1. Due Diligence 1 Flashcards
(310 cards)
1
Q
What are the two most common types of mortgages?
A
Repayment mortgages and interest-only mortgages.
2
Q
How do repayment mortgages work?
A
Borrower makes monthly payments to lender, which are partly instalments of loan and partly interest.
3
Q
How do interest-only mortgages work?
A
Borrower makes monthly payments to lender, which are only interest chargeable on the loan.
4
Q
What are the different interest options for mortgages?
A
Interest can be at the lender’s standard variable rate (SVR), fixed, or a ‘tracker’ rate of a percentage above UK base rate.
5
Q
What happens at the end of the agreed period for fixed/tracker interest mortgages?
A
The interest reverts to the SVR.
6
Q
What happens at the end of the mortgage term for repayment mortgages?
A
The borrower will have paid off their debt.
7
Q
What happens at the end of the mortgage term for interest-only mortgages?
A
The borrower will still be in debt and will have to find an alternative source of finance to pay off the loan, e.g. savings.
8
Q
What are some other types of mortgages for those who cannot enter into agreements that charge interest?
A
Sharia compliant mortgages, where the bank buys the property and resells it to the buyer at a higher price, with the buyer repaying the excess to the bank by instalments over a period of years.
9
Q
What is Stamp Duty Land Tax (SDLT) and who has to pay it?
A
SDLT is a tax paid by the buyer of a property in England, depending on the value of the property and if they are a first-time buyer or not.
10
Q
What is Land Transaction Tax (LTT) and who has to pay it?
A
LTT is a tax paid by the buyer of a property in Wales, depending on the value of the property and if they are a first-time buyer or not.
11
Q
What is Capital Gain Tax (CGT) and who has to pay it?
A
CGT is a tax paid by the seller if they make a capital gain on the sale of their property at a higher price than what they bought it for, unless this property was their only or main home/residence.
12
Q
What tax does the landlord of a rented commercial property have to pay?
A
The landlord will have to pay Corporation Tax on the rent.
13
Q
What is CT?
A
Capital gains tax payable on property sale.
14
Q
What is SDLT?
A
Stamp Duty Land Tax paid on property purchase.
15
Q
What is LTT?
A
Land Transaction Tax paid on property purchase in Wales.
16
Q
How is SDLT paid for residential freehold property?
A
0% up to £425,000, 5% on portion from £425,001 to £625,000.
17
Q
Who can claim relief on SDLT for residential property?
A
First-time buyers of property for £625,000 or less.
18
Q
How is SDLT paid for non-first-time buyers?
A
Rates vary based on consideration amount.
19
Q
What is the SDLT rate for consideration up to £250,000 for non-first-time buyers?
A
0%.
20
Q
What is the SDLT rate for consideration exceeding £250,000 but not exceeding £925,000 for non-first-time buyers?
A
5%.
21
Q
What is the SDLT rate for consideration exceeding £925,000 but not exceeding £1,500,000 for non-first-time buyers?
A
10%.
22
Q
What is the SDLT rate for consideration exceeding £1,500,000 for non-first-time buyers?
A
12%.
23
Q
How can SDLT be saved when chattels are involved in the sale?
A
Apportion part of the purchase price to the chattels.
if someone buys a furnished house, they might allocate part of the purchase price to cover the value of the furniture and appliances (the chattels), separate from the house itself.
24
Q
What is the SDLT rate for non-residential or mixed-use freehold property?
A
Rates vary based on consideration amount.
25
What is the SDLT rate for consideration up to £150,000 for non-residential or mixed-use freehold property?
0%.
26
What is the SDLT rate for consideration exceeding £150,000 but not exceeding £250,000 for non-residential or mixed-use freehold property?
2%.
## Footnote
exceeding 250k is 5%
27
How is SDLT paid if VAT is charged?
Payable on the VAT-inclusive sum.
## Footnote
so regardless whether VAT is included or excluded of price SDLT is payable on full purchase price plus VAT
28
How is LTT paid for residential freehold property?
