Unit 3 Prop - The Contract

Question 1

Land - Easements

What is an easement?

Answer 1

A right for one landowner to make use of another parcel of land for the benefit of their own land.

Question 2

Land - Easements

What is a profit?

Answer 2

A right to go on to somebody else’s land and remove from the land something which exists naturally.

Question 3

Land - Easements

When is an easement capable of being legal?

Answer 3

Must be granted:
- forever - an estate in fee simple absolute in possession; or
- for a fixed ascertainable duration - a term of years absolute.

Question 4

Land - Easements

How can an easement for an uncertain duration exist?

Answer 4

In equity only.

Question 5

Land - Easements

What is the formality required to create a legal easement?

Answer 5

A deed.

Question 6

Land - Easements

Can a legal easement be created without a deed?

Answer 6

Yes, if an agreement for an easement is entered into which complies with s2 LPMPA 1989 - but creates a contract for an easement which is only enforceable in equity.

Question 7

Land - Easements

What is a reservation (easements)?

Answer 7

The land owner creates an easement in favour of their own land when selling to a buyer.

Question 8

Land - Easements

What are the 4 essential characteristics for a right to exist as an easement?

Answer 8

1. There must be a dominant and servient tenement
2. The easement must accommodate the dominant tenement
3. The dominant and servient tenements must not be both owned and occupied by the same person
4. The easement must be capable of forming the subject matter of the grant

Question 9

Land - Easements

Will future owners of the servient tenement enjoy the benefit of the easement?

Answer 9

Yes, when an easement is created it becomes part of the land.

Question 10

Land - Easements

(a) What will be created from any attempt to create an easement without an identifiable dominant tenement?

(b) Must there be a dominant and servient tenement for a profit?

Answer 10

(a) A licence.

(b) No, a profit can exist in gross and only a servient tenement need be identified when creating a profit.

Question 11

Land - Easements

What is a quasi-easement?

Can is be converted into an easement?

Answer 11

Rights exercised by the sole owner of 2 separate properties over one them.
- Have all the characteristics of an easement, save for diversity of ownership/occupation.

Can be converted to easements on a sale of part of the land.

Question 12

Land - Easements

Must an easement be capable of definition?

Can an easement involve expenditure by the servient owner?

Can an easement be so extensive as to amount to a claim to joint possession of the servient tenement?

Answer 12

Must be capable of reasonably exact definition.

Must not involve any expenditure by the servient owner.

No.

Question 13

Land - Easements

When can an easement of light exist?

Answer 13

Only where it is sufficiently definite and the light is enjoyed via a defined aperture, eg a window.

The person claiming the right to light must demonstrate an infringement as follows:
- the light reaching the windows of the dom building must be sufficient according to the usual notions of mankind for the comfortable enjoyment of the building, bearing in mind they type of building and its locality.

Question 14

Land - Easements

Can a right to a view be an easement?

Answer 14

No.

Question 15

Land - Easements

To which degree can an easement over land be coveted?

What is the test?

Answer 15

The right would not be an easement if the effect of it was to leave the servient owner without any reasonable use of their land.

The test is whether the servient owner retains possession and, control of the servient land.

Question 16

Land - Easements

Positive vs negative easements?

What are the only recognised easements?

Answer 16

Positive - where the benefit of the easement is enjoyed by occupants of the dominant land performing some activity (eg. of way, or drainage, to erect a sign, etc.)

Negative - where the right exercised by the dominant owner prevents the servient owner from doing something on their land.

• Only negative easements recognised at law - those of light, air, and support.

Question 17

Land - Easements

Is there an automatic right to light?

Answer 17

No.

Question 18

Land - Easements

List the methods of easement creation.

Answer 18

• Express grant/reservation
• Implied by necessity
• Implied by common intention
• The rule in Wheeldon v Burrows
• s62 LPA 1925
• Prescription

Question 19

Land - Easements

What is an express grant of easement?

Express reservation?

Answer 19

Express grant - where the servient owner executes a deed granting the dominant owner an easement over land owned by the servient owner.
- It is an agreement made knowingly and deliberately.

