13. Conveyancing Overview Flashcards
1
Q
What are the two types of a leasehold transaction?
A
- Grant of a lease (purchasing a new lease)
- Assignment of a lease (transferring an existing lease and whatever term is left on the lease)
2
Q
What is the number of years left to run on a lease called?
A
The ‘residue’ of the lease.
3
Q
Whose conveyancer usually drafts the lease and who drafts the contract?
A
The landlord’s/seller’s conveyancer for both.
4
Q
What are the questions a landlord’s conveyancer needs to ask the landlord before drafting a lease?
A
Information about the freehold estate and terms the landlord wishes to impose in the lease:
1. Whether the landlord has capacity to grant a lease (check with lender)
2. Incumbrances in title
3. Length of term
4. Amount of rent
5. How often rent is reviewed
6. Restrictions imposed on tenant
5
Q
If a tenant grants a sub-lease, what will the tenant’s lease be known as?
A
The head lease, if the only superior title above that is freehold.
6
Q
What is another name for a sub-lease?
A
An underlease
7
Q
What is the exception to the rule that legal leases must be created by deed and comply with the formalities in s1 Law of Property (Miscellaneous Provisions) Act 1989?
A
Leases not exceeding three years that comply with specified conditions set out in s54 Law of Property Act 1925.
8
Q
What are the usual clauses found in the middle of the contract called?
A
Standard Conditions of Sale
9
Q
What will conveyancers follow when it comes to lender’s requirements?
A
UK Finance Mortgage Lenders’ Handbook
10
Q
What are the six key documents you should be familiar with when handling a conveyancing matter?
A
TA6 - Property Information Form
TA10 - Fittings and Contents Form
Contract incorporating the Standard Conditions of Sale (5th edition – 2018 revision)
TA13 - Completion Information and Undertakings
TR1 - transfer form (transfer the title) - OR new lease document
AP1 - application to change the register
11
Q
Outline the conveyancing process
A
See picture.
12
Q
What are the five stages of a conveyancing transaction?
A
Pre-contract
Exchange
Pre-completion
Completion
Post-completion
13
Q
What 6 preliminary steps should you take for a seller in the Pre-contract Stage (1st stage)?
A
- Take instructions/due diligence
- Write to estate agent (for memorandum of sale and EPC) and buyer’s conveyancer.
- Preps TA6 and TA10 for package
- Deduces seller’s title
- Draft contract and lease (if new), or refer to the leasehold title (if assigning).
- Obtain a early redemption statement for mortgage from lender
14
Q
What 6 preliminary steps should you take for a buyer in the Pre-contract Stage (1st stage)?
A
- Take instructions/due diligence
- Pre-contract searches
- Investigate title
- Approve draft contract
- Give survey (and co-ownership) advice
- Check mortgage offer
15
Q
What is done in the ‘Exchange’ stage (2nd stage)?
A
- Conveyancers exchange contracts (after which both seller and buyer are legally bound)
- Buyer pays a deposit on exchange of usually 10% of purchase price
16
Q
What 3 steps should you take for a seller in the ‘Pre-completion’ stage (3rd stage)?
A
- Send back replies to TA13 form to buyer
- Ensure seller signs TR1 form, sent by buyer’s conveyancer
- Obtain up-to-date redemption figures on mortgage(s)
17
Q
What 3 steps should you take for a buyer in the ‘Pre-completion’ stage (3rd stage)?
A
- Draft TR1 form and send to seller with TA13 form.
- Carry out pre-completion searches to check nothing has changed
- Obtain the buyer’s funding to purchase the property (usually requesting drawdown of the mortgage advance from a lender) and do mortgage deed.
18
Q
What is done in the ‘Completion’ stage (4th stage)?
A
On moving date:
- Buyer’s conveyancer pays the completion money to the seller.
- On receipt of the funds, the seller’s conveyancer will contact the estate agent to release the keys to the buyer.
- Seller will move out and buyer will move in.
19
Q
What 2 steps should you take for a seller in the ‘Post-completion’ stage (5th stage)?
A
- Pay off the seller’s mortgage with the 90% of purchase money from buyer, if any
- Date and send the TR1 transfer document to the buyer’s conveyancer
20
Q
What 2 steps should you take for a buyer in the ‘Post-completion’ stage (5th stage)?
A
- Submit the SDLT return along with the payment of any stamp duty land tax that is due to HMRC, within 14 days. (LTT is 30 days)
- Make the AP1 application to change ownership of the property with HMLR.
21
Q
What is an EPC and how long are they valid?
A
An EPC is an Energy Performance Certificate, which gives the home an energy efficiency rating between A and G (least efficient). From the Energy Performance of Buildings (England and Wales) Regulations 2012.
EPCs are valid for 10 years, or until a newer EPC is provided. The EPC can be reused as many times as needed within the 10-year period.
22
Q
What does it mean to “deduce” title?
A
Deducing title means that the seller produces documentation (including the lease) to the buyer, which demonstrates that they have good title to the property they are selling.
