SQE Property Practice Flashcards
A solicitor acts for a buyer of a registered property. The proprietorship register reveals that there are two registered proprietors and contains this entry:
“RESTRICTION: No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court”.
The seller’s solicitors have confirmed that the two proprietors were married but that one of them is now deceased.
Which of the following best describes the position in which the buyer will obtain good legal and beneficial title?
A trustee needs to be appointed and only that trustee needs to execute the transfer deed.
Option b: Only the surviving proprietor needs to execute the transfer deed as the proprietors were married.
Option c: A second trustee needs to be appointed and both the second trustee and the surviving proprietor need to execute the transfer deed.
Option d: The surviving proprietor needs to execute the transfer deed and there needs to be an indemnity covenant added to the transfer deed.
Option e: The surviving proprietor needs to execute the transfer deed and an order of the court must be obtained.
Option C is correct. The entries in the proprietorship register confirm that the property was held as tenants in common. In the absence of an order of the court authorising the execution of the transfer deed by a sole trustee, a second trustee should be appointed in accordance with the Trustee Act 1925, so that two trustees are able to sign the transfer deed.
Option A is wrong. Whilst a second trustee will need appointing, as explained above, two trustees must sign the transfer deed. One person acting alone will not satisfy the restriction.
Option B is wrong. As the property was held as tenants in common, it is irrelevant whether the proprietors were married. A second trustee must be appointed in accordance with the Trustee Act 1925 so that two trustees are able to sign the transfer deed.
Option D is wrong. An indemnity covenant has no bearing on this issue.
Option E is wrong. It is the word “must” that makes this option wrong. Whilst is it possible to acquire a court order to authorise the sale by a single trustee, it is also possible to appoint a second trustee in accordance with the Trustee Act 1925 so that two trustees are able to sign the transfer deed.
A client is looking to acquire a property called Red Acres. The official copies for Red Acres include the following entry:
“The Property is subject to the rights granted in a conveyance of Blue Acres dated 7th June 1969 and made between John Smith (1) and Jennifer Jones (2)”
“A copy of this conveyance is filed at HM Land Registry “
Which of the following best describes the course of action the solicitor should pursue?
Option a. As the rights granted to Blue Acres will bind Red Acres enquiries should be made of the Seller and further details obtained from Land Registry.
selected
Option b: As the Seller will not have any information about these rights it is not worth raising requisitions in relation to them and further details should be obtained from Land Registry.
Option c: As the rights granted to Blue Acres do not bind Red Acres there will be no need to investigate further.
Option d: The rights referred to benefit Red Acres and so no further due diligence is required.
Option e: The rights granted to Blue Acres will only bind the client if he provides an indemnity covenant so advise the client not to give such a covenant.
Option A is the best answer. The rights granted to Blue Acres over Red Acres are referred to on the register and will bind Red Acres. Further information is therefore required of the Seller and a copy of the conveyance should be obtained from Land Registry. As a result, Option C is wrong.
Indemnity covenants are only relevant in the case of covenants (not rights) and so Option E is wrong.
Option D is wrong as the rights burden Red Acres; they do not benefit Red Acres.
The Seller can be asked questions on the rights and may have information on them. So, requisitions should be raised and Option B is therefore not the best answer.
A client is the purchaser of a small freehold commercial unit on a trading estate for £140,000. The solicitor has just completed the transaction and must now deal with Stamp Duty Land Tax (‘SDLT’).
What is the SDLT liability?
A. £300
B. £13,000
C. £26,000
D. Nil
E. £3,000
Option D is correct. SDLT is payable in bands and there are differing rates for residential and non-residential property. This property is non-residential, so up to £150,000 in value, the tax is nil.
Above £150,000 the tax is at a percentage depending on the value of the property. The total SDLT is therefore £Nil and Option D is the correct answer.
All other options show wrong figures.
A solicitor has been consulted by a client who has just purchased a freehold property. The property consists of a large house with two large detached garages at the bottom of the drive. The client would like to convert the two garages into holiday cottages for let but has discovered that one of the garages is being used by a neighbour to park his two classic cars. The neighbour has shown the client a written document, which was signed by the previous owner eight years ago. The document states that the neighbour has been granted an exclusive right to occupy the garage for a period of ten years at a rent of £200 per quarter, with no other monies paid upfront. There was no record of this document in the official copy of the register.
Does the agreement bind the client?
A. Yes, because there is an equitable lease, which did not need to be registered.
Option b: Yes, because there is a legal lease, which did not need to be registered.
Option c: No, because there is an equitable easement, which should have been registered.
.
Option d: No, because there is a legal lease, which should have been registered.
Option e: No, because there is a licence, which will not be binding on the client.
Option B is correct as this falls within the parol lease exception, s.54(2) LPA 25. It is not a fixed term legal lease (not created by deed as per s.52(1) LPA 25) nor fixed term equitable lease (not created in accordance with s.2 LP(MP)A 89). However, on the facts rent is paid quarterly so there is an implied quarterly periodic tenancy, which will fall within the parol lease exception, s.54(2) LPA 25. It is for less than three years (each period of the lease is 3 months), at best rent, without a fine (no upfront payment mentioned in the facts) and in immediate possession. This will be overriding under Schedule 3 Paragraph 1 LRA 02.
Option A is wrong as an equitable lease would need to comply with s.2 LP(MP)A 89 and be in writing, contain all the agreed terms and be signed by both parties
Option C is wrong as the document grants exclusive possession, which prevents there being an easement.
Option D is wrong, as per the discussion above there is a legal lease, but on the facts for a term of less than 7 years so cannot be registered as a registrable disposition.
Option E is wrong, as there is an implied periodic tenancy which falls within the parol lease exception, s.54(2) LPA 25, as above.
A solicitor is advising the buyer of a commercial property. The buyer has agreed in principle to purchase the property, provided the buyer can obtain planning permission to alter the property. The seller wants to incur as few solicitors’ fees as possible and therefore wants there be no exchange of contracts.
Which of the following statements provides the best advice for the buyer client?
A. Exchange of contracts is useful where, as here, the parties are agreed that conditions must be fulfilled before completion can take place.
