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CeMAP 2 > Unit 3 > Flashcards

Unit 3 Flashcards

1
Q

What factors hampered the recovery of the property market following the 2007-09 financial crisis?

A

Recession - reluctance of sellers to put properties on the market or buyers to commit to purchase at a time of falling or static property prices

Financial institutions concentrating on building up reserves rather than lending

Tighter affordability criteria making it more difficult for people to obtain mortgages

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2
Q

What factors are contributed to the difficulties experienced by people seeking to buy their 1st home?

A
  • More stringent affordability criteria
  • A requirement for large deposits
  • Rising property prices
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3
Q

When interest rates are low for a prolonged period, what is likely to happen to property prices?

A

They are likely to increase: people feel confident that they can afford to borrow more which drives demand and in turn, leads to rising prices

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4
Q

Interest rates on mortgage loans are closely linked to which interbank lending rate?

A

3 months Libor

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5
Q

The level of government borrowing has no influence on interest rates in the UK. True or false?

A

False: The level of government borrowing does have an influence on interest rates. When government borrowing increases, interest rates generally increase

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6
Q

Inflation can be reduced by reducing interest rates. True or false?

A

False: inflation usually increases when interest rates are reduced

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7
Q

What percentage of a building society’s total lending activities must be related to residential mortgages?

A) 25 percent

B) 50 percent

C) 75 percent

D) 90 percent

A

C) 75 percent

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8
Q

What is meant by ‘securitised lending?

A

Securitised lending involves bundling together a number of mortgage loans and selling them to another business. The seller receives a capital sum that they can use to offer further mortgage loans. The buyer receives the regular income stream from borrowers’ repayments on the bundled mortgages.

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9
Q

Lemding to people who have county court judgements against them is referrred to a ‘sub-prime lending’. True or false?

A

True

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10
Q

Lending to customers classified as ‘sub-prime’ is always an irresponsible decision. True or false?

A

False

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11
Q

Helena in Cath have a £120,000 mortgage in their joint names on their flat, which they brought 2 years ago. Helena and Cath have split up. Helena has moved out and Cath has not been able to contact her about paying the mortgage. Who will the lender hold liable if the mortgage payments are not made? (assume that Helena and Cath own the flat on a joint tenancy basis)

A) Cath for the whole amount because she is the only person actually living in the flat

B) Helena and Cath, but the lender will pursue Cath for the whole amount if Helena cannot be contacted

C) Cath for 50% of the outstanding payments and Helena for the remainder

D) Cath for 50% because she is only liable for half of the amount borrowed

A

B) Helena and Cath initially, but ultimately Cath for the whole amount because they have joint and several liability for the loan

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12
Q

What are the 3 main reasons why personal borrower might require a mortgage?

A
  • To purchase of family home
  • To arrange additional finance on a second charge basis
  • To provide bridging finance
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13
Q

What must a Lender establish before agreeing to lend trustees?

A

That the trustees have authority to borrow for the proposed transaction under the terms of the trust deed

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14
Q

A partnership business has a legal existence of its own, separate from that of the individual partners. True or false?

A

False. A partnership is not a separate legal entity. Assets and liabilities are jointly owned by the partners.

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15
Q

James wishes to raise £30,000 for his small business by arranging a further advance on the mortgage on his family home. Would the further advanced the irregulated mortgage

A

Yes. Even though the further advance is for business purposes it would be secured on the family home, so it would be regulated, as long as at least 40% of the land is used as the main residence.

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16
Q

Vanda has mortgages on 2 buy to let properties, which she owns via a special purchase vehicle. Are the mortgages regulated under MCOB?

A

No - the properties are regulatedunder the mortgage credit directive order 2015

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17
Q

An undischarged bankrupt cannot own property. True or false?