Express reservation - where the seller reserves/retains rights over the land they are selling.
- The land retained becomes the dominant land, and the land sold the servient land.

Question 20

Land - Easements

When does an easement implied by necessity apply?

When would a claim for easement implied by necessity be defeated?

Answer 20

To grants and reservations.

Would arise on the sale of a land-locked parcel of land - without which the property retained cannot be used at all, and not merely necessary to the reasonable enjoyment.

Claim would be defeated if there was an alternative means of access, even if that alternative access was dangerous.

Question 21

Land - Easements

When does an easement implied by common intention apply?

Answer 21

To grants and reservatons.

Where land is conveyed for a purpose known to the grantor, any easement over land retained by the grantor which is essential in order for that purpose to be carried out is implied into the grant in favour of the grantee.

Question 22

Land - Easements

When is the rule in Wheeldon v Burrows applicable?

What is the effect?

Answer 22

Only applies to the grant of an easement and not a reservation (+thought has no application to profits).

Converts quasi-easements into easements. Occurs when the land owner sells part of their land.

Any quasi-easements exercised by the landowner will pass to the buyer subject to:
- the existence of a quasi-easement prior to the sale;
- the right must be continuous and apparent;
- the right must be necessary to the reasonable enjoyment of the land sold; and
- the right must be in use at the time of sale.

Question 23

Land - Easements

On application of the rule in Wheeldon v Burrows - will a right fail if there is an alternative available?

Answer 23

No, the presence of an alternative might not, necessarily, defeat a claim.

(necessity to reasonable enjoyment of land sold)

Question 24

Land - Easements

Formality requirements for the rule in Wheeldon v Burrows?

Answer 24

A contract, recognised in equity will suffice.

There is no requirement for a conveyance.

Question 25

Land - Easements What are the conditions required for s62 LPA 1925 to apply?

Answer 25

1. There must be a conveyance as defined in s205(1)(ii) LPA 1925; 2. There must be some diversity of occupation of the 2 parts of the land at the time of the grant. But, this requirement does not apply: - to easements of light; or - where the rights were continuous and apparent; 3. There must be an existing privilege at the date of the conveyance - not concerned with future rights; and 4. The right must be capable of being an easement or profit (but the C does not need to demonstrate that the right is necessary for reasonable use of land).

Question 26

Land - Easements What is the effect of s62 LPA 1925?

Answer 26

Operates to pass automatically to a buyer all existing rights, without the necessity of formal words in the conveyance, if nothing to the contrary is stated in the deed.

Question 27

Land - Easements What is a conveyance as defined in s205(1)(ii) LPA 1925?

Answer 27

An instrument (written document) that has the effect of creating/transferring a legal estate. E.g. a mortgage, lease, or written short-term lease not in the form of a deed. BUT DOES NOT INCLUDE contracts of sale.

Question 28

Land - Easements When is an easement created by prescription? What are the 3 types of prescription?

Answer 28

Where the dominant owner cans how use of the right after 20 years, the court will uphold the legal right by presuming that it had a lawful origin. - At common law - Doctrine of lost modern grant - The Prescription Act 1832

Question 29

Land - Easements What will be necessary to show for all of the different kinds of prescription?

Answer 29

That the right has been exercised by or on behalf of a fee simple owner against a fee simple owner: - continuously; and - as of right (must be exercised without force, secrecy, or permission).

Question 30

Land - Easements When is an easement prescribed at common law? How can it be rebutted?

Answer 30

Presumed if it has been enjoyed continuously as of right since time immemorial. It is presumed that a use for 20 years or more is proof od use since time immemorial (1189). Presumption can be rebutted by showing that at some time since 1189: - the right was not exercised; - the right could not have been exercised; or - the dominant and servient tenement were vested in the same owner (unity of seisin).

Question 31

Land - Easements When will an easement be prescribed under the doctrine of Lost Modern Grant? When will it be used?

Answer 31

Presumed if it has been enjoyed continuously as of right for 20 years or more on the basis that there is a presumption that there was a grant of the right since 1189 but that the grant has been lost. Last resort where it is not possible to rely on prescription at common law or under the Prescription Act 1832.

