UNIT 1 AND 2: DUE DILIGENCE

Question 1

Are exchange of contracts compulsory?

Answer 1

• Exchange of contracts not compulsory but useful, fixes completion date + gives buyer time between exchange of contracts + completion in order to make final prep.
• Also useful when parties agree that conditions must be fulfilled before completion. Contract records agreed terms + can be relied upon if anything goes wrong in period between exchange of contracts + completion. Not always necessary to have gap in time. Exchange/completion can happen simultaneously or go straight to completion.

Question 2

Can a solicitor act for a buyer and seller in a property transaction?

Answer 2

The SRA’s exception for circumstances where the two clients have a ‘substantially
common interest’ does not apply to a property purchase.

Question 3

Can a solicitor act for two buyers?

Answer 3

• exception in paragraph 6.2(b) allows a solicitor to act even if there is a conflict of interest where the clients are competing for the same objective - might be possible to act for two buyers who are competing against each other to buy a property, but this exception will not apply in a buyer and seller situation
• It may be necessary to advise residential buyers separately about how they want to hold the equitable interest in the property, particularly if they are not married or in a civil partnership.

Question 4

Can a solicitor act for a borrower and lender?

Answer 4

• Risk of conflict high if:
  o Mortgage is not a standard mortgage (ie provided in normal course of lender’s activities where a significant amount of lender’s activities consists of lending + mortgage is on standard terms) of property to be used as borrower’s priv residence.
  o Mortgage is a standard mortgage but you do not use the approved certificate of title.

Question 5

Can a solicitor act for joint borrowers?

Answer 5

• Usually okay! provided no conflict of interests exists or is likely to arise
• EG husband and wife mortgaging the home
  
  • ISSUE OF UNDUE INFLUENCE
    
    • Etridge guidelines:
      
      • Lender should provide the solicitor with the following information:
        
        1. the purpose for which the loan is being made available;
        2. the current amount of the husband’s indebtedness;
        3. the amount of the current overdraft facility;
        4. the amount and terms of the new loan; and
        5. a copy of any written application made by the husband for the loan
      • Solicitor should:
        
        1. explain to the wife the purpose for which the solicitor has become involved;
        2. explain that the lender will rely on the solicitor’s involvement to counter any suggestion that the wife has been unduly influenced or has not fully understood the nature of the transaction; and
        3. obtain confirmation from the wife that she wishes the solicitor to act for her in the transaction, and to advise her on the legal and practical implications of the transaction.
  • BEST PRACTICE:
    
    • face-to-face meeting with the wife in absence of husband
    • explain everything in non-technical language
    • check the wife wishes to proceed
    • If the solicitor thinks that the transaction is not in the wife’s best interests, they should give reasoned advice to that effect.
    • If it is ‘glaringly obvious’ that the wife is being ‘grievously wronged’, the solicitor should decline to act
• Same principles apply to civil partners, cohabitees, parent child + any other situation where property is being charged in return for loan that is not being made to all property owners.

Question 6

Contract race?

Answer 6

• MUST tell all prospective buyers that they are engaged in a contract race
• if seller client does not agree to disclosing this, must cease to act

Paragraph 1.2 - do not abuse your position by taking unfair advantage

Paragraph 1.4 – do not mislead

If seller refuses to disclosure, solicitor cannot disclose contract race to prospective buyers as they have duty of confidentiality to seller client – 6.3 – solicitor should stop acting.

Question 7

Undertakings?

Answer 7

• Para 1: statement made by or on behalf of a solicitor, or the firm, to someone who reasonably places reliance on it, that the solicitor or firm will do something, cause something to be done, or will not do something.

Professional misconduct - paragraph 1.3: undertakings must be performed within the timescale or within reasonable time + failure = misconduct

personal liability

Question 8

Can a solicitor give advice on financing?

Answer 8

1. Rule: if solicitor is carrying out a regulated activity in relation to a regulated mortgage contract, then they must be authorised
   
   • regulated activity = arrange or advising, or arranging the execution of a mortgage
     
     • NOT generic advice eg differences between types of mortgages
   • regulated mortgage contract = borrowed is an individual + lender takes a first legal charge over the property in the UK + at least 40% of the property is intended for occupation by the borrower or their immediate family
2. EXCEPTION: If the firm is not authorised, solicitor can arrange or advise relying on s327 exemption for professional firms:
   
   • Requirement: the regulated activity is INCIDENTAL to the provision of legal services
3. CANNOT - give recommendations
4. CAN - give generic advice re. different types of mortgages

Question 9

Sources of finance for the client

Answer 9

• Significant consideration – if client has enough money to see transaction through.
• Solicitor must provide best possible info about likely overall cost of matter, at beginning + appropriate points throughout transaction: clearly explain fees, when they may change, warning about any other payments such as Stamp Duty/Land Transaction Tax/LR fees and search fees. Depends on needs of client, type of work, regular?
• Solicitor has to send letter of engagement setting out costings at beginning.

Question 10

Types of mortgages?

Answer 10

1. Repayment mortgage → monthly payments of original owed + interest
   
   • • borrower will have paid off the entire loan at the end of term
   • • higher monthly payments
2. Interest-only mortgage → monthly payments of only interest + pay owed amount by end of term
   
   • • lower monthly payments
   • • must find alternative way to pay off the principal value at the end of term
3. Sharia compliant mortgage → avoid paying interest by increasing price or leasing for a period at the end of which title transfers.

bank buys property + resells to buyer at higher price. Buyer repays excess to bank by instalments. Or bank buys property + leases it to buyer in return of rent, at end of lease bank transfers property to buyer

Question 11

Property taxation - what/who needs to pay for commercial and residential transactions?

Answer 11

RESIDENTIAL

• Buyer → SDLT / LTT (wales)
• Seller → CGT if gain

COMMERCIAL

• Buyer → SDLT / LTT
• Seller → Corporation tax on income and profits

Question 12

SDLT

Answer 12

1. FIRST TIME BUYER
   
   • IF main residence + under £625,000 =
     
     • 0% up to £425,000
     • 5% on to £625,000
2. NOT FIRST TIME
   
   • 0% = £0 - £250,000
   • 5% = - £925,000
   • 10% = - £1,500,000
   • 12% = remainder
     - Payable on land, not chattels
   • can apportion part of the purchase price to the chattels to reduce SDLT payable
     
     • MUST BE OF ‘FAIR VALUE’

Question 13

How to portion SDLT for 275k purchase of residential property, second time buyer?

then what if they apportion fair chattels?

Answer 13

SDLT payable on the purchase of a £275,000 home by a second-time buyer is £1,250 (0% on £250,000 and 5% on £25,000):

subtract chattels from purchase price.then calculate as normal.

Question 14

SDLT for non-residential mixed use freehold?

ie 275k?

Answer 14

0% - 150k or less
2% - more than 150k but less than 250k
5% - 250k +

SDLT payable on the purchase of a £275,000 commercial property by a buyer is £3,250 (0% on £150,000, 2% on £100,000 and 5% on £25,000). If VAT is charged, SDLT is payable on the VAT- inclusive sum.

Question 15

How is SDLT paid

Answer 15

SDLT is paid to HMRC, usually online by bank transfer, accompanied by a form called an SDLT1 which provides the necessary details of the transaction. It must be paid within 14 days of completion and if it is not paid, the transfer of the property to the buyer will not be registered by the Land Registry. Failure to file and pay on time will also attract penalties and interest.

Question 16

LTT and VAT

Answer 16

If VAT is charged, LTT is payable on the VAT- inclusive sum.