If unregistered: obtain deeds from lender/seller and provide an epitome of title to buyer
If registered: obtain office copies of title from HMLR and provide to buyer
23
Q
What does investigating title mean?
A
Investigating title means that the buyer examines the title (including lease and raises any queries, called requisitions on title or pre-contract enquiries on title.
24
Q
How is title deduced in unregistered conveyancing?
A
The seller’s conveyancer will produce an epitome of title for the buyer’s conveyancer. This is a chronological list of the documents of title which will demonstrate the seller’s ownership together with a photocopy of those documents attached.
25
What are the property checks?
- property description
- title plan
- title number (same as contract)
- estate (freehold/leasehold)
- easements
- boundaries
26
What are the proprietorship checks?
- class of title (absolute, possessory, good leasehold)
- names of proprietors
- restrictions (e.g. Form A restriction)
27
What are the charges checks?
- restrictive covenants
- easements
- mortgages (need to be paid off before)
- past/anticipatory breaches of restrictive covenants
28
According to which legislation, how must a contract for the sale of land be created?
s2 LP(MP)A 1989 provides that a contract for the sale of land must:
- be in writing
- incorporate all terms agreed between parties and
- be signed by, or on behalf of, each party.
29
What are the “standard conditions of sale” (SCS)?
Standard conditions of sale appear on the contract of sale, in the middle section. Any amendments to these appear in the special conditions on the final page, which override the standard conditions.
30
Make notes on SCS 1–9 from the standard conditions – what do they cover?
The - Terms
FreeDom - Formation/Deposit
Disguises - Disclosure
The - Title
Ringing - Responsibility/Insurance
Chain - Completion
Rattling, - Remedies
Listlessly - Leasehold Property
Calling - Contents
SCS 1: Defines Terms - defines the terms used in the general conditions
SCS 2: Formation/Deposit - deals with the formation of the contract and deposit conditions
SCS 3: Seller's duty to disclose - deals with the disclosure of incumbrances from the seller
SCS 4: Deducing/investigating Title - deals with lime limits for deducing/investigating the title and provisions about the requirements of proof of title and about title guarantees.
SCS 5: Pending completion/insurance - deals with responsibility of the property pending completion and insurance
SCS 6: Completion - deals with timing and mechanics of completion
SCS 7: Remedies - deals with available remedies of breach of contract
SCS 8: Leasehold Property - existing leases or new leases and consent to let, assign or sub-let.
SCS 9 : Contents
31
What must the landlord provide the tenant with if the term of the new lease will exceed seven years?
According to SC 8.2.4, the landlord shall deduce a title which would enable the tenant to register the lease as HMLR with absolute title.
32
Outline 'Leasehold: New Leases' SCS 8.2.3, 8.2.4 and 8.2.5?
SCS 8.2.3: The draft lease must be attached to the contract.
SCS 8.2.4: Where the term of the new leases exceeds 7 years, the landlord shall deduce a title (the freehold title) which enables the tenant to register the lease at the HMLR with absolute title.
SCS 8.2.5: The seller must engross (print a final copy) the lease and send it to the buyer at least 5 working days before the completion date.
33
Outline 'Leasehold: Consent' SCS 8.3.2 and 8.3.3 for existing leases?
SCS 8.3.2: The seller is to apply for consent at their expense and the buyer should provide any references required.
SCS 8.3.3: Either party can rescind the contract by notice to the other party if the consent is not forthcoming by 3 working days before completion.
34
What does SC 4.6.3 state?
Standard Condition 4.6.3 requires the transfer to contain a statement that the covenants for title as contained in s4 Law of Property (Miscellaneous Provisions) Act 1994 will not extend to any breach of the tenant’s covenants relating to the physical state of the property. Any implied covenant which makes the seller liable to the buyer for any breach of the lease terms about the condition of the property is therefore excluded.
35
Where is the clause providing for an indemnity covenant whereby the tenant afford the landlord indemnity against any future breaches of covenants contained in the freehold title usually included in the contract?
In the special conditions section.
36
What would you put as the title number in a contract for a new lease?
You would put the seller's freehold title number, as the new lease will get its own title number after registration.
37
How many years worth of service change accounts should be inspected?
Three years' service charge accounts.
38
How does the title guarantee and the class of title differ?
The HMLR class of title is the quality of the title awarded by HMLR on first registration and the extent of the state guarantee of title. This can be an absolute title, possessory title, qualified title and good leasehold title.
The title guarantee relates to implied covenants given from seller to buyer, which give possible remedies where the buyer discovers they have been given a defective title. This can be a full title guarantee or a limited title guarantee.
39
Explain the two title guarantees?
1. Full Title Guarantee - seller guarantees property
2. Limited Title Guarantee - seller cannot guarantee the property is not subject to any charges and adverse interests (usually when they have no personal knowledge of the property)
40
Explain the 4 classes of title in regard to leasehold properties?
1. Absolute title - best form, where freehold title is also absolute.
2. Possessory title - adverse possession or lost title deeds, upgraded after 12 years.
3. Qualified title - specific defect stated on the title, which isn't guaranteed by state.
4. Good leasehold - freehold title is not registered, less than absolute, or is not submitted at time of application.
41
What is the significance of a non-owning occupier when it comes to the contract for sale? Which SC deals with this?