Rates vary based on consideration amount.
29
What is the LTT rate for consideration up to £225,000 for residential freehold property?
0%.
30
What is the LTT rate for consideration exceeding £225,000 but not exceeding £400,000 for residential freehold property?
6%.
31
What is the LTT rate for consideration exceeding £400,000 but not exceeding £750,000 for residential freehold property?
7.5%.
32
What is the LTT rate for consideration exceeding £750,000 but not exceeding £1,500,000 for residential freehold property?
10%.
33
What is the LTT rate for consideration exceeding £1,500,000 for residential freehold property?
12%.
34
What is the LLT rate for non-residential or mixed-use freehold property?
Rates vary based on consideration amount.
35
What is the LLT rate for consideration up to £225,000 for non-residential or mixed-use freehold property?
0%.
36
What is the LLT rate for consideration exceeding £225,000 but not exceeding £250,000 for non-residential or mixed-use freehold property?
1%.
37
What is the LLT rate for consideration exceeding £250,000 but not exceeding £1m for non-residential or mixed-use freehold property?
5%.
38
What is the LLT rate for consideration exceeding £1m for non-residential or mixed-use freehold property?
6%.
39
How is LLT paid if VAT is charged?
Payable on the VAT-inclusive sum.
40
Where is SDLT paid?
To HMRC.
41
How is SDLT paid?
Through SDLT1 Form.
42
When should SDLT be paid?
Within 14 days of completion.
43
What happens if SDLT is not paid within 14 days of completion?
Transfer will not be registered and penalties may apply.
44
What is LLT payment?
Payment made to the Welsh Revenue Authority.
45
When is LLT payment due?
Within 30 days of completion.
46
What is CGT?
Capital Gains Tax charged on gains made on 'chargeable assets'.
47
What transactions are also subject to CGT?
Transactions incidental to the sale of land, such as modifications of an easement.
48
How are gifts treated for CGT purposes?
Gifts are considered as 'disposals' and subject to CGT.
49
How is the gain on sale calculated for CGT?
Gain on sale = purchase price - current sale price. If property was bought before 1982, purchase price is the base value in 1982.
50
Can expenditure on improving the property be deducted for CGT?
Yes, expenditure on improving the property can be deducted for CGT.
51
What is the rate at which CGT is charged?
The rate is set by the Government after annual exemption.
52
What is Private Residence Relief (PRR)?
Benefit that can be claimed by the seller of a residential property if it is their main residence and they have lived there continuously.
53
Can an individual with multiple residences choose which one qualifies for PRR?
Yes, if the individual has more than one residence, they can choose which one qualifies for PRR.
54
What is the exception to PRR for sellers with a large garden?
If the seller has a garden greater than 0.5 hectares, the gain on the excess is chargeable to CGT, unless they can demonstrate that the extra garden was necessary for the enjoyment of the house.
55
What happens if any part of the house is used for business purposes?
Relief will be lost for that part of the house.
56
Who else can claim PRR?
PRR is also available to trustees if the property is occupied by a beneficiary as their main residence.
57
Are there any allowed periods of absence for PRR?
Certain periods of absence are allowed, such as travel, but there are specific conditions.
58
What are the basis of charge for VAT?
Taxable supplies and it is an indirect tax.
59
Who charges and collects VAT?
Suppliers who are taxable persons and have a turnover exceeding the VAT registration limit.
60
How is VAT collected?
HMRC collects VAT from each supplier at the end of each VAT period through the completion of a VAT return online.
61
What is output tax?
VAT charged by supplier on goods and services produced.
62
How is output tax indicated on invoices?
Expressly stated when charging customers.
63
What is input tax?
VAT charged to customers of goods or services.
64
How is VAT due to HMRC calculated?
Output tax charged minus input tax paid.
65
What does a supplier do with the input tax paid?
Account it to HMRC and recover it.
66
Under what conditions is input tax recovered?