A

False - an undischarged bankrupt can own property although the trustees in bankruptcy may take it to pay their debts. An undischarged bankrupt cannot acquire an interest in property which means they can not buy property until they are discharged

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18
Q

Alan was declared bankrupt for the 1st time in London and 5th of May this year he will be discharged on:

A) 5th of May next year

B) 5th of May 2 years later

C) 5th of May 3 years later

D) 5th of May 5 years later

A

A) 5th of May next year

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19
Q

A person who makes a power of attorney is known as a donor. True or false?

A

True

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20
Q

Jack established an enduring power of attorney in 2006, with his daughter as his attorney. Jack is now suffering from dementia and his daughter wishes to sell his house and use the proceeds to extend her own home so that Jack can move in with her. Is she permitted to do this?

A

Only if the enduring power of attorney is registered with the office of the public guardian; an enduring power of attorney must be registered when the donor loses mental capacity

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21
Q

Anita took out a second mortgage on her home in January 2016. It’s her mortgage subject to MCOB?

A

Yes. Second charge mortgages that would have been subject to MCOB had they been taken out after 21st of March 2016 fall within the MCOB regime

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22
Q

Brian has just brought a 3 story property with the help of a mortgage. 2 floors provide office accommodation and the top floors is a 2 bedroom flat. Is the mortgage regulated?

A

No. The mortgage would not be regulated, because less than 40% of the land is to be used as a dwelling.

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23
Q

Which category of lending became regulated under MCOB following implementation of the mortgage credit directive?

A

Second charge lending

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24
Q

All mortgages on buy to let property owned by individuals are consumer BTL mortgages. True or false?

A

False, for 2 reasons:

a) the consumer buy to let regime applies only to mortgages arranged on or after 21st of March 2016
b) a mortgage is only a consumer buy to let mortgage if the borrower is an ‘accidental landlord’. ie. not involved in a property letting business

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25
Q

Gabby, aged 56, has entered into an arrangement where a lender has given her a mortgage that must be repaid only when she moves, goes into care or dies. What type of arrangement does she have?

A) a home reversion plan

B) a home finance plan

C) a lifetime mortgage

A

C) a lifetime mortgage

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26
Q

Andy has arranged a home reversion plan, entering 50% of his property into the plan in exchange for a lump sum of £80,000. On his death the properties valued at £300,000. How much, if any, of the property value would be included in his estate for distribution to his heirs?

A) nothing

B) £110,000

C) £150,000

D) £220,000

A

C) £150,000 would form part of Andy’s estate as he entered 50% of the property into the plan which means that the provider would be entitled 50% of the proceeds of the sale regardless of how much Andy received when the plan started

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27
Q

Which of the following is not a chapter of MCOB?

A) application and purpose

B) training and competence

C) financial promotions

D) MCD: further advances

A

B) training and competence

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28
Q

Regulated mortgages of less than £25,000 on residential property are regulated under the consumer credit act 1974 and 2006. True or false?

A

False. Regulated mortgages are regulated under MCOB not the consumer credit legislation.

29
Q

George wants to borrow £20,000 in the form of a personal loan to install a new bathroom and kitchen in his house. This loan would be subject to consumer credit legislation. True or false?

A

True. George wants to use a personal loan rather than a further advance on his mortgage to fund home improvements so the loan is subject consumer credit legislation rather than MCOB. There is no upper limit on the amount of the loan covered by this legislation as the loan is not for business purposes

30
Q

The borrower is known as the ‘mortgagor’. True or false?

A

True: the borrower is known as the mortgagor and the lender is the mortgagee.

31
Q

Which of the following is the technical definition of ‘Freehold’ land tenure?

A) Estate in fee simple absolute in possession

B) Estate in fee simple for a term of years absolute

C) Estate in possession for fee simple absolute

D) Absolute term in possession for fee simple

A

A) Estate in fee simple absolute in possession

32
Q

A legal charge is known in Scotland as a mortgage by demise. True or false?

A

False: a legal charge is known in Scotland as a standard security

33
Q

A ‘second mortgage’ is a further loan from the original lender. True or false?

