set 12&2&13&24&A1&S24 Flashcards
A property owner wants to divide a house that he owns into three flats. The property owner wants the original flat owners – and all subsequent owners – to each be responsible for the repair and upkeep of their flats. The property owner would like to sell the flats on a freehold basis but is not sure whether the obligation for repair and upkeep will be enforceable against subsequent owners. He goes to see his solicitor for advice.
Which of the following best describes the advice that the property owner will receive in this regard?
(B) The flats cannot be sold on a freehold basis due to the difficulty of enforcing the positive obligations of upkeep and repair against subsequent owners. A positive covenant requires a positive act to comply (for example, to spend money). Generally, positive covenants bind only the original covenantor. Here, the property owner wishes subsequent flat owners to comply with positive obligations to repair the flats. Due to the difficulty of enforcing positive covenants against subsequent freehold owners, the property owner would be well advised to sell the flats on long leases and retain the freehold. (A) is incorrect because, as explained above, the property owner wishes to impose positive obligations against subsequent flat owners. Positive covenants generally bind only the original covenantor. (C) is incorrect because it is not true that such covenants may be contained only in a lease. The property owner may include positive covenants in his freehold transfers to the flat owners. However, these covenants may not easily be enforced against successors in title to the original flat owners. (D) is incorrect because, as explained above, the obligation to repair and upkeep requires positive action to comply, and therefore is a positive covenant rather than a restrictive one (for which no action is required to comply). (E) is incorrect because a building scheme is not relevant here. A building scheme may allow a buyer of benefitted land to enforce the benefit of a covenant in equity
A solicitor recently completed the purchase of a property with unregistered title. The solicitor checks their files and notices that completion occurred one month ago.
How long does the solicitor have to make an application for first registration?
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(C) The solicitor must make an application for first registration within one month. An application for first registration of an unregistered title must be submitted to His Majesty’s Land Registry within two months of completion. As one month has already passed since completion, the solicitor has a further one month within which to ensure that the application for first registration is submitted. Thus, the remaining answers are incorrect
A property owner has a house with a large garden. An estate agent has told the property owner that the garden would be big enough for another house to be built. The property owner would like to build a second home and divide the property but presently does not have enough money to undertake the work. She telephones her solicitor for advice. The solicitor advises that they could obtain permission from the local authority so that the work can be commenced when the property owner obtains sufficient funds.
The property owner instructed the solicitor to obtain planning permission. The solicitor presented the property owner’s plans to the local authority, which granted detailed permission for the project.
Which of the following best describes the explanation of the results that the solicitor will give the client?
D) The solicitor should advise the owner that she must start the development within three years from the time permission was granted. That is the rule that applies when detailed permission is granted. The other choices state an incorrect timescale. Note that (C) is incorrect because the three years is measured to the date the development is commenced and not to the date of completion
A solicitor specialising in real estate matters has a verbal agreement to share 10% of their fees with a local estate agent. The estate agent referred a client to the solicitor and the matter has now completed. The solicitor informed the client at the outset of the matter that they would be sharing their fees with the estate agent, and the solicitor has now made the payment to the estate agent.
Were the solicitor’s actions in accordance with the SRA Standards and Regulations?
(C) The SRA Codes of Conduct provide that all fee sharing agreements with a third party must be in writing. Additionally, the client must be informed of any fee sharing arrangement that is relevant to their matter. Because the solicitor’s agreement with the estate agent was verbal, the solicitor’s actions were not in accordance with the SRA Standards and Regulations. (A) is incorrect. It is true that fee sharing agreements are generally permitted (other than with respect to clients who are subject to criminal proceedings, or when related to a referral of a claim following personal injury or death). However, they must be in writing and the client must be informed, and here the writing requirement was not met. (B) is incorrect because fee sharing agreements are generally permitted. (D) is incorrect because the client’s consent in writing is not required. (E) is incorrect. It is true that the client needs to be informed. However, the fee sharing arrangement with the third party must be in writing, and that requirement was not met here.
A solicitor is acting for the buyer of a property which has had a large extension added to it by the seller. The extension was completed two years ago, which was built without planning permission.
How long does the local authority have to take enforcement action?
C) The local authority has four years from the date of the breach to take enforcement action. The facts tell you that the work was completed two years ago, so the local authority has a further two years to take enforcement action. Thus, the remaining answers are incorrect
A man has agreed to buy a property which he intends to live in. The solicitors for the seller and the buyer are using the Law Society’s Conveyancing Protocol.
If the solicitors do not agree otherwise, what method will be used to complete the transaction?
(A) The Law Society’s Conveyancing Protocol provides that completion will be by post in compliance with the Code for Completion by Post unless the solicitors agree otherwise.
A solicitor is preparing for completion on their client’s purchase. The client is purchasing with the aid of a mortgage. The bankruptcy search result has revealed a bankruptcy order registered against the name and address of the solicitor’s buyer client. The solicitor has asked their client about the entry. The client has confirmed that they were made bankrupt a couple of weeks ago.
Which of the following best describes the next step which the solicitor must take in response to the bankruptcy entry?
(B) The bankruptcy search is done prior to completion to protect the lender client. An adverse result must be notified to the lender. This scenario is one of the reasons many solicitors will carry out a bankruptcy search against their client’s name at the beginning of the transaction, but it must be repeated as a pre-completion search. (A) is incorrect. The seller will be notified in due course, but there is no reason to notify the seller until the lender has confirmed that they will not lend the needed funds based on the bankruptcy (which is highly likely). (C) is incorrect. Again, the solicitor is likely to need to liaise with the trustee in bankruptcy, but before doing so, the solicitor needs to discuss the matter with the lender to discover their intentions. (D) is incorrect. A firm’s professional indemnity insurers must be notified if there is evidence of negligence on the part of the solicitor. There is no suggestion of that situation in this question. (E) is incorrect. If the matter fails to proceed, the solicitor will probably contact the estate agent as a matter of courtesy but there is no duty to do so. And in any case, as discussed above, such a notice would be premature at this point.
