1
Q
In a property transaction, when does legal title officially pass to the buyer?
A
Legal title passes at registration, which occurs some time after completion.
2
Q
What does the buyer solicitor do at pre-completion? (Think COMP)
A
Completion information and undertakings
OS1 / pre-completion searches
Money
Purchase deed (TR1) and legal charge
3
Q
What does seller solicitor do at pre-completion?
A
- Completion completion information and undertakings form
- request mortgage redemption figure from lender
- Approve TR1 and arrange execution of TR1
4
Q
What is the key event that happens at ‘completion’ in a conveyancing transaction?
A
It is the point where transfer deeds are executed, money is paid, and the buyer can move into the property.
5
Q
Which solicitor is typically responsible for drafting the transfer deed?
A
The buyer’s solicitor
6
Q
What must the seller’s solicitor request from the seller’s lender before completion to know the exact amount needed to clear the mortgage?
A
A redemption statement
7
Q
What form must a transfer of land be in (s.52 LPA 1925)?
A
Deed
8
Q
What is the most common Land Registry form used for transferring the whole of a registered freehold or leasehold title?
A
Form TR1.
9
Q
Which Land Registry form is used to transfer part of a registered title?
A
Form TP1.
10
Q
What is the purpose of Land Registry Form TR5?
A
It is used to transfer a portfolio of registered titles.
11
Q
Can unregistered land be transferred using a TR1?
A
Yes
12
Q
Who must always execute a TR1 transfer deed?
A
The transferor (seller).
13
Q
Under what circumstance must a transferee (buyer) execute a TR1?
A
- There is more than one person buying the property (ie they will hold as JTs or TinCs); or
- Transferee will hold property on trust for someone else (as should be set out in Panel 10); or
- They are providing an indemnity covenant, or any other obligation in Panel 11
14
Q
In which panel of the TR1 form would an indemnity covenant be included?
A
Panel 11
15
Q
According to s1(3)(a)(i) LP(MP)A 1989, how must an individual execute a deed?
A
They must sign it in the presence of an independent witness who also signs and provides their details.
16
Q
What are the four methods a company can use to execute a deed under s44 of the Companies Act 2006.
A
- Company seal in accordance with Articles
- No company seal but signed by two directors OR one director and company sec
- Signed by one company director and witnessed by independent witness
- Signed by senior employee (not director or co sec) who is authorised by PoA
17
Q
Three friends own a registered, freehold property together as beneficial TinCs in equal shares. The property is subject to restrictive covenants. One of the friends has died. The executors of his estate have recently obtained a grant of probate. The property is being sold to a buyer. She will hold the property on trust for herself and her adult son. The contract for sale has been exchanged. This incorporates the SCS with no relevant amendments The transfer is being drafted in readiness for execution.
Who, if anyone, must execute the transfer in addition to both of the surviving friends?
- No one
- Only the executors
- Only the buyer
- Only the executors and the buyer
- The executors, the buyer and the adult son
A
Correct answer: 3)
This is because (1) no need to have an additional trustee to overreach the interests as there is more than one person selling property (2) executor does not need to sign if TinC because their share goes to will / intestacy; and (3) buyer needs to sign because a trust has been declared
18
Q
What is the primary purpose of pre-completion searches?
A
To check and protect the buyer’s and lender’s ability to obtain title to the property as per the contract.
19
Q
What search does a buyer’s solicitor carry out at the Land Registry to protect the transaction for a registered property?
A
An OS1 search (or OS2 for part of a title).
20
Q
An OS1 search at the Land Registry provides a priority period of how long?
A
30 working days.
21
Q
To benefit from an OS1 priority period, what must the buyer’s solicitor do within that time?
A
Submit the application to register the transfer at the Land Registry.
22
Q
For unregistered land, what search is carried out to gain a priority period?
A
Land charges search (Form K15)
23
Q
A land charges search (Form K15) for unregistered land confers a priority period of how long?
A
15 working days.
24
Q
To gain priority from a K15 search for unregistered land, what must the buyer do within the priority period?
A
Complete the purchase of the property (as opposed to applying for registration).
25
When acting for a buyer and their lender, a solicitor must carry out which solvency search against the buyer?
A bankruptcy search using Form K16.
