Property practice session 2 Flashcards
Why do we have a contract?
a contract sets the date of completion- organise moving company, order mortgage funds.
A contract can give the buyer an option to get planning permission and then back out if not.
What are the standard conditions of sale?
Residential: Standard conditions of sale
Commercial: standard commercial property conditions
What are the essential features of a property contract
1) property address
2) who the proprietors are and who the buyers are
3)10% deposit by default.
4) That the seller solicitor holds the funds
5) The title guarantee (either full title guarantee, limited title guarantee or no title guarantee)
6) The date of the transfer of money and land to take place
7) the completion time (2pm by default)
8) Risk passes to buyer at exchange- should take insurance out at this point.
What are common special conditions?
1) seller has agreed an indemnity policy
2) keep the transaction confidential
3) rents payable by occupational tenants
4) transfer maintainance agreements
What is VAT and where is it applicable?
Residential (unless recently developed) is exempt
Commercial: more complicated-
if over 3 years old- exempt- unless the owner opts to tax.
If opts to tax this affects everything to do with the tenant. If transferred as a going concern- is not a taxable supply and VAT not charged.
Newly constructed commercial property is standard rated and VAT is payable
newly constructed residential is taxable at 0 rated.
Standard conditions include VAT in purchase price.
Standard commercial property conditions deal with the VAT process
What happens at exchange?
done by solicitors over phone. Each solicitor gives an undertaking to each other which allows the exchange to take place.
Law society formula B means that they both undertake to send the post that evening, but if that is not possible they can vary it so it will be posted the next day.
What happens pre-completion
1) prepare the transfer deed- traditionally drafted by buyer- and get it approved. The seller will need to get it executed, and buyer will need to execute it if an indemnity is being given.
2) some pre-completion searches are taken out.
OS1 search, against title, from date of official copies and gives a priority period of 30 working days.
Land Charges search (k15) against full names of seller- priority period of 15 working days. (for unregistered land).
Bankruptcy search (K16) against full name of client. Priority period of 15 working days
Company search- against company name of seller, no priority period.
3) requestions on title- a document which buyers raise any issues with title deeds but now contain more procedural issues eg keys. contains sellers undertaking to post and discharge mortgage
What happens at completion
Buyers solicitor sends money, and calls them once recieved to tell them they have completed. Then signs the transfer deed. Then call seller/agent to release keys. Sellers solicitor then sends money to clear mortgage or charge (redemption money).
What happens with a delay or failure to complete?
Completion time is 2PM.
If missed, interest starts accruing against purchaser under standard conditions. If the seller of a commercial property defaults, compensatory intertest is not payable.
if completion occurs on completion date, but after completion time- considered to have taken place on next working day. Interest is calculated on each calendar day. Eg if missed completion on friday, next working day is monday.
Interest accrues automatically, but can also can claim reasonable expenses.
If the defaulting party fails to complete on time, the non defaulting party can serve a notice to complete on that day of completion to ensure failure does not carry on indefinitely. This makes time of the essence and gives 10 working days to complete. This starts the day after service of the notice.
Interest includes non working days
If buyer fails to comply with notice to complete, the seller may:
1) Forfeit and keep deposit and accrued interest
2) resell the property and contents
3) claim damages
if the seller does not comply with the notice to complete, the buyer may:
1) Require the return of the deposit with accrued interest
2) potentially claim damages
Post completion matters:
SDLT or LTT.
Deadlines: 14 days for SDLT
30 days for LTT
The deadline for registration of charges at Companies house- 21 calendar days- strict deadline
The buyer should lodge their application for registration within the OS1 search timeframe (30 working days) to ensure no competing application can be registered
For unregistered land- application should be within 15 working days (the land charges search priority, but in any event, within 2 months or the transaction is void
What is an FRI lease?
1) tenant has to keep their demise in full repair- landlord recover costs for any common areas/other parts of building shared by tenant if taken a lease of part
2) landlord will insure but recover cost from tenant
3) Tenant will pay for services by service charge
4) any costs during lifetime will be met by tenant
5) FRI lease will tightly control alienation
6) up only rent review
What is an anchor tenant?
This is the tenant that brings customers to the premises- regardless of other shops available. They will get them to signed up to an agreement to lease
What is covenant strength?
This is the ability for the tenant to pay the rents etc- a landlord will check prospective tenant eg by references.
Under an FRI lease, they may require a rent deposit or a guarantor.
What is an agreement for lease?
This is when the parties want to agree to a lease to take place in the future eg whilst things are being built. Typically no rent payable and final draft lease will be included.
What is the tenants solicitor role?
1) negotiate lease
2) advise the tenant of risks
3) investigate tenant
