Property Practice Flashcards
What are the two milestones in a conveyancing transaction?
a) Exchange of contracts
b) Completion
What is the effect of exchanging contracts?
The parties are bound to their agreement and neither can pull out.
What happens to the deposit (usually 10%) which is paid pre-exchange of contracts?
The deposit is paid by the buyer to the seller’s solicitors who hold the deposit until completion.
Does the seller need to make the buyer aware of any defects in the property?
No. The onus is on the buyer to investigate the property before exchanging contracts.
However, the seller cannot give misleading answers to the buyer’s enquiries.
Can a solicitor act for the buyer and the seller?
General rule: No, as there is a conflict of interest.
Can a solicitor act for joint buyers?
Usually acceptable - but may need to advise them seperately about their equitable interest in the property.
Can a solicitor act for borrower and lender?
Yes, unless there is a conflict of interest.
There will be a conflict of interest where the mortgage is not a standard mortgage.
Both clients must give their written consent and effective safeguards must be put in place to protect any client’s confidential information.
Can a solicitor act for joint borrowers?
Yes, unless there is a conflict of interest.
There will be a conflict of interest where the matrimonial home is jointly owned and one party agrees to mortgage the house as security for a business loan.
Is a solicitor obliged to inform a buyer if other buyers are involved?
Yes. The seller’s solicitor cannot mislead buyers.
What is an undertaking?
A legal promise to do something.
The undertaking should be performed within the agreed timescale.
Can a solicitor provide mortgage advice?
Only if they or their firm are authorised to do so by the Financial Services and Markets Act 2000
What tax is due on a residential property during the coveyancing transaction?
Buyer - Stamp Duty Land Tax
Seller - Nothing
What tax is due on a commercial property during the coveyancing transaction?
Buyer - Stamp Duty Land Tax
Seller - Corporatio tax on their income/capital gains
What are the Stamp Duty rates for first time buyers of a residential property?
So long as the property is less than £625,000 and the buyers intend to use the property as their main residence, the following reduced rates apply:
First £250,000 taxed at 0% (tax free)
£250,000 - £625,000 taxed at 5%
Example: Polly and Mark are first time buyers and buy a property for £350,000 which they intend to live in permanently. What Stamp Duty must be paid?
First £250,000 at 0%
£100,000 @ 5%
= £5,000 of SD due
What are the Stamp Duty rates for NON-first time buyers of a residential property?
First £250,000 @ 0%
£250,000 - £925,000 @ 5%
£925,000 - £1,500,000 @ 10%
The remainder @ 12%
Example: Polly and Mark buy a property for £275,000 which they intend to live in permanently. What Stamp Duty must be paid?
First £250,000 @ 0%
£25,000 @ 5% = £1,250
What are the Stamp Duty rates for buyers of a commercial property?
First £150,000 @ 0%
£150,000 to £250,000 @ 2%
The remainder @ 5%
When is capital gains tax due on a property transation?
When gains are made on the sale of a freehold or leasehold property.
Note: capital gains tax will not apply to the sale of a residential property so long as it was the main residence of the seller.
Explain VAT in regard to a property transaction.
- VAT is not usually paid on residential transactions
- VAT is only compulsory on ‘new’ commercial properties (within 3 years of completion)
- VAT is not always charges on ‘old’ commerical properties - it is optional. The seller should opt to charge VAT if they need to recover VAT they have paid)
When is planning permission required?
When any ‘development’ of land is carried out.
Development includes:
- building
- engineering
- mining
Maintenance and improvement of the interior a building does not count.
What is the effect of the class system in realtion to planning permission?
Where the development changes the use of the property to a use within the same class, planning permission is not required.
Does planning permission run with the land?
Yes. unless a completion notice is stipulated (3 years in England)
How can planning permission be enforced?
Enforcement notice - where there has been a breach of planning control - must be served on owner or occupier and will become effective 28 days after service.
Stop notice - halt development for 28 days.
Injunction
What are the two forms of co-ownership?
Joint tenancy - each co-owner is wholly entitled to the land.
Tenants in Common - each co-owner has an individual share which they can do with what they wish.
What is formula A in relation to the exchange of contracts?
where the solicitor holds both parts of the contract duly signed.
Following phone call effecting exchange, the solicitor holding the signed parts inserts the completion date and sends contract to their client and other solicitor.
What is formula B in relation to the exchange of contracts?
where each solicitor holds their own signed part of the contract
Following phone call, each solicitor inserts completion date and sends contract to client.
What is formula C in relation to the exchange of contracts?
Used for chain transactions. Each solicitors holds their own signed part and agrees to release for a speciifc period.