A

False. A further loan from the original lender is known as a ‘further advance’.

34
Q

Where more than one charges held over registered land, the order of priority for repayment in the event of default is determined by:

A) which lender is owed the most money

B) the magistrates’ court

C) the date order in which the charges were registered

D) the Financial Ombudsman Service

A

C) the date order which the charges were registered

35
Q

Gary had a property subject to a legal charge with the Pleasant Building Society, registered 15 years ago on the 1st of May, securing a loan of a £140,000, and a legal charge with the Consolidated Loans Company, registered 10 years ago on the 11th of July, securing a loan of £30,000. Gary defaulted on his loans and the house was taken into possession and sold for £160,000 on 10th of May this year. Who would get what from proceeds of the sale?

A) Consolidate Loans would receive £30,000 and Pleasant Building Society would receive £130,000

B) Pleasant Building Society would receive £140,000 and Condolidated Loans would receive £20,000

C) Pleasant Building Society would receive £140,000, Gary would receive £20,000 and Consolidated Loans would receive nothing

D) Pleasant Building Society and Consolidated Loans would require the court to decide how the proceeds should be divided between them.

A

B) Pleasant Building Society would receive £140,000 and Consolidated Loans would receive £20,000

36
Q

‘Tenancy in Common’ means that when one joint owner dies their beneficiaries automatically become joint legal owners of the property. True or false?

A

False: the survivor becomes the sole legal owner, but must hold their deceased co-owner’s part in trust for the deceased beneficiaries

37
Q

Keith and Linda have just married. They have both been married before and each has 2 adult children. Each has a house of their own, but they have now decided to sell them and buy a home together. Which ownership arrangement would enable them to each leave their share of the property value to their children on their death?

A) joint tenancy

B) joint and several tenancy

C) tenancy in Common

D) ownership in one name with the partner as a beneficial owner

A

C) tenancy in common

38
Q

Why might it be inadvisable for a leaseholder with 20 years remaining on their lease put their flat on the market?

A

A flat with only 20 years remaining on the lease might have to be sold for below the going market rate for similar properties; it would be preferrable to negotiate an extension to the lease before trying to sell the flat.

39
Q

Iliana owns 1 of 2 flats in a converted house on a leasehold basis. She and her fellow leaseholder cannot buy the Freehold of the property because it is too small to qualify under the commonhold legislation. True or false?

A

False. A building need only contain a minimum of 2 flats in order for the leaseholders to have the right to buy the Freehold.

40
Q

Kevin and Janice married 5 years ago and lived in the house Kevin brought before their marriage; he is registered as the sole owner. The couple divorced last year, but under the family law act 1996 there is a charge over the property to protect Janice’s interests in the property. This charge would be shown in the:

A) proprietorship register

B) property register

C) charges register

D) ownership register

A

C) charges register

41
Q

Karen has put her house on the market. She is registered as the owner at the land registry but at the time of registration she was unable to provide the title deeds or other proof of title. What form of title does Karen have?

A) qualified

B) possessory

C) absolute

D) limited

A

B) Possessory - Karen is the registered owner but, because she did not have the title deeds or other proof of title, there is possibility that someone else has a claim on the property. Therefore she cannot be granted absolute title.

42
Q

How long after taking possession of the land can a ‘squatter’ apply for ownership of registered land?

A) 10 years

B) 12 years

C) 15 years

D) it is not possible in relation to registered land

A

A) 10 years

43
Q

Rights over unregistered land are registered in the charges register. True or false?

A

False: rights over unregistered land are registered with the land charges registry

44
Q

What are the implications for the buyer of failing to register previously unregistered land within 2 months of purchase?

A

The legal transfer becomes void. Title reverts to the previous owner, who holds it on trust for the new owner

45
Q

Javier’s self build property is encircled by land owned by the person who sold in the plot. An easement by necessity will give him a right of way to gain access to his house. True or false?

