Real Estate Flashcards
what does the solicitor check for in the commercial lease?
9 things
duration rent review service charge alienation payment of rent use of premises insurance alterations irritancy
What are the lease management documents?
deposit agreement
guarantee
licence for works
explain duration under the commercial lease
sets our how long the lease is for
landlord prefers longer lease as looking for assured return on investment
tenants would possibly want it to be shorter (plans could change)
explain rent review under the commercial lease
sets out when each rent review will take place, the method of review
landlord prefers this to be as frequent as possible in order to increase rent often
tenant would want this to be as infrequent (cheaper)
landlord would put in an upwards only clause
explain service charge under the commercial lease
a fair proportion of the service costs subject to any adjustments made by the landlord
landlord will want to give tenant as much notice as possible so that they can pay
tenant will want as much notice as possible so they have time to pay
also want the cost to be as low as possible
low rent = higher service charges
explain alienation under the commercial lease
contract will include standard provision prohibiting tenant from assigning or subletting the lease without the landlords consent
landlord wants to know who is renting the premises at all times
tenants lease could be terminated if sublet without consent
explain payment of rent under the commercial lease
dates when rent is payable
landlord wants the rent to be paid in easy instalments so there are no issues with payment from the tenant
tenant will want smaller, frequent instalments so they don’t have to pay large sums at a time
explain use of premises under the commercial lease
sets out the purpose for which the tenant may use the premises
landlord doesn’t want the premises being used for inappropriate purposes
tenant needs to know exact purposes allowed so as not to breach the lease
explain Insurance under the commercial lease
usually covers a full repairing and insuring basis - means tenant is solely reliable for repairs
landlord doesn’t want to take responsibility for repairs to damage not caused by them
tenant wouldn’t prefer this
explain alterations and additions under the commercial lease
tenant is prohibited from making major alterations to the property and may be required to reinstate it
landlord wants to keep property in the same condition it started in
tenant will not want to make any changes in case the have to change them back/pay a fine
explain irritancy under the commercial lease
allows landlord to terminate the lease is any one of a number of specified breaches by the tenant occurs
stops landlord from having to continue the lease where the tenant is not acting the way they should
encourages tenants to be careful to follow the lease terms properly
explain the deposit agreement for lease management documentation
as an alternative to seeking guarantees to secure an otherwise inadequate tenant, landlords will sometimes seek deposit agreements
money is placed into a financial pot at the commencement of the lease which the landlord can dip into in the event of a default by the tenant
can apply to rent but also other costs like damage
interest accumulated on the deposit belongs to the tenant and the tenant can acquire this yearly
explain the guarantee for lease management documentation
used in circumstances where a guarantee regarding the tenants obligations under the lease is required
prepared on the assumption that a full guarantee is given, making the guarantor a debtor in their own right regarding any failure by the tenant to meet the obligations
what are the conditions for bankruptcy?
must owe a debt of at least £1500 but no more than £17000 if you want to apply through MAP
if the debt is over £17000 or you own assets valued over £2000 then only option is to apply through the full administration route
must have received money advice from a money advisor
must live or have lived in scotland, or established a business in scotland in the year leading up to your bankruptcy
must not have been made bankrupt in the last 5 years
cant apply though MAP if youve been made bankrupt this way in the last 10 years
need to either meet MAP conditions, be apparently insolvent or have a certificate or sequestration
how can a creditor make an individual bankrupt?
creditors will ask the sheriff to make you bankrupt
you must owe them at least £3000 including fees, interest etc
the creditor must have provided you with the debt advice and information package
(must have been sent this at least 2 weeks before petition)
you must be apparently insolvent
what is apparent insolvency?
legal term that shows you cannot pay your debts
a creditor must have gone to court and obtained a ruling that you owe the debt
what evidence can be used to prove apparent insolvency?
charge for payment
- requires payment in 14 days or can be used to prove AI
statutory demand
- gives notice that a creditor may make you bankrupt if you dont pay
- becomes evidence after 21 days
what is gratuitous alienation?