Option b: Exchange of contracts is necessary because it fixes the completion date.
Option c: The parties should agree to simultaneous exchange of contracts and completion.
Option d: Exchange of contracts is not compulsory but would be useful here because it gives the buyer time between exchange of contracts and completion in order to make their final preparations.
Option e: Exchange of contracts is necessary because it is required by the Law Society Conveyancing Protocol.
Option A is the best advice because it makes the seller commit now to selling the property to the buyer client if, in the future, the buyer’s application for planning permission succeeds. If the buyer’s application is unsuccessful the buyer does not have to buy the property.
Option B is not the best advice because fixing the completion date is not the buyer’s concern here.
Option C is not the best advice because, whilst it is possible to simultaneously exchange contracts and complete, it would not help the buyer to obtain the position set out at A above.
Option D is not the best advice because having time to make final preparations is not the buyer’s concern here.
Option E is not the best advice because exchange of contracts is not required by the Law Society Conveyancing Protocol.
A seller of a freehold commercial property replies to enquiries before contract made by the buyer. The seller’s replies confirm that the property was built 10 years ago.
Which of these statements sets out the correct value added tax (VAT) position in respect of the sale of the property?
A. The sale of the property is a standard-rated supply and VAT will be charged at 20%.
Option b: The sale of the property is an exempt supply and no VAT can be charged.
Option c: The sale of the property is a zero-rated supply, however the seller can opt to charge VAT at the standard rate of 20%.
Option d: The sale of the property is an exempt supply however the seller can opt to charge VAT at the standard rate of 20%.
Option e: The sale of the property is a zero-rated supply and VAT is charged at 0%.
Option D is correct. Since the property is more than three years old, it is classified as an old commercial building for VAT purposes. The sale of an old commercial building is an exempt supply but the seller can decide to exercise its option to tax and charge VAT at the standard rate of 20%.
Option A is wrong because the sale of an old commercial building is an exempt supply, subject to the option to tax.
Option B is wrong because although the sale of an old commercial building is an exempt supply, the seller can waive that exemption and opt to tax the property.
Option C is wrong because the sale of an old commercial property is an exempt supply subject to the option to tax. Zero-rated supplies are taxable, but, as the name suggests, are subject to VAT at 0%. Exempt supplies are not subject to tax.
Option E is wrong because the sale of an old commercial building is an exempt supply, subject to the option to tax.
A buyer wishes to purchase a registered freehold property. The buyer’s solicitor is investigating the title and discovers that the Official Copies show the following entries.
Entry 2 of the Proprietorship Register:
“The transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.”
Entry 3 of the Charges Register:
“A conveyance of the land dated 1 April 1928 made between (1) the vendor and (2) the purchaser contains the following covenant:
The purchaser with the intent and so as to bind (as far as practicable) the property hereby conveyed and to benefit and protect the Retained Land hereby covenants with the vendor that he and his successors in title will at all times hereafter not allow the fence on the northern boundary to fall in to disrepair.”
Will the buyer be obliged to maintain the fence as the new registered proprietor of the land?
Option A. Yes, because the covenant is registered then the buyer has notice and so will be bound by it.
Option b: No, because the indemnity is a personal covenant and as such will not bind the buyer.
Option c: No, because the burden of a positive covenant will never bind a buyer as it does not run to a successor in title.
Option d: Yes, because this is a registered restrictive covenant and so the burden runs with the land.
Option e: Yes, because the buyer will be required to give an indemnity covenant to the seller offering an indirect means of enforcing the covenant by way of a chain of indemnity.
Option E is correct. The covenant not to allow the fence to fall into disrepair is positive in nature as it requires expenditure i.e. to repair if it falls into disrepair. The burden of a positive covenant does not pass to a successor in title at law but there are indirect means of enforcement possible. This is an example of a chain of indemnities which work as a personal contractual agreement between a seller and buyer each time the property is sold. The chain of indemnities is already in existence, as evidenced by Entry 2 of the Proprietorship Register and the seller will require the buyer to continue this on, offering a means of enforcing the covenant indirectly against the buyer. As such, the buyer will be obliged to maintain the fence.
Option A is wrong as the statement only applies to restrictive covenants: the fact that a positive covenant appears on the Official Copies is insufficient to bind a successor.
Option B is wrong as whilst the covenant in the Proprietorship Register is personal, the seller will require the new buyer to enter into a new personal covenant, as discussed above.
Option C is wrong as there are indirect means of enforcing a positive covenant against a successor in title, as discussed above.
As the covenant not to allow the fence to fall into disrepair is positive, Option D is wrong.
A buyer is purchasing a residential property and is funding the purchase with the aid of a mortgage. The mortgage is on standard terms.
Will the buyer’s solicitor be able to act for both the buyer and the lender during the transaction?
A. Yes, because as the mortgage is on standard terms, it is possible to conclude that there is a ‘substantially common interest’ in that both the borrower and the lender want a good and marketable title to the property to be acquired.
Option b: Yes, because no conflict of interest can arise between buyer and lender. It is standard practice for the buyer’s solicitors to act for the lender on residential matters irrespective of the terms of the mortgage.
Option c: No, because the buyer and lender do not have a substantially common interest. Each party wants very different things in terms of the transaction: the buyer wants a property which has a good marketable title, the lender simply wants to ensure it can register its mortgage over the property.
Option d: No, because it is common for a conflict of interest to arise in such a transaction. Therefore, the lender will not want the buyer’s solicitors to act for it. It is normal practice for the lender to be separately represented.
Option e: No, because if the solicitor acts for both parties it will conflict with the solicitor’s own personal interest in the transaction and the solicitor should not therefore act for both.
Option A is correct. In residential transactions, the buyer will often be borrowing from a high street bank or building society where the mortgage is offered on standard terms and conditions with no negotiation being necessary. Therefore, it is likely that either no conflict will arise between the parties or that if there is a conflict, it will fall within the ‘substantially common interest exception’.
