Topic 7 - The legal aspects of property purchase

Question 1

What is a licenced conveyancer. How do they differ to solicitors?

Answer 1

A licensed conveyancer is a person who has met specific
requirements relating to study, qualification and experience
as required by a recognised conveyancing organisation.

Solicitors can deal with a number of legal matters whereas a licenced conveyancer’s qualifications limit them to property‑related matters

Many property buyers nowadays use licence conveyancers instead of solicitors

Question 2

What is conveyancing?

Answer 2

The legal process of transferring property ownership from one party to another

Involves various tasks such as title searches

Question 3

One vital role of a solicitor or licenced conveyancer is to give advise to buyer throughout the process of the property purchase

True or false?

Answer 3

True

Advise might relate to:
„ the purchase/sale transaction;
„ the mortgage itself
„ ensuring the property is covered by buildings and contents insurance

Question 4

If a solicitor or licenced conveyancer makes a serious mistake, for example failing to detect a defect in the title, this can have massive consequences for their clients and others. What can be done in the circumstance?

In respect to this, what important thing must solicitors have?

Answer 4

They be sued for negligence in the civil
courts by those to whom they owe a duty of care. To establish negligence, the
plaintiff must prove that a duty of care was both owed and breached, and that
some loss, damage or inconvenience was caused.

Solicitors may also face disciplinary action against their own professional body, the law society

All solicitors must carry professional indemnity insurance against claims for negligence.

This does not protect them entirely – if guilty of negligence, both
their finances and future prospects of business can be severely damaged.

Professional indemnity insurance does, however, ensure that the client will be
paid in full if damages are awarded

Question 5

During the conveyancing process, the solicitor carries out an investigation of title .
If they find defects in the title what must they do?

Answer 5

The solicitor must advise how these affect the security and/or how they may be overcome.

For example, further legal work may be required to overcome the problem or, instead,
insurance cover could be arranged to protect the lender

Question 6

During the conveyancing process the solicitor will carry out various searches

One of these is the land registry search

Tell me about this

Answer 6

Carried out if the land IS registered

Involves a search of the property, proprietorship (the type legal ownership over property) and charges registers (any existing finance secured on the property)

Question 7

During the conveyancing process the solicitor will carry out various searches

One of these is the Land Charges Registry search

Tell me about this

Answer 7

Carried out if the land is unregistered

Check for puisne mortgages or spousal
interests

NOTE: Spousal interests exists where a non‑owning spouse has lodged an interest in the property
under the Family Law Act 1996

Question 8

What are puisne mortgages?

Answer 8

A second or subsequent mortgage of unregistered land of which the title deeds are retained by the first mortgagee

A puisne mortgage is one where the lender on an unregistered
property does not have the title deeds as security for the mortgage.

For unregistered land, the lender holding the title deeds is considered to be
the first‑charge holder.

A puisne mortgage holder is in the same position
as a second or subsequent charge holder on registered land

Question 9

During the conveyancing process the solicitor will carry out various searches

One of these is the Local Land Charges Registry Search and Enquiries of the Local Authority

Tell me about this

Answer 9

The Local Land Charges Register identifies details of obligations and restrictions
attaching to the property.

Enquiries to the local authority
identify road changes, town planning schemes and so on, which may affect the property
and apply to the land (both registered and unregistered) rather than the individual

NOTE: The details above the restrictions and obligations attaching to the property are being transferred from local authorities to
the Land Registry, with completion expected by 2025

Question 10

During the conveyancing process the solicitor will carry out various searches

One of these is a Bankruptcy search

Tell me about this

Answer 10

Carried out by the lender’s solicitor to ensure that the applicant is not a bankrupt

Also, a vendor who is an undischarged bankrupt would not be entitled to receive the proceeds of the sale, as their assets are controlled by an insolvency
practitioner so bankruptcy searches of the vendor also takes place

Question 11

True or false: a vendor who is an undischarged bankrupt would not be entitled
to receive the proceeds of the sale

Answer 11

True, it is because their assets are controlled by an insolvency
practitioner

This makes it important solicitors carry out bankruptcy searches of the vendor during conveyancing

Question 12

During the conveyancing process the solicitor will carry out various searches

One of these is a Commons registration search

Tell me about this

Answer 12

Checks that the land being sold is not common land.

Usually applies where the land is in the countryside and previously undeveloped; or belonged to the Lord of the Manor; or
is designated a town or village green.

Question 13

What is common land?