when the trustee discovers that the debtor has disposed of parts of the assets prior to sequestration
s.98(2)
must be shown that there has been transfer of the debtors property or a renunciation of a claim or right
an alienation will be challenged if made to an associate of the debtor within 5 years of the date of sequestration
if made to someone who is not an associate then the period goes back as far as 2 years
who is an associate for gratuitous alienation?
s.229
spouse/CP (includes former)
business partners and other associates
debtors employer or employee
a friend of a debtor no matter how close cannot be an associate
neither can fiance, mistress etc
when does alienation become completely effectual?
moveables - date of delivery
heritage - recording of disposition
what is unfair preference?
choosing to pay one creditor to the prejudice of others
preference must have occurred no more than 6 months before the date of sequestration
a prejudice is unfair if a creditor is preferred to the prejudice of the general body of creditors
s.99(1)
what happens to the family home if owned fully by the debtor?
fully own the house yourself then your interest in the property transfers to the trustee
becomes their duty and intention to sell
have to check for a mortgage and make sure repossession hasnt begun by the lender
if there is a mortgage and the equity in the house isnt far greater than what is owed its unlikely the trustee will sell
if there is a spouse need to check that there are no interests in the house under the matrimonial homes (family protection) act 1981
usually wont sell where children involved
what happens to the family home which is jointly owned?
trustee cannot sell without the co-operation of the joint owner
can buy out the partners share - can be possible via remortgage
if you jointly own the property and there is enough equity to make it worthwhile to release it to your creditors, you may be able to ask the other owner/s to buy you out of your share via lump sum/installments/remortgage
what is bankruptcy?
bankruptcy is the legal process by which you are formally declared insolvent (means you cant pay your debts as they become due)
to become bankrupt the court has to issue a bankruptcy petition against you (you can apply or your creditors can)
what happens when you are made bankrupt?
your assets are used to pay your debts
must follow the bankruptcy restrictions
name and details are placed in the register of insolvencies
how long does bankruptcy last?
6 months for MAP
usually 12 months for full administrative
what are the conditions for applying for bankruptcy through MAP?
must owe total debt of at least £1500 but no more than £17000
total assets cannot exceed £2000
must have taken money advice from a money advisor
living or have lived in scotland 1 year
not been sequestrated in 5 years
not made bankrupt through MAP for 10 years
pay application fee £90
have a signed certificate of sequestration
what are the conditions under MAP bankruptcy?
discharged after 6 months
trustee discharged shortly after
cannot borrow more than £2000 where you already have debts of £1000 or more without disclosing your bankruptcy status
cannot engage in business transactions without disclosing the name of the business
what happens if you do not comply with restrictions under MAP or to comply with your trustee?
committed an offence and liable to a fine, imprisonment or both
failure to co-operate with your trustee can result in consequences such as a bankruptcy restriction order
what are the conditions for applying for full administration bankruptcy?
owe total debts or £3000 or more but do not qualify for MAP
be living or have lived in scotland for the past year
not made bankrupt in 5
pay application fee of £200
must have received money advice from a money advisor
must be either apparently insolvent, have a certificate of sequestration but dont qualify for MAP
what are the conditions under a full administration bankruptcy?
not discharged until at least 12 months
after discharge you must continue to pay your debtor contribution order if you have a regular income (usually 48 months)
provide your trustee with the current financial information every 6 months until debtor contribution order has ended,
keep trustee informed of changed in circumstances
co-operate fully
what happens if you fail to co-operate under the full administrative bankruptcy?
fail to co-operate with terms - committed an offence and liable to a fine, imprisonment or both
failure to co-operate with your trustee can result in consequences such as a bankruptcy restriction order
what is a certificate for sequestration?
granted by an authorised person and certifies you have demonstrated that you are unable to pay your debts as they become due
most money advisors, insolvency practitioners are authorised to grant a certificate
use it to apply for your own bankruptcy
must apply within 30 days or issue
no charge for the certificate itself but may be charged for the advice
what is the trustees role in bankruptcy?