Question 17

LTT for residential transaction

Answer 17

• IMPORTANT - NO first-time buyer relief
• LTT is also payable on VAT-inclusive sum

RESIDENTIAL FREEHOLD

• 0% = £0 - £225,000
• 6% = - £400,000
• 7.5% = - £750,000
• 10% = - £1,500,000
• 12% = remainder

Question 18

LTT non residential/mixed used freehold

Answer 18

• 0% = £0 - £225,000
• 1% = - £250,000
• 5% = - £1,000,000
• 6% = remainder

Question 19

Capital gains - basis of charge?

Answer 19

CGT charged on gains made on ‘chargeable assets’ within Taxation of Chargeable Gains Act 1992.

Includes freehold + leasehold property, and interests of co-owners in case of jointly-owned property . some transactions incidental to sale of land also give rise to a charge to CGT, ie separate payment made for release or modification of an easement or covenant, gifts also fall within ‘disposal’ meaning.

Gain on sale of property calculated by deducting price of property (or base value in 1982 if purchased earlier than this) from current sale price.

Certain forms of expenditure incurred in acquiring or improving property can be deducted in appropriate cases. Gain is chargeable at a rate set by Government after allowing for individual’s annual exemption.

Question 20

How is CGT calculated

Answer 20

Gain on sale of property calculated by deducting price of property (or base value in 1982 if purchased earlier than this) from current sale price.

Question 21

Private residence relief

Answer 21

REQUIREMENT = seller occupied the dwelling house as their only or main residence throughout the period of ownership

PRR also be available to trustees if the property is occupied by a beneficiary as their principal residence.

• Absences = allowed in certain circumstances, eg temp living abroad for work or in service accommodation as part of job
• LIMITATIONS
  
  1. If seller has a garden of more than 0.5 hectares, the gain on the excess is chargeable to CGT unless the seller can demonstrate that it was necessary for the reasonable enjoyment of the house
  2. Relief may be lost on any part of the house used exclusively for business use

Question 22

When does VAT apply?

Answer 22

• Applies to taxable supplies - good and services provided by a taxable person in the course or furtherance of a business
  
  • taxable person = turnover over past 12 months exceeded £85,000

VAT is collected by HMRC from each supplier at the end of each VAT period (usually every three months) by supplier completing a VAT return to HMRC online.

Question 23

Output vs Input tax?

Answer 23

• Output tax is the VAT charged by the supplier on its goods or services (ie its output).
• Supplier delineates this output VAT separately on its invoices when charging its customers.
• Customer, the recipient of the goods or services, pays the VAT. In a customer’s business this is called input tax.

*To calculate the VAT due to HMRC, the supplier deducts input tax it has paid against the output tax it has charged and only the net amount is sent to HMRC.

*Supplier accounts to HMRC for the value added by its business; input
tax paid by the supplier is recovered.

Question 24

Standard rated supplies - VAT due?

Answer 24

20%

Question 25

What products have reduced rate of VAT?

Answer 25

Domestic fuel supplies, certain construction/renovation services - 5%.

Question 26

Exempt supplies

Answer 26

are non- VATable - sometimes a supplier of land has the option to charge VAT (‘the option to tax’).
Majority of residential transactions do not involve payment of VAT.

Question 27

Is VAT charged to residential properties?

Answer 27

Majority of residential transactions do not involve payment of VAT.

Sale of new build house by a developer is zero rated - buyer will not pay any VAT, and the subsequent sale of a residential property by a private individual will not be in the course of a business, so the seller will not be charging VAT to the buyer in addition to the purchase price.

Question 28

VAT charged on commercial property transactions?

Answer 28

Types of commercial:

• NEW COMMERCIAL = less than 3 years → 20%
  
  1. The sale of a new freehold building is standard rated.
• OLD COMMERCIAL - 3+ YEARS → OPTION
  
  1. The sale of an old freehold building is exempt, subject to the option to tax.

Taxable supplies give the seller the option to tax, eg:

1. Sale of a greenfield site is exempt, option to tax
2. The grant of a lease is exempt, subject to the option to tax.
   - Professional services, provided by an architect or surveyor for example, are standard rated.
   - Supply of construction services is standard rated

Question 29

Reasons to / not to opt to tax

Answer 29

Seller of a new commercial building has no choice but to charge the buyer VAT + seller of an old commercial building does have a choice.

Seller opting to tax = turning what would have been an exempt supply into a taxable supply. Seller of an old building may want to do this to enable recovery of the input tax incurred in relation to the building, for example on building work costs and professional fees incurred in renovating the
building to get it ready to sell.

Possible disadvantage of taxing supply of an old building = seller has to charge VAT on purchase price, not a problem if the buyer makes taxable supplies and is therefore able to recover its input tax VAT. However, if the buyer cannot recover its input tax VAT, or can only make a partial recovery, then the purchase price is increased; there will be a real cost to the buyer’s business and the building will be unattractive.

If target market for the building includes ‘VAT- sensitive’ financial buyers (City of London), seller will try very hard to avoid opting to tax the supply of the building; detrimental effect on sale price of the property that can be charged because the potential buyer will seek to claw back some of the irrecoverable input tax VAT by reducing its offer for the purchase price.

If option to tax has been made before date of transaction (or if there is a VAT element in the price because the building is new), the VAT will count as chargeable consideration for SDLT/ LTT purposes so there will be extra SDLT/ LTT to pay, which is ‘tax on tax’.

Question 30

Planning law: matters that DO NOT constitute ‘development’

Answer 30

‘Development’ s 55* of the TCPA 1990 : carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land.

Carrying out maintenance, improvement or other alteration of any building or works which affect only the INTERIOR of a building, or do not materially affect the external appearance of a building specifically excluded.

Question 31

Change of use/class

Answer 31

S 55(2) TCPA 1990 excludes a change of use within the same class of use as specified in the Town and Country Planning (Use Classes) Order 1987

• ‘sui generis’: uses which could potentially have adverse effects on their locality and include entertainment establishments (such as cinemas and bingo halls), drinking establishments (such as pubs and wine bars) and hot food takeaways (for the sale of hot food for consumption off the premises).
• Changes of use to another use, or mix of uses, within the same use class will not require planning permission. For example, in England, a change of use from a clothes shop to a restaurant will not require planning permission as both are within class E.

Question 32

Change of use in Wales

Answer 32

• In Wales, a change of use from a clothes shop to a stationers will not require planning permission as both are within class A1.
• A change of use from one class to another will require planning permission.
• Changes to and from a sui generis use will always require planning permission.

In Wales, the uses are divided into the following main groups:
A1 – shops
A2 – financial and professional services
A3 – food and drink
B1 – business
B2 – general industrial
B8 – storage and distribution
C – _ residential uses: hotels (C1), residential institutions (C2), dwelling houses sole or main
residence (C3), homes in multiple occupation (C4), dwelling houses not sole or main
residence (C5), short term lets (C6)
D – non-residential institutions (D1), assembly and leisure (D2).

Question 33

Class E

Answer 33

B2 – general industrial
B3 – storage and distribution
C – residential uses: hotels (C1), dwelling houses (C3), houses in multiple occupation (C4)
E – commercial, business and service
F – _ local community and learning: learning and non- residential institutions (F1) and local
community (including shops selling essential goods in premises not exceeding 280m2 with
no other such facility within 1,000m) (F2).

