What are the two main steps in a conveyancing transaction?
- Exchange of contracts
- Completion
What is completion?
Stage where the bulk of purchase money is transferred to the seller and the transfer deed is completed to transfer the property to the buyer
What are the key stages in a property transaction?
- Pre contract
[Exchange of contract] - Pre-completion
[Completion] - Post-completion
When are parties bound/not bound to the sale of freehold?
Parties are not bound until exchange of contract
What is the principle of caveat emptor?
The principle that the seller is not obliged to disclose information about property other than about matters of title
Seller is not liable for defects in the property which are discovered at a later date
What is the first thing a solicitor needs to do in the pre-contract stage ? (basic)
Both parties need to take detailed instructions from their client - need to establish consensus and identify outstanding issues to avoid:
delay, frustration, additional costs down the line
What does a solicitor need to check in the pre-contract stage?
- Seller is entitled to sell the property (ie. title)
- No encumbrances (eg. restrictive covenants) which would prevent the buyer from using the property as they intend
- Additional searches/enquiries about boundaries, access, disputes, outgoings, previous works carried out on the property
- NOTE: contract usually includes a provision prohibiting the buyer from raising further queries on the title (‘requisitions’)
When is the pre-completion stage?
Between exchange of contracts and completion
What are the basic steps a solicitor needs to take at the pre-completion stage?
- Parties make sure all correct documentation and completion money will be available on completion date
- Transfer deed to be prepared and executed in readiness for completion
- Pre-completion checks done - ie. confirm that information obtained at Pre-Contract stage is still accurate
What is completion? (basic)
Buyer pays the balance of the purchase money and the seller hands over the keys to the property
What are the seller’s solicitor’s obligations in the pre-contract stage? (OV)
- Take instructions from seller client
- Investigate titled produce evidence of title (deduce title) to the buyer
- Reply to the buyer’s pre-contract enquiries
- Draft the contract
What are the buyer’s solicitor’s obligations in the pre-contract stage?
- Take instructions from buyer client (and possibly the lender if also instructed)
- Investigate title
- Raise pre-contract searches and enquiries (and check buyer client has commissioned survey)
- Approve the draft contract
- Prepare pre-exchange report to client(s)
What does the buyer’s solicitor do at the exchange of contract?
Pay the deposit
What does the seller’s solicitor do at the pre-completion stage?
Approve the draft transfer deed
Reply to the buyer’s pre-completion enquiries, including giving undertaking to discharge the seller’s mortgage
What does the buyer’s solicitor do at the pre-completion stage?
Draft the transfer deed
[Draft the mortgage deed if acting for the lender] + obtain client execution of mortgage deed
Raise pre-completion searches and enquiries (updating and, if acting for the lender, checking buyer’s solvency)
Submit a report on title/certificate of title to the lender and request mortgage advance if applicable
What does the seller’s solicitor do at the post-completion stage?
Post-completion matters (inc. discharging existing mortgage if necessary)
What does the buyer’s solicitor do at the post-completion stage?
Post-completion matters (eg. pay SDLT/LTT; registering transfer of title with LR)
What professional conduct issues arise if a solicitor acts for both a seller and a buyer?
- 6.2 Code of Conduct – solicitor cannot act for both parties if there is a conflict of interest or significant risk of conflict
- High risk here
- NOTE: if power imbalance and unequal bargaining power where land is being transferred for value
- ‘substantially common interest’ exception does. NOT apply for property transactions
What professional conduct issues arise if a solicitor acts for joint buyers?
- Acceptable to act for joint buyers
- May advise separately about how equitable interest is to be held
- NOTE: no marriage may need more advice
When can a solicitor act for both a borrower and a lender in a property transaction?
When this complies with 6.2(a) - substantially common interest exception:
- Informed written consent
- Effective safeguards
- Solicitor satisfied it is acting reasonably
Exceptions where risk of conflict is high:
1. Mortgage not a standard mortgage
2. Mortgage is standard mortgage but you do not use the approved certificate of title
Can a solicitor act for joint borrowers?
General rule: normally yes, if there is no conflict or likely conflict
Where may there be issues with joint borrowers in a property transaction? [see notes for full solicitor obligations]
Where the matrimonial home is owned by a married couple jointly, and one of them agrees to a mortgage as security for a business loan [ie. undue influence/Etridge situation]
What are the general rules re contract races/professional conduct issues?
Contract races are legitimate if all prospective buyers know they are engaged in a race
Solicitor must not mislead or attempt to mislead buyers - S must inform all buyers of seller’s intention to deal with more than one buyer
If seller refuse to agree to disclosure, Solicitor cannot disclosure, but must stop acting for the client (Solicitor still owes duty of confidentiality)
How do you pay stamp duty? (ENGLAND)
How to pay SDLT:
1. Online to HMRC via bank transfer
2. Form – SDLT1
3. 14 days of completion
4. No payment = buyer will not be registered by Land Registry
5. Penalties and interest