If it is attributable to a taxable output supply and has an immediate and direct link.
67
What are the standard, reduced, and zero-rated VAT rates?
Standard: 20%, Reduced: 5%, Zero-rated: 0%.
68
What is the VAT status of exempt supplies?
They are not VATable.
69
Are most residential transactions subject to VAT?
No, they do not involve the payment of VAT.
70
What is considered a new commercial property?
One within three years from completion of the building.
71
Are supplies of interests in commercial land or buildings exempt?
Yes, they are generally exempt.
72
What supplies are taxable or can be made taxable by exercising the 'option to tax'?
Sale of greenfield site, supply of construction services, professional services, sale of new freehold building, grant of a lease.
73
Why would a client make an option to tax?
To enable recovery of input tax incurred.
74
What is the effect of exercising the option to tax for a seller of a new building?
They must charge the buyer VAT.
75
What is the effect of exercising the option to tax for a seller of an old building?
They have the choice to charge VAT.
76
Why would a seller of an old building exercise the option to tax?
To recover input tax incurred in relation to the building.
77
What is an EPC?
Energy Performance Certificate provided to buyer.
78
Who produces an EPC?
Accredited energy assessor.
79
When should the seller provide an EPC to the buyer?
Within 7 days of first marketing, within 28 days.
80
Why is it important to establish consensus between parties?
To avoid delay, frustration, and additional costs.
81
What are the two most common types of mortgages?
Repayment mortgages and interest-only mortgages.
82
How do repayment mortgages work?
Borrower makes monthly payments towards loan and interest.
83
How do interest-only mortgages work?
Borrower makes monthly payments for interest only.
84
What are the options for interest rates on mortgages?
Lender's SVR, fixed rate, or tracker rate.
85
What happens at the end of a fixed/tracker rate mortgage?
Interest reverts to the SVR.
86
What happens at the end of a repayment mortgage?
Borrower has paid off their debt.
87
What happens at the end of an interest-only mortgage?
Borrower still owes the loan and needs alternative finance.
88
Are there other types of mortgages for those who cannot pay interest?
Yes, e.g. Sharia compliant mortgages.
89
What is the buyer's responsibility in terms of taxation when purchasing a residential property?
Buyer may have to pay Stamp Duty Land Tax (SDLT) in England or Land Transaction Tax (LTT) in Wales.
90
What is the seller's responsibility in terms of taxation when selling a residential property?
Seller may have to pay Capital Gain Tax (CGT) on any gain made from the sale, unless the property was their only or main home/residence.
91
What tax is payable on the rent of a commercial property?
Corporation Tax (CT) is payable on the rent of a commercial property.
92
What tax is payable if a commercial property is sold at a higher price?
Corporation Tax (CT) is payable on any gain made from the sale of a commercial property.
93
What is the relief available for first-time buyers of residential property in terms of SDLT?
First-time buyers of residential property for £625,000 or less can claim relief.
94
What is the SDLT rate for first-time buyers on the portion of the property price from £425,001 to £625,000?
5% SDLT.
95
What is the SDLT rate for non first-time buyers on the portion of the property price that does not exceed £250,000?
0% SDLT.
96
What is the SDLT rate for non first-time buyers on the portion of the property price that exceeds £250,000 but does not exceed £925,000?
5% SDLT.
97
What is the SDLT rate for non first-time buyers on the portion of the property price that exceeds £925,000 but does not exceed £1,500,000?
10% SDLT.
98
What is the SDLT rate for non first-time buyers on the remainder of the property price?
12% SDLT.
99
What can be done to save on SDLT when the sale involves valuable chattels?
Apportioning part of the purchase price to the chattels may save on SDLT.
100
What is the SDLT rate for non-residential or mixed use freehold property that does not exceed £150,000?
0% SDLT.
101
What is the SDLT rate for non-residential or mixed use freehold property that exceeds £150,000 but does not exceed £250,000?
2% SDLT.