Question 32

Land - Easements When will an easement/proft be prescribed under the Prescription Act 1832? Are interruptions permitted? What may assist when there is interruption for longer than permitted?

Answer 32

If the dominant owner can show user as of right for 20 years (30 years for profits) then they will obtain a prescriptive easement even though the user clearly commenced sometime after 1189. Must prove uninterrupted enjoyment for a period of at least 20 years which immediately precedes and which terminates in an action. Short interruptions are permitted - but any interruption lasting a year or more stops time running. If there is an interruption for more than one year, the doctrine of lost modern grant may assist.

Question 33

Land - Easements Can an owner with a piece of land with the benefit of an easement over another's land release their benefit? How?

Answer 33

Yes, expressly by deed. They may also abandon an easement.

Question 34

Property - Preparation for and Exchange of Contracts When does the legal interest in the property pass from seller to buyer?

Answer 34

At completion.

Question 35

Property - Preparation for and Exchange of Contracts What is the significance of exchange of contracts?

Answer 35

Both parties become bound to complete the transaction on the agreed terms.

Question 36

Property - Preparation for and Exchange of Contracts Can a contract transfer land? What is the significance of the contract in a land transaction?

Answer 36

No, the contract cannot transfer land - deed required to do that. Contract merely an agreement to transfer the land at a later stage.

Question 37

Property - Preparation for and Exchange of Contracts Which party's solicitor will normally draft the contract?

Answer 37

The seller's solicitor.

Question 38

Property - Preparation for and Exchange of Contracts What are the 2 sets of standard conditions commonly in use? When are they used?

Answer 38

* The Standard Conditions of Sale (SC) - for all residential transactions, and some simple commercial transactions. * The Standard Commercial Property Conditions (SCPC) - more suitable for high value commercial properties and contain more detailed provisions for the management of occupational leases with which the property is being sold.

Question 39

Property - Preparation for and Exchange of Contracts Drafting - For a registered property, what needs to be included in the contract?, Where will the class of title be added in the contract?

Answer 39

The contract will need to state the title number and class of title. Can be either incorporated into the address by the 'Property' heading or type in brackets after the 'Title Number': "Property (freehold/leasehold)" (strike through inapplicable one) or "Title Number: ... (Absolute Title)"

Question 40

Property - Preparation for and Exchange of Contracts Drafting - Under which heading will all the burdens on the property be specified?

Answer 40

"Specified Incumbrances"

Question 40

Property - Preparation for and Exchange of Contracts Drafting - How will an unregistered property be defined in the contract?

Answer 40

By reference to the root of title. "Root of Title (instead of title number): The Conveyance"

Question 41

Property - Preparation for and Exchange of Contracts What are incumbrances?

Answer 41

Third party rights which will survive the transfer of the property to the buyer.

Question 42

Property - Preparation for and Exchange of Contracts What happens if incumbrances are not specified in the contract?

Answer 42

The seller could be in breach of SC 3.1.1, which says that the seller sells free of all incumbrances other than those specified in the contract or of a type listed in SC 3.1.2.

Question 43

Property - Preparation for and Exchange of Contracts Under the SC and SCPC, which incumbrances are subject to which the property is sold?

Answer 43

* Those specified in the contract * those discoverable by inspection before the date of the contract * those the seller does not and could not reasonably know about * public requirements + under the SC: - those, other than mortgages, which the buyer knows about - entries made before the date of the contract in any public register, except for those maintained by the Land Registry, the Land Charges Department and Companies House + under the SCPC: - matters, other than mortgages, disclosed or which would have been disclosed by the searches and enquiries which a prudent buyer would have made before entering into the contract

Question 44

Property - Preparation for and Exchange of Contracts Why do seller's solicitors tend to list all incumbrances revealed by title investigation?

Answer 44

Because non-disclosure of an incumbrance burdening the property might result in the buyer having a right to rescind the contract and/or claim damages.

Question 45

Property - Preparation for and Exchange of Contracts Where will incumbrances appear for registered property?