A

True

46
Q

Don’s deeds contain a clause for bidding him from having trees in excess of 2m in height on his boundary. This is an example of a:

A) positive covenant

B) negative easement

C) easement by necessity

D) restrictive covenant

A

D) restrictive covenant

47
Q

Vendors are deemed to covenant that they have the right to sell the property. True or false?

A

True: venders are deemed to covenant their right to sell whether or not they sell with full title guarantee

48
Q

If the owner of a property has chancel repair liability, they will be required to pay for all repairs to the local church where necessary. True or false?

A

False: the owner will have a liability for repairs to the chancel which is a specific part of the church. The liability may be shared with other property owners

49
Q

In the event that the borrower fails to insure the property, what rights, if any, does the lender have under the mortgage deed?

A) to call in the debt

B) to insure the property and debit the borrowers current account

C) to insure the property and charge the premiums to the mortgage account

D) the lender has no rights in relation to insuring the property

A

C) to insure the property and charge the premiums to the mortgage account

50
Q

In a contract to buy and sell a property, both vendor and buyer give consideration. True or false?

A

True: the buyer’s consideration is the money for the purchase; the vendors is the property to be purchased

51
Q

John is acting as agent for Donna. John carries out a transaction that appears to be outside his authorization but Donna confirms she is happy with what he did. The technical term for this is:

A) apparent authority

B) additional authority

C) ratification

D) retrospective authority

A

C) ratification

52
Q

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 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?

A

The commission each agent charges is like to be higher than if they had sole agency

53
Q

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 vendors solicitor

A

B) the estate agent

54
Q

An energy performance certificate:

A) must be received by the estate agent before a property can be marketed

B) is commissioned by the buyers 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

A

C) Must be commissioned before the property can be marketed

55
Q

Once a lender has issued an offer advance and the applicant has accepted it, the lender is bound to go ahead with the transaction. True or false?

A

False. There are 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

56
Q

India 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

A

D) the buyer

57
Q

Either vendor or buyer can drop out of the sale/purchase of a property at any point up until the completion date. True or false?

A

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 have withdraw after exchanging contracts and either party might be sued by the other for breach of contract

58
Q

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

A

B) satisfactory valuation of the property

59
Q

James has heard that bargains can be found by buying at property auctions. What cautionary advice would you give him?

A

A successful bid is binding; 10% 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 preliminarily 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 sales achieves a lower price

60
Q

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

A) public liability insurance

B) professional indemnity insurance

C) partnership insurance

D) law society insurance

A

B) professional indemnity insurance

61
Q

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

A

If the title is defective in any way the lender might not be able to exercise its rights over the property and thus the mortgage loan might not be fully secured

62
Q

Town planning issues will be highlighted by a local land charges registry search. True or false?

A

False. They will be shown in enquiries of the local authority

63
Q

Why might a bankruptcy search carried out on a vendor?

A

A vendor who is in undischarged bankrupt would not be entitled to receive the proceeds of the sale, as their assets are controlled by insolvency practitioner

64
Q

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

A

The seller’s property information form

65
Q

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

A) a built in oven

B) a free standing wardrobe

C) laminate flooring

D) a bathroom vanity unit

A

B) a free standing wardrobe

66
Q

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

A) details of the buyer and vendor

B) the agreed deposit

C) the amount of the mortgage loan

D) details of the property being sold

A

C) the mortgage loan

67
Q

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

A) The vendors solicitor obtains a settlement figure to repay any outstanding mortgage on their property

B) The buyer signs the mortgage deed

C) The vendor completes a ‘seller’s property information form’

D) The buyers solicitor applies for release of mortgage funds

A

C) The vendor completes a ‘seller’s property information form’

68
Q

The legal charge for the mortgage takes effect:

A) From the point where the solicitor registers the new owner at the land registry

B) From completion

C) When the lender issues its offer of advance

D) From the point where contracts are exchanged

A

B) From completion

69
Q

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

A

True

CeMAP 2 (1 decks)

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