1
Q
Key questions:
1. Title: registered or unregistered?
2. Estate: freehold or leasehold?
3. Client: selling or buying or both?
4. Transaction: residential or commercial?
5. Transaction: what stage?
A
2
Q
Unregistered title
A
- Documentary evidence
- Epitome of title
3
Q
Registered title
A
- Title number
- Register of title:
1. Property register
2. Proprietorship register
3. Charges register
4
Q
If buying a flat or apartment = leasehold
A
5
Q
Leasholds help get around problem of enforceability of positive covenants in the freehold context as the burden of a positive covenant does not pass in the freehold context
A
6
Q
A leasehold contract should include a provision whereby the landlord can enforce covenants against other tenants in the block. This provision is not implied into lease and must be express
A
7
Q
Synchronising transactions
A
Process of assuing the property that is being sold and the one being bought complete on the same day
8
Q
Related transactions
A
If a client is buying and selling property on the same day
9
Q
Stage of transaction
A
- Pre-market
- Pre-contract
- Exchange of contracts
- Pre-completion
- Completion
- Post- completion
10
Q
Before stage 3: no binding commitment between seller and buyer
A
11
Q
Stage 2
A
Seller’s solicitor:
- Prepare contract package
Buyer’s solicitor:
- Investigate title
- Conduct searches
- Raise enquiries
- Establish buyer’s finances
12
Q
Completion must take place on a weekday
A
13
Q
Stage 3
A
Transaction becomes legally binding
Usually take place on the phone
14
Q
Once parties have exchanged contracts the parties cannot withdraw without penalty
A
15
Q
Pre-contract v pre-completion
A
Pre-contract:
- Buyer deciding whether to buy
- Due diligence
Pre-completion:
- Buyer committed to buy
- Avoid suprise third-party interests
16
Q
Completion
A
Date seller moves out and buyer moves in
Final 90% of sale proceeds are transferred and keys are handed over
17
Q
Post-completion
A
Buyer’s solicitor must:
- Pay stamp duty tax within 14 days of completion
- Submit application to register the buyer’s title with land registry
18
Q
Residential leasehold
A
Long term e.g. 99-999 years
Premium (up front purchase price) plus nominal rent
19
Q
Commercial leasehold
A
Medium term e.g. 7-21 years
Usually higher monthly rent
20
Q
Grant of new lease
A
Head lease created
Freehold owner grants to new tenant
21
Q
Assignment of existing lease
A
Transfer of lease remainder
Existing tenant transfers to new tenant
22
Q
Once lease is completed it is final and no longer negotiable between parties
A
23
Q
A lease of more than 7 years is registrable
A
24
Q
If a lease is being assigned and the incoming tenant finds any of the lease terms unacceptable they need to get the outgoing tenant to negotiate with the landlord to alter terms of lease and any alterations must be enshrined in a deed of variation of the lease
A
25
Deed of variation
26
In a commercial property it is likely the landlord must consent to assignment of leasehold but less likely in residential context
27
Key provisions of a lease
- Term
- Rights and easements
- Service charge and management company
- Tenant covenants e.g. rent, repairs, use of premises
- Alienation (ability of tenant to transfer their interest e.g. assign, sell or obtain mortgage)
- Landlord covenants e.g. quiet enjoyment, enforcement of tenant covenants, forfeiture
28
Rent review provision
Mechanism in commercial lease in which the landlord can review and increase rental payments
29
Capital gains tax
Tax on profits made when taxpayer disposes of an asset that has increased in value
30
When is tax payable?
Submit tax return
Pay tax within 30 days of completion
31
Principal private residence relief exemption
Provides relief against capital gains tax on the sale of a person's principle residence
No tax payable on gain if:
- Seller's only or main residence
- Not greater than half a hectar
- No part of their home has been used exclusively for business purposes e.g. holiday home, buy to let etc.