Class E 1 September 2020, large number of different uses, most common:
E(a) – retail sale of goods, other than hot food
E(b) – sale of food and drink for consumption on the premises
E(c) – financial and professional services
E(g) – _ uses which can be carried out in a residential area without detriment to its amenity,
including offices to carry out any operational or administrative functions and research
and development.

Question 34

Effect of planning permission

Answer 34

• Once obtained, continues to exist for benefit of land + of all persons for time being interested in it (unless otherwise specified).
• Usually states that it has to be implemented within certain time + will lapse if not.
• England – usually within 5 years of date of permission; Wales 5.
• Do not usually impose time limit by which authorised development must be completed, but if Local Planning Authority decides will not take place in reasonable time, can serve a completion notice stating that permission will cease to have effect if completion not taken by expiration period stated in notice  but rare and general rule, once implemented runs w/ land forever + any conditions will burden relevant land.
• Grant of planning permission effective for planning purposes only; does not obviate need for other types of approval or confer right to breach covenant.

Question 35

Matters that do not require express planning permission

Answer 35

• Development may not always need explicit planning permission; it can be automatically granted in certain cases.
• England: Permitted development rights are outlined in the Town and Country Planning (General Permitted Development) Order 2015 (GDPO 2015).
• Wales: Governed by the Town and Country Planning (General Permitted Development) Order 1995 (GPDO 1995), which previously applied to both countries but was revoked in England.
• Common permitted developments include in DWELLING HOUSE minor home extensions and small operations like painting or installing CCTV. Automatic permission also applies to specific changes in use classes, but the current Use Classes Order should always be checked.
• The Secretary of State or Local Planning Authority (LPA) can exclude certain developments from permitted rights via an Article 4 Direction - important to check for these before relying on automatic permission by consulting the latest GPDO and local searches.
• If unsure, one can apply for a Certificate of Lawfulness of Proposed Use or Development under section 192 of the Town and Country Planning Act 1990. This certifies whether the proposed works fall within permitted development rights. If not, express planning permission is required.

Question 36

Enforcement notice?

Answer 36

Can be issued where it appears to LPA that there has been breach of any type of planning control.

Must be served to owner, occupier, and any other person having interest in land ie mortgagee and will become effective 28 days after service: must specify alleged breach, or steps to be taken/discontinued to remedy breach + timescale – any person can appeal.

England, 25 April 2024 – LPAs have power to issue enforcement warning notices when it appears there has been breach.

Enforcement warning notice invitation to recipient to regularise the breach by applying for retrospective planning permission.

Question 37

Enforcement notice in Wales

Answer 37

Wales: LPA can serve when it appears there has been breach of planning control + reasonable prospect that planning permission would be granted if application was made. Warning notice must give details of breach + warn that further enforcement action may be taken if app not made within time.\

Question 38

Stop notice

Answer 38

Enforcement notice must be served first

Cannot become effective until 28 days after served + its effect is suspended if recipient appeals it, so LPA can serve a stop notice to bring activities in breach of planning control to an end before enforcement notice takes effect.

Stop notice cannot be served as method of enforcement in its own right; enforcement notice must be served first.

LPA can serve temporary stop notice effective for 28 days for further investigation, or injunction application to court if extreme.

Question 39

Breach of condition notice

Answer 39

Similar to enforcement notice but can only be served where the breach of planning control is a breach of condition attached to planning permission.

Unlike enforcement notice, NO RIGHT OF APPEAL against service of a breach of condition notice.

Question 40

Injunction: England vs Wales

Answer 40

LPA can apply to court for an injunction to restrain an actual or apprehended breach of planning control: discretionary remedy, LPA must show that an injunction is
Expedient, necessary and appropriate in the circumstances.

England: LPA must take enforcement action within 10 YEARS of the alleged breach.

breaches of operational development (such as building works) or changing the use of a building to use as a single dwelling house that took place before 25 April 2024 –> within 4 YEARS of the alleged breach.

Wales: for breaches involving operational development (such as building works) or changing use of a building to use as a single dwelling house, time limit for enforcement action is within four years of the alleged breach. time limit for all other breaches of planning control is within 10 years of the alleged breach.

LPA can apply to magistrates’ court for a planning enforcement order to enable enforcement action to be taken when the statutory time limits have expired and the breach of
planning control has been concealed. If LPA fails to take enforcement action within the relevant time period, then no further action can be taken in respect of the breach.

Failure to comply with one of these planning control notices is an offence punishable with a fine.

current owner of the property who is held responsible and not necessarily person who obtained the planning permission, or failed to obtain it  important for the buyer’s solicitor to carry out the necessary searches and enquiries at the pre- contract stage to discover the planning history of the property.

Question 41

Building regs

Answer 41

• Necessary to apply for building regulations consent for many works carried out to buildings, even where the changes themselves do not require an application for planning permission.
• work will be inspected by a building control officer. After final inspection, building control authority should issue a certificate of compliance.
• self- certification schemes regulated by trades and professions (eg plumbing and installation of windows), which do not require a separate application to the building control authority. The person who does the work can self- certify their work and their relevant body sends notification to the building control authority.
• Building control authorities can prosecute for breach of building regulations control.

In Wales, a prosecution must be brought within TWO YEARS of the offence.

In England there is now NO TIME LIMIT for bringing a prosecution: prior to 1 October 2023 the prosecution had to be brought within six months of the breach being discovered and within two years of completion of the building work.

• A building control authority can also serve an enforcement notice requiring the work to be altered or removed. In Wales, an enforcement notice must be served within ONE YEAR of completion of the work. In England, the time limit is within TEN YEARS of completion of the work.

Question 42

Issues for seller re building regs?

Answer 42

• They can also take out injunctions, which are not time limited, if the work is unsafe. A prospective buyer, and their lender, would be concerned about the structural soundness of a building which had not been granted building regulations consent, even after the risk of prosecution or enforcement has passed. A lender may be reluctant to lend without a full structural survey and/or retain some of the mortgage advance until remedial works are carried out
• Buyer can check that building regulations have been complied with using searches + enquiries usually carried out before exchange of contract - pre- contract enquiries of the seller will ask about any works carried out to the property and any consents obtained and the CON29, part of the local search, will reveal details of building regulations consents and certificates granted.
• If a consent has not been granted, the buyer can ask the seller to obtain a regularisation certificate from the building control authority which lists the work required to bring the building up to standard.

Alternatively insurance can be obtained, but this usually only covers the cost of compliance with the regulations should the building control authority bring enforcement proceedings; it will not cover personal injuries or business interruption caused by a defective building.

Question 43

Listed buildings

Answer 43

• Once a building has been listed, owner will probably require listed building consent to demolish, alter or extend the building in addition to planning permission.
• The higher the listing, the harder it will be to obtain listed building consent from the local authority. Listed building consent may be required even when planning permission is not required, for example for internal alterations.
• Number of classes of permitted development under the GPDO that do not apply to listed buildings, so if this type of work is to be carried out to a listed building, express planning permission from the local authority will be required.

Question 44

Conservation area

Answer 44

o Changes to the external appearance of a building in a conservation area may require planning permission from the LPA that is not required elsewhere, as some permitted development rights are curtailed.
o Demolition or substantial demolition of a building within a conservation area will require planning permission from the LPA.
o Any work planned to a tree in a conservation area must be notified to the LPA SIX WEEKS IN ADVANCE so that the LPA may determine whether or how the work to the tree should take place.

Question 45

Energy Performance certificate

Answer 45

• Important that solicitors for both parties to a sale and purchase transaction take instructions from their clients at the start: will need to check what has been agreed at the marketing stage and that the buyer has been provided with an Energy Performance Certificate (‘EPC’) for the property.

