The Contract Flashcards
Can a solicitor act for a borrower and lender ?
Yes this is more common then acting for other parties. But risk of conflict of interest is higher if it is not a standard mortgage or don’t use approved certificate of title.
What is the rule for contract races ?
Solicitor is allowed to act as long as the parties are made aware that they are engaged in a race.
What is VAT ?
Value added tax - on taxable supplies
What is considered taxable supplies in VAT ?
Foods and services provided by a taxable person in course of business.
What makes someone a taxable person under VAT ?
Person who’s turnover in past 12 months has exceeded registration limit (£85k)
What is the standard rate of VAT ?
20%
What is a taxable supply in a property transaction ?
Residential properties are zero-rated but sale of new (3 years old) commercial buildings are standard rated.
What is the purpose of a contract ?
Cannot transfer land as deed is required to do that. Merely an agreement to transfer at later stage.
What are SCs and SCPCs ?
Standard conditions of sale (SC) for residential transactions and Standard commercial property conditions (SCPC) for high value commercial transactions.
What happens if seller doesn’t specify burdens on the property in the contract ?
They may be in breach of the contract.
What do SC and SCPC both list the following as encumbrances subject to which the property is sold ?
- Those specified in the contract
- Those discoverable by inspection before date of contract
- Public requirements
- Seller solicitor must list as specified encumbrances in contract everything not covered by SC and SCPC
What are specified encumbrances ?
Burdens on the property not included in SC or SCPC that must be included in contract.
When is the deposit payed and what are the rules around it ?
Payed upon exchange of contract and buyer fails to complete the seller can keep the deposit.
What’s the difference between taking deposit as a stakeholder and an agent ?
As a stakeholder solicitor won’t release funds to seller until after completion. As an agent they can use them once received at exchange of contract.
Who has the risk of damage to the property at what stages ?
At exchange of contract the risk of damage switches to the buyer. (Must complete the purchase even if the property is damaged or destroyed
What VAT is payable part 1 of SCPC is incorporated on purchase of new commercial building without amendments ?
VAT will be payable on top of purchase of property at standard rate.
If conditions 1A part 2 are incorporated into a contract what is true of the contract regarding VAT ?
Unless a change in the law has come into effect between the date of the contract and completion whereby the sale of office building (example) will constitute a supply chargeable to VAT, no VAT will be payable on the purchase price by buyer.
As a solicitor acting on a sale and purchase of a commercial property, you should recommend that the purchase price is expressed to be inclusive of VAT when ….
Your client is a buyer and an insurance company, bank or building society which makes only exempt supplies in the course of business.
If you have exchanged contracts which incorporates condition A1 part 2 of SCPCs and there is a change in legislation between exchange and completion affecting VAT is now payable ?
The contract provides that your client will be liable to pay VAT in addition to the purchase price.
What is SCPC 1A part 2 ?
Sale of commercial building - purchase price is exclusive of VAT but VAT will be chargeable on top in event law change to make exempt supply chargeable at standard rates
When is a there a binding contract for seller to purchase property ?
Must be in writing and signed by both parties
Under SCPC how is deposit handled ?
10% and held as stakeholder so cannot be handed over until completion
What is the contract rate ?
Interest charges if party is late in completing - most opt for law society interest rate