## Footnote
upwards of 250 ]k is 5%
102
What is SDLT?
Stamp Duty Land Tax - a tax on property transactions.
103
How is SDLT paid?
Paid to HMRC through SDLT1 Form.
104
When should SDLT be paid?
Within 14 days of completion.
105
What happens if SDLT is not paid within 14 days?
Transfer will not be registered and penalties may apply.
106
What are the rates for LTT on residential freehold property?
0% for up to £225,000, 6% for £225,000 to £400,000, 7.5% for £400,000 to £750,000, 10% for £750,000 to £1,500,000, and 12% for the remainder.
107
What are the rates for LLT on non-residential or mixed-use freehold property?
0% for up to £225,000, 1% for £225,000 to £250,000, 5% for £250,000 to £1m, and 6% for amounts exceeding £1m.
108
What happens if VAT is charged in LLT?
LLT is payable on the VAT-inclusive sum.
109
Where is LLT paid?
Paid to the Welsh Revenue Authority.
110
When should LLT be paid?
Within 30 days of completion.
111
What is CGT?
Capital Gains Tax - a tax on gains made on chargeable assets.
112
What transactions are subject to CGT?
Transactions incidental to the sale of land, such as modifications of an easement.
113
How is the gain on sale calculated for CGT?
Purchase price minus current sale price. If property was bought before 1982, the purchase price is the base value in 1982.
114
Can expenditure on improving the property be deducted from CGT?
Yes.
115
What is the rate at which CGT is charged?
Rate set by the Government after annual exemption.
116
What is Private Residence Relief (PRR)?
A benefit that can be claimed by the seller of a residential property if it is their main residence and they have lived there continuously.
## Footnote
applies to CGT
117
Can an individual with multiple residences choose which one qualifies for PRR?
Yes.
118
Are gifts considered as disposals for CGT purposes?
Yes.
119
What are the exceptions to PRR?
Not specified in the notes.
## Footnote
THBGS TO ASK FOR PRR: riya lived in her house continuously from 2009
* She owned and/or lived in more than one house during this time
* The garden is more than 0.5 hectares
* She used any part of the house for a business use
120
What is chargeable to CGT for sellers with a garden greater than 0.5 hectares?
Excess garden unless necessary for house enjoyment.
121
What happens if any part of the house is used for business purposes?
Relief will be lost for that part.
122
Who is eligible for PRR?
Beneficiary occupying property as main residence.
123
Are there allowed periods of absence for PRR?
Yes, with specific conditions.
124
What are the conditions for VAT registration?
Turnover exceeding £85,000 in the past 12 months.
125
How is VAT collected?
By HMRC from each supplier through VAT returns.
126
What is output tax?
VAT charged by supplier on goods and services.
127
What is input tax?
VAT paid by customers of goods or services.
128
How is VAT due to HMRC calculated?
Output tax charged minus input tax paid.
129
When is input tax recovered?
If it is attributable to a taxable output supply.
130
What are the rates for standard, reduced, and zero-rated supplies?
20%, 5%, and 0% respectively.
131
Are exempt supplies VATable?
No, they are not VATable.
132
Do most residential transactions involve VAT payment?
No, the vast majority do not.
133
What is the basis of charge for VAT?
Taxable supplies charged by suppliers.
134
Who can charge and collect VAT?
Taxable persons with turnover exceeding £85,000.
135
How often is a VAT return completed?
At the end of each VAT period (every 3 months).
136
What does the supplier account to HMRC for?
The value added by its business.
137
What is the requirement for input tax recovery?
Immediate and direct link to a taxable output supply.
138
What is the 'option to tax' for taxable supplies?
Allows VAT payment on normally exempt transactions.
139
What is a new commercial property?
Within three years from completion of the building.
140
Are supplies of interests in, rights or licences to occupy commercial land or buildings exempt?
Yes.
141
Is the sale of a greenfield site exempt?
Yes, subject to the option to tax.
142
Are construction services taxable?
Yes, standard rated (may be reduced).