Option B is wrong. It is not standard practice. The solicitor will on each occasion assess the transaction based on the SRA Code of Conduct. There are occasions were a conflict can arise and the solicitor should not act for both parties (by way of example, where the terms of the mortgage offered are unfair to the buyer, the buyer is unable to comply with the mortgage terms or substantial negotiation will be required). On such occasions it would not be suitable for the buyer’s solicitor to act, irrespective of the fact that the matter relates to residential property.
Option C is wrong. Both the lender and the buyer will want a good and marketable title to the property. The lender is not solely concerned with registering the mortgage; the lender has an interest in the property and will want to ensure that the property has a suitable value and is marketable.
Option D is wrong. This is a transaction relating to a residential property and the mortgage is based on standard terms, therefore it is unlikely that the lender will need to be separately represented.
Option E is wrong. The fact that a solicitor acts for both parties will not mean that this will conflict with the solicitor’s own interest. There is nothing on the facts to suggest that the solicitor has a personal interest in the transaction.
A solicitor is contacted by two existing clients concerning the transfer for full market value of a property by one client to the other client. The heads of terms have already been agreed between the seller and the buyer. They include that the transfer must complete very quickly and that the buyer and the seller will instruct the solicitor to act for them both to speed up the process.
Can the solicitor accept instructions from both the seller and the buyer in these circumstances?
A. Yes, because the parties have already agreed heads of terms so there is no conflict of interest or significant risk of conflict of interest.
Option b: Yes, because a solicitor can act where the clients are competing for the same objective, in this case the quick transfer of the property.
Option c: No, because the while solicitors can on occasion act for two parties that have a substantial common interest, this does not apply to a property purchase.
Option d: No, because the speed with which the parties will be able to complete the transaction is not within the solicitor’s control.
Option e: Yes, because both the seller and the buyer are existing clients and therefore there is no possibility that they have unequal bargaining power.
Option C is correct. Solicitors can sometimes act for more than one client where the parties have a substantially common interest in relation to the matter. However, the Law Society has stated that “the SRA’s exception for circumstances where the two clients have a ‘substantially common interest’ does not apply to a property purchase. Although both clients will have a common interest in completing the sale, they also have different interests, since one is buying and one is selling.” The parties’ mutual desire to transfer the property or to do it quickly, does not extinguish the conflict of interest or significant risk of a conflict of interest. Thus applying paragraph 6.2 in the SRA Code of Conduct, the solicitor cannot act for both parties.
Option A is wrong because agreeing the heads of terms does not prevent the possibility of the parties arguing later, e.g. if something is revealed in the searches and enquiries that leads the buyer to seek a reduction in the purchase price.
Option B is wrong because the exception in paragraph 6.2(b) in the SRA Code of Conduct does not apply to property transactions in a buyer and seller situation.
Option D is wrong because the solicitor has not been asked to give an undertaking to speed up the completion of the transfer therefore the issue of whether or not the speed of the transaction is under the solicitor’s control is irrelevant.
Option E is wrong because whether or not the solicitor has acted for both parties in the past does not affect the parties’ bargaining position. The relevant point is as, the Law Society has stated, that “the SRA’s exception for circumstances where the two parties have a ‘substantially common interest’ does not apply to a property purchase”.
A client has agreed a sale of a freehold property it owns for £1,200,000.00, exclusive of value added tax (VAT), to a property investment company. The property was originally a cotton mill built in 1825 but was converted into offices by the client two years ago. The client informs its solicitor that it has incurred a significant amount of costs, including VAT, on carrying out the conversion work and wishes to recover as much of that VAT as possible on the sale. The solicitor is in the process of drafting the contract incorporating the Standard Commercial Property Conditions (3rd edition – 2018 Revision) (‘SCPC’) to send to the buyer’s solicitor for approval.
Which of the following statements best describes how the solicitor should deal with VAT in the draft contract?
A. The incorporation of the SCPC means that nothing further needs to be included in the draft contract to deal with VAT.
Option b: A special condition should be drafted to the effect that the purchase price of £1,200,000.00 is inclusive of VAT.
Option c: The solicitor should expressly incorporate the relevant optional standard condition in the SCPC relating to VAT.
Option d: A special condition should be drafted to disapply the SCPC insofar as they relate to VAT.
Option e: A special condition should be drafted to the effect that the sale is not a chargeable supply and that the seller will not exercise its option to charge VAT in any circumstances.
Option A is correct. This is a sale of an ‘old’ commercial freehold property and so the transaction is exempt from VAT, subject to the seller’s option to tax. Given the seller client’s instructions, the option to tax should be exercised in order that the VAT incurred by the seller on the conversion works can be offset against the VAT charged to the buyer on the sale. The effect of the SCPC being incorporated into the contract is that, by virtue of SCPC 2, the seller warrants that the sale is a chargeable supply and the buyer is to pay an additional amount equal to the VAT on completion. In this way, nothing further needs to be done to the draft contract to deal with VAT.
Option B is wrong because such a special condition would have the effect of overriding SCPC 2, with the effect that the seller would have to account for the VAT from the purchase price agreed instead of the buyer paying an amount equal to the VAT on top of the agreed purchase price.
Option C is wrong because incorporating the optional standard condition in Part 2 condition A1 by way of special condition would have the effect of disapplying SCPC 2 so that the sale would not constitute a chargeable supply for VAT and the buyer would not be required to pay VAT, unless there was a change in the law obliging the buyer to do so.
Option D is wrong because this would have the effect of the buyer being able to argue that the sale is not a chargeable supply and so no VAT would be payable by it.
Option E is wrong because it would have a similar effect to incorporating the relevant optional standard condition in Part 2 condition A1 and would prevent the seller from charging VAT on the sale in any circumstances.
On exchange of contracts for the purchase of a property a buyer has paid to the seller’s solicitors a deposit equal to 10% of the purchase price. Completion has not yet taken place.
Which one of the following statements regarding the deposit is correct?
A. If the deposit has been paid to the seller’s solicitor as agent for the seller, the seller’s solicitor will have to pay the deposit to the estate agents.
Option b: If the deposit has been paid to the seller’s solicitor as stakeholder, whether the contract incorporates the Standard Conditions or the Standard Commercial Conditions, the deposit can never be used by the seller until completion.
