U3: T6 - BUYING A PROPERTY - AN OVERVIEW Flashcards
We will look at stamp duty land tax (SDLT) in more detail in Topic 15, but from your studies for UK Financial Regulation can you recall:
a) who pays SDLT?
b) how it is levied?
c) what happens if a single transaction involves multiple properties?
a) SDLT is paid by the buyer.
b) It is levied in bands, with different portions of the purchase price being taxed at different rates.
c) For multiple properties purchased in a single transaction, SDLT is charged on the average value of each property, rather than on the overall total.
In a contract to buy and sell property, both vendor and buyer give a consideration.
True or false?
True: the buyer’s consideration is the money for the purchase; the vendor’s is the property to be purchased.
John is acting as agent for Donna. John carries out a transaction that appears to be outside his authorisation but Donna confirms that she is happy with what he did.
The technical term for this is:
a) apparent authority.
b) additional authority.
c) ratification.
d) retrospective authority.
c) Ratification.
Fred and Eileen are about to put their house on the market and are considering whether to agree a sole agency arrangement with an estate agent or a joint sole agency in the hope of achieving a quicker sale.
What would be the likely disadvantage to Fred and Eileen of the joint sole agency approach?
The commission each agent charges is likely to be higher than if they had sole agency.
Who is liable to sanctions for a sales brochure that exaggerates the size of the main living room?
a) The vendor.
b) The estate agent.
c) The vendor’s solicitor.
b) The estate agent is liable for exaggerated claims about a property contained in the estate agent’s particulars.
An Energy Performance Certificate:
a) must be received by the estate agent before a property can be marketed.
b) is commissioned by the buyer’s solicitor as part of the searches.
c) must be commissioned before the property can be marketed.
d) will cover all the flats in a block.
c) The EPC must be commissioned, but not necessarily received, before the property is marketed. It is the responsibility of the vendor to ensure this is done.
Once a lender has issued an offer of advance and the applicant has accepted it, the lender is bound to go ahead with the transaction.
True or false?
False. There are a number of situations in which the lender may withdraw the mortgage offer, including dishonesty on the part of the applicant, a material change in their circumstances such that the lender is not satisfied that the mortgage is still affordable for them, material defects in the condition of the property or defects in the title.
Indira had exchanged contracts on the sale of her flat a week before her kitchen was badly damaged by a fire that caused structural damage.
Who was responsible for insuring the property at the time the damage occurred?
a) Indira as the vendor.
b) The buyer’s lender.
c) Indira’s solicitor.
d) The buyer.
d) The buyer was responsible for arranging buildings insurance from the point at which contracts were exchanged.
Either vendor or buyer can drop out of the sale/purchase of a property at any point up to the completion date.
True or false?
True. Technically, either party can drop out from a purchase prior to the completion date, but the buyer would lose their deposit if they were to withdraw after exchanging contracts and either party might be sued by the other for breach of contract.
Which of the following would not be a legitimate reason to arrange exchange of contracts on a conditional basis?
Exchange is conditional subject to:
a) sale of another property.
b) satisfactory valuation of the property.
c) satisfactory search results.
d) a ‘long‐stop date’.
b) The valuation would have taken place in order to arrange a mortgage, which should be agreed before exchange of contracts.
James has heard that bargains can be found by buying at property auctions.
What cautionary advice would you give him?
A successful bid is binding; 10 per cent deposit is paid at the auction and contracts are exchanged the same day. There is no time to change your mind. Finance – mortgage or cash – must be in place prior to the bid. The survey and preliminary legal work must be completed before the auction. This can all be money wasted if the bid is not successful. If the bid is successful and James pulls out later, the vendor can keep the deposit and claim any shortfall from James if a subsequent sale achieves a lower price.
When purchasing a house is there a duty of disclosure?
No. Generally, there is no duty of disclosure between parties to a contract; most contracts are based on the principle of caveat emptor (‘let the buyer beware’).
What does ‘caveat emptor’ mean?
let the buyer beware
When purchasing a house, who is the agent?
The estate agent
When purchasing a house, who is the principal?
The vendor
When purchasing a house, what is the relationship between the agent and the principal?
The agent acts on behalf of the principal. It is crucial that the actual authority of the agent is established at the start of the agreement.
The principle is liable for the agents actions. True or false
True.
The principal is liable for the agent’s actions unless the agent acted outside their authority.
What are the two instances where an estate agent can act beyond their actual authority?
1) Apparent Authority
2) Ratification