32
Professional conduct issues
- Undertakings
- Client confidentiality
- Conflicts of interest
33
Undertakings
Professionally binding promise given by solicitor (or anyone in the firm)
34
Law Society conveyancing protocol
Standardised forms and best practices for residential conveyancing
35
Stage 1 - energy performance
Seller produce an energy performance certificate to the buyer
- Details of property's energy efficiency
- Valid for 10 years
- Not needed for listed buildings
36
Stage 1 - commercial
- Landlord's **consent to assign** often required
- **Licence to assign** required (document containing landlord's agreement)
- Outgoing tenant pays fees for landlord's solicitor to prepare licence to assign
- Undertaking required to meet fees
- Extra security for landlord
a. rent deposit deed
b. guarantor
c. authorised guarantee agreeement
37
Stage 2 - seller's solicitor
1. Investigate title
a. If registered download via HMLR
b. If unregistered review **epitome of title** sent by seller and ensuring root of title is at least 15 years old
2. Obtain seller's title
a. If registered download via HMLR
b. If unregistered locate **title deeds**
38
If the seller's solcitor finds defects in their investigation of title what should they do?
1. Rectify issue
2. Include defects in draft contract
39
Stage 2 - seller's duty of disclosure in contract
1. Must disclose latent defects/encumbrances i.e. not apparent from inspection e.g. restrictive covenant
2. Need not disclose patent defects/encumbrances i.e. discoverable from inspection
Exception: need not disclose physical defects due to caveat emptor/buyer beware
40
Stage 2 - seller's solicitor
Seller fills out a **property and information form** and **fittings and contents** form
Buyer can ask seller questions
Seller may be liable to buyer for misrepresentation if forms incorrectly filled out or does not answer buyer's questions
41
Stage 2 - the contract package
Residential property:
1. Draft contract in dupliate
2. Property information form
3. Fittings and contents form
4. Copy of seller's title and title plan
5. Other relevant documents e.g. guarantees for work to be done such as new doors
Leasehold property - new lease:
1. Contract should have draft lease annexed to it
2. **Landlord's freehold title**
3. Copy of any relevant planning permission and/or building regulation consent
3. Service charge budget
4. Details of any management company
5. If property less than 10 years old a **new build warranty**
Leasehold property - existing lease:
1. Outgoing tenants leasehold title
2. Existing lease
3. Leasehold information form
4. Copy of last 3 years service charge accounts
5. Copy of landlord's freehold title
42
All agreed issues must be in contract to be binding
43
Parts of the contract
1. Particulars of sale
- Name of seller, buyer and solicitors
- Details of property
- Purchase price
2. Standard conditions of sale
- Small print
- Basic provisions that govern transaction
- Capacity deposit is held
- Occupation of property between exchange and completion
- Steps in event of default
- And more
3. Special conditions of sale
- Fittings and contents
- Whether vacant on completion
- Additional provisions agreed
44
Key standard conditions on sale - deposit
Buyer pays **10% on exchange**
Held by **seller's solicitor** as **stakeholder** which means the solicitor does not have the right to transfer the funds to seller until completion
Seller's solicitor may change standard terms so that buyer's deposit is hold as agent for seller
45
Key standard conditions of sale - risk
Risk in the property **passes to buyer on exchange** of contract e.g if property burns down between exchange and completion the buyer is liable for the property
A prudent buyer will wish to **insure property** upon exchange
46
Contract only creates obligation to buy and sell, it doesn't transfer the title to the property
47
Property information form
Gives practical information about property to buyer
Seller must declare presence of a **non-owning occupier**
Information must be fully disclosed by seller
If seller makes an **misrepresentation** then buyer can sue
48
If there is a **non-owning occupier**, a special provision in the contract is required to ensure they **vacate on completion**. The non-owning occupier must **sign** the contract so that they are bound by this clause.