Option c: Whether the contract incorporates the Standard Conditions or the Standard Commercial Property Conditions, if the buyer fails to complete the purchase, the seller can rescind the contract and forfeit and keep the deposit.
Option d: Whether the contract incorporates the Standard Conditions or the Standard Commercial Property Conditions, provided the deposit is paid with funds from a clearing bank, that account can be in the name of the buyer or the buyer’s solicitor.
Option e: It is never possible for a buyer to pay less than 10% of the purchase price.
Option C is correct.as the Standard Conditions and the Standard Commercial Property Conditions both provide that the seller can rescind the contract and forfeit and keep the deposit if the buyer fails to complete.
Option A is wrong because if the deposit is paid to the seller’s solicitor as agent for the seller it means that the seller’s solicitor can pay the deposit to the seller immediately without waiting for completion.
Option B is wrong because the Standard Conditions provide that if the seller has agreed to buy another property in England and Wales as the seller’s residence, the seller may use all or part of the deposit as a deposit in that transaction.
Option D is wrong because the Standard Conditions and the Standard Commercial Property Conditions both provide that the funds to pay the deposit must come from an account at a clearing bank in the name of a conveyancer.
Option E is wrong because the seller and the buyer are free to agree the payment of a deposit of less than 10% of the purchase price.
A solicitor is asked to advise a client regarding the purchase of a registered commercial property. The client is purchasing the property with the assistance of a mortgage and the lender is separately represented.
The solicitor is asked to prepare a certificate of title.
Which of the following statements best describes the certificate of title which the solicitor will prepare?
A. The solicitor is likely to use the certificate of title in the form approved by the Law Society and UK Finance.
Option b: The final version of the certificate of title will be provided before exchange of contracts.
Option c: The certificate of title will not be disclosed to the lender as they are separately represented.
Option d: The solicitor cannot be sued by the lender if the information in the certificate of title is wrong as the solicitor does not act for the lender.
Option e: The certificate of title may be addressed to the client and its lender.
Option E is correct as a certificate of title will often be addressed to the buyer and the lender, sometimes just the lender.
Option A is wrong. On the facts this is a commercial transaction. In commercial transactions, the lender is likely to require a more detailed certificate of title, such as the one produced by the City of London Law Society. The form of certificate of title approved by the Law Society and UK Finance is used in residential transactions.
Option B is wrong because the final version of the certificate of title will be provided immediately prior to completion, not before exchange of contracts. Drafts will be provided to the buyer/lender’s advisors at earlier stages in the transaction so they will have early warning of any major issues.
Option C is wrong because even when a lender is separately represented, it is common for the buyer’s solicitor to report to the lender on the results of the title investigation and the pre-contract searches and enquiries. The certificate of title will provide such information.
Option D is wrong, if any of the information in the certificate is wrong, the lender can sue the firm which gave the certificate because there are warranties as to the correctness of the information contained within the certificate of title.
In which of the following circumstances should a solicitor acting on a sale and purchase of a commercial property recommend that in the contract the purchase price is expressed to be inclusive of VAT?
A. The solicitor is acting for a buyer which is an insurance company.
selected
Option b: The solicitor is acting for a buyer which is a firm of accountants.
Option c: The solicitor is acting for a seller and the property has been recently constructed.
Option d: The solicitor is acting for a seller and the property is a 1950s office building.
Option e: The solicitor is acting for a seller and the buyer is an insurance company.
Option A is correct. An insurance company is ‘VAT-sensitive’, ie it makes exempt supplies and may not be able to recover any VAT it has to pay on the purchase price. By contrast, a firm of accountants makes mainly standard rated supplies and is unlikely to object to paying VAT in addition to the purchase price since it will recover it (so option B is not the best answer).
A seller should never be advised by its own solicitor to make the purchase price inclusive of VAT (so options C, D and E are wrong). This is because if the supply is standard-rated (as with a new building), or it wants to opt to tax in order to recover VAT paid on refurbishment (as with the 1950s building), or the law changes the VAT status of the sale between exchange and completion, the seller will be unable to add the VAT to the agreed price. The sale proceeds will be reduced by the amount of VAT payable to HM Revenue and Customs.
Of course the seller may have to agree to a VAT inclusive purchase price as part of the commercial terms for the transaction, in which case, the seller’s solicitor must draw their client’s attention to the possible financial consequences of that decision.
A solicitor acts for a buyer who is buying a registered freehold property from the executor of a deceased owner. The official copies state that the class of title is absolute title. The executor is described in the contract as the seller. The solicitor is explaining to the client the concept of ‘limited title guarantee’ referred to in the contract.
Which of the following is the best advice to the buyer about the seller selling with limited title guarantee?
A. The seller should be selling the property with full title guarantee if the grant of probate appointing the executor has been granted, rather than limited title guarantee.
Option b: Limited title guarantee means that there is an implied covenant that the seller has not incumbered the title to the property and the seller is not aware that anyone else has done so since the last disposition for value.
Option c: The seller should not be selling the property with limited title guarantee because the class of the registered title is absolute title.
Option d: Limited title guarantee means that there is an implied covenant that the property is disposed free from incumbrances other than those the seller does not know about and could not reasonably know about.
Option e: Limited title guarantee means that once the transfer to the buyer has taken place, the class of title on the proprietorship register will be changed to qualified title.
Option B is the best answer as it is the correct definition of limited title guarantee.
Option A is not the best answer as you would expect an executor to sell with limited title guarantee because they will have limited knowledge of the property.
Option D describes full title guarantee. Options C and E are not the best answers as title guarantee for the purpose of the contract does not link to the class of title in registered land; the property may continue to be registered with absolute title even though it has been sold to the buyer by a seller only offering limited or no title guarantee. Title guarantee is about the seller; class of title is about the property.
A solicitor has exchanged contracts to buy a commercial property for a client. Title to the property is registered at Land Registry. The contract incorporates the Standard Commercial Property Conditions (Third Edition-2018 Revision) without amendment. The client wants to know if he now has an interest in the property and what happens if the property should be damaged by a bad storm that is forecast before completion.
What advice should be given on whether the client has an interest in the property and who bears the risk of storm damage?