Answer 45

Usually appear in the Charges register of the official copies, but the property register should also be checked as burdens are often hidden away there, perhaps where a right benefitting the property has been given subject to an obligation to pay for it.

Question 46

Property - Preparation for and Exchange of Contracts Why may a solicitor not refer to positive covenants in 'specified incumbrances'?

Answer 46

Because the burden of a positive covenant does not run to a successor in title as a matter of land law.

Question 47

Property - Preparation for and Exchange of Contracts When should a seller sell with full title guarantee? Limited title guarantee?

Answer 47

Full title guarantee - If they own the entire legal and equitable title to the property. Limited title guarantee - where the seller has limited knowledge of the property.

Question 48

Property - Preparation for and Exchange of Contracts With both full title and limited title guarantee, what is the seller covenanting in the transfer of the property? With just full title guarantee?

Answer 48

1. They have the right to dispose of the land 2. They will do all they reasonably can to transfer the title 3. In the case of leasehold land, the lease is subsisting at the time of disposal and there is no breach of covenant making the lease liable to forfeiture With just full title guarantee: - impliedly covenant that the land is disposed free from incumbrances other than those the seller does not know about and could not reasonably know about.

Question 49

Property - Preparation for and Exchange of Contracts (a) What is the contract rate? (b) How is it applied? (c) Which do most companies opt for? Is it included in the SC and SCPC? (d) Can it be negotiated?

Answer 49

(a) The rate of interest that will be charged if a party is late in completing. (b) Charged on the purchase price (les the deposit if it is the buyer in default) (c) Most conveyancers opt for the Law Society's interest rate - currently 4% above the base lending rate of Barclays Bank plc. This is what the SC and SCPC provide. (d) Yes, the rate can be negotiated.

Question 50

Property - Preparation for and Exchange of Contracts How much is the deposit normally? When is it payable? Under the SC and SCPC, how does the seller's solicitor hold the deposit? Can this be varied? How?

Answer 50

10% of the purchase price, payable on exchange of contracts. Under the SC and SCPC, the seller's solicitor holds the deposit as stakeholder - means the seller's solicitor cannot hand it over to the seller until completion. If the SC are being used, the seller can use the deposit as a deposit on a related purchase of a house for the seller.

Question 51

Property - Preparation for and Exchange of Contracts Under the SC and SCPC, if the buyer fails to complete can the seller keep the deposit?

Answer 51

Yes, the seller may forfeit and keep the deposit.

Question 52

Property - Preparation for and Exchange of Contracts When is an indemnity covenant necessary? What does it mean? What is the position for buyer's indemnity under SC and SCPC?

Answer 52

When the title is burdened with covenants and the seller is either the original covenantor or has given an indemnity covenant to their seller when they acquired the property. Means they will have an ongoing liability even after they part with the property and are no longer in a position to ensure compliance with the covenants. Under SC and SCPC, where the seller has such an ongoing liability in relation to the property, the buyer must give the seller a personal indemnity covenant in the transfer. (As this is covered by the SC there is no need to expressly insert a special condition to this effect, but some solicitors do).

Question 53

Property - Preparation for and Exchange of Contracts Under the SC and SCPC, when does the risk of damage pass to the buyer? Must the buyer complete if the property is damaged between exchange and completion?

Answer 53

Under both sets, on exchange of contracts. Yes, the buyer must complete the purchase even if the property is damaged/destroyed between exchange and completion.

Question 54

Property - Preparation for and Exchange of Contracts Under the SC and SCPC, is the seller under an obligation to insure a freehold property?

Answer 54

No, the seller is under no obligation to insure a freehold property unless required to do so by a special condition in the contract.

Question 55

Property - Preparation for and Exchange of Contracts When will the seller be required to maintain their insurance policy, under the SC and SCPC? What if the property suffers damage before completion?

Answer 55

If agreed, then the SC and SCPC, require the seller to maintain the policy until completion and if the property suffers damage prior to completion, to hand the insurance proceeds over to the buyer or assign to the buyer all the seller's rights under the policy.