26
Why should a buyer's solicitor conduct a company search against a company seller immediately before completion?
To check there is no pending insolvency or crystallisation of a floating charge.
27
What is the standard Law Society form used for requisitions on title in residential transactions?
Form TA13 (Completion information and undertakings).
28
In response to requisitions on title, the seller's solicitor provides a crucial undertaking regarding what financial matter?
To redeem the seller's mortgage(s) on completion and forward the evidence of discharge (e.g., Form DS1).
29
What matters does the requistions on title deal with?
1 Vacant possession –
* Asks about arrangements for collecting keys
* If there is a rent-paying tenant, asks for an authority for tenant to pay rent to the buyer following completion
2 Deeds and documents –
* For unregistered property, asks for a list of deed and documents to be sent on completion
3 Completion –
* Asks for confirmation that completion will take place according to Law Society’s Code for Completion by Post
* Similar to Law Society Formula B for exchange, the Code for Completion by Post sets out expectations and undertakings of the solicitors on completion
4 Money –
* Asks for the seller’s solicitors client account details (to send the money), and for the exact amount payable on completion
5 Mortgages and charges –
* Asks the seller’s solicitor to list any mortgages secured on the property and confirm their undertaking to redeem them on completion
* Seller solicitor does not have the power to discharge mortgage (only the lender can do this) so the seller solicitor will undertake to pay money immediately to lender and send DS1 (certificate of discharge)
30
The buyer’s solicitor wants to ensure that the mortgage is cleared from the property promptly after completion so that the buyer’s transfer can be registered. What undertaking does the Seller solicitor give?
* To redeem the mortgage against the property
“To undertake forthwith to pay the lender the money required to redeem the mortgage and to forward Form DS1 to the buyer’s solicitor as soon as the seller’s solicitor receives it from the lender.”
- DS1 is provided by lender which can be produced to LR to discharge the mortgage
31
What framework governs the process when completion of a property transaction happens by post?
The Law Society Code for Completion by Post.
32
Under the Code for Completion by Post, when must the buyer send deposit, registration fees and any SDLT monies to their solicitor?
Day before completion
33
Under the Code for Completion by Post, what does the seller's solicitor undertake in respect of completion monies and mortgage?
To have the Seller's authority to recieve purchase money on completion; and have the authority of lender to recieve the sum intended to repay the mortgage.
Seller solicitor will order a redemption statement showing the amount needed to repay the mortgage
34
Under the Code for Completion by Post, the buyer's solicitor must do what on the day of completion and what must the seller solicitor do in response?
Buyer’s solicitor must **send** the balance of the purchase to seller’s solicitor’s client account
Seller solicitor must **confirm** that the funds have been received
35
Under the Code for Completion by Post, when must the seller's solicitor send the completion documents (like the TR1) to the buyer's solicitor?
As soon as possible after completion, and in any event by the end of the working day following completion.
36
When will the seller's solicitor handwrite the date on the TR1 form?
*The Seller’s Solicitor will complete upon becoming aware of the receipt of the [completion monies]*
Seller’s solicitor will inform buyer’s solicitor that completion monies have been arrived, and they will agree that completion has taken place
Seller’s solicitor will hand write the date on the TR1 form, which operates as delivery and the deed is completed
Buyer’s solicitor hand writes the date on the charge
37
Under the Standard Conditions of Sale (SCS), what is the immediate remedy for a delay in completion?
The non-defaulting party is entitled to contractual compensation (interest).
38
If a buyer is late completing, under SCS the interest is calculated on the purchase price less what amount?
The deposit already paid.
39
If a seller is late completing, under SCS the interest is calcuated on what?
The full purchase price
40
SCS remedies may not be adequate if buyer has incurred other expenses (such as removal truck, storage, hotel, etc). In addition to SCS remedies, what remedy does buyer have at common law?
If the seller has breached the contract, the buyer can claim **common law damages** for any losses incurred
This is not always practical / cost effective to take proceedings if the seller resist the claim
If buyer is successful, any interest paid under SCS will be deducted from the damages received
41
Once a notice to complete has been served, the parties must complete within how many working days?
10 working days (excluding the day on which the notice is given)
42
If a buyer fails to comply with a notice to complete, what remedies does the seller have regarding the contract and deposit?