A. From exchange of contracts, the client has a legal interest in the property and bears the risk of any storm damage to the property.
Option b: From exchange of contracts, the client has a beneficial interest in the property and bears the risk of any storm damage to the property.
Option c: From exchange of contracts, the client has neither a legal or beneficial interest in the property and does not bear the risk of any storm damage to the property.
Option d: From exchange of contracts, the client has a legal interest in the property, but the seller retains the risk of any storm damage to the property.
Option e: From exchange of contracts, the client has a beneficial interest in the property, but the seller retains the risk of any storm damage to the property.
Option B is the correct answer. On exchange, the beneficial (or equitable) interest in the property passes to the buyer, but the legal title remains with the seller. Under the Standard Commercial Property Conditions (Third Edition-2018 Revision) risk in the property passes on exchange and so if the property is damaged by a storm after exchange, the buyer will bear the risk of that damage (and must still buy the property).
Option A is wrong. The buyer does not acquire the legal interest in the property until completion has taken place and the transfer to the buyer has been registered at Land Registry.
Option C is wrong. The buyer does have a beneficial interest from exchange and the risk of damage passes to the buyer.
Option D is wrong. The buyer only has an equitable interest but still bears the risk of damage from exchange.
Option E is wrong.it is correct that the buyer has an equitable interest but wrong to say the seller retains the risk of damage, as this risk passes to the buyer on exchange.
A solicitor is asked to advise a client regarding the purchase of a registered freehold property and is reviewing the draft contract. The solicitor is explaining to the client the concept of title guarantee referred to in the contract.
Which of the following statements is correct?
A. Limited title guarantee means that the class of title in the Proprietorship register will be Absolute Title.
Option b: Full title guarantee means that there is an implied covenant that the land is disposed of free from incumbrances other than those the seller does not know about and could not reasonably know about.
Option c: Full title guarantee means that the class of title in the Proprietorship register will be Qualified Title.
Option d: Limited title guarantee means that there is an implied covenant that the land is disposed of free from incumbrances other than those the seller does not know about and could not reasonably know about.
Option e: An executor of a deceased estate selling a property will normally give full title guarantee.
Option B is correct as it describes full title guarantee. A full title guarantee implies more comprehensive implied covenants for title than would be the case with limited title guarantee including that the land is disposed free from incumbrances other than those the seller does not know about and could not reasonably know about.
Options A and C are wrong because title guarantee is not the same as class of title on the Register or linked to it. Title guarantee is about the seller, class of title is about the property.
Option D is wrong as this wording describes full, not limited, title guarantee.
Option E is wrong as executors will not normally give full title guarantee as they will likely have limited knowledge of the property.
Contracts have been exchanged this morning for the sale and purchase of an office building. The contract incorporates the Standard Commercial Property Conditions (Third Edition) (SCPCs) without amendment. Completion is to take place in two weeks. The seller has now informed its solicitor that it needs part of the deposit monies straight away to put down as a deposit for the purchase of another commercial building.
Which of the following statements best describes what the seller’s solicitor should do?
A. Explain to the client that the solicitor must retain the deposit until completion.
selected
Option b: Transfer the entire deposit to the seller immediately.
Option c: Explain to the client that the solicitor must retain the deposit until the transfer to the buyer has been registered.
Option d: Transfer to the seller only that part of the deposit required for the purchase of the new commercial building.
Option e: Serve the buyer with notice to complete so that if the buyer does not complete by the time stated in the notice the seller can use the deposit monies.
Option A is the best answer. The SCPCs provide for the deposit to be held by the seller’s solicitor as stakeholder. This means that once received from the buyer, the deposit cannot be released to the seller until completion.
Option B is wrong: the deposit would need to be held as agent for this to be correct.
Option C is not the best answer, as the deposit can be released at completion.
Option D is wrong: only when the Standard Conditions of Sale apply, is there provision for the property to be used on a related purchase.
Option E is wrong: a notice to complete cannot be served until completion is delayed beyond the contractual completion date.
A solicitor has been contacted by a prospective buyer of a residential property. The buyer tells the solicitor that he has viewed a property and made a verbal offer to the estate agent to purchase it for £350,000. The offer has been accepted by the seller. The parties have discussed which fittings the seller will leave for the buyer and when they wish to complete.
Does the buyer have a binding contract with the seller to purchase the property?
A. Yes, because consideration has been provided.
Option b: Yes, because there has been an offer and acceptance.
Option c: No, because a contract for the sale of land must be in writing and signed by both parties.
Option d: No, because a contract for the sale of land must be in the form of a deed.
Option e: No, because a contract for the sale of land must include a standard set of conditions.
Option C is the correct answer. The main requirements for creating a binding contract for the sale of land are set out in s 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. These are that the contract must be in writing; it must incorporate all the agreed terms; these must be contained in one document, or where contracts are exchanged, in each copy of the contract; and, finally, the contract must be signed by the parties. The agreement described in the question is verbal and as a result unsigned. It does not therefore satisfy the above requirements.
Option A is wrong. There is no consideration on the facts and in any event a contract for the sale of land must satisfy the additional requirements of s 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989 (described above).
Option B is wrong. Offer and acceptance are requirements for a contract, but there are additional statutory requirements for a contract for the sale of land, as described above.
Option D is wrong. A legal estate can only be transferred by deed, (which is why a TR1 is a deed) but the contract does not have to be by deed.
Option E is wrong. Most contracts do include a set of standard conditions, but this is not a legal requirement.
A solicitor has just exchanged contracts on the purchase of a commercial property for a client. The contract incorporates the Standard Commercial Property Conditions (Third Edition-2018 Revision) without amendment. The exchange of contracts was carried out over the telephone using Law Society formula B.
Which of the following statements best describes steps that should be taken on the day of exchange by the buyer’s solicitor?
A. The buyer’s solicitor should send his client’s part of the contract and the deposit to the seller’s solicitor and advise the buyer to immediately insure the property.
Option b: The buyer’s solicitor should send his client’s part of the contract and the deposit to the seller’s solicitor and check the seller has insurance in place for the property.