A contract for the sale of a piece of land contains the following clause: “The seller shall be entitled to remove the garage at the property on completion and shall make good any damage caused by its removal.”
Which of the following best describes the effect of the clause?
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(A) The effect of the clause is that the seller is entitled to remove the garage on completion in accordance with the contractual provision. Even if the garage is sufficiently permanent to have become part of the land and thus to be a fixture, a contractual provision can still permit its removal. Fixtures pass automatically on the sale of land without specific mention in a contract or transfer. Here, though, the garage is specifically provided for in the contract, and that clause will govern its removal. (B) is incorrect because, as explained above, though it is likely that the garage is a fixture, the seller can remove it as he has specifically negotiated this into the contract. (C) is incorrect because this choice, again, alludes to the fact that the garage is a fixture because it is annexed to the land. The seller is still entitled to remove the garage due to the contractual provision specifically providing for this. (D) is incorrect because it is unlikely that the garage is a fitting due to the fact that a garage is affixed/annexed to the land. In any event, as explained above, the seller can remove the garage due to the contractual provision covering this situation. (E) is incorrect because the seller’s right to remove the garage is based on the contractual provision, which also requires him to make good any damage caused.
A company owns the freehold of a shop which it let to a tenant under the terms of a lease dated 1 January 1995. The original tenant assigned his interest in the lease to a second tenant 10 years ago. The second tenant assigned her interest in the lease to the current tenant five years ago. The lease still has eight years left to run on its term. The current tenant is in arrears with his rent and is on the verge of bankruptcy.
Which of the following best describes the steps that the landlord could take regarding the rent arrears?
(E) The landlord can bring proceedings against the original tenant or the current tenant for non-payment of rent. Under a lease made before 1 January 1996, the original landlord and the original tenant remain liable to each other under the lease for the entire lease period – even after the lease is assigned – due to the doctrine of privity of contract. If a tenant assigns the lease and the new tenant breaches a covenant in the lease, the landlord can seek to recover from the new tenant or the original tenant. Here, the lease is dated 1 January 1995 and its term has yet to expire. Thus, the landlord may bring proceedings to recover the rent arrears from the original tenant or the current tenant. (A) and (B) are incorrect because, as explained above, the landlord does not need to proceed only against the current tenant. The landlord may seek to recover the rent arrears from either the original tenant or the current tenant (regardless of that tenant’s pending bankruptcy, though this situation may make collection difficult). (C) is incorrect because the landlord cannot pursue the second tenant as there is no privity of estate or contract between the landlord and the second tenant. (D) is incorrect because the landlord does not need to rely on forfeiture as the only means to collect the rent arrears. As explained above, the landlord can sue either the original tenant or the current tenant for non-payment of rent.
A solicitor has been instructed by a couple who are buying a house. The solicitor has already exchanged contracts with the seller’s solicitor. The solicitor asks their paralegal to carry out the pre-completion searches on a property. The solicitor also asked the paralegal to check the epitome of title and to prepare the certificate of title to request a drawdown of the mortgage advance.
What searches should the paralegal carry out?
D) The paralegal should carry out a full land charges search and bankruptcy search. The facts indicate that the paralegal was asked to check the epitome of title. An epitome of title is used only when title is unregistered. When title is unregistered, after the exchange of contracts, the solicitor for the buyer will conduct a full land charges search (against the full name of the seller and all owners in the epitome for the full period of their ownership). This will give the buyer a 15 working day priority period in which to complete. The buyer’s solicitor will also repeat the bankruptcy search if the buyer requires a mortgage. We know the buyer requires a mortgage here because the solicitor asked the paralegal to request a drawdown of the mortgage advance. (A) incorrect, as the official search with priority is the pre-completion search used if the title is registered. (B), (C), and (E) are incorrect as each refers to a local search, which is a pre-contract search. As indicated, we are in the pre-completion stage here, as contracts have been exchanged, so the time for pre-contract searches has passed. (E) is also incorrect because like (A), it refers to the official search with priority, which is used for registered property.
A landowner has used a private sewage pipe which runs beneath his neighbour’s land for 22 years. The landowner’s title does not contain reference to any right to use the sewage pipe. The neighbour discovers the use and claims that the landowner has no right to use the sewage pipe. The landowner visits his solicitor for advice.
What advice is the landowner’s solicitor likely to give in this matter?
(B) The solicitor should advise that the landowner has a prescriptive right to continue to use the sewer pipe. There is no reference on the title to a right to use the sewage pipe, so no legal right created by deed to do so exists. However, the landowner has acquired a prescriptive right to continue using the pipe because he has used it for more than 20 years, apparently without permission. (The use must be without permission, but there is no requirement that the use be openly observable.) (A) is incorrect. There is no reference on the title to a legal right to use the sewage pipe, the landowner would need to use the pipe for 20 years to acquire a prescriptive right to do so. (C) is incorrect. There is no legal right to use the sewage pipe running beneath the neighbour’s land, the fact that a right to dispose of sewage might be considered an essential service is irrelevant. (D) is incorrect. A water company cannot grant rights to use private pipes running beneath privately owned land. (E) is incorrect. There is no suggestion in the question that a licence has been granted, which is a personal right.
A solicitor is acting for a married couple regarding the purchase of a property. The solicitor has received the mortgage offer which contains the following condition:
‘The solicitor must ensure that existing loan of £4,000 is paid off prior to drawdown of the loan.’
