Direct covenant is expressed to last while sub-tenant is bound by the tenant covenants of the sub-lease
122
Q

What is the most important consideration when drafting a lease? Who drafts it?

A

If the lease is over 3 years, it must be granted by deed to vest the legal estate in the tenant. Landlord’s solicitors draft the lease.

123
Q

Under SCS, when can a head tenant rescind a sub-lease due to failure to obtain the landlord’s consent, for RESIDENTIAL property?

A
  1. Consent not given **3 WORKING DAYS **before completion date
  2. Landlord’s consent was given SUBJECT TO A CONDITION to which buyer reasonably objects
124
Q

Under CSC, when can a head tenant rescind a sub-lease due to failure to obtain the landlord’s consent, for COMMERCIAL property?

A

If consent is not obtained within SIX MONTHS of the ORIGINAL COMPLETION DATE.

(NB: if consent not obtained by completion then completion postponed to FIVE WORKING DAYS after Seller gives notice stating consent has been granted)

125
Q

In a sub-lease under SCS/CSC, what are the seller’s obligations with respect to landlord consent?

A

He must apply for the landlord’s consent, at his own expense, and use all reasonable efforts to obtain such consent

126
Q

What are the formal requirements for an agreement for a lease?

A

Same requirements as S.2 LP(MP)A:
1. In writing
2. Contain all the terms agreed between the parties
3. Signed by or on behalf of each party to the contract

Draft lease is usually annexed to the agreement for lease

127
Q

What are the parties’ execution obligations prior to completion of an agreement for lease?

A
  1. Landlord should engross the lease and counterpart and send to the buyer at least FIVE WORKING DAYS prior to completion
  2. Tenant should execute the counterpart and deliver to the Seller ON COMPLETION
128
Q

3 general principles surrounding deduction of title for leases?

A
  1. T is not allowed to examine the freeholder’s title
  2. Landlord does not have to deduce title to the freehold where the lease is granted for < 7 years
  3. Landlord must deduce title by providing an official copy of the Register + title plan (or the Epitome of Title for unregistered land) for any lease > 7 years
129
Q

When will a sub-lessee require deduction of the superior landlord’s title?

A
  1. Where the sub-landlord’s title is registered with good leasehold title, or completely unregistered.
  2. Where the sub-lease exceeds** seven years** in term, the sub-landlord must deduce both the superior landlord’s title and his own leasehold title

Deduction not required if the sub-landlord’s title is registered with absolute title and the lease is under 7 years

130
Q

Name 2 documents relating to the head-lease that a sub-tenant is entitled to request.

A
  1. Copy of the lead lease
  2. All assignments of the head-lease leading back 15 years
131
Q

What additional documents must be sought by the tenant’’s solicitor where the landlord’s title is subject to a mortgage?

A

A letter of consent permitting the lease to be granted to the prospective tenant, free of the landlord’s charge

132
Q

What additional documents must be sought by the tenant’s solicitor where the landlord is corporation?

A
  1. Perform COMPANY SEARCH to identify any floating charges or insolvency proceedings
  2. If there are floating chargeholders, identify LETTER OF NON-CRYSTALLISATION
133
Q

4 problems when the leasehold is only registered with “good leasehold title”?

A
  1. On first registration, freehold was not deduced, so it is unclear whether the lease was validly granted
  2. Title may have been granted in contravention of a restriction affecting the superior title
  3. Title will be subject to any incumbrances or defects affecting the superior title, which likely are not known
  4. Lenders will not accept good leasehold title unless seller provides title indemnity insurance
134
Q

2 solutions a seller can adopt to remedy issues associated with “good leasehold title”?

A
  1. Apply using form UT1 to upgrade to absolute leasehold title
  2. Seller can pay for a good leasehold title indemnity policy
135
Q

What is the scope of the security of tenure provisions in the LTA 1954?

A

Fixed and periodic business leases AND agreements for leases where the tenant enters into occupation

136
Q

Which leases cannot contract out of the security of tenure provisions?

A

Periodic tenancies

137
Q

3 notable exclusions from the security of tenure provisions?

A
  1. Tenancies at will and licenses
  2. Fixed term leases for six months or less
  3. Leases where tenant is no longer in occupation of any part of the property at the expiry of the contractual term
138
Q

With reference to the security of tenure provisions, what are 3 consequences if a sub-tenant in business occupation acquired the lease only in breach of an alienation provision?

A
  1. Still enjoys security of tenure
  2. L can claim damages from original tenant
  3. L can also bring claim against sub-tenant requiring the surrender of the tenancy if it can show that the sub-tenant knowingly and intentionally caused the breach of covenant
139
Q

Where there is a sub-lease, when will the sub-tenant’s competent landlord for security of tenure be the superior landlord?

A

Where the term of the head lease will end within 14 months AND the actual landlord sub-let the whole of its holding to the tenant

140
Q

For leases granted from and including 1 June 2004, how does the landlord contract out of the SoT provisions (4 points)?