Option c: The buyer’s solicitor should send his client’s part of the contract and the deposit to the seller’s solicitor and advise the buyer to insure the property from the completion date.
Option d: The buyer’s solicitor should send his client’s part of the contract to the seller’s solicitor and ask the buyer to send the deposit to the seller and to immediately insure the property.
Option e: The buyer’s solicitor should send his client’s part of the contract and the deposit to the seller and advise the buyer to immediately insure the property.
Option A is the best answer. By using Law Society formula B, the buyer’s solicitor has undertaken to send the deposit and contract to the seller’s solicitor. As the contract contains the Standard Commercial Property Conditions (Third Edition-2018 Revision), the risk in the property passes to the buyer on exchange and therefore the buyer must insure the property from exchange.
Option B is not the best answer. Whilst the seller may well retain its insurance over the property, the risk in the property passes to the buyer on exchange and therefore the buyer must insure the property from exchange.
Option C is not the best answer. The risk in the property passes to the buyer on exchange and therefore the buyer must insure the property from exchange, not from completion.
Option D is not the best answer. By using Law Society formula B, the buyer’s solicitor has undertaken to send the deposit and contract to the seller’s solicitor. The buyer’s solicitor should not rely on the buyer to send the deposit monies, as if the buyer does not do so the solicitor will be in breach of undertaking.
Option E is not the best answer. To comply with the Law Society Formula B undertakings the contract and deposit must be sent to the seller’s solicitor, not the seller.
A solicitor is acting for the seller of a freehold commercial property which was constructed a year ago. The buyer is a firm of accountants. The parties are nearly ready to exchange with completion planned for three weeks’ time.
Should the solicitor recommend to the seller that in the contract the agreed purchase price is expressed to be inclusive of VAT?
A. Yes, because it will be compulsory for VAT to be chargeable at the sale.
Option b: No, because making the purchase price inclusive of VAT will cause the buyer to try and reduce the purchase price.
Option c: Yes, because VAT will not be chargeable unless the seller opts to tax the property.
Option d: No, because this will reduce the amount of the purchase price available for the seller.
Option e: Yes, because VAT will only be chargeable if the government changes the VAT status of the transaction in the next three weeks.
Option D is correct. The seller should not be advised by its own solicitor to make the purchase price inclusive of VAT (so options A, C and E are wrong). This is because the supply of a ‘new’ building within three years of construction is standard-rated so VAT will have to be charged. With a VAT- inclusive purchase price, the seller will be unable to add the VAT to the agreed price so the sale proceeds will be reduced by the amount of VAT payable to HM Revenue and Customs.
Option B is wrong because an accountancy firm is not ‘VAT-sensitive’ (ie an entity which makes exempt supplies and may not be able to recover any VAT it has to pay on the purchase price). A firm of accountants makes mainly standard rated supplies and is unlikely to object to paying VAT in addition to the purchase price since it will recover it.
A solicitor is acting for the buyer of a property and is preparing to exchange contracts. The property is being sold for £500,000 and the contract incorporates the Standard Commercial Property Conditions (Third Edition-2018 Revision) with a special condition stating that any monies due under the contract can be paid either electronically or by client account cheque. The solicitor has agreed with the seller’s solicitor they will exchange using Law Society formula B. Completion will be 14 days after exchange.
Which of the following best describes what monies the buyer’s solicitor should obtain from the client to exchange?
A. The solicitor should obtain £500,000 in cleared funds to exchange, as the solicitor will be undertaking that all monies due under the contract can be paid.
Option b: The solicitor does not need to obtain any monies to exchange, as no monies are due until completion
Option c: The solicitor should obtain £50,000 in cleared funds to exchange, as the solicitor will be undertaking to send a 10% deposit on exchange.
Option d: The solicitor should obtain £25,000 in cleared funds to exchange, as the solicitor will be undertaking to send a 5% deposit on exchange.
Option e: The solicitor does not need to obtain any monies to exchange, as the client will send the deposit monies directly to the seller.
Option C is the best answer. The Standard Commercial Property Conditions (Third Edition-2018 Revision) (‘SCPC’) provide for a 10% deposit to be paid by the buyer on exchange. When the buyer’s solicitor exchanges using Law Society formula B, the buyer’s solicitor will undertake to send the deposit monies to the seller’s solicitor on the day of exchange. According to the special condition referred to in the facts, these can be sent electronically or by client account cheque. The buyer’s solicitor should therefore have cleared funds to ensure he can comply with the undertaking and the terms of the contract.
Option A is not the best answer. Whilst the buyer’s solicitor could collect the whole of the purchase monies in advance of exchange, the buyer’s solicitor is only undertaking to send the deposit on the day of exchange.
Option B is wrong- the deposit must be paid on exchange.
Option D is wrong. The SCPC provide for a 10% deposit. The facts do not indicate a special condition has been agreed to provide for a 5% deposit.
Option E is wrong. Formula B requires the buyer’s solicitor to send the deposit to the seller’s solicitor.
A solicitor is advising the buyer of a commercial property. The contract for the sale of the property has been drafted by the seller’s solicitor and sent to the buyer’s solicitor for review. The draft contract incorporates the Standard Commercial Property Conditions (Third Edition – 2018 Revision) (‘SCPC’).
The section on the front page of the pre-printed form of contract concerning the contract rate has been left blank. There are no other relevant special conditions.
Will compensation be payable under the contract should completion be delayed due to buyer default?
A. Yes, because the SCPC contain a contractual entitlement to compensation, the buyer will pay compensation to the seller, calculated at The Law Society’s interest rate from time to time in force.
selected
Option b: No, because the section concerning the contract rate has been left blank, no compensation will be payable in the event of late completion.
Option c: Yes, because the SCPC contain a contractual entitlement to compensation, the buyer will pay compensation to the seller, calculated at 4% above the Law Society’s interest rate from time to time in force.
Option d: No, because only the seller has an obligation to pay compensation for late completion under the SCPC.
Option e: No, because late completion only entitles the seller to claim damages where loss has been.