143
Are professional services provided by an architect or surveyor taxable?
Yes, standard rated.
144
Is the sale of a new freehold building taxable?
Yes, standard rated.
145
Is the sale of an old freehold building exempt?
Yes, subject to the option to tax.
146
Is the grant of a lease exempt?
Yes, subject to the option to tax.
147
Why would a client make an option to tax?
To charge the buyer VAT.
148
What is the effect of making an option to tax for a seller of a new building?
Must charge the buyer VAT.
149
What is the effect of making an option to tax for a seller of an old building?
Has the choice.
150
Why would a seller of an old building exercise the option to tax?
To recover input tax incurred in relation to the building.
151
What are some examples of input tax that can be recovered by exercising the option to tax for an old building?
Building work costs and professional fees incurred in renovating the building.
152
What is a possible disadvantage of opting to tax the supply of an old building?
The seller has to charge VAT on the purchase price.
153
Is it a problem if the buyer of an old building makes taxable supplies?
No, they can recover input tax by offsetting it against the output tax.
154
What happens if the buyer of an old building cannot recover its input tax VAT?
The purchase price is effectively increased.
155
What can VAT-sensitive buyers do if they cannot recover input tax?
Seek a reduction in the price or be deterred from buying the property.
## Footnote
sensitive buyers include bank, building society and insurance company.
156
Do VAT-sensitive buyers make taxable supplies as part of their business?
No.
157
Can VAT-sensitive buyers recover input tax?
No.
158
What is 'tax on tax'?
VAT counting as chargeable consideration for SDLT/LTT purposes.
159
What types of real estate transactions are exempt from VAT?
Most transactions, especially residential ones.
160
When is VAT compulsory on commercial properties?
Only on 'new' commercial properties.
161
When is VAT not charged on 'old' commercial properties?
When the seller has an option to tax.
162
When does the seller need to opt to tax for 'old' commercial properties?
If they want to recover VAT they have paid.
163
Can the buyer recover VAT paid if the seller opts to tax?
Usually, yes.
164
Can a buyer making exempt supplies recover VAT fully?
No, they may be unable to recover fully.
165
What can a buyer making exempt supplies do to resist the seller's option to tax?
Resist the option or seek a compensatory reduction in the purchase price.
166
What should solicitors check during the marketing stage?
Agreements made and provision of an Energy Performance Certificate (EPC).
167
What is an Energy Performance Certificate (EPC)?
A document provided by the seller, produced by an accredited energy assessor.
168
When should the seller provide the EPC to the buyer?
Preferably within 7 days of first marketing, and within 28 days at the latest.
169
Why is it important to establish consensus between parties?
To avoid delays, frustration, and additional costs later in the transaction.
170
What is the distinction between registered and unregistered land?
Registered land is recorded by the Land Registry with property and ownership details.
171
Where is registered land recorded?
In the Land Registry.
172
What information does the Land Registry hold for registered land?
Information relevant to the property and ownership details.
173
What is unregistered land?
Land not recorded before 1 December 1990.
174
Why is it now compulsory to register unregistered title on a change of ownership?
To ensure proper record keeping.
175
What does the seller's solicitor need to obtain during the investigation of title to freehold registered land?
Copies of the register of title and the Land Registry plan.
176
What is the purpose of deduction of title?
To prove ownership to the buyer.
177
When must the deduction of title take place?
Before exchange.
178
Can the buyer object after exchange has taken place?
No.
179
What should the seller supply to the buyer during the deduction of title?
Official copies less than six months old.
180
What are the three registers shown in the official copies of registered land?
Property register, Proprietorship register, Charges register.
181
What information does the Property register contain?
Description of land, type of title, easements, and excluded rights.
182
What information does the Proprietorship register contain?
Current owners, class of title, price paid (if sold), indemnity covenant, and restrictions on selling.
183
What does the Charges register contain?
Details of any charges or mortgages on the property.
184
What is included in the description of the land in the Property register?
