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Purchase and Sale Flashcards

1
Q

What are the four methods of sale?

A

Private Treaty, Informal Tender, Formal Tender, and Auction

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2
Q

What is the Private Treaty method of sale?

A

The most common method, involving direct negotiation between the seller and potential buyers, often through an estate agent.

Advantages: Flexible, relatively inexpensive, confidential, and no obligation to sell until contracts are exchanged. Disadvantages: Can be time-consuming, and there’s no certainty over pricing or timing.

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3
Q

What is the Formal Tender method of sale?

A

A method where a legally binding agreement is reached upon acceptance of the tender, leading to a quicker completion.

Advantage: High degree of certainty for both buyer and seller. Disadvantage: The process can be complex and may deter some buyers.

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4
Q

What is the Informal Tender method of sale?

A

Allows seller to see all offers made for their property with transparency.

Advantage: Potentially achieve a higher price due to competition. Disadvantage: The sale is not legally binding until contracts are exchanged, leading to uncertainty.

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5
Q

What is the Auction method of sale?

A

Provides a quick and transparent sale process with a clear deadline.
Advantage: Potential for a high sale price due to competition. Disadvantage: The property might not sell if no bids are received.

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6
Q

What is the first step in the legal processes to complete a purchase/sale?

A

Offer and Acceptance: Once an offer is accepted, both parties should instruct a conveyancing solicitor or solicitor to act on their behalf.

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7
Q

What is involved in instructing a solicitor during a property transaction?

A

The buyer and seller should instruct a conveyancing solicitor to handle the legal aspects of the transaction.

The solicitor will represent their client’s interests throughout the process.

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8
Q

What happens during the drafting of the contract and raising enquiries?

A

The solicitor drafts the contract of sale and raises necessary enquiries with the other party’s solicitor.

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9
Q

What are property searches and surveys?

A

The buyer’s solicitor commissions property searches, including local authority searches, and the buyer may arrange for a property survey.

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10
Q

What occurs during the exchange of contracts?

A

Once the contract is finalized and all enquiries are answered, the contracts are exchanged, creating a legally binding agreement.

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11
Q

What is completion in a property sale?

A

The sale is completed when the buyer’s solicitor receives the funds and the seller’s solicitor transfers ownership of the property.

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12
Q

How does exchange and completion work in an auction transaction?

A

Exchange of contracts happens immediately when the hammer falls, and completion usually occurs within 28 days.

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13
Q

What are the 6 key principles of the Estate Agents Act 1979?

A
  • Responsibilities,
  • Providing Clients with Information
  • Keeping Clients’ Money
  • Interest Insurance Cover
  • Standards of Competence
  • Conflict of Interest
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14
Q

What does Section 18 require from estate agents?

A

Requires estate agents to provide particulars of the circumstances in which the client will become responsible for the estate agent’s fees.

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15
Q

What is a ready, willing and able purchaser?

A

A buyer who is fully prepared, has the financial capacity, and is genuinely interested in purchasing a property.

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16
Q

What does Section 21 (AST) relate to in agency practice?

A

Section 21 is a legal eviction notice that allows landlords in England to end an assured shorthold tenancy without providing a reason.

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17
Q

What are the three things needed to make a contract?

A

Parties, property, price.

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18
Q

Can a verbal contract be legally binding?

A

Yes, verbal agreements can be legally binding in the UK, but proving their existence and terms can be challenging.

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19
Q

Does the sale of land have to be in writing?

A

Yes, a contract for the sale of land must be in writing as defined by the Law of Property Act 1989.

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20
Q

How does the Misrepresentation Act 1967 relate to agency practice?

A

It protects consumers from false or fraudulent claims that induce them into buying something or entering into a contract.

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21
Q

What is the application of the Blue Book to the sale of residential property?

A

It provides residential sales and letting professionals with best practice advice to enhance the quality of service provided to clients.

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22
Q

What is the difference between freehold and leasehold?

A

In freehold ownership, you own both the property and the land it sits on indefinitely, while with leasehold, you own the right to occupy the property.

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23
Q

What are profits a prendre?

A

The right to take something from another person’s land that is both capable of ownership and a product of nature, such as soil or timber.

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24
Q

What is an example of an equitable interest in land?

A

An example is where a couple shares a home, but one of them is the sole legal owner.

