Property Practice I Residential vs Commercial Flashcards
typical length in years for a leasehold of residential property
Typical length in years for a commercial lease
125, 699 pr 999 years (virtual freehold)
3, 7 or 21 years
meaning of premium in property transactions
The upfront/surplus purchase price paid for a leasehold at a modest ground rent.
Two meanings of assignment
The transfer of a leasehold estate from one party to another; and
The name of the document that transfers the leasehold estate itself
Meaning of prescribed clauses
If a lease term is more than seven years and thus is subject to compulsory registration at HMLR, the lease must contain prescribed clauses at the front of the lease. These clauses are a summary of the lease terms and are in a standard form so that HMLR can refer to them and complete the registration of leases more quickly.
Main Lease Provisions for a long-term residential lease
Term: a term of fewer than 80 years is normally unacceptable to a mortgage lender
Easements and exceptions: the lease should grant the buyer all the necessary rights over common parts and access ways
Suspension of rents: suspension of rent if the premises are damaged or destroyed
Service: assessment and payment of service charges
Management company: whether the landlord has agreed to transfer the freehold to the management company on the grant of the last long lease, or whether each tenant may take a share in the management company.
Meaning of alienation?
the transfer of the ownership of property rights
Typcial tenant covenants
Repairs: tenant is responsible for inside repairs and the landlord or management company for outside repairs and common parts
Alteration: Alteration by the tenant to the premises often require the landlord’s consent. the consent cannot be unreasonably withheld.
Use: only residential use.
Insurance: landlord typically insures the entire property,
Alienation: Typically there should not be a restriction on the ability of the tenant to sell or mortgage the lease unless it is otherwise provided. The landlord can impose such restrictions but it cannot be overly restrictive in a long residential lease.
How does a commercial lease differ from a residential lease?
Rent: rent payments are usually nominal due to the payment of the premium. commercial rent typically will be paid on a monthly or quarterly basis. Since the obligations to pay this significant rent is ongoing, Refusal to assignment is reasonable if the landlord believes the incoming tenant may not pay.
Rent review: only allowed if there is a provision to this effect. if the landlord and tenant cannot agree on a new rental figure. They should be able to take the matter to arbitration if the lease so provides.
Permitted use is often specified in a commercial lease.
What a solicitor must send for the client to complete and return before officially taking an instruction?
1) Send a client letter informing the level of service provided and costs
2) Obtain appropriate identification documentation (know your client)
3) Due diligence check (AML, source of funds)
When should the survey take place?
Before the commencement of all work, the buyer should have a surveyor carry out a physical inspection of the property to determine whether there are any structural defects or problems that may result in a reduced offer or withdrawal.
Why does CGT have to be paid?
A residential property return must be submitted to HMRC and any tax due must be paid within 30 days of the completion day.
Explain the rules on Private Residence Relief (PRR)
4
if the dwelling house has been their only OR main residence during their period of ownership
They have not been absent during their period of ownership other than for an allowed period of absence or because they have lived in job-related accommodation
The grounds or garden are not greater than 0.5 hectares (5000m2); and
No part of their home has been used exclusively for business purposes during their period of ownership.
Professional conduct related to a conveyancing transaction for accepting an undertaking
For an unregistered piece of land with a mortgage, the seller’s solicitor will undertake to the seller’s lender not to release the unregistered title deeds
With an existing mortgage, the seller’s solicitor will undertake to the buyer’s solicitor to pay off the seller’s mortgage out of the sale proceeds on completion
The consequence of failure to comply with an undertaking
The recipient may seek enforcement if reliance was placed upon the undertaking.
the recipient may seek specific performance/damages
sanctions or disciplinary action by the SRA.
Confidentiality related to
handling client’s information with other interested parties
with the mortgagee
Solicitors should not discuss the client’s transaction with other parties unless they have authority;
if the buyer needs a mortgage to fund their purchase, the buyer’s solicitor will almost always act for the buyer’s lender as well. The lender will expect the buyer’s solicitor to report to them any issue which might affect the value of the property. But the buyer’s solicitor also must have the consent of their buyer client to report such issues to the lender.