An EPC is produced by an accredited energy assessor and the seller must make one available to the buyer, free of charge, at the earliest opportunity, preferably within SEVEN DAYS of first marketing and in any event within 28 days.

Question 46

What is the investigation of title?

Answer 46

Process of establishing who owns the property + whether there are any rights/rules which could affect owner’s use + enjoyment.

Solicitor will need to check seller owns property + whether anything burdens.

Lender will want to ensure that if borrower defaults on loan, property can be sold on open market for at least as much as is outstanding on loan.

Seller’s solicitor will need to investigate client’s title to produce first draft of contract of sale, typical sale contract seller promises to sell property ‘free from incumbrances’ (3rd party rights that bind property) unless seller states otherwise – need to be identified.

Question 47

How does the seller’s solicitor investigate registered land?

Answer 47

Seller’s solicitor needs to obtain official copies of register of title.

Will need copy of Land Registry plan – title plan.

Firm likely to have account with LR, allows solicitor to order docs by phone or online and receive them next day. Arrangements with LR which allows them to request official copies electronically + review register and title plans online.

Question 48

How does the seller deduce title to buyer of registered land?

Answer 48

Deduction of title = seller’s obligation to prove to buyer their ownership of property.

Proved by documentary evidence, modern practice is for title to be deduced before exchange of contracts + for buyer to be prevented from raising any objections to that title after exchange.

Registered land: seller should supply to buyer, at their own expense, official copies that are LESS THAN SIX MONTHS OLD.

Buyer’s solicitor will need to investigate overriding interests.

Question 49

How is the official copy set out in registered land?

Answer 49

show title number to the property + ‘edition date’, ie date on which the Land Registry last updated the title (probably on a previous sale or mortgage).

also show ‘search from date’: specific date of the official copies showing the entries subsisting on the register at a certain time.

show entries on 3 registers: property, proprietorship, charges.

Question 50

Edition date in an official copy?

Answer 50

Date on which LR last updated the title - likely on a previous sale or mortgage

Question 51

Search from date in an official copy?

Answer 51

Specific date of official copies showing entries subsisting on register at certain time

Question 52

What is shown on the property register?

Answer 52

Will always contain description of land, re postal address, title plan, whether it is freehold/leasehold.

May indicate that:

1. There are easements or rights BENEFITING the land subject to obligations.
2. There are certain things one might expect to come with land (rights of light/air over adjacent land) have been EXCLUDED from the title.
3. Mines and minerals exception
4. sometimes burdening easements if conveyance is extracted (as well as on charges)

Question 53

What is shown on the proprietorship register?

Answer 53

Will always identify current owners + their address, and class of title.

INDEMNITY COVENANTS AND RESTRICTIONS CAN BE SHOWN.

State guarantees the title and compensation payable in certain circumstances if defect found. Class of title determined by LR when first registered, 3 possible classes for freehold land:

1. Absolute title: most common + best, registered proprietor has vested in them the legal estate subject only to entries on register, overriding interests + where proprietor is trustee, minor interests of which they have notice ie interests of beneficiaries under the trust.
2. Possessory title: granted where proprietor is in possession of property but has lost title deeds or is claiming through adverse possession, also subject to all adverse interests existing at date of first registration.
3. Qualified title: granted where there is a specific identified defect which Registrar feels cannot be overlooked or cured by grant of absolute title.

May also indicate price paid for the land by the current owners (if it has been sold since 1 April 2000), will show if the owners gave an indemnity covenant when they bought the land, which will be evidence of a chain of indemnity covenants.

Proprietorship register will also contain any restrictions on the owners’ ability to sell. Since 13 October 2003, LR has provided only two types of entry for the protection of third party interests – notices and restrictions.

[Prior to LRA 2002: possible to apply for two other types of entries, cautions and inhibitions, and it is still possible to come across these types of entry on the Register, rare.]

Restriction is an indication that the proprietor’s ability to deal with the property is limited or that a prior condition must be satisfied in order for a disposition to be registered; protection afforded by restriction may be permanent or for a specified period - may be absolute or conditional (ie a restriction requiring the consent of another party to a disposition). A restriction is therefore a more powerful type of entry than a notice.

Examples of restrictions are a co- ownership restriction and a lender restriction, or where a court makes an order requiring a restriction to be entered, in course of litigation or family proceedings to prevent the property being sold.

Question 54

Why would a buyer be concerned if a title was not absolute?

Answer 54

Although sometimes possible to upgrade a possessory or qualified title, the buyer will be concerned if the class of title is not absolute - may affect ability to obtain a loan to purchase the property and/ or sell it in future.

Question 55

What is shown on the charges register?

Answer 55

Will identify incumbrances, ie:
(i) covenants affecting the property, restrictive or positive
(ii) easements affecting the land, ie right of way over property
(iii) charges over the land, ie mortgages
(iv) leases granted over the whole or part of the property
(v) notices registered by third parties claiming an interest in the property.

Some may pose problems; buyer’s solicitor needs to be able to identify them to advise the client on what action to takein respect of the different entries.

Question 56

How to investigate title to freehold unregistered land?

Answer 56

1. Check whether land is already registered or pending application for first registration
2. Check if a third party lodged a CAUTION against first registration that they have an interest, ie easement.
3. Land Reg will warn off cautioner when app for 1st reg lodged, limited period to establish rights, may lose.
4. CHECK INDEX MAP SEARCH AT LR ON FORM SIM
5. If not registered - title proved by TITLE DEEDS.

• Seller provides buyer with copies of title deeds (usually before exchange of contracts) and if sale is sale of whole of property, hands over originals to buyer on completion
• If sale of part, seller will keep original title deeds and hand over certified copies to buyer on completion.
• At completion, buyer’s solicitor examines original title deeds against copies that they received prior to exchange to check if same; ‘verification of title’.
• Memorandum of sale of part marked on original deed.

Question 57

How does a seller’s solicitor deduce title to the buyer in unregistered land?

Answer 57

• Examine parchment/paper deeds used to transfer ownership of property in past: conveyances, mortgages, assents (between personal reps and beneficiary under will), deeds of gift and land charges searches.
• seller’s solicitor usually able to obtain title deeds from client if property mortgage free or mortgage lender.

-Having obtained the title deeds, seller’s solicitor must consider whether any transaction in the property’s history should have triggered first registration of title; if title should have already been registered, seller will be required to register it before any other transactions can proceed: buyer’s lender is likely to insist that this defect in title is remedied before completion of the buyer’s purchase.

• look at title deeds for root of title - single doc, usually most recent. can ignore older docs UNLESS root of title refers back to third party conveyance.
• The seller’s solicitor will then prepare ‘epitome of title’, a schedule of all the documents from and including the root up until the present day. The documents should be numbered and listed in chronological order. Attached to the epitome are copies (rather than originals) of each of these documents.
• Before epitomes of title became common, the practice was for a seller’s solicitor to prepare an ‘abstract of title’, a precis of all the documents comprised in the title. In practice a solicitor may encounter both forms of presentation in relation to the same property, particularly with older properties that have not often changed hands.

Question 58

Requirements for a good root of title?