The solicitor has reported fully to the clients on the terms of the offer. After completion, the mortgage lender discovers that the married couple still owe £4,000 on the loan referred to in the mortgage offer.
Did the solicitor breach any duties with respect to the couple’s existing £4,000 loan?
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(A) The solicitor breached the condition in the mortgage offer. The condition in the offer required the instructing solicitor to ensure that the existing loan was paid off; thus, the failure to do so is a breach of the solicitor’s duty to the lender. (B) is factually incorrect. A mortgage offer almost always imposes duties on the instructing solicitor, as the offer here did. (C) is incorrect because it is overbroad. If the borrowers default, the solicitor might well be liable for the £4,000, as the solicitor did not assure the loan was repaid. But this choice goes beyond that and provides the solicitor may be pursued for any shortfall incurred by the lender. (D) is incorrect because the condition imposes the obligation on the instructing solicitor to ensure that the existing loan is paid off. Merely reporting on the terms of the offer to the borrower is not enough. (E) is incorrect because the UK Finance Mortgage Lender’s Handbook does not require solicitors to ensure their clients’ existing debts are fully paid before submitting the certificate of title to the lender.
A man was interested in selling his house. His cousin had often remarked how much she admired the house, and so the man contacted his cousin and asked her whether she was interested in buying the house from him.
The man told his cousin that if she agreed to buy the house, he would sell it to her for below current market value because he would save the time and effort required to sell the house to a stranger. The two orally agreed a deal.
The man told the woman that to further save money, he would find a solicitor to facilitate the purchase and sale for both of them. To that end, the man contacts a solicitor whom he has used for a number of business transactions over the past few years and asks the solicitor to represent the man and his cousin in the transaction.
Which of the following statements best describes whether the solicitor should act for both clients?
E) This is a conflict of interest; the solicitor owes separate duties to act in the best interests of the two clients and cannot act for them both. (A) is incorrect; the two clients do not want the same thing as one wants to sell the property and the other wants to buy the property. (B) and (C) are incorrect; the solicitor must not act if there is a conflict even if the clients request or consent to waiving the regulatory duty. There are two exceptions that allow a solicitor to act despite a conflict between clients if certain conditions are met, but neither exception applies here. (D) is incorrect because a conflict covers the entire firm.
A buyer has agreed to purchase a residential leasehold flat. The solicitors for the seller and the buyer are using the Law Society’s Conveyancing Protocol and the Code for Completion by Post.
Which of the following warranties will the seller’s solicitor give pursuant to the Protocol?
C) Under the Code for Completion by Post, the seller’s solicitor gives a warranty that the solicitor is authorised to act by the true seller. (A) is incorrect. The buyer’s solicitor will have determined whether title is good and marketable through pre-contract searches and enquiries. (B) is incorrect as no one is required to give such a warranty in any part of the transaction. (D) is incorrect. The transaction proceeds on the basis of ‘caveat emptor’ (let the buyer beware), meaning that the buyer has to satisfy himself that the property is structurally sound; they will usually do this by commissioning a survey prior to exchange of contracts. (E) is incorrect because the seller’s solicitor does not need to send the completion money until the contractually agreed completion date.
A man purchased a property. The title is registered in his sole name. The man contributed £100,000 towards the purchase price and his friend contributed £50,000. It was intended that the friend be a co-owner and take a share of the proceeds when the property is sold.
Which of the following best describes how the friend’s interest should be protected?
(B) The friend should protect their interest by having a Form A restriction placed on the proprietorship register of the title. A restriction is used to prevent any dealing with the land other than in accordance with the terms of that restriction. Here, the legal estate is held solely by the man, but the beneficial interest is held by the man and his friend as tenants in common, given the friend contributed an unequal share of the purchase price and is intended to take a share of the proceeds when the land is sold. When property is owned as tenants in common, a Form A restriction (a restriction on dispositions by a sole proprietor) is placed on the proprietorship register to put the world on notice of a party’s beneficial interest. (A) is incorrect because a charge on the charges register is not the appropriate method to protect the friend’s interest. The charges register indicates any encumbrances which affect the land, for example, covenants or mortgages. As explained above, the friend’s beneficial interest as a tenant in common (and the parties’ intention that the friend receive a portion of the purchase price) should be protected by a Form A restriction on the proprietorship register. (C) is incorrect because a caution against first registration is not the appropriate way to protect the friend’s interest. A caution against first registration is used so that a party with an interest in unregistered land is informed when that land is about to be registered so that their interest can be investigated. (D) is incorrect because it is the method of protecting a second or subsequent charge in the unregistered system, neither of which is relevant here. (E) is incorrect because this is not the appropriate way of protecting the friend’s interest. A notice is an entry in the register in respect of the burden of an interest affecting a registered estate or charge, such as an estate contract.QUESTION ID: LAN044
The owner of a small publishing business built an office building about nine years ago. The building had twice as much space as the owner needed at the time, but the owner was hopeful that the business would grow. To help with expenses, the owner leased the ground floor of the building to a shop owner under a 10-year lease. The building owner’s publishing business has expanded as hoped. As these are the only commercial premises the owner owns, she would like to retake the leased premises to use in her business at the end of the lease term 11 months from now.
The landlord and tenant did not contract out of the provisions of the Landlord and Tenant Act 1954 (Part II) when they entered the lease that is about to expire. Additionally, the tenant has always complied with all obligations imposed on the tenant under the lease.
May the landlord terminate the shop owner’s tenancy at the end of the lease term under these circumstances?