person who administers the bankruptcy - works for the accountant in bankruptcy
gathers the debtors assets, including property and sells them pay the costs of managing their bankruptcy and pay debts
trustee will contact the debtor about their finances and request information about such assets, who their creditors are, income and weekly outgoings, entitled to ask for wage slips, bills, bank statements etc
what are the consequences of bankruptcy?
credit rating is affected for many years
banks may freeze or close your accounts and savings are transferred to the trustee
name and details remain in public record in register of insolvencies for 2 years
trustee may seek to enforce bankruptcy restrictions on the debtor due to their conduct
what are the examples of behavior which would warrant a bankruptcy restriction order?
incurring debts they knew that had no chance or repaying
giving away assets or selling them at less than their value (gratuitous alienation)
gambling
not co-operating with the trustee
explain the discharge of bankruptcy
debtor is discharged (12 or 6 months) but the administration of the bankruptcy continues until the trustee has done everything required and is then discharged themselves
debtor must continue to co-operate until the trustee is discharged
trustee remains in office until the administration of the debtors estate is concluded and only then can they seek their own discharge
once a debtor is discharged they have no personal liability to repay the debts they had before being made bankrupt
if the trustee recovers all the costs of the bankruptcy and pay the creditors in full, plus interest, and theres money left over/assets remaining they are returned to the debtor
what are the exceptions to the rule that debtors no longer have liability for debts after bankruptcy?
student loans court fines any fraud incurred aliment all secured payments such as mortgages
what is a standard security?
when you take out a loan from a bank to buy property, the bank will want to ensure they can get their money back if you have problems repaying the loan
the property you buy is offered as security for the loan
registered in the land register
fail to honour the terms of the loan = bank takes control of your property
explain discharging a standard security
once you have repaid the loan you can request a discharge from the lender
this is then registered against your title in the land register
if selling your property - the proceeds of sale go towards the balance of the standard security which the solicitor discharges
what remedies are available for defaults of payment
renegotiate the missives
bridging finance
damages or penalty
explain non-performance by the seller
before taking action, ascertain if there is any non performance by the seller which would entitle non payment by the purchaser
standard missives state that there are documents which need to be produced so if they are not the purchaser can resile (withdraw from the contract lawfully)
what does renegotiate the missives mean?
if it looks likely that there is to be a default then could delay and change the date of entry
amend the missives
what does bridging finance mean?
if rescheduling isnt available then the purchaser could ask the bank for a short term loan on the basis of them receiving the money on a specific date
this is expensive and should only be used on a short term basis
explain the use of damages for default of payment
if none of these practical remedies can be agreed, and payment is not forthcoming, the purchaser will be in default on the day of entry
sometimes already agreed in the contract how damages are to be calculated or a clause states an amount already
what is an advance notice?
provides interim protection for deeds between two named parties that are intended to be registered in the land register
provides the purchaser with a 35 day period of protection that safeguard their purchase from an inhibition against the seller and any competing deeds granted to a third party entering the register first
cant be extended or renewed
can be discharged at any time
£10
come into effect the day after registration
when is a real right created regarding advance notices?
a real right is only created on registration of the deed in the land register so there is a period of risk between the delivery of the deed and registration
using an advance notice bridges this gap
how long before completion should advance notices be registered?
commercial - submission no earlier than 5 working days before completion
residential - 10 working days
what is the home report?
a pack of documents which gives potential buyers information about the property that is for sale
should be no more than 12 weeks old when property put on the market
what does the home report contain?
three components
- a single survey
- an energy report
- a property questionnaire
what is the single survey?
an assessment of the overall condition of the home (roof walls plumbing etc)
a valuation
notes accessibility for people who have particular needs such as wheelchair access
what is the energy report?
gives the home an energy efficiency rating and its environmental impact in terms of carbon dioxide emissions
higher the rating the more efficient and therefore the lower cost of fuel bills
also considers the environment and how well insulated the home is and type of heating system
what is the property questionnaire?