Postal address and title plan.
185
What does the class of title in the Proprietorship register indicate?
The type of ownership (freehold or leasehold).
186
What does the Proprietorship register indicate if the owners gave an indemnity covenant?
Evidence of a chain of indemnity covenants.
187
What information may be included in the Proprietorship register if the land was sold since 1 April 2000?
The price paid by the current owners.
188
What restrictions on selling may be found in the Proprietorship register?
Notices and restrictions on the owners' ability to sell.
189
What is the purpose of the Land Registry plan?
To provide a visual representation of the property.
190
What is the purpose of the Charges register?
To show any charges or mortgages on the property.
191
What is a restriction?
A limitation on dealing with a property.
192
What is the difference between a restriction and a notice?
A restriction is more powerful than a notice.
193
What does the State guarantee in relation to title?
The State guarantees the title and may provide compensation for defects.
194
What are the three classes of title for freehold land?
Absolute title, possessory title, and qualified title.
195
What is absolute title?
The most common and best class of title, where the registered proprietor has the legal estate subject to certain conditions.
196
What is possessory title?
Granted when the proprietor is in possession of the property but has lost the title deeds or is claiming through adverse possession.
197
What is qualified title?
Granted when there is a specific identified defect that cannot be overlooked.
198
Why would a buyer be concerned if the class of title is not absolute?
It may affect their ability to obtain a loan or sell the property in the future.
199
What does the Charges register identify?
Incumbrances on the property.
200
What are some examples of incumbrances listed in the Charges register?
Covenants, easements, charges, leases, and notices.
201
What are covenants affecting the property?
Restrictive or positive obligations related to the property.
202
What are easements affecting the land?
Rights of way or other rights over the property.
203
What are charges over the land?
Most commonly mortgages.
204
What are leases granted over the property?
Leases of the whole or part of the property.
205
What are notices registered by third parties?
Claims of interest in the property by third parties.
206
What does the buyer's solicitor do with the information from the Charges register?
Identify any problems and advise the client on necessary actions.
207
What are easements?
Rights over another person's land.
208
Where can easements that burden a property appear?
Charges register and Property register.
209
Where can easements that benefit a property appear?
Property register.
210
What financial obligations may be attached to easements that benefit a property?
Maintenance costs.
211
What does a mining exception mean?
Seller doesn't own mines and minerals.
212
What happens if a buyer encroaches on mines and minerals with a mining exception?
It constitutes trespass.
213
What does a reservation indicate regarding mining?
Mining has taken place in the vicinity.
214
What should be enquired about if there is a reservation for mines and minerals?
Ground stability and subsidence.
215
Where is a mining exception noted in registered land?
Property register.
216
What should the buyer's solicitor conduct to identify the owner of mines and minerals?
Index Map search at Land Registry.
217
Declaration as to rights of light and air
A landowner may sell off a part of their land ('Part A') and retain the other part ('Part B') for their own purposes.
218
Preserving the right to develop Part B
The landowner may declare in the transfer of Part A that Part A does not enjoy the benefit of any rights of light and air over Part B.
219
Blocking off light to windows
The owner of Part B may build on the land and block off light to the windows in the building on Part A.
220
Co-ownership
When two or more people co-own a property, the legal interest can only be held under a joint tenancy.
221
Jointly owning the equitable interest
Equitable interest in a property can be jointly owned as joint tenants or tenants in common.
222
Joint Tenants
Joint tenants have an equal interest in the property.
223
Survivorship in joint tenancy
If one joint tenant dies, the other becomes the sole owner.
224
Inability to leave share by will in joint tenancy
Joint tenants cannot leave their share to anyone else by will.
225
Tenants in Common
Tenants in common can own equal or unequal shares.
226
Distribution of share in tenants in common upon death
Upon death, the share of a tenant in common passes according to their will or to close relatives if there is no will.
227
Leaving share by will in tenants in common
Tenants in common can leave their share by will to anyone they choose.