Option A is correct. The forms of contract purchased from law stationers contain a space on the front page in which the contract rate may be inserted. If it is wished to rely on Condition 1.1.1(e) this can be left blank. If left blank, compensation will be payable to the seller at the contract rate specified in Condition 1.1.1(e) in the event that the buyer defaults in performing its obligations under the contract and completion is delayed. This is confirmed at paragraphs 10.3.1 and 10.3.2 SCPC. The contract rate specified in Condition 1.1.1(e) is “The Law Society’s interest rate from time to time in force.”
Option B is wrong because in that instance the contract rate set out in Condition 1.1.1(e) can be relied upon.
Option C is wrong because the contract rate specified in Condition 1.1.1(e) is “The Law Society’s interest rate from time to time in force.” This is set at 4% above the base lending rate of Barclays Bank plc.
Option D is wrong because it is only the buyer that has an obligation to pay compensation for late completion under paragraph 10.3.1 SCPC.
Option E is wrong because SCPC 10.3 requires payment of compensation for delayed completion irrespective of whether the seller has suffered any loss.
A solicitor is advising the buyer of a commercial property. The contract for the sale of the property has been drafted by the seller’s solicitor and sent to the buyer’s solicitor for review. The draft contract incorporates the Standard Commercial Property Conditions (Third Edition – 2018 Revision) (‘SCPC’).
The section on the front page of the pre-printed form of contract concerning the contract rate has been left blank. There are no other relevant special conditions.
Will compensation be payable under the contract should completion be delayed due to buyer default?
A. Yes, because the SCPC contain a contractual entitlement to compensation, the buyer will pay compensation to the seller, calculated at The Law Society’s interest rate from time to time in force.
Option b: No, because the section concerning the contract rate has been left blank, no compensation will be payable in the event of late completion.
Option c: Yes, because the SCPC contain a contractual entitlement to compensation, the buyer will pay compensation to the seller, calculated at 4% above the Law Society’s interest rate from time to time in force.
Option d: No, because only the seller has an obligation to pay compensation for late completion under the SCPC.
Option e: No, because late completion only entitles the seller to claim damages where loss has been suffered.
Option A is correct. The forms of contract purchased from law stationers contain a space on the front page in which the contract rate may be inserted. If it is wished to rely on Condition 1.1.1(e) this can be left blank. If left blank, compensation will be payable to the seller at the contract rate specified in Condition 1.1.1(e) in the event that the buyer defaults in performing its obligations under the contract and completion is delayed. This is confirmed at paragraphs 10.3.1 and 10.3.2 SCPC. The contract rate specified in Condition 1.1.1(e) is “The Law Society’s interest rate from time to time in force.”
Option B is wrong because in that instance the contract rate set out in Condition 1.1.1(e) can be relied upon.
Option C is wrong because the contract rate specified in Condition 1.1.1(e) is “The Law Society’s interest rate from time to time in force.” This is set at 4% above the base lending rate of Barclays Bank plc.
Option D is wrong because it is only the buyer that has an obligation to pay compensation for late completion under paragraph 10.3.1 SCPC.
Option E is wrong because SCPC 10.3 requires payment of compensation for delayed completion irrespective of whether the seller has suffered any loss.
A buyer is purchasing a commercial property and is about to exchange contracts. The purchase price is £250,000. The contract incorporates the Standard Commercial Property Conditions (Third Edition-2018 Revision) without amendment.
What deposit will be payable on exchange and what can the seller’s solicitor do with the deposit?
A. £25,000 will be payable on exchange and the seller’s solicitor can hand over the deposit to the seller upon receipt.
Option b: £12,500 will be payable on exchange and the seller’s solicitor can hand over the deposit to the seller upon receipt.
Option c: £12,500 will be payable on exchange and the seller’s solicitor cannot hand it over to the seller until completion.
Option d: £25,000 will be payable on exchange and can be used by the seller’s solicitor on a related purchase.
Option e: £25,000 will be payable on exchange and the seller’s solicitor cannot hand it over to the seller until completion.
Option E is the correct answer. The Standard Commercial Property Conditions (Third Edition-2018 Revision) (‘SCPC’) provide for a 10% deposit to be paid which is to be held as stakeholder. Where a deposit is held as stakeholder, it cannot be handed over to the seller until completion.
Option A is wrong. This describes the position where the deposit is held as agent. The contract provides for the deposit to be held as stakeholder.
Option B is wrong. This describes a 5% deposit held as agent. The contract provides for a 10% deposit to be held as stakeholder.
Option C is wrong. This describes a 5% deposit. The contract provides for a 10% deposit.
Option D is wrong. The deposit can be used on a related purchase under the Standard Conditions, but not under the SCPC.
A solicitor is acting for a client who intends to purchase a property. The client inspected the property and noted that it is located near a medieval church which is used by the local people. Contracts have not been exchanged, but pre-contract enquiries of the seller have been raised. The current seller has owned the property since June 2010 and the property is registered at Land Registry. The solicitor wants to establish if the client may have any liabilities in respect of the church when it buys the property.
Which of the following statements best describes the additional searches, enquiries and investigations the solicitor should carry out to establish this?
A. The solicitor should carry out a Chancel Repair Screening search and a Local Land Charges (LLC1) search.
selected
Option b: The solicitor should carry out a Chancel Repair Screening search and an Index Map search.
Option c: The solicitor should carry out a Chancel Repair Screening search and review the official copies of the Seller’s title.
Option d: The solicitor should carry out a Local Land Charges (LLC1) search and review the official copies of the Seller’s title.
Option e: The solicitor should raise both standard and optional enquiries with the Local Authority (CON29 and CON29O).
The solicitor should carry out the Chancel Repair Screening search. For historical reasons certain properties in certain parishes could be under an obligation to pay the cost to repair the chancel of the parish church. Since 13th October 2013, chancel repair liability is no longer an overriding interest. Chancel repair liabilities can now only be protected by notice on the title of the burdened property. This registration can take place at any time until a transfer for value occurs on or after 13th October 2013.The current owner has owned the property since June 2010. No transfer for value has taken place since 13th October 2013. This therefore means potentially the liability can still be registered at any time on the title. This means the solicitor must carry out the Chancel Repair Screening search to ascertain whether the property is within a liable parish.