Seller may rescind the contract and, on doing so, may also: (i) forfeit and keep the deposit and any interest accrued on it; (ii) resell the property and any contents included in it; and (iii) claim common law damages
43
If seller fails to comply with a notice to complete, what remedies does the buyer have?
Buyer may rescind the contract, and on doing so, may also: (i) demand return of deposit with any interest accrued on it; and (ii) claim common law damages or even specific performance
44
What is the deadline for submitting an SDLT return and paying the tax for a property in England?
Within 14 days of completion.
45
What is the deadline for submitting an LTT return and paying the tax for a property in Wales?
Within 30 days of completion.
46
Upon submitting an SDLT return to HMRC, what certificate does the buyer's solicitor receive as proof of submission?
An SDLT5 certificate.
47
Upon submitting an LTT return to Welsh Revenue Authority, what certificate does the buyer's solicitor receive as proof of submission?
Welsh Revenue Authority Certificate
48
If a company buyer purchases a property with a mortgage, the charge must be registered at Companies House within what time limit?
Within 21 days of the creation of the charge.
49
What is the consequence of failing to register a company's charge at Companies House within the 21-day time limit?
The charge becomes void against a liquidator or administrator, and the lender is not protected.
50
What Land Registry form is used to apply to register a transfer of a property that is already registered? When should this be submitted?
Form AP1. Which should be submitted within 30 days of OS1 search result (OS1 priority period)
51
What Land Registry form is used to apply for the first registration of an unregistered property?
Form FR1.
52
For a purchase of unregistered land, what is the deadline from completion to apply for first registration?
Two months.
53
What happens if a buyer of unregistered land fails to apply for first registration within the two-month deadline?
The transaction is void.
54
If a buyer is aware of overriding interests affecting a property, which Land Registry form should be completed to disclose them?
Form DI.
55
When does CGT arise?
When there is a chargeable disposal of a chargeable asset by a chargeable person which gives rise to a chargeable gain.
56
First-time buyers get a discount from SDLT provided their home is no more than what amount?
£500,000
57
If the first-time buyer relief applies, how does this operate?
There will be no SDLT on the first £300,000 of the purchase price, and 5% on any part of the price over £300,000 (but not exceeding £500,000)
58
Is there a first-time buyer relief for LTT in Wales?
No
59
If a buyer is buying a second property, what is the additional SDLT rate payable on the whole of the purchase price?
5%.
You should calculate the SDLT that would be chargeable as usual, and then add 5% of the total purchase.
60
Is a gift of an asset on death a chargeable disposal for CGT purposes?
No, it is not a chargeable disposal.
61
When calculating a chargeable gain, what is the term for costs like solicitor's fees and estate agent's commission?
Allowable expenditure.
62
What is not allowable expenditure for CGT purposes?
Costs of repair
63
Is the costs incurred thet contribute to the value of the asset (such as costs of building an extension) allowable expenditure for CGT purposes?
Yes.
64
Akeyo buys a restaurant for £140,000 in good condition. He pays conveyancing fees of £1,000.
He spends £6,000 in adding a conservatory to extend the dining area.
Unfortunately, the roof of the main building is damaged by a storm, and due to a problem with the insurance, he spends £2,000 in repairing it.
Akeyo sells the restaurant in September 2022 for £180,000 and incurs conveyancing fees and agent’s commission totalling £3,000.
What is his chargeable gain?
Disposal value: £180,000
less the acquisition value: (£140,000)
less allowable expenditure: (£1,000 + £6,000 + £3,000 = £10,000)
Chargeable gain therefore = £30,000
* NB - £2,000 repairing it is not an allowable expenditure
65
If taxpayer made losses during tax year, can these be offset against gains made?
Yes
66
What relief prevents a person from paying CGT on the sale of their main home?
Private Residence Relief (PRR).
67
What relief from CGT is available to all indviduals?
Annual exemption of £3,000
68
To qualify for Private Residence Relief, what are the grounds that must be met? (5 in total)
1. It has been the person's main home for all the time they lived in it
1. They have not let it out (other than taking a lodger)
1. it has not been used for business purposes
1. The grounds including all buildings are less than 5,000 sqm
1. it was not bought just to make a gain
69
For a married couple, how many properties can be treated as their main home for Private Residence Relief purposes?
