Property Transaction terms Flashcards
Overage
If land will only achieve its maximum potential value following a certain event (such as grant of planning), the landowner will want to include overage provisions in the agreement to ensure they get a share of the increased value at that later date.
An example would be where the agreed purchase price is reduced to factor in the developer’s additional costs for remediating polluted land. The option agreement can include provisions requiring a final accounting of the costs and profits, so that if the eventual value is higher than the baseline value, the landowner will receive an additional payment at practical completion, or at a specified time after that date.
Rights to overage can be secured by imposing a charge, guarantee or bond, or registering a positive or restrictive covenant on the land. An alternative is for the landowner to be granted a reverse option, giving it a right to buy back the land if the developer fails to pay the overage when due.
Special Conditions of Sale (5th edition: 2018 revision)
The standard conditions designed for use in residential conveyancing transactions as drawn up by solicitors.
This is a formal document, designed to create legal rights and legal obligations.
Ready, Willing and Able Purchaser
Estate Agents
(Provision of Information) Regulations 1991 - concerns sellers liability to pay Estate Agent
- the seller has to pay the estate agent the agreed fee if a buyer is introduced who is willing and able to exchange contracts, even if the seller changes their mind and does not exchange contracts. It does not matter what reasons are given by the seller for not exchanging contracts, the fee still has to be paid if there is a buyer who was willing to exchange contracts.
Formal Tender?
If a property is being sold by formal tender the formal tender pack should be made available from the for potential purchasers to view. The pack contains the legal documentation with regard to the property, as well as useful further information including searches.
When submitting a tender offer for the property a deposit cheque equivalent
(usually of 10% of the offer) will also be required, as well as proof of funds ID etc.
Whilst the vendor is not obliged to accept the highest or any offer, if one of the offers is accepted, the agents will countersign the tender/Memorandum of Sale whereby there will be a legally binding agreement with exchange of contracts taking place. Completion will then take place on a pre-decided date, as standard with auctions = 28 days following exchange.
Modern method of auction?
With the “modern auction” method, when the auction takes place the buyer secures a period of exclusivity of 28 days in which to sign. There is no legally binding contract at this stage. The buyer is charged a fee by the selling agent for this exclusivity, which can be in the region of £5,000 or more, which they forfeit if they do not sign the contract within that period. The seller has no guarantee that the sale is confirmed until contracts are signed and if not, they may not receive all or any of the exclusivity fee that has been charged by the agent. If the buyer changes their mind, the seller needs to start the process all over again.
Disadvantages of modern method of auction?
Whilst the “modern auction” method can appear attractive to buyers (as it can give them more time to secure funds for instance or research the purchase further), a potentially greater risk falls on the seller. The sale of their property may be delayed, they may miss their opportunity with a buyer who can fulfil their financial commitment and if their purchase of another property depends on the sale of their own they may miss out on this too.