228
Assumption of joint tenancy in registered land
In registered land, the equitable interest is assumed to be held as a joint tenancy unless a restriction appears in the Proprietorship register.
229
Restriction on disposition by sole proprietor
A restriction may prevent a sole proprietor from registering a disposition unless authorized by a court order.
230
Selling property jointly owned by one co-owner
The missing co-owner must be found and be a party to the contract and transfer.
231
Finding the missing co-owner
To sell property jointly owned, the status of the missing co-owner must be determined.
232
Alive missing co-owner
If the missing co-owner is alive, they must be a party to the contract and transfer.
233
Transfer of property with missing co-owner
The missing co-owner must be involved in the transfer of the property.
234
Determining the status of the missing co-owner
To sell property jointly owned, it is necessary to find out what has happened to the missing co-owner.
235
Passing of share in tenants in common
Upon death, the share of a tenant in common passes according to their will or to close relatives if there is no will.
236
What does the seller's solicitor need to provide if the missing co-owner has died?
Certified copy of the death certificate.
237
How did the co-owners hold the legal title to the property?
As joint tenants.
238
What can the buyer assume in registered land regarding the equitable joint tenancy?
It was not 'severed' prior to the death of the co-owner, unless stated in the Proprietorship register.
239
What needs to be done to overreach the equitable interest of the deceased co-owner?
Appoint a second trustee.
240
How can the appointment of the second trustee be made?
In the transfer of the property or by separate deed of appointment.
241
What happens if the buyer pays the purchase price to at least two trustees on completion?
The equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of it.
242
What should the contract provide for regarding the appointment of the second trustee?
For the purposes of the transfer.
243
How can it be proven that the deceased co-owner's interest passed to the surviving co-owner?
By producing certified copies of the grant of probate and the assent from the PRs to the surviving co-owner as beneficiary.
244
Is it necessary to appoint a second trustee if there are two or more legal owners remaining?
No, overreaching will take place as the purchase price will be paid to at least two trustees on completion.
245
What do restrictive covenants do?
Prevent land from being used in particular ways.
246
Who are restrictive covenants binding on?
Successors in title to the original parties.
247
Where do restrictive covenants appear in registered land?
In the Charges register.
248
What are the buyer's solicitors' options?
Factors to consider.
249
Who currently owns the property with the benefit of the covenant?
Ask the seller.
250
Can the buyer come to an arrangement with the owner over the proposed use?
Ask the owner.
251
What is a possible solution for a breach of covenant?
Obtain a restrictive covenant insurance policy.
252
When is a restrictive covenant insurance policy not appropriate?
If the person with the benefit of the covenant is likely to object.
253
What is another option for modification or discharge of the covenant?
Apply to the Upper Tribunal (Lands Chamber).
254
What are the grounds for applying to the Upper Tribunal?
Obsolete covenant, no practical benefit, contrary to public interest.
255
What is a potential drawback of applying to the Upper Tribunal?
Not quick or cost-effective.
256
Are the options mutually exclusive?
Yes, they can be.
257
What is a positive covenant?
Obligation to carry out works or incur expenditure.
258
Where do positive covenants appear in registered land?
Charges register.
259
Who does a positive covenant always bind?
The original covenantor.
260
Does the burden of a positive covenant run to a successor in title?
No, it does not run with the property.
261
What is a chain of indemnity?
A binding agreement.
262
Is a chain of indemnity always binding?
Not necessarily.
263
What is a positive covenant?
A binding obligation on the property owner.
264
Is a positive covenant binding on a new buyer?
No, not at first sight.
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What is an indemnity covenant?
A covenant that allows the original covenantor to recover losses from their buyer if the covenant is breached.
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What is a 'chain of indemnity'?
A series of indemnity covenants from the original covenantor to the current seller of the property.
267
What can be checked to see if the current seller gave an indemnity covenant?
The entry in the Proprietorship register in registered land.
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What does the entry in the Proprietorship register indicate?
That the transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.