Only one property between them.
70
If solicitor (acting for buyer and lender) does not open a separate ledger for lender, how should the solicitor record entries for money coming in from lender for purchase monies?
Credit client ledger client account for buyer
Debit cash sheet client account
71
If solicitor (acting for buyer and lender) has separate client ledger for lender, how should the receipt of the mortgage funds from lender be recorded?
Then at completion the mortgage funds should be moved from lender to buyer. How should this be recorded?
*Money recieved from lender*
Credit client ledger client account for lender
Debit cash sheet client account
*Mortgage money moved to buyer at completion*
Credit client legder client account for buyer
Debit client ledger client account for lender
72
Solicitor acting for a seller may also act for seller’s existing mortgage lender in connection with paying back the mortgage when property is sold
If solicitor (acting for seller and lender) does not open a separate ledger for lender, how should accounting entries be recorded for redeeming mortgage?
Credit cash sheet client account
Debit client ledger client account for seller
73
Solicitor acting for a seller may also act for seller’s existing mortgage lender in connection with paying back the mortgage when property is sold
If solicitor (acting for seller and lender) does open a separate ledger for lender, how should accounting entries be recorded for redeeming mortgage?
Solicitor will first need to move monies from seller to lender ledger.
Step 1 - Move monies to lender (inter-transfer between clients)
Credit client ledger client account for lender
Debit client ledger client account for seller
Step 2 - Redeem mortgage (money paid out)
Credit cash sheet client account
Debit client ledger client account for lender
74
When handling a private loan between two clients where the money is already in the firm's client account, what accounting entries are made?
Credit client ledger client account for client recieving money
Debit client ledger client account for client loaning money
75
What does the buyer's solicitor send to the buyer's lender before completion to confirm details and request the loan advance?
A certificate of title.
76
A firm of solicitors is acting on behalf of a client who is buying a property. The firm also acts for the lender who will be providing a mortgage to the buyer to fund the purchase. The firm does not have a separate client ledger for the lender.
**Which one of the following pairs of double entries should the firm make to record the receipt of funds from the lender to purchase the property?**
1. Credit client ledger client account for the (lender) client
Debit cash sheet client account
1. Credit client ledger client account for the (buyer) client
Debit cash sheet client account
1. Debit client ledger client account for the (buyer) client
Credit cash sheet client account
1. Credit client ledger client account for the (lender) client
Debit cash sheet client account
Debit client ledger client account for the (lender) client
Credit client ledger client account for the (buyer) client
1. Debit client ledger client account for the (lender) client
Credit client ledger client account for the (buyer) client
Correct answer: 2)
77
A woman is selling a registered freehold property that she owns as tenants in common with a man. The man dies between exchange and completion. The buyer of the property will give an indemnity covenant in relation to positive covenants.
**Which one of the following best describes the form of transfer deed that should be drawn up and the correct parties who must execute it?**
1. A conveyance will be executed as a deed by (1) the woman selling and a second trustee and (2) by the buyer.
1. A TR1 will be executed as a deed by (1) the woman selling and a second trustee and (2) the buyer.
1. A TR1 will be executed as a deed by (1) the woman selling provided she is also a personal representative and (2) by the buyer.
1. A conveyance will be executed as a deed by (1) the woman and a personal representative and (2) by the buyer.
1. A TR1 will be executed as a deed by (1) the woman selling and a personal representative and (2) by the buyer.
Correct answer: 2)
78
A man is buying the whole of a registered freehold residential property with the aid of a mortgage. The buyer’s solicitor is also acting for the buyer’s lender. The seller is a company.
**Which one of the following best describes the pre-completion searches which the buyer’s solicitor should carry out?**
1. An OS1 against the property, a K16 against the buyer and a company search against the seller.
1. An OS1 against the property and a company search against the seller.
1. An OS2 against the property, a K16 against the buyer and a company search against the seller.
1. An OS2 against the property and a company search against the seller.
1. An OS1 against the property and a K16 against the buyer.
Correct answer: 1)
* An OS1 is the relevant priority search for the whole of registered land (OS2 is for sale of part but this is a sale of whole).