49
The seller's solicitor should not also act for the non-owning occupier (conflict of interest)
50
Seller's solicitor should check with lender how much is owing on mortgage before exchange
51
Defect in title - indemnity insurance
Seller indemnifies buyer for loss due to defect in title
Buyer's solicitor should ensure a **special condition** is inserted into contract obliging seller to provide **indemnity insurance** at seller's cost on completion
52
Pre-exchange tasks
Seller's solicitor:
- Obtain redemption figure for existing mortgage
- Agree form of contract
Buyer's solicitor
- Report to buyer
- Confirm buyer wishers to proceed
- Confirm buyer's financing
53
On exchange transaction becomes legally binding i.e point of no return
54
Buyer has to put down a 10% deposit on exchange and if they do not complete they will loose their 10% deposit
55
Methods of exchange
1. By person
2. By post: exchange takes part when the seller's part is posted to the buyer's solicitor
3. By phone: three formuae for exchange of contracts over the phone:
a. One solicitor holds both signed parts of contract
b. Each solicitor holds own client's signed part of contract
c. Used if chain of transactions
56
After exchange the solicitors must make a written memorandum of exchange to place on their files
57
Protection of contract by registration
If there is considerable time between exchange and completion the buyer's solicitor should consider **registering buyer's interest**
Registered land: notice on **charges register**
Unregistered land: **C(iv) land charge**
58
Varying terms of contract for sale of land
**Exchange contracts again** to include the new term of the contract
Example: if completion date is missed
59
Simultaneous exchange and completion
60
Pre-completion tasks: seller's solicitor
1. Apply to lender for up-to-date **redemption figure** for existing mortgage up to date of completion
2. Prepare **completion statement** = net sale proceeds
3. Complete the completion information and undertakings **forms**
61
Pre-completion tasks: buyer's solicitor
1. Check completion information and undertakings form
2. Submit **Certificate of Title**
3. Conduct pre-completion **searches**
4. **Bankruptcy search** if buyer is obtaining a **mortgage**
5. **Company search** is seller is a **company** i.e commercial contract
6. **Physical inspection** by buyer
7. **Draft transfer**
- TR1 form (all land being sold)
8. Prepare **completion statement** for buyer
62
Pre-completion searches
Registered land:
1. **Official search with priority**
- Search updates register of title
- 30 working day priority period
- Prevents new interests from being registered after the search if the conveyance is completed and registered in te priority period
Unregistered land:
- Land charges search against seller's name
- 15 working day priority period in which the transaction must complete
- Land registration must take place within 2 months of completion
63
Priority periods
Registered title:
- **30 working days** to complete and register
Unregistered title:
- **15 working days** to complete
- **2 months** to register land
64
Completion
The buyer's solicitor sends the balance of the sale price to the seller's solicitor
Buyer collects the keys and takes up occupation and ownership of the property
65
Under the standard conditions of sale completion must take place by 2pm
66
Methods of completion
1. By personal attendance
2. By agent
3. By post: the seller's solicitor acts as agent for the buyer's solicitor
67
Code for completion by post
68
Effect of completion: when does title pass?