Answer 58

• S44 LPA 1925, root of title must:
  o Deal with/show who owns entire interest (legal and equitable) that is being sold by current owner
  o Contain recognisable description of relevant land
  o Do nothing to cast doubt on seller’s title
  o Be at least 15 years old
• Conveyance generally preferable to mortgage as it is more likely to contain detailed description of property by reference to a plan + more details of incumbrances affecting property + deal expressly with legal/equitable interest.
• If neither conveyance/mortgage available, deed of gift or assent can be used but as gifts and not for value, title investigation unlikely to have taken place, do not provide double guarantee as given by conveyance on sale or legal mortgage, less satisfactory to buyer.
• To establish whether a conveyance deals with both the legal and equitable interests in the land, solicitor should look for a paragraph beginning with the word ‘WHEREAS’ stating that the Vendor (seller) is ‘seised of the property … for an estate in fee simple and is selling the same to the Purchaser’ (buyer). The conveyance should also state that the Vendor conveys the land as ‘beneficial owner … unto the Purchaser’. Such a conveyance is dealing with the entire legal estate and equitable interest in the land.

Question 59

Checking each title deed listed in the epitome of title? What applies?

Answer 59

• Root + all subsequent title deeds must be checked in systematic + thorough manner.
• Many read through all title deeds many times, focus on:
  o Chain of ownership
  o Description of land
  o Stamp duties
  o Incumbrances
  o Execution
  o Land charges searches

Question 60

Chain of ownership

Answer 60

There should be an unbroken chain of ownership from owner indicated in the root of title up to the present seller. Since legal estates can only be transferred by a deed, there should be documentary evidence of every change of ownership.

Person who acquired the
property in the root of title should be the same person who is transferring title in the next document.

If the owner has died, the property will vest in their Personal Representatives (PRs), in which case the GRANT OF PROBATE identifying the PRs must also be produced to check it was them who transferred title in the next document in the chain.

Question 61

Description of the land?

Answer 61

The title deeds need to be checked to ensure the description of the property is consistent throughout.

Question 62

Stamp duty?

Answer 62

Was payable on many conveyancing documents prior to December 2003; evidenced by embossed stamps being placed on the document, usually in top margin.

Conveyance on sale was liable to ‘ad valorem duty’ - duty that varied according to amount of the purchase price. Some low- value transactions were exempt or liable to a reduced rate, only if conveyance included a ‘certificate of value’ stating that the transaction did not form part of a larger transaction or series of transactions in which the value exceeded the relevant threshold.

Ad valorem stamp duty was not payable on mortgages executed after 1971, or on deeds of gift and assents after 30 April 1987 provided the deed contained a certificate stating that the transaction fell within one of the categories of exempt documents.

In addition to stamp duty, from 1931 Inland Revenue also required some documents, including conveyances on sale, to be sent to them, in which case they would get a ‘particulars delivered’ or ‘PD’ stamp on them. Without the PD stamp the conveyance was not properly executed and the original buyer could be fined.

Practitioner’s text should be consulted to establish whether the right amount of stamp duty was paid at the time of the transaction. Stamp duty on property transactions was largely replaced by SDLT on 3
December 2003.

Question 63

Incumbrances - unregistered title deeds?

Answer 63

Each title deed should be checked for incumbrances ie easements/covenants.

EASEMENTS often appear in a conveyance beginning with the words ‘EXCEPTING AND RESERVING’ indicate that on an earlier sale, seller was reserving an easement of some kind over the land being sold, ie a right of way.

Words ‘SUBJECT TO’ also used to introduce an incumbrance, ie an obligation to pay towards the maintenance of a road – might also be restrictive + positive covenants buyers entered into on previous sales.

Question 64

Execution for deeds?

Answer 64

Each document should be checked to ensure properly executed. Most documents transaction will need to be executed as a deed (s 52 Law of Property Act 1925), so the formalities for execution as a deed must have been complied with.

s 1(2) Law of Property (Miscellaneous Provisions) Act 1989, must:

a) Be in writing
b) Make it clear on face that it is a deed
c) Be signed by person granting interest in presence of a witness who ‘attests’ the signature (ie provides evidence of it)
d) Be delivered as a deed

Before 31 Jul 1990 – deed had to be signed + sealed by maker + delivered as deed, seal (red circular piece of paper) had to be on doc before marker signed, if not could not have conveyed a legal estate.

!! The seller will ALWAYS execute a conveyance in order to pass the legal estate in the land. A buyer will not always execute a conveyance (or a transfer of registered land).

A buyer will only do so if they are giving a NEW COVENANT or they will be holding the land on
TRUST, in which case they are required to make a declaration about the nature of that trust. So in the case of co- owners you would always expect the BUYERS to sign.

Question 65

Land charges search - unregistered land?

Answer 65

K15!!

Some incumbrances, esp. restrictive covenants, will only bind unregistered land if they are correctly registered as a land charge at the central Land Charges Department in Plymouth.

Immediately after such an incumbrance was created, the solicitor acting for the person who owned the land that benefited from the incumbrance should have registered the land charge.
The registration should have been against the name of the person (the ‘estate owner’) who owned the legal estate in the land bound by the incumbrance. The most common land
charges protect the following interests:

Solicitor must ensure that valid searches have been made against the names of all the estate owners revealed in the epitome of title and the attached documents, even if their period of ownership pre- dates the root of title. The search, on form K15, should be against each estate owner for the period that THEY OWNED THE LAND. Only the years need be entered onto the K15 form, not the precise dates.

If uncertainty about exact years someone owned the land, search should be for any years that the individual might have done so – solicitor should search back to 1926, when the land charges system was introduced. It is possible to rely on valid searches done by others in the past, on previous sales.

Question 66

Further action for easements - REG VS UNREGISTERED?

Answer 66

Most common = rights of way, rights of drainage and rights of support.

In registered land, easements that burden the property should appear in the Charges register, but they may also appear in the Property register if the Land Registry has extracted text from a conveyance and easements that burden the property are mixed in with easements that benefit it.

Property register will be financial obligations to contribute attached to easements that benefit the property, such as a right to use a driveway on a neighbour’s property subject to paying one half of the maintenance costs.

In unregistered land, easements are usually granted or reserved immediately in the first operative paragraph of the conveyance, just after the words that convey the property to the buyer.

Question 67

Mines and minerals exceptions/reservations

Answer 67

In past, seller may sold piece of land but excepted or reserved out of the sale the mines and minerals beneath the surface, together with a right to come onto the land to extract the valuable coal and other substances.

In registered land this will be noted in the PROPERTY REGISTER, ie:
There is excepted from the registration the mines and minerals underneath the property together with ancillary powers of working thereof.

In unregistered land, such a provision will appear in the conveyance itself.

A mining exception means that the seller does not own any mines and minerals underneath the surface of the property and cannot transfer them to the buyer.

Any encroachment on to them by the buyer will constitute a trespass. A reservation creates an incorporeal right in the mines and minerals by way of a profit à prendre  This type of entry could indicate that mining
has taken place in the vicinity in the past, so enquiries should be made as to the ground stability and whether there has been any subsidence.

Although entries such as these are fairly common, the buyer should be informed and enquiries made as to who is able to exercise this
right and if it has ever been exercised in the past. All interests in coal are now vested in the Coal Authority under the Coal Industry Act 1994 and a coal mining search should be carried out.

Regardless of whether the property is registered or unregistered, the buyer’s solicitor should also conduct an Index Map search at the Land Registry, on form SIM, to check whether the mines and minerals are registered under a separate title; if they are, this will help to identify the owner of those mines and minerals and any associated rights.

Question 68

Declaration as to rights of light and air

Answer 68

Sometimes a landowner will sell off a part of their land (‘Part A’) and retain the other part (‘Part B’) for their own purposes. In order to preserve the right to develop Part B in the future, they may have declared in the transfer of Part A that Part A does not enjoy the benefit of any rights of light and air over Part B  will be nothing to stop the owner of Part B building
on that land and, for example, blocking off light to the windows in the building on Part A.