Question 56

Property - Preparation for and Exchange of Contracts Under SC and SCPC, what happens when there are 2 insurance policies out on the property at the same time and a claim is made?

Answer 56

There is a danger that when a claim is made, the buyer's insurer will reduce the proceeds because another policy exists. The SC and SCPC therefore provide that if this happens and the buyer is unable to recover the full amount of the proceeds, the purchase price is reduced accordingly.

Question 57

Property - Preparation for and Exchange of Contracts What are the 3 options for VAT in a commercial transaction?

Answer 57

* The purchase price is exclusive of VAT and VAT will be added on top * The purchase price is inclusive of VAT so that VAT, if any, cannot be added on top * The purchase price is exclusive of VAT, so VAT can be added on top in the unlikely event that the law changes to make an exempt supply chargeable at the standard rate.

Question 58

Property - Preparation for and Exchange of Contracts Which option for VAT is popular for VAT sensitive buyers (commercial)? Which option for VAT is appropriate for the supply of an old commercial building where the seller does not have input VAT to recover?

Answer 58

The purchase price is inclusive of VAT so that VAT, if any, cannot be added on top. The purchase price is exclusive of VAT, so VAT can be added on top if the law changes between exchange and completion.

Question 59

Property - Preparation for and Exchange of Contracts When are mortgages legal?

Answer 59

If made by deed and completed by registration.

Question 60

Property - Preparation for and Exchange of Contracts What does the certificate of title confirm to the lender?

Answer 60

* There are no legal problems with the property (has good and marketable title), so the lender can safely lend against it * who will own the property once the sale is completed * the completion date when the funds are needed

Question 61

Property - Preparation for and Exchange of Contracts What happens if the information on the certificate of title is wrong?

Answer 61

The lender can sue the firm who gave the certificate because there are warranties as to the correctness of the information contained within it.

Question 62

Property - Preparation for and Exchange of Contracts When is the certificate of title given?

Answer 62

Immediately prior to completion of the loan.

Question 63

Property - Preparation for and Exchange of Contracts What are the main requirements for creating a binding contract for the sale of land?

Answer 63

Set out in s2(1) Law of Property (Miscellaneous Provisions) Act (LP(MP)A) 1989. - Must be in writing; - must incorporate all the agreed terms; - these must be contained in one document, or where contracts are exchanged, in each copy of the contract; and - the contract must be signed by the parties.

Question 64

Property - Preparation for and Exchange of Contracts In which 3 ways can exchange of contracts be done?

Answer 64

* In person, * By post, * Over the telephone

Question 65

Property - Preparation for and Exchange of Contracts What is the advantage of using the Law Society Formula for exchange of contracts?

Answer 65

They all involve undertakings from the solicitors which, if breached, can result in disciplinary action against the offending party.

Question 66

Property - Preparation for and Exchange of Contracts When does a chain transaction occur?

Answer 66

Where there are 2 or more properties being sold.

Question 67

Property - Preparation for and Exchange of Contracts What are the Law Society Formulaes A, B, and C? Which is most common?

Answer 67

A: - the solicitor holding both signed parts of the contract will, that same day, send their client's signed part of the contract to the other side by first class post, through a dx, or by hand. - the buyer's solicitor also undertakes, that day, to send to the other side a banker's draft or client account cheque for the agreed deposit, with their client's signed part of the contract if it is the buyer's solicitor who holds both parties. B - MOST COMMON: - used where each solicitor holds their own client's signed part of the contract - QUICKER. - each solicitor will, that same day, send the signed part of he contract that they are holding to the other side by first class post, through dx, or by hand duly dated. - that the buyer's solicitor, together with the signed part of the contract, will that day also send to the other side a banker's draft or client account cheque for the agreed deposit. C - most complex: - mainly in residential property work when there is a chain transaction.

Question 68

Property - Preparation for and Exchange of Contracts How does the seller hold legal and equitable title to the property after exchange? Who is responsible for outgoings?

Answer 68

The seller retains legal title in the property until completion, but holds the beneficial interest on behalf of the buyer. The seller is entitled to physical possession. The seller must pay all outgoings.