* A K16 needs to be carried out against the buyer because this is the relevant solvency search against the buyer when the buyer is an individual and the buyer’s solicitor should carry it out as they are acting for the buyer’s lender.
* A company search needs to be carried out against the seller as this is the relevant solvency search when the seller is a company. As this search does not give a priority period it must be carried out at the pre-completion stage even if it was also carried out earlier in the transaction.
79
A company bought the whole of a registered freehold commercial property for £275,000.
Assume that the following rates applied at the date of completion:
0% on the first £150,000
2% on the next £100,000
5% on the next £250,000
**Which one of the following best describes the post-completion steps in respect of Stamp Duty Land Tax (‘SDLT’) which the buyer’s solicitor should have carried out?**
1. The buyer’s solicitor should have sent Form SDLT1 to HM Revenue and Customs within 14 days of the date of completion together with the sum of £5,500 in respect of the SDLT payable.
1. The buyer’s solicitor should have sent Form SDLT1 to HM Revenue and Customs within 14 days of the date of exchange together with the sum of £3,250 in respect of the SDLT payable.
1. The buyer’s solicitor should have sent Form SDLT5 to Her Majesty’s Revenue and Customs within 14 days of the date of completion together with the sum of £3,250 in respect of the SDLT payable.
1. The buyer’s solicitor should have sent Form SDLT1 to HM Revenue and Customs within 14 days of the date of completion together with the sum of £3,250 in respect of the SDLT payable.
1. The buyer’s solicitor should have sent Form SDLT1 to HM Revenue and Customs within 14 working days of the date of completion together with the sum of £3,250 in respect of the SDLT payable.
Correct answer: 4)
The SDLT1 needed to be sent to HMRC within 14 days of the completion date together with the correct SDLT payable. Applying the rates that were given:
· 0% on the first £150,000 = £0
· 2% on the next £100,000 = £2,000
· 5% on the remaining amount (the portion above £250,000) i.e. the final £25,000 = £1,250
· Total SDLT = £3,250
80
You act for the seller of a residential property, and have exchanged with completion to take place by 3 pm today (which is a Friday). The contract incorporates the Standard Conditions of Sale. The completion monies do not arrive from the buyer until 4.45 pm. There are no bank holidays in the next few weeks.
The seller was not living in the property and does not have a related transaction, and is not put to any practical inconvenience. However, it is too late to send the money to the bank to redeem the seller's mortgage.
**What should you do?**
1. Claim three days' interest from the buyer in accordance with the contract.
1. Advise your client that there is nothing that can be done as the money was received before you had a chance to serve notice to complete.
1. Claim one working day's interest from the buyer under the contract.
1. Claim four days' interest from the buyer in accordance with the contract.
Correct answer: 1)
When the contractual completion time is missed, completion is deemed to take place the next working day. This interest should compensate the seller for the additional interest that the seller will have to pay on the mortgage over the weekend.
81
You act on the purchase of commercial property. The purchase is part-funded by a commercial mortgage offered by a specialist lender, who has its own solicitor acting.
**Which of the following options best reflects what you and the lender's solicitor will do after exchange but before completion?**
1. You will provide a draft form certificate of title for approval and undertakings relating to the mortgage money to the lender's solicitor.
1. You will provide a final form certificate of title, and the lender's solicitor will undertake to send you the mortgage money following completion.
1. You will request a redemption statement from the lender's solicitor to enable completion to take place.
1. The lender's solicitor will issue a draft legal charge for approval.
1. You will provide a final form certificate of title and undertakings relating to the mortgage money to the lender's solicitor.
Correct answer: 5)
The final form of certificate of title will be in the form of a draft which should have been approved by the lender/their solicitor before exchange. The lender's solicitor will require undertakings to ensure that you can only use the mortgage money for the appropriate purpose.
FLK 2: PP
flashcards
Decks in class (12)
# Cards
-
1 - Intro to Freehold Transaction32
-
2 - Title Investigation86
-
3 - Pre-contract Searches and Enquiries78
-
4 - Exchange of Contracts91
-
5 - Completion81
-
Formatives 120
-
6 - Grant of a Lease77
-
7 - Lease Structure and Content72
-
8 - Alienation97
-
9 - Business Tenancies110
-
10 - Lease Termination98
-
Formatives 220
