U1. Freeholds - Key elements and structure of FH property transactions

Question 1

What is Conveyancing?

Answer 1

The Process of transfering title (ownership) between the seller and buyer

Question 2

What is Exchange of Contracts

Answer 2

When a deposit is paid, and through the exchange of contracts, both partys become bound to complete the transaction.

The buyer gains an equitable interest in the property under a constructive trust.

Until exchange, the parties are free to withdraw from the transaction as it remains subject to contract

Question 3

When do parties become bound to complete the transaction of a property?

Answer 3

On exchange of contracts.

Question 4

What is Completion?

Answer 4

The purchase price is paid, they keys are handed over, and the transfer deed is completed.

The buyer is entitle to apply to become registered as the proprietor and gains legal ownership.

Question 5

What 5 things does the sellers solicitor do in the precontractual stage?

Answer 5

1. Investigation and deduction of title.
2. Provides draft contract, supporting documentation, and replies to pre contract enquires
3. Responds to additional pre-contract enquires and requisitions on title
4. Responds to proposals to amend the contract and produces clean copies for signature
5. Arranges for contract to be signed by the seller , may need to request redemption statement from mortagee

Question 6

What 5 things does the buyers solicitor do in the pre contractual stage?

Answer 6

1. Investiagtion of title under caveat emptor and raises contract searches and enquires
2. Reviews draft contract, supporting documentation, and replies to pre contract searches and enquires
3. Raises additional pre contract enquires and requisitions on title
4. Amends draft contract
5. Reports to buyer (and possibly their mortgage) and arranges for the contract to be signed - ALSO OBTAINS DEPOSIT IN READINESS FOR EXCHANGE OF CONTRACTS

Question 7

What is Investigation of title?

Answer 7

The title of the property is checked/examined to ensure:

1. The seller is entitled to sell, and
2. The title is good and marketable, with all the necessary rights and with no materially adverse incumbrances (such as easements/covenants burdening the property)

Both the seller and buyers solicitor will investigate title.

Question 8

After the sellers solicitor has investigated title, he is able to do 2 things.

What are those 2 things?

Answer 8

The Sellers solicitor must complete this in order to:

1. Deduce Title, and
2. Pre-empt requisitions that may be raised by the buyers solicitor

Question 9

Under what principle does the buyer’s solicitor investigate title?

Answer 9

Cavaet Emptor - Buyer beware

Question 10

What is deduction of title?

What 2 documents can be used to deduce title?

Answer 10

This is the process whereby the seller’s solicitor provides the buyers solicitor with proof/evidence of the sellers ownership.

This consists of either:

1. Title Deeds (for Unregistered Land)
2. Official Copies of the Registers of title (for Registered Land)

Question 11

What is pre contract searches and enquires?

Answer 11

Pre Contract Searches - Are made by the buyers solicitor to the sellers solicitor to ascertain further information about the property which SHOULD be known by the seller

Pre Contract Enquires - Are made by the buyers solicitor to Third Parties (local authority and local water authority) to ascertain important information about the property that is held by third parties.

Question 12

What is Requisitions on Title?

Answer 12

The buyer makes additional enquires to the sellers solicitor as part of investigation of title and the results of pre-contract searches and enquires.

They are specific questions about an issue that requires a solution made by the buyers solicitor to the sellers solicitor as part of investigation of title and the result of pre-contract searches and enquires.

Generally, the buyer is not entitled to raise further requisitions on title until after contracts have been exchanged.

Question 13

What is Caveat Emptor?

Answer 13

‘Let the Buyer Beware’ means the onus is on the buyer to investigate the title fully and so be aware of any problems or issues.

Thus, the seller only has a limited duty of disclosure as part of the covenaycning process, and the onus is on the buyers solicitor.

Question 14

What is the Pre-Completion Stage?

Answer 14

After exchange of contracts, but before completion.

1. The Buyers Solicitor - Prepares the draft transfer deed for approval by the sellers solicitor and the mortgage deed for execution by the buyer.
2. The Buyers Solicitor carries out pre completion searches and enquires of the Sellers Solicitor and third parties, then submit there certificate of title/report on title to the lender and request the mortgage advance.
3. The Buyers Solicitor also requests the blanace due for the client in order to complete.
4. The Buyers solicitor deals with any amendments to the transfer deed requested by the sellers soliciotr, producing a clean copy for execution.
5. The sellers solicitor approves the transfer deed and arranged for it to be executed by the seller.
6. The Sellers Solicitor also responds to the buyers completion information and undertaking forms (which includes an undertaking to discharge any pre-exsisting mortgages)

Question 15

What is the Post Completion Stage?

What does the sellers solicitor do?

What does the buyers Solicitor do?

Answer 15

After Completion

Sellers Solicitor:

1. Discharges any existing mortgages and provides the buyers with proof of discharge
2. They also pay any estate agent costs and account to their client

Buyers Solicitors:

1. Submits and Pays Tax (Stamp Duty or Land Transaction Tax)
2. Registers the property at HM Land Registry (And sometimes companies house)

Question 16

What are the 5 key stages in a property transaction?

Answer 16

1. Pre Contractual Stage **
2. Exchange of Contracts
3. Pre Completion **
4. Completion **
5. Post Completion Stage **

Question 17

When does the legal transfer of land take place for registered land v unregistered land?

Answer 17

After Completion

With registered land, the legal transfer does not take place until registered.

With unregistered land, the legal transfer takes place on completion, which becomes void if the title is not registered within 2 months of completion.