(D) The landlord may terminate the lease because the landlord intends to occupy the whole premises. Under the Landlord and Tenant Act 1954 (Part II), a tenant can continue to occupy leased commercial premises under the lease after the term of the lease expires unless the landlord serves a section 25 notice on the tenant between six to 12 months before the end of the lease term. The notice must state a statutory ground for termination of the lease. Such grounds include breaches of obligations under the lease by the tenant; the availability of suitable, alternative premises for the tenant; and the landlord’s desire to demolish, reconstruct, or move into the premises. Here, the landlord intends to occupy the premises. Additionally, the facts indicate that there are 11 months left on the lease, so the time for a section 25 notice has not expired. (A) is incorrect because merely reaching the end of the term of a lease is not a ground for terminating a commercial tenancy under the Landlord and Tenant Act 1954. (B), (C), and (E) are incorrect because although each refers to a statutory ground for terminating the tenancy which is not present under the facts, a landlord’s desire to occupy the leased premises also is a statutory ground and that ground is present in the facts.
Two solicitors who work in a firm (‘ABC and Co’) have set up a separate estate agency which is not regulated by the Solicitors Regulation Authority or other approved regulator. The solicitors want to name the estate agency ‘ABC Solicitors Estate Agency’.
Do the rules of professional conduct allow the use of this name?
C) A solicitor must not be an interest holder of a business that has a name which includes the word ‘solicitors’ unless it is an authorised body (meaning, a body that has been recognised by the SRA). (B) is incorrect because the additional publicity will not remedy the first breach (using the word ‘solicitors’ in its name). (D) is incorrect because it is not the best answer. The name is prohibited because the estate agency is not an authorised body. (E) is incorrect because the fact that solicitors work at the estate agency does not mean that it is an authorised body
A firm of solicitors acts for a client in a matrimonial matter. The client receives a bill for professional charges of £4,000 plus VAT of £800. The client is dissatisfied with the service provided by the firm and requests a reduction. A partner of the firm decides to reduce the bill by 10%.
Which one of the following entries is correct?
(C) Credit £400 client ledger - business side; Credit £80 client ledger - business side. To correctly record the abatement of costs, the client ledger, business side, should be credited with the amount of the abatement. In this question, a 10% reduction would be a credit of £400 on the professional charges and £80 on the VAT. (There would also be a corresponding debit on the profit costs and on the HMRC VAT ledger account.) (A) and (B) are incorrect as it is a credit and not a debit entry. The figures in (B) are also incorrect - they represent what the bill would be reduced to. (D) is incorrect as the figures represent 5% and not 10% and they are also debit entries rather than credit entries. (E) is incorrect. There is no movement on the cash account as no money has been received by the firm.
Disbursements are treated differently as regards VAT, as they are not part of a solicitor’s supply of services to the client. Therefore, the cost of disbursements is simply passed on to the client.
Which of the following is not a condition laid down by HMRC in order for a cost to be treated as a disbursement?
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E) In order for a cost to be treated as a disbursement, the client must be aware that the goods or services were from another supplier, not the firm. (A)-(D) are all incorrect as these are conditions that must be met for an item to be treated as a disbursement.
A solicitor acts for a client who is registered for VAT. The solicitor is holding £1,000 on account for the client. The solicitor pays a surveyor’s bill of £700 plus £140 VAT out of the client’s funds, as the invoice is addressed to the client and there are sufficient funds held on account for the client. The firm’s profit costs are £1,000 plus £200 VAT.
Which of the following statements is incorrect?
(B) As the client is registered for VAT, the firm should send it a VAT invoice but only for the VAT that relates to the firm’s professional charges (profit costs), and not the VAT on the surveyor’s fee. The solicitor must also send the client the surveyor’s bill showing the amount of VAT the client has paid on that bill. (A) reflects the correct procedure; the firm will provide the client with a VAT invoice for its profit costs, and also it will send the surveyor’s bill on to the client. (C) is a wrong choice because it reflects the proper procedure - the firm would record only the VAT that relates to the supply of goods or services provided by the firm (£200) and not that which relates to a third party. (D) also reflects correct procedure - all professional charges, once a bill has been sent, should be recorded on both the client ledger and the profit costs ledger. (E) reflects a correct procedure as long as there are sufficient funds in the client account.
A newly qualified solicitor has recently joined a firm. In the course of working on several matters, the solicitor encounters different examples of money being received or held by the firm. The solicitor is unsure which of these examples represent client money and asks a colleague for guidance.
Which of the following is an example of client money?
D) Money received for unpaid disbursements is treated as client money unless a bill has been sent including those disbursements. All of the other options are business money.QUESTION ID: A
A trainee solicitor is dealing with several clients in a property department at a firm. He is uncertain as to whether money received from his clients is business or client money.
Which of following statements is untrue regarding money received by the firm?
(D) Money received in payment of professional charges included on a bill is business money rather than client money. As long as the bill has been sent to the client and the client has sent a payment on the bill, the payment is business money. All of the other statements are true
A solicitor acts for a baker on a commercial transaction. The solicitor also acts for the baker’s son on a conveyance. The baker asks the solicitor to transfer £100,000 of her money to her son so that he may purchase a flat.
Which of the following entries will the solicitor make to record the transfer?
(C) When carrying out an inter-client transfer, the client cash account is bypassed and remains untouched, as you are simply recording the transfer of money from one client ledger to another client ledger, and the money remains in the same bank account. (A) and (B) are incorrect as there is no movement on the cash account. (D) is incorrect as the money is not being held for both clients jointly in a stakeholder account. (E) is incorrect as there should be a corresponding credit for every debit entry.Q
Question
A solicitor is setting up a new law firm that will be handling client money.
Which one of the following statements is correct with regard to the client money?