answered by the seller and features the things purchasers want to know like council tax bank, property alterations, costs for upkeep or communal areas etc
what are missives?
exchange of a series of letters between solicitors comprising a formal offer,
letter that make up the contract of sale
can a solicitor act for both a borrower and a lender for standard securities?
generally lenders will permit solicitors acting for the borrower in the purchase of a house to act on the lenders behalf as well
law society guidelines allows this despite the apparent conflict of interest
terms of the loan must have been agreed between the parties before the solicitor has been instructed by the lender
what if a conflict of interest does arise between the solicitors/borrowers/lenders in the standard security agreement?
if a genuine conflict of interest does emerge, the solicitor must immediately stop acting for both parties
what counts as a genuine conflict of interest when acting for borrower and lender?
if solicitors find themselves in possession of information that is clearly detrimental to one of the parties, they are under a duty to reveal it to the other party
if they are unable to do so then they should withdraw
can a solicitor act for a married couple in conveyancing?
yes, acting for related parties is exempt from the general rule of conflict of interest
husband and wife still have separate interests so solicitor must ensure that both partners signing the standard security understand its terms
ensure spouses receive independent legal advice
what are the standard conditions?
typical conditions that all or most lenders would want to apply to the basis on which they are lending money for a property
standard securities
things the borrower will be obliged to do
what are the main standard conditions?
maintenance and repair - borrower is to keep the property in good and sufficient repair
observance of conditions in title - observe any condition to perform any obligation that applies to the property
planning notices etc - deal with planning and other notices and provide the lender with copies of any received
insurance - borrower is to insure the property for market value and the proceeds of any claim are to be dealt with as directed by the creditor
what standard security remedies are available via the 1970 act for enforcement?
service of calling up notices
service of notices of default
immediate court action - s.24 action
explain the calling up notice
requires the owner of the property to pay the creditor the whole sum secured by the standard security within 2 months of the date on which the notice is served
generally served in circumstances where the creditor wants the debt secured by the standard security discharged in full
explain the notice of default
can be served in circumstances where there has been a breach of the terms of the standard security and the breach is remediable
notice of default requires the debtor or the owner to remedy the default specified in the notice within one month
typically used when the debtor has fallen into arrears
what is a s.24 court action?
must only be used after a calling up procedure for residential properties
gets remedy for the default through the courts
what is a bankruptcy restriction order?
may be made against you if you have acted dishonestly, recklessly or unlawfully before or during your bankruptcy
trustee will inform AiB of suspicious behavior and a BRO can be held for 2-15 years
what warrants a bankruptcy restriction order?
for failing to cooperate with the trustee at any stage - not supplying info, misleading the trustee about your level of debt
gratuitous alienation
unfair preference
incurring debts you know you cant repay
fraudulent activity
what is the effect of a bankruptcy restriction order?
have to inform potential lenders of your BRO if you seek credit in excess of £2000 or if you are in debt over £1000 and seek further credit
cant take a role as a local authority member
cant act as company director
what is a licence for works agreement?
designed to be used to record the consent of a landlord to works carried out by a tenant under the lease
what are the advantages of the home report?
costs nothing for buyer
lots of info given on house you are buying
purchaser will have a clear idea of what issues that affect the property
new build homes dont need it
what are the disadvantages of the home report
expensive for seller
compulsory - to be able to place home on the market you need one
time consuming process
property cannot be put on market with home report 12 weeks or older
what is an energy performance certificate?
contained in the energy report - details the house’s grade of energy efficiency
needed whenever a property is built, sold or rented
must have this before marketing property
must be displayed somewhere in the home
valid for 10 years
when do you need a home report?
whenever you sell a home which is not a new built and it is displayed on the market
a cardboard sign counts as being displayed
(any form of advertisement)
what is a closing date?
seller normally waits until a number of people have expressed n interest in making in offer and then will announce a closing date
sealed offers are submitted on that date and the seller chooses one
do not have to take the highest offer
what is noting interest?
if you are interested in buying a particular property but are not yet ready or willing to offer a note of interest can ensure you get an opportunity to make an offer
whats the timeline for missives?