A
  1. L must serve a notice in the prescribed form annexing a copy of the final agreed lease
  2. The tenant must swear a statutory declaration (if L gives less than 14 days notice before completion or exchange of agreement for lease) or simple declaration (if L gives more than 14 days notice)
  3. A certified copy of T’s declaration must be annexed to the lease
  4. The lease must stat that the lease is contracted out of the LTA 1954
141
Q

For leases granted before 1 June 2004, how does the landlord contract out of the SoT provision?

A

L and T must obtain a court order confirming that the lease was contracted out and insert a provision stating the same

142
Q

What are two tests for validity of a S.25 notice?

A
  1. Would not mislead a reasonable recipient regarding the notice’s terms
  2. Provides proper information enabling the tenant to deal in a proper way
143
Q

What are two rules L must follow when specifying the termination date in a S.25 notice?

A

1.Termination date cannot be earlier than the expiry date of the contractual term of the lease
2. Date must be 6-12 months from the date of service of the notice

144
Q

If tenant wishes to renew a lease but no agreement on a renewal has been reached with L, what must he do?

A

Apply to the County Court for a renewal lease (or agree with the landlord in writing to extend the deadline for a court application) before the termination date

145
Q

2 conditions for tenants to make a S.26 renewal request?

A
  1. Lease is for a fixed term (not periodic) of one year or more
  2. L has not yet served a S.25 notice
146
Q

Requirements for a valid S.25 notice?

A

Must state: (1) start date of the renewal lease, 6-12 months from the date of service of the notice and (2) the main terms on which T wants the lease to be granted

147
Q

Deadline for L to respond to a S.26 request by T? Consequences of not meeting the deadline?

A

Two months from the date of the request to serve a counter notice proposing new renewal terms OR stating that he will oppose any application to court, outlining the grounds of opposition

If he fails to respond in time, T’s request is assumed to have been entirely accepted by L.

148
Q

When can T apply to court for a renewal lease after making a S.26 request?

A

Two months following service of the request if L has not replied.

If L has served counter notice, IMMEDIATELY.

149
Q

What are the four discretionary grounds of opposing a renewal lease?

A
  1. Failure to repair property
  2. Persistent delays paying rent
  3. Breach of obligations
  4. L wishes to dispose of the whole property and there is a sub-lease
150
Q

When must L take note of when serving a hostile S.25 notice or counter-S.26-notice?

A

L must state the grounds of opposition to a renewal and MUST NOT ACT RECKLESSLY OR DISHONESTLY; otherwise the notice will be invalid and unenforceable

151
Q

What are the three discretionary grounds of opposing a renewal lease?

A
  1. Suitable alternative accommodation has been offered
  2. Landlord genuinely intends the demolition or reconstruction of all or part of the property
  3. Landlord’s occupation, provided he owned the property for at least 5 years before the end of the tenancy
152
Q

When is T entitled to statutory compensation from the landlord, and how is it calculated?

A

When the court refuses to grant a renewal lease to T on any of the mandatory grounds.

If T and his predecessors in title were in occupation for > 14 years, compensation is the rateable value of the property

If > 14 years, compensation is twice the rateable value

153
Q

When can L validly exclude the right to statutory compensation in the lease?

A

If T was in occupation of the premises for LESS THAN FIVE YEARS immediately preceding the date on which T is to QUIT THE HOLDING of the premises

154
Q

Once either party has applied to court, what happens to the existing lease?

A

Existing lease continues at the current rent until 3 MONTHS AFTER PROCEEDINGS END, but either party may apply for INTERIM RENT to be payable either from the earliest termination date that could have been specified in L’s S.25 notice, or the earliest renewal date that could have been stated in T’s S.26 request

155
Q

What four factors will the court take into account if it has to impose the terms of the renewal lease on the parties?

A
  1. Lease will be over the WHOLE OF THE PROPERTY
  2. Max term court can award is 15 YEARS (usually mirrors current lease term)
  3. Rent will be calculated based on OPEN MARKET RENT
  4. THe terms of the current lease and all relevant circumstances
156
Q

What two points should L and T take into account when considering the deadlines under the SoT provisions?

A
  1. Time limits are strict and cannot be extended by the court
  2. L and T can agree in writing to extend the statutory periods
157
Q

How is interim rent calculated when L is opposing a renewal lease?

A

Court will order a CUSHIONED interim rent: a reasonable rent taking into account current lease rent, but on the assumption the tenancy is only granted for one year

158
Q

How is interim rent calculated when L is not opposing a renewal lease?

A
  1. Market rent payable at the termination/renewal date stated in the notice OR
  2. A reasonable amount of rent if there is a substantial difference between the current market rent and that payable at the termination/renewal date stated in the notice
159
Q

What is the deadline for service of a S.27 notice to quit a fixed term tenancy?

A
  1. No later than three months prior to the expiry of the contractual term OR
  2. For a continuation tenancy, at least three months prior to T vacating the property

SQE - FLK1 (21 decks)

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