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(A) The SRA Accounts Rules state that a client bank account must be held at a bank or building society in England and Wales and must include the name of the firm and the word ‘client’. (B) is incorrect because a bill is not required if the solicitor had explained to the client how and when disbursements would be made and that they would be taken from the client account. (C) is incorrect as the rules refer only to the transfer of funds to pay costs. (D) is incorrect as a firm does not need a client bank account if the only client money received is for fees and unpaid disbursements prior to delivery of a bill. (E) is incorrect as once a bill is issued, all disbursements on the bill (both paid and unpaid) can be transferred, although guidance says that any large sums for which the client remains liable (for example, stamp duty land tax) should not be transferred.
A firm has received a letter from a client querying why the firm has charged VAT on its profit costs in a bill that the client has received. A junior solicitor is uncertain of the firm’s reasoning behind this and has asked a senior partner for some advice. The senior partner saw this as an opportunity to teach the junior solicitor some of the details of VAT.
Which of the following statements is incorrect and so should not be included in the explanation?
(E) A firm of solicitors must charge VAT where its taxable supplies exceed the threshold set by the government (£85,000 for tax year 2019/20). This refers to any form of supply or service provided by the law firm. This is why (B) and (C) are true statements. (A) and (D) are true as most law firms will exceed the threshold set by the government and will therefore be registered for VAT
A law firm acts for a client in relation to a property matter. The client requires a mortgage of £300,000 and a bank the firm represents is providing the mortgage facility. The bank sends the firm £300,000 in relation to the mortgage.
Which of the following best states the legal position regarding the mortgage?
E) Under the SRA Accounts Rules, solicitors must keep a client ledger identified by the client name for all client money. However, if the buyer is receiving a mortgage from an institutional lender on standard terms and conditions, then the solicitor may credit the mortgage funds on the borrower’s ledger but indicate in the details column that the funds are held for the lender. Therefore, (A) and (C) are incorrect, as the firm has a choice: It can open a ledger for the bank, or it can credit the money to the borrower’s ledger. (B) is incorrect because the firm is holding the mortgage funds for the lender until completion, after which it becomes the client’s money. (D) is incorrect, as at no point do the funds from the mortgage provider become business money – this would be a serious breach of the Rules
A client sends in a cheque for £6,000 comprised of (1) payment of an outstanding bill recently sent to the client (£3,800, including VAT), and (2) money paid on account in respect of professional disbursements that have yet to be paid (£2,200) and that were not included in the bill.
How should this payment be treated?
(B) The cheque can be paid into the client account, but the £3,800 must be transferred into the business account promptly. When a firm receives a cheque that contains both business and client funds, the SRA Accounts Rules give two options: Either split the cheque or deposit the money into one account and transfer the relevant funds to the other account promptly. As many banks will refuse to split cheques, (B) is the best answer. (A) is incorrect because the money can be paid into the client account or it can be paid into the business account. (C) is incorrect because the cheque can be paid into the client account and not the business account. (D) and (E) are incorrect because there is no rule that the money must be split. Additionally, (D) has the split wrong: £2,200 would go to the client account and £3,800 to the business account, as stated in
A client sends a firm a cheque for £2,000 on account of costs in a litigation matter. The firm pays court fees of £500 on behalf of the client. Subsequently the firm discovers that the cheque has been dishonoured. As a consequence, the client account has become overdrawn and £500 of other clients’ money has been used.
Which of the following best describes the immediate action the firm must take?
(D) The best course of action is to transfer £500 from the business account to the client account. An overdrawn account constitutes a breach of the SRA Accounts Rules which the firm must remedy promptly upon discovery. Since the account has become overdrawn by £500, the firm must put in £500 of its own money. (A) is not the most urgent action to be taken. (B) and (C) are not required actions (although (C) is a good idea). (E) is not the best solution for the firm as it is only required to make up the amount overdrawn - not the whole of the dishonoured cheque.
A man instructed a solicitor to assist the man in a transaction in which he intends to borrow money from a building society in exchange for a first legal mortgage on the home. Title to the home was unregistered. The parties then executed a mortgage deed.
As a result of the transaction must the solicitor make an application for first registration?
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(D) The solicitor must make an application for first registration to HMLR within two months of completion of the mortgage. (A) and (E) are incorrect as creation of a first legal mortgage triggers first registration and so the building society will apply to have their mortgage appear on the charges register for the property. (B) and (C) are incorrect as they each state an incorrect timescale.
A solicitor acts for the executors of an estate and the administration has come to an end. The executors instruct the solicitor to close their client account and transfer the residuary estate to the deceased’s granddaughter, who the firm is also acting for in a separate property transaction.
Which one of the following statements is correct with respect to the transfer?
(C) To close the executors’ client account, the remaining funds within it must be taken out of the account and transferred directly into the granddaughter’s client account. (A) is incorrect as a note of this can be made in the granddaughter’s client file, but this would not be sufficient to end the matter. (B) is incorrect. As the funds from the estate remain in the general client account, there is no movement; the funds are simply attributed to another client. (D) is incorrect. If the granddaughter was not a client of the firm you would not have a client ledger for her, you would have simply sent the granddaughter a cheque from the executors’ client account. (E) is incorrect as the VAT ledger has no relevance here; this is not a business transaction.
The solicitors for a buyer and seller of a house have agreed to use the Law Society formulae for exchanging contracts by telephone. They also agree to use the Standard Conditions of Sale, unamended. The parties are ready to exchange, but the buyer’s solicitor has limited time available over the course of the next week and so has suggested that they exchange using Formula A. The solicitor for the seller agrees.
How will the solicitors effect exchange of contracts?