In this example, enquiries about the extent and location of the adjoining land owned by the Vendor in July 2010 should be made and the buyer will need to be informed and asked whether this reservation of rights to light and air causes concern given their intended use of
the property and the likelihood of development nearby.

Question 69

Co-ownership relevant investigations?

Answer 69

In registered land, it can be assumed that the equitable interest is held as a joint tenancy unless a restriction appears in the Proprietorship register in the following terms:

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.

In unregistered land, the conveyance to joint buyers will state whether the equitable interest is to be held as joint tenants or tenants in common.

When the title investigation shows that a property is jointly owned but it is being sold by only one of the co- owners, it is necessary to find out what has happened to the missing co- owner. If they are alive, they must be a party to the contract and the transfer of the property.

If the missing co- owner has died, the seller’s solicitor will need to provide a certified copy of the death certificate. The co- owners held the legal title to the property as joint tenants as this is the only way the legal title can be held by co- owners. If the equitable interest was also held as joint tenants, then the surviving co- owner can transfer the property alone.

In registered land, the buyer can assume that the equitable joint tenancy was not ‘severed’ (turned into a tenancy in common) prior to the death of the deceased co- owner in the absence of the restriction in the Proprietorship register.

In unregistered land, the buyer will be entitled to assume that the joint tenancy was not severed if the transfer by the surviving joint owner to the buyer contains a statement that the surviving joint owner is solely and beneficially entitled to the land and neither of the following has occurred before the date of the transfer:

1. A memorandum (written record) of severance endorsed on conveyance of property to joint tenants.
2. Bankruptcy proceedings registered against either of joint tenants at Land Charges Registered.

Where there is only one surviving legal owner and the equitable interest was held by the co- owners as tenants in common, another legal owner (often referred to as a ‘second trustee’) needs to be appointed to overreach the equitable interest of the deceased co- owner.
A second trustee needs to be appointed and both the second trustee and the surviving proprietor need to execute the transfer deed.

The appointment of the second trustee can be made in the transfer of the property or by separate deed of appointment. Provided the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co- owner will be overreached and the
buyer will take the property free of it.

The contract should provide for the appointment of second trustee for the purposes of the transfer (see 4.5).

Alternatively, deceased co- owner’s interest may have passed to the surviving co- owner by will or under the intestacy rules; can be proved by producing certified copies of the grant of probate and the assent from the PRs to the surviving co- owner as beneficiary.

There is no need to appoint a second trustee where there are two or more legal owners remaining, as the purchase price will be paid to at least two trustees on completion so overreaching will take place.

Question 70

Registered land - what suggests that joint tenancy has been severed?

Answer 70

In registered land, it can be assumed that the equitable interest is held as a joint tenancy unless a restriction appears in the Proprietorship register in the following terms:

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.

Question 71

What happens if there is one surviving co-owner and words of severance?

Answer 71

JT: If the missing co- owner has died, the seller’s solicitor will need to provide a certified copy of the death certificate. The co- owners held the legal title to the property as joint tenants as this is the only way the legal title can be held by co- owners. If the equitable interest was also held as joint tenants, then the surviving co- owner can transfer the property alone.

Where there is only one surviving legal owner and the equitable interest was held by the co- owners as tenants in common, another legal owner (often referred to as a ‘second trustee’) needs to be appointed to overreach the equitable interest of the deceased co- owner.

A second trustee needs to be appointed and both the second trustee and the surviving proprietor need to execute the transfer deed.

The appointment of the second trustee can be made in the transfer of the property or by separate deed of appointment. Provided the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co- owner will be overreached and the
buyer will take the property free of it.

The contract should provide for the appointment of second trustee for the purposes of the transfer (see 4.5).

Alternatively, deceased co- owner’s interest may have passed to the surviving co- owner by will or under the intestacy rules; can be proved by producing certified copies of the grant of probate and the assent from the PRs to the surviving co- owner as beneficiary.

There is no need to appoint a second trustee where there are two or more legal owners remaining, as the purchase price will be paid to at least two trustees on completion so overreaching will take place.

Question 72

Unregistered land - severance?

Answer 72

In unregistered land, the buyer will be entitled to assume that the joint tenancy was not severed if the transfer by the surviving joint owner to the
buyer contains a statement that the surviving joint owner is solely and beneficially entitled to the land and neither of the following has occurred before the date of the transfer:

1. A memorandum (written record) of severance endorsed on conveyance of property to joint tenants.
2. Bankruptcy proceedings registered against either of joint tenants at Land Charges Registered.

Question 73

Restrictive covenants - further steps?

Answer 73

Restrictive covenants prevent land being used in particular ways + are usually binding on successors in title to the original parties. In registered land they appear in the Charges register.

In unregistered land they appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the purchaser.

If the property is unregistered, a post- 1925 restrictive covenant will only be binding against the buyer if it was validly registered as a D(ii) Land Charge against the name of the original covenantor. This can be checked with a Land Charges search.

Buyer’s solicitor should

• ask seller who owns property with benefit + see if permanent release/one-off consent is possible - not appropriate if covenant v old + person w/ benefit cannot be easily identified if land sold in parts
• obtain restrictive cov policy for proposed breach of covenant - cost-effective, not appropriate if person w/ benefit of covenant is likely to know that they have benefit of covenant + object to porposed use
• apply to Upper Tribunal Lands Chamber for modification or discharge under s84 lPA on grounds that cov is obsolete + no practical benefit of substantial value / contrary to public interest + loss can be compensated. discretion of tribunal, not cost effective or quick.
• restrictive cov insurance policy not available where approach made
• if covenant old - benefitting successor may not be aware - approach may not be best interest

Question 74

Positive covenants - further steps?

Answer 74

Obliges the covenantor to carry out works or incur expenditure.

In registered land they appear in the Charges register.

In unregistered land they appear in the conveyance, often in or immediately after the first operative paragraph conveying the property to the buyer.

A positive covenant always binds the original covenantor, but the burden of a positive covenant does not run to a successor in title to the original covenantor. At first sight, a positive covenant is not binding on a new buyer.

However, when the original covenantor sold the property, it is likely that they required their buyer to give them an indemnity covenant, so that if their buyer breached the covenant and the original covenantor was sued directly for the breach, they could recover their losses from their buyer.

This arrangement is likely to have been repeated each time the property changed hands, resulting in a ‘chain of indemnity’ from the original covenantor to the current seller of the property.

It is possible to check whether the current seller gave an indemnity covenant to their seller when they purchased the property.

In registered land, there will be the following entry in the Proprietorship register:

If seller did give an indemnity covenant when they purchased the property, they will require their buyer to give an equivalent indemnity covenant in the transfer of the property, so buyer will be liable to the seller in contract if they do not observe and perform the positive covenant. Provision for this must be made in the contract.

• if cov binding on seller + seller requiring indemnity covenant, buyer’s solicitor should inform buyer of obligation to maintain + get surveyor to inspect condition.
• ask seller if they have been complying, if not, anyone tried to enforce it?
• may involve bigger expense.

Question 75

Unknown covenants

Answer 75

Sometimes a property is subject to covenants, but the nature of those covenants and the wording of them is unknown. Often this is because they were contained in an earlier deed which has since been lost.
In registered land, the entry in the Charges register will make it clear that the details were notavailable when the property was first registered:

Conveyance of the land in this title and other land dated 24 April 1939 made
between STUART GRIFFIN (1) and HERBERT RHODE (2) contains covenants but neither the original conveyance nor a certified copy or examined abstract thereof was produced on first registration.