The solicitor should also request copies of the title from the Land Registry to check whether the chancel repair liability has already been registered on the title. Option C is therefore the best answer.
Options A and D are not the best answers as they both refer to the Local Land Charges search (LLC1). Whilst this search is routinely carried out, the LLC1 search result only discloses financial charges or restrictions on land that have been imposed by public authorities under statute and will not reveal any chancel repair liability.
Option B is wrong, as an Index Map search would only reveal if the land or any part of it has been registered at Land Registry. On the facts we are told that the land is registered at the Land Registry and an index map search will not reveal information on chancel repair liability.
Option E is wrong. Enquiries of the Local Authority (CON29) reveal an enormous quantity of non-statutory information which affects a property but will not disclose any chancel repair liability.
A solicitor is acting for the buyer on the purchase of a registered freehold property which is in the pre-contract stage. The solicitor is also acting for the buyer’s lender. The buyer is an individual and the seller is a company. The solicitor’s firm’s policy is to carry out solvency checks where necessary at the pre-contract stage.
What searches should the solicitor carry out to check the solvency of the parties?
A. A company search against the seller and a K16 bankruptcy search against the buyer.
Option b: A company search against the buyer and a K16 bankruptcy search against the seller.
Option c: A company search against the buyer and the seller.
Option d: A K16 bankruptcy search against the buyer but no search against the seller.
Option e: A company search against the seller and the lender and a K16 bankruptcy search against the buyer.
Option A is the correct answer. As the seller is a company it is necessary to carry out a company search to check various matters including solvency. As the buyer is an individual it is necessary to carry out a k16 search at the Land Charges department to check for insolvency. All firms should carry out the K16 search as a pre-completion search (if acting for a lender), but on the facts of the question this firm also checks for solvency pre-contract.
Option B is wrong. As the seller is a company checks for insolvency must be made via a company search. As the buyer is an individual, searches for bankruptcy will be made using a K16 search at the Land Charges department.
Option C is wrong as a company search cannot be carried out against the buyer as they are an individual.
Option D is wrong. Although a K16 search against the buyer is appropriate, the solicitor will also need to carry out a company search against the seller to check various matters including solvency.
Option E is wrong as although the searches against the buyer and seller are correct, there is no need to search against the lender.
A solicitor is acting for the seller on the sale of freehold property with an unregistered title. The solicitor is preparing for deduction of title to the property to the buyer’s solicitor and has examined the deeds and documents relating to the property.
Which of the following documents is the best candidate for a good root of title?
A. A Deed of Gift dated 1 October 1990.
Option b: A Conveyance of the property dated 13 June 1998.
Option c: A Mortgage of the property dated 13 June 1998.
Option d: A Grant of Probate dated 6 February 2010.
Option e: An Assent of the property dated 25 March 2010.
Option B is correct.
Under s 44 of the Law of Property Act 1925, a root of title must be at least 15 years old. The Deed of Gift in Option A is old enough and will probably fulfil the other criteria set out in s 44, but as it was not a transaction between third parties for valuable consideration, it will not offer the double guarantee like the Conveyance and the Mortgage (ie that title has been investigated for at least 30 years).
Both the Conveyance and the Mortgage are capable of being good roots of title and offer the double guarantee, but the Conveyance is preferable to the Mortgage as it is likely to contain a more detailed description of the property by reference to a plan and details of the incumbrances that burden the property and deal expressly with the legal and equitable interest in the property. Therefore, option C is not the best answer. The Grant of Probate and the Assent (options D and E) are too recent to be good roots of title.
A solicitor acts for a client who is buying a residential registered freehold property.
Which one of the following statements is correct concerning the need to obtain pre-contract searches and enquiries?
A. The buyer’s solicitor should raise pre-contract searches on behalf of the buyer to comply with the principle of caveat emptor.
selected
Option b: The buyer’s solicitor should raise pre-contract searches and will expect the seller to disclose details of physical defects with the property.
Option c: The seller’s solicitor should raise pre-contract searches and forward the results to the buyer’s solicitors.
Option d: The buyer’s solicitor should raise pre-contract searches including a Land Charges Department search.
Option e: The buyer’s solicitor will only raise searches where indicated as necessary out of the results of the title investigation.
Option A is correct because searches and enquiries are raised on behalf of the buyer as a consequence of the principle of “buyer beware.”
Option B is wrong because the seller is under no obligation to disclose details of physical defects to the buyer.
Option C is wrong because since the risk of buying the property subject to undiscovered defects rests with the buyer, it is up to the buyer to make the necessary searches and check the results are satisfactory.
Option D is wrong because a Land Charges Department search is required where the land is unregistered and the facts tell us that the property being purchased by the buyer is registered.
Option E is wrong because searches and enquiries should be obtained and considered even where there are no problems arising from investigation of title.
A solicitor acts for a buyer purchasing a factory to be converted into a car showroom (‘the change of use’). Factories and car showrooms fall within different use classes for the purposes of planning legislation.
The client will be installing large glass showroom windows to face the highway (‘the window installation’). At present there are no windows facing the highway.
Neither the change of use or window installation are covered by the Town and Country Planning (General Permitted Development) Order 2015 (‘GPDO’).
Which of the following best describes the position on planning permission?
A. The client will not need to apply for planning permission for the change of use but will require planning permission for the window installation.
Option b: The client will not need to apply for planning permission for the window installation but will require planning permission for the change of use.
Option c: The client will require planning permission for both the change of use and the window installation.
Option d: The client will not require planning permission for either the change of use or the window installation.
Option e: Planning permission is required but is automatically granted by the GPDO for both the change of use and the window installation.
Option C is best answer: Planning permission will be required for the change of use from a factory to a car show room, as a material change of use constitutes “development” for the purposes of S55 Town and Country Planning Act 1990. It will also be required for the window installation as building works materially affecting the external appearance of a property also constitute ‘development’.
Option A and B are therefore wrong: both suggest planning permission is only required for one aspect of the development. Option D is also wrong, as planning permission is required for the reasons stated above.
Option E is wrong as the facts indicate that the change of use and window installation do not amount to permitted development under the GPDO. As a result, an express planning application must be made.