Answer 13

Land that is owned collectively or is accessible to the public for reasons such as recreation or grazing livestock

Usually rural land

Important during conveyancing a solicitor checks the property is not being sold on common land, which they can achieve by searching on the ‘Commons registration’

Question 14

Before exchange of contracts, the vendor must complete the ‘seller’s property information
form’ for the buyer.

Give me an example of the information this form should include and what happens if the vendor doesn’t answer the form correctly?

Answer 14

Property boundaries

Disputes with neighbours

Notices affecting the property

Guarantees relating to the property

Services to the property
Water, electricity, gas, etc.

Sharing with neighbours
(Any joint responsibilities to pay for maintenance of joint or common areas, or any need to
go on to neighbour’s property, or for neighbours to go on to the vendor’s property, for maintenance purposes)

Arrangements and rights

Changes to the property

Planning and building control issues

Fittings included in the sale or fixtures that are to be removed

Other issues to do with the mechanics of the sale

If the Vendor answers this form incorrectly and the buyer suffers as a result, the buyer can seek redress through courts

Question 15

What is the difference between a fixture and a fitting when it comes to property. Give examples:

What one is the vendor likely to take with them when selling their property

Answer 15

Fixtures are items that are permanent additions to the fabric of the property – ie screwed in, nailed down, plumbed in and so on.

Examples would be laminate flooring,
fitted kitchen units and built‑in appliances.

Typically, fixtures are included in the sale, whereas personal items (chattels) are not

Fittings are items that it would be reasonable for a vendor
to take with them, including curtains, carpets, freestanding
furniture and so on.

Question 16

Before exchange of contracts,

As well as having to complete the ‘property information form’ the vendor must also create a ‘draft sales contract.’

What information should a draft sales contract include?

Answer 16

T&C’s of purchase

The details of the buyer and vendor

The property being sold

The agreed sale price

The agreed deposit amount to be paid upon exchange of contacts

Question 17

Once all the searches have been completed, and the buyer’s solicitor is
satisfied with the results and has confirmation that a binding mortgage offer is in place (if required), the contracts exchange stage can take place ( the point of no return )

Is a buyer required to pay a deposit at this point?

Answer 17

The amount
of the deposit paid at this stage is negotiable so no

It could be 10% or even 0% in some circumstances

NOTE: If the buyer pays 0 deposit and they withdraw from the purchase after exchange of contracts, they will still be liable for breach of contracts

Question 18

What happens on completion day when purchasing a property?

Answer 18

Completion day is when the property is finally transferred from vendor to
buyer.

This is when the money is sent over

Once the money is received the vendor can officially move in

Question 19

What must a solicitor do after completion day is complete?

Answer 19

File a SDLT return within 14 days of the effective date (usually the completion date) of the transaction and pay the applicable tax.

„ Apply for registration of the new owner at the Land Registry, and for any mortgage to be noted on the register.

„ Send a bill to the buyer to cover any conveyancing fees and disbursements.

Question 20

What are DISBURSEMENTS?

Answer 20

Expenses paid by the solicitor on the buyer’s behalf, such as stamp duty land tax, registration fees, searches

Question 21

After how many years of training and qualifying employment can a conveyancer apply for a full licence?

Answer 21

5 years

Question 22

Which of the following can be protected by defective title insurance?

The purchaser only.

The lender only.

Both the lender and purchaser.

Answer 22

Both

Defective title insurance can be arranged to protect the lender, the purchaser or both

Question 23

A lender’s solicitor carries out a bankruptcy search on the vendor. What is the purpose of the search?

To check whether the vendor has ever been bankrupt.

To check the vendor’s overall credit rating.

To check whether the vendor is entitled to receive the proceeds of the sale.

Answer 23

To check whether the vendor is entitled to receive the proceeds of the sale

An undischarged bankruptcy order means that any money due to the vendor must be reported to the trustee in bankruptcy, the insolvency practitioner, who is legally able to claim the money to settle debts.

Question 24

A search of which register at the Land Registry would identify restrictions attaching to a property?

Land Charges Registry.

Covenant and Easement Registry.

Local Land Charges Registry

Answer 24

Local Land Charges Registry

A Land Charges Registry search is carried out if the land is unregistered to check for puisne mortgages or spousal interests. There is no Covenant and Easement Registry search

Question 25

All solicitors carry professional indemnity insurance to protect them in the event of claims for WHAT?

Answer 25

Negligence

Question 26

An estate agent is marketing a house with a new fitted kitchen. The main components of the kitchen will be classified as fittings. True or false?