In unregistered land existence of covenants may be apparent on the face of the conveyance. For example, in a 1983 Conveyance, the property is sold ‘SUBJECT TO the covenant contained in a Conveyance dated the 18th July One thousand nine hundred and thirty and made between Harold Stephens (as vendor) of the one part and Gerard Howard (as buyer) of the other part’, but the seller is unable to produce the original or a copy of the 1930 Conveyance.

The safest option is to assume that the covenants are restrictive and will be binding on the buyer, even though the details are unknown, and to consider the options for dealing with problematic restrictive covenants set out in 2.5.5 above. In practice, obtaining an indemnity Insurance policy will often be the most cost- effective course of action. The seller should take care to disclose this defect in title in the contract so that the buyer cannot object to it and use
it as a reason not to complete the purchase.

Question 76

Mortgages?

Answer 76

Mortgages rarely a problem because seller usually intends to discharge it using the proceeds of sale immediately after completion – buyer will not commit to buying property unless they are satisfied that the seller’s mortgage will be discharged on completion of the sale.

Possible to tell if a registered property is subject to a mortgage as there will be two entries in the Charges register, one giving the date and purpose of the
charge and the other stating the identity of the lender. The following is an example:
1. (1 March 2005) REGISTERED CHARGE dated 1 September 2005 to secure the moneys
including the further advances therein mentioned.
2. (1 March 2005) Proprietor: THE ROYAL BANK OF SCOTLAND PLC of 109/ 109A Castle Street,
Edinburgh EH2 4JW

The lender may also have put a restriction in the Proprietorship register preventing the borrower from making a disposition of the property without the consent of the lender:

RESTRICTION: No disposition of the registered estate by the proprietor of the
registered estate is to be registered without a written consent signed by the
proprietor for the time being of the charge dated 1 September 2005 in favour of
THE ROYAL BANK OF SCOTLAND PLC of 109/ 109A Castle Street, Edinburgh EH2 4JWreferred to in the charges register.

In unregistered land, a mortgage will appear as one of the title deeds listed in the epitome of title. A buyer will only be concerned with a mortgage that has not been discharged (paid off): a mortgage that has been discharged will have, usually on the back page, a ‘vacatingreceipt’ in the following terms:
R E C E I P T NATIONAL MIDLAND BANK LIMITED hereby acknowledges to have received from [THE BORROWER] all monies intended to be secured by the written deed.

If there is a subsisting mortgage on the property, the buyer will want this to be discharged on completion so that they do not take subject to it. The buyer’s solicitor should check that the contract states that the seller is selling the property free of the mortgage and that the seller’s solicitor gives an undertaking to discharge the mortgage immediately on completion.

Question 77

Leases ?

Answer 77

Lease affecting a freehold property will not be a problem if the buyer is
expecting it – buyer may be purchasing the property as an investment and is
relying on the rental income payable by the tenant of the lease.

The existence of a lease will be a problem to a buyer who is expecting the property to be sold with vacant possession, as the tenant will have possession and control of the property for as long as the lease lasts.

In registered land, grant of a lease for a term of more than seven years, or the disposition of a (previously unregistered) lease with more than seven years to run, requires registration in its own right with a separate title number, but such leases are also regarded as third party interests that should be registered against the landlord’s title.

Such leases are protected and will appear as notices in the Charges register of the landlord’s title. If they are so protected by the date when the transfer of the property to the buyer is registered, they will bind the buyer. If
a lease for a term of more than seven years is not so registered, it will not bind the buyer, but it might qualify as an overriding interest if the tenant is occupation.

Legal leases for a term not exceeding seven years and equitable leases where the tenant is actual occupation may be enforceable as overriding interests.

In unregistered land, a legal lease (other than a parol lease for three years or less) will have been created by deed and should be one of the title deeds scheduled in the epitome of title.

A parol lease (ie one complying with the criteria in s 54(2) Law of Property Act 1925) does not require any formalities and will be binding on the buyer whether they know about it or not.

If a lease is revealed by the title investigation (or through the searches and enquiries) the buyer’s solicitor should report it to the buyer and check that the existence of the lease and its terms are compatible with the buyer’s proposed use of the property.

Question 78

Notices (registered land only)

Answer 78

A notice is an entry in the Charges register in respect of the burden of an interest affecting a registered estate or charge. Notices can be agreed or unilateral: agreed notices are put on the register with the agreement of the registered proprietor, unilateral notices are used where the registered proprietor has refused to consent to the entry or has not been asked about it.

The entry of a notice does not guarantee that the interest it is valid or that it even exists. The notice itself does not give the person who registers it any rights over the property as such. It merely serves to ensure that the priority of the interest referred to in the notice is protected against any subsequent interests.

The first step is to ask the seller’s solicitor to ascertain to what the unilateral notice relates.

Then there are two courses of action available to the buyer:

1. Walk away from the transaction and another is to refuse to proceed any further with the transaction until the seller deals with the unilateral notice. This buyer should require the seller to get the notice cancelled by the Land Registry before exchange of contracts.
2. If Mr Darcey agrees to the cancellation or the unilateral notice was lodged in relation to an option that has now expired, this should not be much of a problem. However, if the notice is in respect of a valid interest such as a contract for sale, covenants or a lease over the property, this will be of greater concern.

Question 79

Home rights

Answer 79

Statutory right created under the Family Law Act 1996 for a non- owning spouse or civil partner to occupy the matrimonial home. A home right does not create an interest in land.

In registered land, home right will bind a buyer if it is protected by a notice in the Charges register by the date when the transfer of the property to the buyer is registered.

In unregistered land a home right must be protected as a Class F land charge in order to be binding on a buyer.

If the title investigation reveals a home right (or an occupier comes to light in the searches and enquiries, the seller should be required to obtain from the non- owning occupier a release of all rights in the property and agreement to vacate on or prior to completion. This is usually dealt with in the contract.

Question 80

Survey + personal inspection?

Answer 80

Strongly recommended. Lender requires survey for mortgage applicant and to pay valuation - adequate security for loan? will not tell borrower state of structure of property.

Full structural survey recommended, detailed commentary. BUT ‘homebuyers’ valuation and survey less detailed but cheaper and provides advice on necessary repairs/maintenance.

personal inspection of property by buyer’s solicitor advisable – reveals more than plan; solicitor may find plan inaccurate, cable, drain, pathway, occupier not on it.

Personal inspections very rare in residential conveyancing as too expensive, often in high value commercial transactions.

Question 81

If buyer has concerns about state / wants alterations?

Answer 81

Full structural survey recommended, detailed commentary. BUT ‘homebuyers’ valuation and survey less detailed but cheaper and provides advice on necessary repairs/maintenance.

Question 82

Local search?

Answer 82

EVERY sale. proposed developments?

LLC1: any financial charges/restrictions imposed by public authorities under statute (planning consent, tree pres, conservation)

CON29 (standard enquiries): planning permission, restrictions on permitted development (ie Art. 4), contaminated land designation, ALSO liability for road repair to check if road maintained

CON290: optional depending on locality, ie environment / pollution notices + rights over COMMON LAND.

Question 83

LLC1

Answer 83

any financial charges/restrictions imposed by public authorities under statute (planning consent, tree pres, conservation)

Question 84

CON29

Answer 84

planning permission, restrictions on permitted development (ie Art. 4), contaminated land designation, ALSO liability for road repair to check if road maintained

Question 85

Water and drainage search

Answer 85

Separate set of standard drainage and water enquiries should be raised with statutory undertaker (water company), under forms CON29DW (residential properties) and CommercialDW.

