Property Practice - Contents of the Contract

Question 1

Agreed Issues

Answer 1

Must be included in contract to be binding on both parties

Question 2

Form of Contract

Answer 2

Usually a standard form of contract of sale

Residential transactions will use the Contract Incorporating the Standard Conditions of Sale

Commercial transactions will use Contract Incorporating the Standard Commercial Property Conditions (“SCPC”)

Both residential and commercial transaction contract will include:

• Particulars of sale
• Standard conditions of sale
• Special conditions of sale

SCPC divided into two parts:

• Part 1: conditions apply unless expressly excluded
• Part 2: conditions apply only if expressly incorporated

Question 3

Particulars of Sale

Answer 3

Particulars of the transaction - e.g. details of seller and buyer and their solicitors, purchase price, completion date, etc

Question 4

Standard Conditions of Sale

Answer 4

Basic provisions which govern the transaction

E.g. capacity in which deposit will be held, occupation of property between exchange of contract and completion, require buyer to pay 10% of the purchase price on exchange, etc

Question 5

Special Conditions of Sale

Answer 5

Specific provisions that relate to this particular transaction

Some special provisions already included in the residential form of contract and solicitor can indicate whether or not they apply (e.g. whether proeprty will include specified fittings and content, whether property will be vacant on completion, etc)

Where any additional provisions agreed between seller and buyer will appear

Question 6

Key Standard Conditions of Sale

Answer 6

• Deposit: require buyer to pay 10% of purchase price on exchange of contracts, held as a stakeholder (as opposed to agent) by the seller’s solicitor to be paid on completion. This means that the seller’s solicitor holds it in their firm’s client account on behalf of both parties
• Risk and insurance: risk in the property passes to the buyer on exchange (and so buyer still has to purchase if something happens to the property before completion) therefore the buyer should insure the property on exchange (although not required to under the standard conditions)

Question 7

Property Information Form

Answer 7

• Gives practical information about property to buyer; buyer entitled to rely on the information in the form
• Seller must declare presence of non-owning occupier on the form; buyer can sue the seller for any misrepresentations (one special condition of sale is that non-owning occupier signs the contract indicating their intention to vacate property on completion)

Question 8

Indemnity Insurance

Answer 8

Seller indemnifies buyer for loss due to defect in title if defect can’t be rectified

Special condition should be included in the contract obliging the seller to take out indemnity insurance

Question 9

Deposit

Answer 9

10% of purchase price recommended by Law Society but parties can agree to a different amount

If using the Law Society’s standard terms if the buyer breaches the contract they are liable for the full 10% even if the parties have agreed a lesser amount

Deposit can be used for a related purchase - e.g. seller can use deposit received on their sale towards the deposit required on related purchase (provided property in England and Wales and will be used as their residence)

Question 10

Proof of Title

Answer 10

Standard Conditions of Sale required seller to prove their title and their ability to transfer it

Registered title: production of an official copy
Unregistered title: production of an ‘epitome of title’

Question 11

Title Guarantee

Answer 11

Full title guarantee: seller is entitled to sell the property, they will do all in their power to transfer the purported title to the buyer and the property is being sold free from all charges and encumbrances other than those disclosed

Limited title guarantee: as above save for the seller warrants that they have not created any charges or granted any rights during their period of ownership which have not been disclosed

No title guarantee: seller has no knowledge of the property (i.e. disposing of the property by way of gift)

Question 12

Indemnity Covenant

Answer 12

Buyer agrees to perform obligations relating to the property and to indemnify the seller if they breach the obligation in the future

Question 13

Completion Date

Answer 13

Should be inserted into the contract on exchange

If not, the Standard Conditions provide that completion will take place 20 working days after exchange

Question 14

Fittings and Contents Form

Answer 14

List the items which are at the property and included in the sale price and excluded from the sale price

Annexed to and forms part of the contract