Question 18

What is ‘taking instructions’ ?

Answer 18

Taking instructions is when a solicitor takes on a new client.

When taking on instructions, there is a long list of information that the solicitors must discover upon taking instructions

Question 19

What is Syncornisation?

Answer 19

Synchronisation is imperative where a client has a related sale and purchase (Onwards chain)

	○ Synchronisation involves making sure the contracts on the sale are exchanged at the same time as contracts on the purchase, to be completed on the same date. 

This ensures that the client does not end up without somewhere to live, or being committed to buy another property without someone being committed to by their existing property

Question 20

What is an Energy Peformance Certificate? (EPC)

How long Is it valid for?

Answer 20

Produced by an accredited energy assessor, it details the property’s energy use, cost and efficient based from A (the best) to G.

It is valid for 10 years.

Question 21

When must the seller make an EPC certificate available?

Answer 21

It must be available by the seller without charge before or within 7 days of marketing and in any event, within 28 days.

Question 22

What properties are exempt from EPC Certificate requirements?

Answer 22

Listed Properties (Ie importance due to architectural or historical interest) are exempt from this requirement.

Question 23

What is the procedure for new build properties with regards to EPC Certification?

Answer 23

1. A predicted Energy assessment must be produced
2. A full EPC following construction

Question 24

Can a Solicitor act for both the buer/borrower in a property transaction?

Answer 24

Yes.

Their interests usually overlap. Both parties will want to ensure that adverse matters do not affect the value of the property, its use, enjoyment, marketability and value for secured lendnign purposes.

Question 25

Can Solicitors give advice to their clients on mortgages?

Answer 25

Yes, BUT they can only give GENERIC ADVICE concerning the TYPES OF MORTGAGES

Question 26

What are the 2 types of mortgages?

Answer 26

1. Repyament Mortgage (Higher payments but paid in full at end)
2. Interest Only Mortgage (Lower payments, but not paid in full at end)

Question 27

What is a repayment mortgage?

Answer 27

Monthly Payments of both interest and capital and so the full amount will be repaid by the end of the mortgage term.

Monthly payments are higher, the buyer will be mortgage free at the end of the term.

Question 28

What is a interest only mortgage

Answer 28

Monthly Payments of Interest Only, and so the full amount will not be repaid by the end of the mortgage term.

The month payments are lower, but if the buyer wishes to keep the property at the end of term they will need to find another way to repay the capital

Question 29

What 2 things do the buyers solicitor advice on with regards to a Survey?

Answer 29

1. Is a Survey needed?
2. What type of Survey is best? (1 of 3)

Question 30

What are the 3 types of Surveys?

Answer 30

1. Basic Valuation
2. Homebuyers Valuation and Report Survey
3. Full Structual Survey

(In order of detailedness and cost)

Question 31

What is a basic valuation?

Answer 31

Does not assess the physical state and condition of the property in any detail.

Simply assures to the lender that the property will be worth sufficiently more than its security, and so they will always get their money back.

This is the bare minimum survey required by lenders

Question 32

What is a Full Structural Survey?

Answer 32

*
The Most Comprehensive survey, but also most expensive.

*  Contains detailed Assement for the physical state and condition of the property. 

*  Is especially worth it where the property is old, particularly valuable, or there have been past or proposed alterations. 

*  It may be used to renegotiate the purchase price if adverse matters are revealed.

   *   The results and any price reductions must be reported to the lender

Question 33

What is a homebuyers valuation and reports survey?

Answer 33

Lies in the middle of a basic valuation and full structural survey

Although it will refer to the need for repairs/maintenance, there are limitations. Such as any physical inspection may have been limited to exposed and accessible areas.

Although it is a compromise, its value to a buyer may be affected depending on these limitations

Question 34

What surveys should the buyer of a new build get?

Answer 34

Basic Valuation + Structural Defects Insurance Policy

Lender will usually undertake a basic valuation, and a further survey is usually not appropriate (especially when it is yet to be constructed)

Instead the Developer should provide a Structural Defects Insurance Polic

Question 35

What is a Structual Defects Insurance Policy.

Answer 35

For new build houses, a Basic Valuation Survey should be undertook, and a Structural Defects Inusrance Policy Should be given by the Developer.

A Structural Defects Insurance Policy

Covers defects in design and construction for a period of 10 years

• Usually from the National House Building Council through its ‘Buildmark scheme’. However, other products are available.
  • For the first 2 years (initial liability period), the builder is responsible for remedying the defects.

For the last 8 years (the structural liability period) the NHBC will be responsible.

Question 36

What does a Structural Defect Insurance Policy cover and for how long?

Answer 36

Covers defects in design and construction for a period of 10 years

Question 37

How long is the builder liable under a the 10 year Structual Defect Insurance Policy?

Answer 37

For the first 2 years (initial liability period), the builder is responsible for remedying the defects.

For the last 8 years (the structural liability period) the NHBC will be responsible.

Question 38

What is the Law Society Conveyancing Protocols?

What transactions does it apply to?

When is it compulsory?

Answer 38

The Law Society created a standard set of instructions for Solicitors to follow and standard forms to be used as part of the covenanting process, like the property information form and the completion information and undertaking forms to create an improvised conveyancing process.

It applies to all conveyancing transactions where the property is residential and the owner is the occupier.

However, it is only compulsory to adopt the protocol for firms that are a part of the Law Society Conveyancing Quality Scheme.

Most firms are usually apart of the scheme as major lenders usually require this.