Unregistered: title passes on completion
Registered land: titles passes on registration
69
Service charge
Cost of **maintenance** or repairs to the **shared areas**
70
Apportionment
Calculating the **overpayment of service charge** by the seller with the sum to be paid by the buyer on completion
May arise on completion of a leasehold transaction
71
Post-completion: seller's solicitors tasks
- Report completion to seller
- Pay off seller's **mortgage**
- Pay estate agent's bills
- Send bill for legal fees
72
Post-completion: buyer's solicitor
- Report completion to buyer
- Send bill for legal fees
- Register any **company charge** (mortgage) at Companies House within 21 days of completion
- **Stamp Duty Land Tax** submit return and pay within 14 days of completion
- **Register title**: register within 30 working day priority period
- Unregister title: register within 2 months of completion
Additional tasks for leasehold
- Purchasing a newbuild leasehold property which is managed by a management company they may need to buy a share in the management company - by way of application
- Assignment of existing lease: may be necessary for seller to transfer their share in the management company to the buyer - by way of a stock transfer form
- Assignment of existing lease: may be necessary for buyer's solicitor to serve notice of assignment and mortgage (if any) to landlord under the terms of the lease
73
Stamp Duty Land Tax: thresholds
Residential freehold: **£125,000**
Residential leasehold: assessed on the premium paid if over threshold of £125,000 (lump sum purchase price) AND net present value (based on total rent paid on life on lease) if over £125,000
Commercial: **£150,000**
74
On exchange the completion date is inserted in contract and becomes fixed
75
Delayed completion = breach of contract - remedies
Any delay = right to **interest** on outstanding balance calculated at the contract rate
Completion is treated as taking place on the next working day e.g. if meant to take place on a Friday and it was delayed the next working day is Monday and so interest accrues over the weekend
Interest can be obtained if competition is delayed beyond 2pm but still takes place on the agreed day
76
If **time of the essence** = firm and cannot be moved = innocent party can **rescind contract** (unusual)
77
Under standard conditions of sale time is NOT of the essence unless otherwise stated in contract - innocent party is not immediately entitled to rescind contract BUT can claim interest
78
Notice to complete
Served on defaulting party requiring them to complete = **makes time of the essence**
Requires defaulting party to complete within **10 working days** of service of notice (excluding day of service)
Innocent party must be **willing, able and ready to complete** at point of service of notice to complete
If defaulting part still does not complete then the innocent party can now rescind contract
79
What happens if defaulting party does not complete after service of notice to complete?
Buyer in default
- **Rescind** contract
- **Keep deposit**
- Claim **damages** for losses
Seller in default
- **Rescind** contract
- Claim **deposit with interest** at contract rate
- Claim **damages** for losses
80
Buyer's deposit is held in seller solicitors account as stakeholder. If seller defaults on completion it can be recovered easily as held in seller's solicitors client account
81
Default position under Standard Conditions of Sale is that the buyer's deposit is held as stakeholder as this makes it easier to recover the deposit in event of a default by the seller
82
Remedies before completion
1. **Specific performance** (equitable remedy) only available if damages are insufficient BUT likely in the sale of land as the land is unique
2. **Damages** flowing from breach
83
Remedies after (or before) completion
1. **Misrepresentation**: false representation of fact that induces the other to enter into a contract = recession
2. **Misdescription**: error in property particulars of contract
3. **Breach of title guarantee** covenants
84
Security of tenure for commercial tenants
Protection for tenants to **remain in premises** at end of tenancy under the Landlord and Tenant Act 1954
85
If Landlord and Tenant Act 1954 applies to business tenancy, tenant has security of tenure
86
If business tenancy is protected the tenancy will automatically continue unless brought to an end by:
- Forfeiture
- Surrender
- Landlord serves section 25 notice
- Tenant serves section 26 notice
87
Exclusions from Landlord and Tenant Act 1954
- Fixed-term tenancies which are **less than 6 months**
- **Service tenancies**
- Tenancies **contracted out of the Act**
88
Requirements for contracting out
1. Landlord serves **health warning notice** (statutory notice explaining terms) at least **14 days before** tenant commits to lease
2. **Tenant signs declaration** in front of solicitor confirming they have **seen and agree** to health warning notice
3. Reference to **health warning in lease**
89
Section 25 notice
**Landlord serves** to **end tenancy** or enter into **new lease** with tenant
Must serve **6 to 12 months** before they wish to bring tenancy to an end
Must specific **statutory ground** to reclaim possession
90
Section 26 notice
**Tenant** serves to **request new lease**
Must serve** 6 to 12 months before** they wish new tenancy to start
**Landlord** has **2 months** to notify whether they **oppose** and must specify **statutory ground** to oppose
Tenant may be entitled to **compensation if lease ends** and the **tenant not at fault**
FLK2
flashcards
Decks in class (8)
# Cards