True
False

Answer 26

False

Fittings are items that are not intended to be fixed permanently and could be taken by the vendor if they chose. Fixtures are items fixed to the walls and floors that form a permanent part of the fabric of the building, such as fitted kitchens

Question 27

A solicitor has drawn up a draft contract. Which of the following would not be included? Select all the correct answers.

Property details.

Agreed sale price.

Amount of the mortgage.

Deposit required.

Buyer details.

Insurance details

Answer 27

Neither the mortgage amount nor insurance details would be included, because they would not be relevant

Question 28

Which document is a formal and binding contract between mortgagee and mortgagor?

The mortgage offer.

The mortgage deed.

The purchase contract

Answer 28

Mortgage Deed

The purchase contract is between the vendor and the buyer.

The mortgage offer is merely an offer and not a binding contract

Question 29

Which of the following statements is true in relation to the house-buying process?

No further searches are required once contracts have been exchanged.

The legal charge for the mortgage takes effect at completion.

The buyer’s solicitor files a stamp duty land tax return and pays the applicable tax shortly before completion.

Answer 29

The legal charge for the mortgage takes effect at completion.

After exchange of contracts, the buyer’s solicitor carries out a further bankruptcy search and final Land Registry searches to make sure nothing has changed and that the report on title is consistent with the application details.

The stamp duty land tax return is filed and the tax paid after completion

Question 30

Once in force, the contents of a mortgage deed can be varied:

on the instruction of the mortgagee without the consent of the mortgagor.

on the instruction of the mortgagor without the consent of the mortgagee.

only with the consent of both parties to the contract

Answer 30

only with the consent of both parties to the contract

Neither party can vary the contents or terms of an existing deed without the agreement of the other party to the contract.

Question 31

What type of insurance must a solicitor have in case of claims of negligence against them?

Law Society insurance.

Partnership insurance.

Public liability insurance.

Professional indemnity insurance

Answer 31

Professional indemnity insurance

Question 32

Why is it important for the lender to be provided with certificate of title?

To meet record-keeping requirements.

If the title is defective, the lender may not be able to exercise its rights over the property.

For insurance purposes

Answer 32

If the title is defective, the lender may not be able to exercise its rights over the property.

Question 33

Local town planning issues will be highlighted by a Local Land Charges Registry search. True or false?

True
False

Answer 33

False

They would be shown in enquiries of the local authority

Question 34

A vendor who is an undischarged bankrupt would not be entitled to receive the proceeds of a sale. True or false?

True
False

Answer 34

True

Question 35

Carmen and Joanna had had a long‑running dispute with their neighbour over his poor maintenance of the boundary wall dividing their properties. On what document were the couple required to declare this issue when they sold their property?

Key features illustration.

The seller’s property information form.

Disclosure form

Answer 35

Neighbour dispute so ‘The seller’s property information form’

Question 36

Which of the following would usually be classified as a fitting?

A bathroom vanity unit.

Laminate flooring.

A free‑standing wardrobe.

A built‑in oven

Answer 36

A free‑standing wardrobe.

All others are fixtures

Question 37

Which of the following would not be contained in a draft sale contract?

The agreed deposit.

The amount of the mortgage loan.

Details of the property being sold.

Details of the buyer and vendor

Answer 37

The amount of the mortgage loan.

All others are included

Question 38

Which of the following processes is not carried out between exchange of contracts and completion?

The buyer’s solicitor applies for release of mortgage funds.

The buyer signs the mortgage deed.

The vendor completes a ‘seller’s property information form’.

The vendor’s solicitor obtains a settlement figure to repay any outstanding mortgage on their property

Answer 38

The vendor completes a ‘seller’s property information form’.

Question 39

The legal charge for the mortgage takes effect:

from the point where contracts are exchanged.

From completion.

when the lender issues its offer of advance.

from the point where the solicitor registers the new owner at the Land Registry.

Answer 39

from completion

Question 40

When a borrower is remortgaging, it is possible to minimise the conveyancing work involved by arranging search indemnity insurance. True or false?

True

False

Answer 40

True

Question 41

What is professional indemnity insurance?

Answer 41

Taken by various professions to cover the legal costs and expenses incurred in their defence, as well as any damages or costs that may be awarded, if they are alleged to have provided inadequate advice and services or have been negligent therein

Question 42

What do i mean by investigation of title?

Answer 42

The checks carried out by the buyer’s solicitor in various registers to ensure that the property is what it is claimed to be, that the seller has the right to sell and the property is free from any restrictions that would cause problems.