(B) Formula A is used when the solicitors think it is prudent for one solicitor to hold both contracts on exchange. Here, the buyer’s solicitor has limited availability, so under Formula A, the buyer’s solicitor will send the contract signed by the buyer to the seller’s solicitor, along with the deposit. The seller’s solicitor will confirm both contracts are the same over the telephone, insert the exchange date in both, and send the part signed by the seller to the buyer’s solicitor. (A) is incorrect because it describes a Formula B exchange - where each solicitor holds their own client’s part of the contract, confirms they are the same, and then sends it. Since the buyer’s solicitor will have limited time here, the facts provide that the solicitors did not agree this type of exchange. (C) is incorrect both because it describes a Formula B exchange, as just explained (where each solicitor holds their own client’s contract), and because under the unamended Standard Conditions of Sale, the seller’s solicitor will hold the deposit funds. (D) is incorrect because whilst it generally describes a Formula A exchange, as with the previous choice, under the unamended Standard Conditions of Sale, the seller’s solicitor will hold the deposit. (E) is incorrect because none of the formulae for exchange require both solicitors to send their client’s contract to the other solicitor before effecting exchange of contracts.
A limited company has instructed a solicitor to act on the acquisition of a lease of shop premises. The limited company is funding the purchase with a mortgage. The company’s solicitor has received the mortgage offer. The company is taking an assignment of an existing lease which has a residue of 21 years and an unregistered title.
How long after completion does the solicitor acting for the limited company have to register the mortgage at Companies House?
(D) If a limited company is borrowing money, it is necessary to register the charge at Companies House within 21 days. Thus, the remaining answers are incorrect
A solicitor is acting for the buyer of a new build property on a large estate from a developer. The solicitor has carried out their pre-completion official search with priority against part of a registered title (OS2).
For how long will the buyer be protected against registration of new adverse interests against the title to the property as a result of the search?
(B) The official search with priority against part of a registered title protects the buyer against registration of new adverse interests against the title to the property which is the subject of the search for 30 working days. The buyer’s registration application will have priority over any application for an entry to be made in the register during the 30-day period (known as the priority period) if the buyer completes and registers their title within the priority period. (Note that the OS2 priority period is the same as the priority period conferred for an official search with priority against the whole of a registered title (OS1).) (A), (C), (D), and (E) are incorrect as they do not state the correct time period. Note that 15 working days is the priority period conferred by a full land charges search in an unregistered title transaction (completion must take place during the 15 working day priority period). Two months is the time period within which an application for first registration must be made to His Majesty’s Land Registry following the purchase of an unregistered title
In a particular financial year, a firm of solicitors sends bills to clients that total £550,000 in profit costs, on which the firm adds a charge for VAT. The rate of VAT at this time is 20%. In the same financial year, the firm undertakes an office refurbishment at a cost of £50,000 on which the firm is charged VAT by the various suppliers.
How should the firm account to HMRC in relation to the VAT?
B) The firm will be accountable to HMRC for £100,000 (£110,000 output tax, less £10,000 input tax at a rate of 20%). (A) is incorrect because £110,000 is the full rate of output tax on the firm’s profit costs with no deduction for input tax on the office refurbishment. (C) is incorrect because £27,500 is 5% of the profit costs, which is the incorrect rate of VAT, and also no deduction has been made for input tax. (D) is incorrect because £10,000 is only the amount of input tax that would be charged on the office refurbishment. This figure would be offset against any output tax the firm charged on the supply of its professional services, in this case £110,000. (E) is incorrect because £25,000 is input tax less output tax on this scenario but based on a VAT rate of 5%. The correct rate is 20%.
A firm charges a client £2,500 plus VAT of £500 in profit costs for work carried out in relation to a probate transaction. The client complains that this cost is too high and not what the client was expecting. The client refuses to pay. The firm realises there has been an error in its billing and decides to reduce the bill to £2,200 with VAT reduced to £440.
Which of the following statements describes the firm’s best course of action?
(D) This is an abatement of fees, and as such the firm should record the reduction of costs on the appropriate ledgers and send the client out a new bill. (A) is incorrect. As the firm has realised its error, it should not request payment in full from its client; it should simply send a new bill out. (B) is incorrect. A firm is obliged to abide by the SRA Accounts Rules as well as the overall principles set out in the Code of Conduct. Once an error has been identified, it must be rectified without delay. It would be inappropriate to not disclose this matter to a client and send them to the SRA, as the SRA would penalise the firm in this circumstance, in any event. (C) is incorrect because the firm need not waive its entire fee; it must rectify its error. (E) is true but it is not the best answer because the firm must also note the reduction of costs on the appropriate ledgers in its internal accounting records
A solicitor is acting for a client in a conveyance. The client provides the solicitor with £1,000 and has asked the solicitor to pay a surveyor on the client’s behalf.
Which of the following statements best describes what the solicitor should do?
(A) Client money (subject to certain exceptions which do not apply here) must be promptly paid into a client account. The firm should record the receipt on the client’s ledger. (B) and (C) are incorrect as they do not require the solicitor to record the receipt, and in the case of (B), it is not sufficient to hold the money in a safe. (D) is incorrect both because the solicitor should record the receipt and because the payment must go into the client account before it is paid to the third party. (E) is incorrect as the surveyor is not the solicitor’s client-client ledgers are for clients
Question
A homeowner is irritated that his neighbour has started to run a car repair business from his garage at his home. The homeowner has noticed a significant increase in traffic to the area and is annoyed at the noise caused by the neighbour’s work to the cars. The neighbour has put up a sign advertising his car repair business. The homeowner tells the local authority about the business which is now taking place in a residential area.
How long does the local authority have to take enforcement action against the homeowner’s neighbour?
(E) Running the car repair business from a residential area would be sufficient to constitute a material change of use from a planning point of view, in which case the local authority has a 10-year enforcement period. Thus, the remaining answers are incorrect.
A bank has repossessed a property and has obtained an order for possession. The bank has instructed a solicitor to act for it in relation to the sale of the property.
Which title guarantee is most appropriate in this circumstance?