Enquiries establish whether drains/sewers serving property are ‘adopted’ + responsibility of statutory undertaker rather than owner. Search will review wither property connected to public sewer for foul/surface water drainage and public water supply.

If property does not drain into public sewer – buyer liable for costs of maintaining drains + sewers, may be liable for costs of bringing them up to adoption standard if water authority decides to adopt them.

Question 86

Pre-contract enquiries: seller

Answer 86

Questions seller is required to answer, preliminary enquiries. Standard questions for buyer’s solicitor to raise at pre-contract stage.

Depends on solicitor + past personal experience in acting for buyers, ie

• seller’s disputes regarding property,
• third parties occupying?
• compliance with covenants?
• planning permissions
• boundary maintenance
• VAT status for commercial properties.

Question 87

Environmental searches?

Answer 87

Desktop search most common, all plans, contamination risk, physical survey next step if needed.

CON29 and CON290 optional enquiries contain some questions relating to entries/notices made under EPA, but reliance on this is not sufficient to identify environmental risks; CON29 form asks whether a notice has been served designating the property as contaminated land, but a negative reply may just mean that the local authority has not inspected the property yet

Question 88

Flood search

Answer 88

recommended on most - indicated where property is close to river/coast.

Insurance for flooding available for most residential properties, Government backed reinsurance scheme ‘Flood Re’ – not for commercial properties (inc. buy-to-lets) + insurance may have very high premiums or unavailable

Info available online – free screening search for river coastal surface water and reservoir flooding offered by Environment Agency + river/coastal flood risk indicator on LR website – not property-specific and neither show groundwater flooding.

Property- specific flood risk searches available from commercial providers, vary in cost/coverage  interpretation of results is a specialist area which should be referred to the buyer’s surveyor and/ or the consultant who produced the report, but a key thing to look for is whether the property can be insured at normal rates.

If a flood risk is identified, a specialist report can be obtained to advise the buyer on flood risk and possible flood damage
mitigation measures.

Question 89

Chancel repairs

Answer 89

Owners of certain properties in Church of England parish where there has been a medieval church with vicar could be liable to pay for cost of repairing chancel of parish church.

In registered land, chancel repair liability lost its overriding status on 13 October 2013, but continues to bind a buyer if the previous transfer for value occurred prior to that date.

In unregistered land, buyer only bound if chancel repair liability is referred to in the title deeds or protected by a caution against first registration lodged prior to first registration, but such a caution could be lodged after completion but prior to first registration (in the ‘registration gap’).

Even where there is no obvious Church of England Church nearby, some firms continue to carry out chancel repair screening searches on all property transactions, even though no liability will exist where the property is registered and the previous transfer for value occurred after 13
October 2013.

Many firms consider that obtaining insurance against the liability is a more cost- efficient way of protecting the buyer than incurring legal costs in investigating the issue and obtaining the screening search.

Question 90

Mining search

Answer 90

makes sense to carry out coal mining search of every property in coal mining area as identified in Coal Authority’s interactive map viewer.

Coal mining search of Coal Authority, on CON29M form, will confirm if property is in an area where mining has taken place in past or likely to take place in the future, whether there are shafts on the property, the existence of underground workings which may cause problems with subsidence + whether any claims for subsidence damage have been paid in the past / are pending.

Subsidence occurs when the ground under a building collapses, or sinks lower, damaging the foundations and causing cracks in the structure above  find out whether a claim for subsidence has already been paid as if so, this may prevent a future claim being made.
T
here are other areas which have been affected by mining activity in the past; for example, tin in Cornwall, Devon and Somerset, clay in Cornwall, Devon and Dorset, limestone in parts of the West Midlands and brine and salt in Cheshire. It is possible to do specific searches, similar to the CON29M, in these areas.

Mining searches may also be indicated where there is a mines and minerals reservation revealed in the title investigation.

Question 91

Canal and river trust search

Answer 91

If property adjacent to river or canal, buyer needs to be made aware of any liability for repairs to maintenance of waterways, banks + tow paths / whether property affected by past flooding.

Question 92

Railway searches

Answer 92

Buyer will want to know if obligations to maintain boundary features separating property from railway line / restrictions on building work next to line. Network Rail will not answer enquiries; pre-contract enquiries by buyer’s solicitor of seller needed, but not much info may be provided.

Buyer’s solicitor can advise buyer that there may be issues with future works near railway line + approach to Network Rail should be made about specific proposal.

Possible to do searches on existing and proposed railway undertakings. Reply to enquiry 22 in CON29 form in local search will reveal if property might be affected by proposed rail scheme.

Question 93

Highways

Answer 93

Enquiry 2 CON29 search will provide info about roads adjoining property, but verges and pavements not covered.

Info may not be detailed enough where property is going to be redeveloped and there is a grass verge in third party private ownership between the road and the title boundary of the property forming a possible ‘ransom strip’. In such circumstances, the buyer’s solicitor can send a plan to the relevant highways authority, asking for the boundaries of the publicly maintainable highways (including verges) to be marked
onto it.

Question 94

Unregistered land searches

Answer 94

An Index Map Search (‘SIM’) and a Land Charges Department search against the seller and previous estate owners will be necessary in any purchase of unregistered land.

Question 95

Company searches

Answer 95

Where seller is company, buyer’s solicitor should carry out a company search at Companies House  confirms whether seller has the capacity to enter into the contract, confirm the identity of the current officers of the company (to check the documents are signed by the right people) and to see if there are any fixed or floating charges secured on the property that will need to be discharged on completion.

The search will need to be repeated just before completion to check for insolvency issues.

Where the property is unregistered land, company searches should also be carried out against any corporate estate owners revealed in the epitome of title.

Question 96

Insolvency search

Answer 96

• A solicitor acting for a lender should make a search against the borrower (who may also be their buyer client) to ensure that there are no bankruptcy or insolvency proceedings affecting them.
• These searches must be made just before completion, but some firms will also make them prior to exchange of contracts so that any problems can be sorted out in good time.
• Where the borrower is an individual, the search is done by sending a K16 form to the Land Charges department in Plymouth.
• Where the borrower is a company, a company search will be needed.

Question 97

Common LLC1/CON 29 RESULTS

Answer 97

Tree preservation orders
* TPO revealed as a local land charge in the LLC1 result, protect trees of amenity value to local communities  buyer will need to be told about any TPO as it is a criminal offence to lop or fell a tree subject to a TPO without the consent of the local planning authority.
* Solicitor should raise pre- contract enquiries of the seller to obtain a copy of the TPO, establish the location of the protected tree(s) and check the TPO has been complied with.

Smoke control orders
* A smoke control order will be revealed as a local land charge in the LLC1 result. Its purpose is to restrict the use of non- smokeless fuels in domestic fireplaces and so might be a problem for the buyer if the property has an open fireplace which they intend to use.

Conservation areas
* If property is located within a designated conservation area, this will be revealed in either the LLC1 or CON29 results. The buyer should be informed as it will be more difficult to make changes to the property than would normally be the case.

Question 98

Building regs Wales vs England time limits

Answer 98

Wales: prosecution must be brought within TWO YEARS of the offence.

England: NO TIME LIMIT for bringing a prosecution.

Building control authority can also serve an enforcement notice requiring the work to be altered or removed.

Wales - enforcement notice must be served within ONE YEAR of completion of the work.

England - within TEN YEARS of completion of the work.