269
What does the seller give at the time of purchase?
An indemnity covenant.
270
What does the seller require from their buyer in the transfer of the property?
An equivalent indemnity covenant.
271
What happens if the buyer does not observe and perform the positive covenant?
They will be liable to the seller in contract.
272
What are unknown covenants?
Covenants whose nature and wording is unknown.
273
Why are unknown covenants often present?
Because they were in an older deed that has been lost.
274
What does the entry in the Charges register indicate about unknown covenants?
That the details were not available when the property was first registered.
275
What is the safest option when dealing with unknown covenants?
To assume that the covenants are restrictive and will be binding on the buyer.
276
What should be considered when dealing with problematic restrictive covenants?
The options for dealing with them.
277
What is often the most cost-effective course of action when dealing with problematic restrictive covenants?
Obtaining an indemnity insurance policy.
278
What is a defect in title?
A problem or issue with the legal ownership of a property.
279
When should the seller disclose a defect in title?
In the contract, to prevent the buyer from objecting.
280
Is the seller obligated to disclose a defect in title?
No, as long as they don't mislead the buyer.
281
What is a mortgage?
A loan secured by a property.
282
Is a mortgage usually a problem in property sales?
Rarely.
283
What does the seller usually intend to do with the mortgage?
Discharge it using the sale proceeds.
284
What condition must be met for a buyer to commit to buying a property with a mortgage?
They must be satisfied that the seller will discharge the mortgage on completion.
285
How can you tell if a registered property is subject to a mortgage?
There will be two entries in the Charges register, one for the date and purpose of the charge, and the other for the lender's identity.
286
What is a restriction in the Proprietorship register?
A limitation preventing the borrower from disposing of the property without the lender's consent.
287
What should the buyer's solicitor check regarding the mortgage?
That the contract states the property is being sold free of the mortgage, and that the seller's solicitor will discharge it on completion.
288
What is a lease?
A legal agreement granting possession of a property for a specified period.
289
Is the existence of a lease a problem for all buyers?
No, it depends on the buyer's expectations and intentions for the property.
290
When is the existence of a lease a problem for a buyer?
When they expect the property to be sold with vacant possession.
291
What is the term for a lease that lasts more than 7 years?
A lease for a term of more than 7 years.
292
What are third party interests?
Interests that should be registered against the landlord's title.
293
How are protected interests recorded?
As notices in the Charges register.
294
When do protected interests bind the buyer?
If they are protected by the date of property transfer registration.
295
What types of leases may be enforceable as overriding interests?
Legal leases for a term not exceeding 7 years and equitable leases where the tenant is in actual occupation.
296
What should the buyer's solicitor do if a lease is revealed during title investigation?
Report it to the buyer.
297
What should the buyer's solicitor check regarding a lease?
That its existence and terms are compatible with the buyer's proposed use of the property.
298
What are notices in registered land?
Entries in the Charges register regarding the burden of an interest affecting a registered estate or charge.
299
What are the two types of notices?
Agreed notices and unilateral notices.
300
How are agreed notices put on the register?
With the agreement of the registered proprietor.
301
When are unilateral notices used?
When the registered proprietor has refused consent or has not been asked about it.
302
Does the entry of a notice guarantee the validity or existence of the interest?
No, it does not.
303
What rights does a notice give the person who registers it?
None over the property itself.
304
What does a notice serve to ensure?
The protection of the priority of the interest referred to in the notice against subsequent interests.
305
What are home rights?
Statutory rights for a non-owning spouse or civil partner to occupy the matrimonial home.
306
Do home rights create an interest in land?
No, they do not.
307
When does a home right bind a buyer in registered land?
If it is protected by a notice in the Charges register by the date of property transfer registration.
308
What is a home right?
A right held by a non-owner occupier of a property.
309
What should the seller do if a home right is revealed?
Require the non-owning occupier to release all rights and agree to vacate.
310
How is the release of home rights usually handled?
In the contract for the property sale.