8
prospective purchaser arranges finance
ensures satisfaction with home report
get mortgage approved in principal
instructs solicitor to submit written offer on their behalf
offer usually met by a qualified acceptance
solicitor acts as your agent and signs for you
missives are the contract so if your offer is accepted you are locked into the contract
contract is formed and have to come up with the money on date of entry
what are the obligations of the seller under missives?
to deliver a good and marketable title
to delivery a valid disposition
out of house by date of entry
to exhibit and deliver clear searches
what are the obligations of the purchaser under missives?
to pay the price on the due date
to complete any further obligations which they have agreed to in the missives
can you submit an offer for a son when instructed by the mother?
no there no authority unless there is power of attorney
what is a form A standard security
where both the personal obligation of the debtor as well as the details of the mortgage and the grant of security are all contained in one document
what is a form B standard security
only contains the grant of security over the property
personal obligation are in a separate document
mostly for commercial loans
what are the disadvantages of buying a repossessed property?
wont know much about hte property and its faults
may not have a guarantee that things work (central heating etc)
house could have been sold cheaper because of this
explain equity
value of ownership built up in home or property that represented in current market value
home worth 300,000 mortgage is 50,000 equity is 250,000
what is the timetable for sequestration?
6
apply for sequestration
application successful=trustee appointed
debtors assets invested and legally become part of the trustees estate
investigation into value of assets (value of house, gratuitous alienation, unfair preference checks)
what creditors are there and how much is owed
releasing of assets
what is an alternative to sequestration?
trust deed
- can enter into a voluntary agreement with the creditors as an alternative to sequestration
- arrangment entered into between a debtor and creditors whereby an agreed portion of the estate is given to a trustee to be administered for the debtors
- if the debtor fails to comply then the creditor can petition for sequestration
- difficult to get consent for this so statutory protection could be debt arrangement scheme to spread payments over a reasonable period
what are the three categories under the single survey?
The survey documents the condition of each aspect of your property within the report, broken down into 3 categories.
Category 1 = no immediate report is required
Category 2 = repair or replacement requiring future attention, but estimates are still advised
Category 3 = Urgent repairs or replacement are required now. Failure to deal with the issues may cause further problems to other parts of the property or cause a safety hazards. Estimates for repair or replacements are required now.
What is LBTT?
Land and Buildings Transaction Tax
what is LBTT applied to?
applied to residential and commercial land and buildings transactions including commercial purchases and leases
tax is payable at different rates on each portion of the purchase price within specified tax bands
between 0 - 12% depending on the value of the property but usually ill be in the range of 0-5%
first time buyers don’t have to pay this
when should i get home insurance?
the day contracts are concluded - a fire could engulf the home and you would not be covered.
insure for market price you are paying henceforth
what documentation is needed to prove no occupancy rights in the property for married people?
incorporate consent of spouse/cp into documentation (disposition, standard security, stand alone form)
get renunciation of occupancy rights from spouse/cp
what documentation is needed to prove no occupancy rights for unmarried people?
get a declaration that the property is not a matrimonial home so is not subject to occupancy rights
what are the 6 main things the property enquiry certificate searches for?
planning building control roads statutory notices water and sewage contaminated land
explain the plannings search under the property enquiry certificate
searches fo any planning applications that have been made in respect of the property being purchased
explain the building control search under the property enquiry certificate
searches for any building warrants applied for in respect of alteration to the property and whether the council has approved the works
explain the roads search under the property enquiry certificate
whether the road is adopted to the boundary of the property or whether the council owns the pavements etc
explain statutory notices under the property enquiry certificate searches
whether the council has served any under various statutes
explain the water and sewage search under the PEC
report states whether the property is connected to the water and sewage mains
explain the contaminated land search under the PEC
whether the property is contaminated