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25
What is a guide price?
Estimated value set by the seller or their estate agent, indicating the minimum price they're willing to accept.
26
What is a reserve price?
The minimum price a seller is willing to accept for an item.
27
What fees are typical for an auctioneer?
A commission of around 2% to 2.5% of the sale price, plus VAT.
28
Can you sell a property before or after auction?
No, if there is interest let them bid.
29
What deposit is typically payable and when?
Typically 10% of the purchase price, is payable immediately after the hammer falls within 20 days.
30
How can you bid at auction?
Register: You'll typically need to register with the auction house and obtain a bidder number.
31
What is SDLT?
Stamp Duty Land Tax when you buy houses, flats and other land and buildings over a certain price in the UK. LBTT in Scotland.
32
What is the relationship between VAT and residential property sales?
Normally, residential property purchases are exempt from VAT
33
What other taxes may be payable upon sale of a residential property?
Capital Gains Tax is payable on the profit (gain) you made from selling your property. Calculate the gain by subtracting the amount you originally bought the property for from the sale price
34
Why are POA listings unlawful?
Price on Application (POA) listings are unlawful because they are considered misleading and contravene consumer protection legislation by withholding the asking price
35
When should you involve a solicitor in the sale of a property in Scotland?
A solicitor must be involved in the process of accepting an offer.
36
What is a Home Report?
A pack of documents providing potential buyers with information about a property, including its condition, energy efficiency, and a valuation.
37
What are the exceptions to requiring a Home Report?
Sales of new builds, newly converted homes, Right to Buy homes, holiday accommodation and buildings scheduled for demolition.
38
When and why would you set a deadline for offers to be made by?
To encourage swift decisions from buyers and allow sellers to compare all final offers fairly.
39
What are missives?
Missives are the formal letters exchanged between solicitors that constitute the contract of sale.
40
When does a sale become legally binding?
A sale becomes legally binding once the missives are concluded.
41
What is qualified acceptance?
Response to an offer that agrees to some terms but not all, introducing conditions or changes, effectively becoming a counteroffer.
42
What is a concluding missive?
The final letter in a series of missives that formally establishes a legally binding contract for the sale.
43
What does the conveyancing process include?
Including instructing a conveyancer, property searches, drafting and exchanging contracts, and registering the transfer with the Land Registry.
44
What is disposition?
Transfer of ownership or an interest in property to another party.
45
How does ownership transfer to the new owner?
Culminating in a transfer deed (TR1 form) being registered with the Land Registry.
46
What is gazumping?
In England, estate agents may continue to market the property even after an offer is accepted, allowing the seller to consider counter-offers and potentially accept a higher offer, leading to gazumping
47
Why did you advise Nether Rusko be loted?
Increase demand by splitting property into farmhouse and steading.
48
What is a TA 6 Form?
Property details: Description of the property, including its location, boundaries, and any notable features
49
What is a TA 10 Form?
exactly what is included in the sale such as kitchen fittings.
50
What is the Land Registration Act 2002?
primary legislation governing land registration in England and Wales
51
What are Standard Conditions of Sale?
set of standard clauses used in residential property contracts to cover key aspects of the sale process, including completion and deposit
52
Is Standard Conditions of Sale mandatory?
No.
53
What is the current Standard Conditions of Sale edition
5th edition 2018
54
What are the 3 repair Categories in Home Reports?
1: No immediate action needed 2: Repairs requiring future attention 3: Urgent repairs needed now, may cause hazard
55
How long are Home Reports valid for?
3 months
56
What valuation standard is used in Home Reports?
Market Value. Net value may be used for Mortgage Valuation where essential repairs are needed.
57
What legislation prescribes the Home Report?
Schedule 1 of the Housing (Scotland) Act 2006
58
What is a note of interest?
It indicates you are interested in the property and wish to be told if a closing date for offers is set.
59
What is a closing date?
More than one party is seriously interested, invitation to submit best offer by closing date. In Scotland solicitor should submit.
60
In Scotland is a verbal offer legally binding?
No
61
What is a key difference between Scotland and England when selling?
In Scotland it is a series of letters exchanged between solicitors (missives). In england it is a contract pack that is signed.
62
What happens after missives are concluded?
Transfer of title to purchaser. New title deed, check deeds, transfer of funds, complying with taxes.
63
What happens on date of entry?
Payment to solicitor acting for seller, in exchange keys are released.
64
Can a purchaser and seller use the same Solicitor?
Typically no due to COI but can if closely related family members.
65
Where is the title sent to?
Registers of Scotland creating a electronic title sheet.
66
What is a servitude?
A legal right granted to one property owner (the "benefited property") over the land of another (the "burdened property")
67
What is the sales process in England?
1) Once a sale is agreed upon, instruct a Solicitor. ID requirements to verify your ID and verify address etc. The estate agents will issue a memorandum of sale confirming the purchase price, the buyer's details, and their solicitors' details. 2) ID information and return the welcome pack forms to us along with any deeds and the seller's property information form, and the fixtures and contents form (TA10 Form). 3) Contract pack to the buyer's solicitors. If the buyers have a mortgage, the estate agents will contact you so that the surveyor can value the property. 4) The buyer's solicitors will review the contract pack, instigate searches (usually drainage, coal mining, environment) and, once they receive the searches, raise enquiries regarding the property. 5) Obtain your signatures on the contract and the transfer deed in readiness for exchange and completion. Completion statement. 6) Once a date has been agreed for completion to exchange contracts. Buyer will usually have a 10% deposit. 7) Once we have been able to effect the exchange of contracts, the parties become legally bound and must complete on the completion date. Keys are handed over.
68
What is the latest ADS (Scotland)?
Additional Dwelling Supplement (ADS) will increase to 8%. The revised rate will apply to contracts entered into on or after 5 December 2024.
69
What is the LBTT First time buyer relief?
Relief on the first £175,000 of the property price.
70
What is the council tax rate for second homes?
200%
71
What is the SDLT First time buyer relief?
£300,000
72
What is the LBTT rate for selling Nether Rusko steading?
1% (£150k-£250k)
73
What is rollover relief?
Where the sale of an asset used in your business is reinvested into replacement assets also used in your business. You will not pay tax on the gains made on the sale of the old shop until you sell the new one (unless you made a gain)
74
What is the eligibility for rollover relief?
Buy the new assets within 3 years of selling your business must be trading when you sell the old assets and buy the new ones you must use new assets in your business
75
What is the date of disposal for CGT?
date that contracts are exchanged and not the date of completion
76
Do you pay CGT on your main home?
No as you get Private Residence Relief
77
What is timeframe for reporting and paying CGT?
Report and pay any Capital Gains Tax on most sales of UK property within 60 days.
78
What can be deducuted from CGT?
Estate agents’ and solicitors’ fees costs of improvement works, for example for an extension
79
How does Consumer Protection from Unfair Trading Regulations 2008 apply to the sale process?
Accuracy and truthfulness, no unfair or aggressive sale tactics.
80
What happens if you breach Estate Agents Act 1979?
Fines, prohibition of being an Estate Agent.

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