(A) No title guarantee is most appropriate in this circumstance. No title guarantee is typically given when a seller has no knowledge of the property at all, for example, a mortgagee in possession, as the bank is here. (B) is incorrect. A limited title guarantee is narrower in scope than a full title guarantee; in it, the seller merely warrants that the seller has not created any charges or granted any rights during their period of ownership that have not been disclosed in the contract. This type of guarantee is typically given by a seller with less knowledge or involvement with the property and is appropriate when, for example, the seller is a personal representative. (C) is incorrect. A full title guarantee includes a guarantee that the seller is entitled to sell the property, that they will do all in their power to transfer the purported title to the buyer, and that they are selling the property free from all charges or encumbrances other than those disclosed in the contract. This type of guarantee is generally given by a seller who owns the full legal and equitable interest in the property and has lived at the property. (D) and (E) are incorrect. There are no such title guarantees
A man has decided to sell his home in Sheffield so that he can retire to Christchurch in Dorset. The solicitors for the parties have agreed to use the Law Society’s Conveyancing Protocol and the Code for Completion by Post. Contracts have already been exchanged, which incorporate the Standard Conditions of Sale unamended.
Which of the following is a requirement under the Code after the sale proceeds are received?
(D) The Code for Completion by Post provides that after completion, the seller’s solicitor must act as agent for the buyer’s solicitor, meaning that once the sale proceeds are received, the seller’s solicitor will date and send the executed transfer (and any other relevant documents) to the buyer’s solicitor not later than the end of the working day following completion. Note that the seller’s solicitor is also required to confirm to the buyer’s solicitor and to whomever holds the keys (such as an estate agent) – by telephone, fax, or email – the date and time at which completion has taken place. This notice must be given as soon as possible after completion. (A) and (B) are incorrect because it is the seller’s solicitor who completes the completion documents. (A) is also incorrect in that it states the wrong timescale. (C) and (E) are incorrect for that same reason
A landlord acquired a residential investment property for £350,000 on 1 September 2022 to add to her existing portfolio of residential properties. The stamp duty land tax for residential property at the time was as follows:
- 0% up to £125,000
- 2% for amounts £125,001 - £250,000
- 5% for amounts over £250,000 but not more than £925,000
A 3% premium is owed on additional residential properties.
How much stamp duty land tax will the landlord owe on the purchase?
A) £18,000. An additional 3% is charged in each band due to this being an additional purchase of residential property. Residential properties are exempt from VAT, so we need not worry about calculating VAT. Thus, the landlord must pay 3% on the first £125,000 (£3,750), 5% on the next £125,000 (£6,250), and 8% on the amount over £250,000 (£350,000 - £250,000 = £100,000; £100,000 x 8% = £8,000). So, £3,750 + £6,250 + £8,000 = £18,000
A solicitor has completed a commercial transaction and must close the client’s account. There is a credit on the client account for £500. The solicitor immediately makes a payment to her client of £500.
Which one of the following entries would be the most appropriate entry to record this payment?
ResponsesPress Enter or Space to submit the answer
(A) The payment should be recorded as a debit in the client ledger - client side, as the firm would need to debit the client account to send her the money. The corresponding entry would be a credit entry in the cash account, as the firm no longer owes this money to the client. (B) is incorrect as this is not business money and so should not be reflected on the business side. (C) and (D) are incorrect because there should be a corresponding credit to match the debit entry. (E) is incorrect because the payment should not be reflected as a credit to the client account.
A firm of solicitors issues a bill to its client. The bill is comprised of the firm’s professional charges plus VAT, a search fee from the land registry, which the firm has already paid. The client has sent the firm a cheque for the entire sum.
Which of the following statements best describes how the cheque from the client should be handled?
(E) As a bill has been issued including the disbursements, the cheque does not include any client money and so should be placed into the business account. (A) is incorrect as this receipt does not contain client money. (C) is not the best answer here as business money could be placed into the client bank account so long as it is promptly transferred to the business bank account. (B) and (D) are incorrect as we know the receipt is not client money.
A probate solicitor is good friends with an estate agent who often takes the solicitor to golf club days out and for expensive meals. The solicitor regularly recommends the estate agent to his clients, informing each client of his personal relationship with the estate agent and urging the client to contact them. Out of loyalty to the estate agent, the solicitor does not recommend any other estate agents to clients, but he sincerely believes that the estate agent is competent.
Are the solicitor’s actions in accordance with the SRA Standards and Regulations?
(A) The Principles provide that a solicitor must act with independence, and in each client’s best interests. Therefore, when a solicitor recommends a particular person or business to a client, the recommendation must be in the best interests of that particular client and must not compromise the solicitor’s independence. Here it appears that the solicitor is not acting with independence because he will not recommend any other estate agents out of loyalty to this estate agent, even though there might be other estate agents who are more suited to a client’s specific needs. The fact that the solicitor has not received payments of money from the estate agent is irrelevant; the meals and golf days might be seen as inducements, which indicate that the solicitor has been persuaded to recommend the estate agent when it is not in the best interests of the clients to do so. (B) is therefore incorrect. (C) is incorrect because a ‘prohibited referral fee’ is the payment or receipt of referral fees in claims for damages following personal injury or death and is not relevant here. (D) is incorrect because even though the solicitor does not have a financial interest in the estate agent’s business, he is not acting with independence or in the clients’ best interests. (E) is incorrect. It is true that a solicitor must inform the client of any interest they have in referring the client to another person, but even if the solicitor does this, they still must act with independence and in the best interests of the client when making the referral.QUESTION ID: ETH040
A woman is interested in buying a paddock for her horses. Access to the public highway is important to her. She sees the following statement on the estate agent’s particulars of sale:
‘The property benefits from a right-of-way over the eastern side of the neighbouring field to access the nearest public highway, known as ‘The Common Lane’.
The woman’s solicitor has sent her a seller’s register of title.
Where should reference to the right-of-way appear on the title?
(D) The Property Register. The woman is interested in buying a property with the benefit of the right-of-way. The question makes it clear that the title is registered. If a registered title benefits from any rights, these would appear on the Property Register. (A) is incorrect as the Proprietorship Register specifies the class of title held and the name of the current holder or holders of the legal estate. (B) is incorrect as the Charges Register contains details of encumbrances on the land, that is, entries which adversely affect the land. (C) and (E) are incorrect because the facts ask specifically where the reference should appear on the title – and the question makes it clear this is a registered title. It might be necessary to look at a conveyance or deed if the right-of-way is not yet registered.
A solicitor acts for a corporate client on a commercial transaction. The client is registered for VAT. The solicitor pays an expert’s fee of £7,000 plus VAT of £1,400 on behalf of the client and receives an invoice addressed to the client.
Which of the following statements is correct with respect to these events?
(C) The agency method must be used here as the invoice is addressed to the client. If there are sufficient funds in the client account, the entire amount should be debited from the client account, without distinguishing between the fee and VAT. (A) is incorrect because the agency method, not the principal method, applies here and will be used. (B) is incorrect. Petty cash would not be used here as this is not an expense of the firm; it is the client’s. Also, typically petty cash is used only to deal with small payments, and the payment here is not small. (D) is incorrect. A firm should issue VAT invoices only in relation to its own professional charges/supply of goods; here, it should simply pass the original invoice, including the VAT element, on to the client. (E) is incorrect as only VAT related to the solicitor’s professional charges is recorded on its HMRC VAT ledger.
On completion of a property transaction worth £1,500,000, the solicitor is informed by the bank that £175 interest on client funds held in a client account has accrued. There is an outstanding bill of £1,500 plus VAT for professional services and disbursements of £75.
Which of the following statements is not true with respect to the interest?
(D) It is not true that a solicitor must account to its client for all interest. The SRA Accounts Rules provide that a solicitor should account for a fair sum of interest unless the client has agreed an alternative arrangement. (A) and (B) are true because the solicitor can choose to offset any interest payments against other amounts owed by the client to the firm for payment of bills. (C) is true because a solicitor and client can reach an agreement to contract out of the provisions of the rules on payment of interest. (E) is true because the solicitor should account to the client for a fair sum of interest.Q
A first-time buyer has put in an offer to buy a property which has recently been extended by the seller. The first-time buyer has instructed her solicitor and has paid money on account of searches. The first-time buyer is very cautious and wants to be sure that all is in order regarding the extension. She telephones her solicitor to discuss this point.
How would the solicitor find out more detail about the extension and the documentation relating to it?
(C) To find out more about the extension, the solicitor would look at the Property Information Form (‘PIF’) and the results of a local search. The seller should disclose the fact that they have carried out building works on the PIF. Details of the planning and building regulation documentation will be revealed by the local search. (A) is incorrect as there is no such thing as a local planning search. (B) is not as good an answer as (C) as the PIF would be the starting point; it would be the basis of enquiries, but it might be that enquiries are not needed, depending on what is provided in the PIF. (D) and (E) are incorrect as the drainage and water search reveals whether the property is connected to the public foul drainage system and public water supply and is not related to the extension
A woman made a valid will five years ago. Amongst other gifts, the will left £5,000 to one of the witnesses of the will. Last year the woman validly executed a codicil to the will. The codicil increases the gift to the witness to £10,000, makes two additional new gifts, and confirms that the rest of the will is unamended. Different witnesses, who are unconnected to any beneficiaries, were present at the execution of the codicil. The woman has now died.
Which of the following statements best describes the effect of the codicil?
(A) The gift of £10,000 to the witness of the original will is valid. A codicil is a document that adds to, amends, or partially revokes an existing will. It must be executed with the same formalities that are required for a will. A codicil may remedy a gift which was void because the beneficiary also witnessed the will. Here, the gift of £5,000 to the witness in the will is invalid because any gift to a beneficiary who is also a witness fails. However, this is remedied by the codicil, as there were different witnesses for the execution of the codicil. The gift of £10,000 is therefore valid. (B) is incorrect. There can be different witnesses for the codicil and the will. (C) is incorrect. The codicil makes clear that the rest of the will is unamended, and so other gifts remain effective. (D) is incorrect. The codicil was validly executed, so all three gifts within it are valid. As explained above, because different individuals witnessed the codicil, the gift to the witness of the will is valid. (E) is incorrect. The original gift of £5,000 is invalid, as the beneficiary was a witness to the will. Only the gift of £10,000, in the correctly executed codicil, will take effect
A man made a valid will 10 years ago, leaving most of his estate to his wife. Since then, the man separated from and subsequently divorced his wife. He then met his new partner. They got engaged last year and entered into a civil partnership this year.
Which of the following statements best describes the effect of these events on the man’s will?
C) The man’s will was revoked by his civil partnership. A marriage or civil partnership revokes a pre-existing will unless it is clear from the will that: (1) the testator was expecting to marry or enter into a civil partnership with a particular person, and (2) the testator intended that the will should not be revoked by the marriage or civil partnership. Since the man made his will while still married to his wife, he could not have written it with the expectation that he would be entering into a civil partnership with his partner. Therefore, the testator’s civil partnership revoked the will. (A) is, therefore, incorrect, as the will has been revoked. (B) is incorrect, as a will is not revoked by separation. (D) is incorrect. If a testator divorces after executing a will, gifts to the testator’s former spouse will fail, but the will is not automatically revoked by the divorce. (E) is incorrect. Getting engaged does not revoke an existing wil