An adult who is living in a property which is being sold but who does not appear on the registered title is the *non-owning occupier*.
Special Condition 7 asks the occupier to sign confirming that they will move out of the property on completion.
42
What will a new leases “pre-contract package” contain? 5 main, 4 possible.
The pre-contract package is prepared by the seller's conveyancer and contains:
- Draft contract in duplicate
- Draft lease and plan in duplicate
- Evidence of seller's title
- TA6: Property information form
- TA10: Fitting and contents form
+ 4 other forms, if applicable:
- Planning permission
- Guarantees/NHBC guarantee
- Results of searches/enquiries made by seller to landlords/management company from questionnaire
- EPC certificate
43
What will an existing lease “pre-contract package” contain? 8 main, 6 possible.
The pre-contract package is prepared by the seller's conveyancer and contains:
- Draft contract in duplicate
- Copy of lease including lease plans
- Evidence of seller's leasehold title
- Evidence of seller's freehold title
- TA6: Property information form
- TA7: Leasehold information form
- TA10: Fitting and contents form
- LPE1: Management information
+ 6 other forms, if applicable:
- Consent to assign
- Copy of share certificate
- Planning permission
- Guarantees/NHBC guarantee
- Results of searches/enquiries made by seller to landlords/management company from questionnaire
- EPC certificate
44
What kinds of things must the buyer's conveyancer check on a lease for unregistered/registered property?
Easements (positive/negative)
Restrictive covenants
Class D(ii) land charges for unregistered title
Future rent review/increases
Restrictions on alientation
Class of title
Lender demands (deducing freehold title first)
45
What are the kinds of things the lender will want to check before providing a mortgage?
Freehold title is deduced with absolute title
Adequate insurance
Proper repairing covenants
46
What is a TA6 form?
Property Information Form
47
What is a TA7 form?
Leasehold Information Form
Designed to be completed by the seller.
48
What is a TA10 form?
Fittings and Contents Form
49
What is a LPE1 form?
Management Information Form
Designed to be completed by the landlord or management agent/company.
E.g. Contact details, who deals with day-to-day maintenance, service charges/ground rent
50
What is a LPE2 form?
Buyer's Leasehold Information Summary
Outlines the buyer's leasehold responsibilities, e.g. costs during property ownership (rent, service charges, insurance premium), increases in service charges.
51
What is a DJP form?
A DJP is a death of joint proprietorship form that goes to HMLR with the death certificate to remove their name from the proprietorship register and make the surviving co-owner the sole holder of the legal estate.
52
How is a new lease executed?
The seller engrosses the lease and an exact copy (counterpart lease).
The actual lease is executed by the seller and is given to the buyer on completion.
Counterpart lease is sent to buyer at least 5 working days before the contractual completion date. On completion, this is executed by buyer and given back to landlord for a record of the terms and covenants in the lease.
53
Why is no transfer deed required for a new lease?
Because it is a brand new title being created by the new lease, so no transferring occurs.
54
What is the difference between a Notice and a Restriction?
A notice:
- protects third party rights
- appears in the charges register
- notifies a potential buyer of a burden of an interest in the land, e.g. a mortgage lender.
A restriction:
- prevents a disposition (e.g. sale, transfer, new mortgage)
- appears on the proprietorship register
E.g. A Form A restriction, which notifies the buyer that there is a co-ownership situation which is held as tenants in common.
55
Can a notice or a restriction prevent the legal owner from selling the property?
Only a restriction (Form A restriction) can prevent the legal owner from selling the property. A notice does not.
56
What is the FR1 form?
The first registration for previously unregistered titles.
57
What is an AP1 form?
The application form to change the register for registered land.
58
What are the two types of forms required for a local search and what are they for?
LLC1 - local land charges search.
CON29 - enquiries of the local authority
59
What is the difference between CON29 and CON29O forms?
The CON29 form is half of the standard local search (the other being the LLC1 form).
The CON29O form is for options enquiries of the local authority.
60
What is the name of the standard drainage and water enquires form?
CON29DW
61
What is the coal mining search form called?
CON29M
62
What are the ways of exchanging contracts?
Physical Exchange or Telephone Exchange (see formulae below).
Formula A: One conveyancer holds both signed parts of the contract
Formula B: Most common, each conveyancer holds their own client's part contract.
Formula C: For linked transactions/chains.
63
Where do the telephone exchange formulae come from?
The Law Society
64
What is the Law Society formula A?
Formula A is used where one conveyancer holds both signed parts of the contract.
1. One conveyancer telephones the other.
2. They agree the completion date
3. The conveyancer holding the contracts confirm that they are identical
4. They insert the completion date in both contracts
5. They agree to exchange the contracts (binding moment)
6. The conveyancing holding the contracts undertakes to send out their client's signed contract that day (+ buyer's deposit)
7. They prepare a memorandum to record the exchange
- the date and time of exchange;
- the use of Formula A and the exact wording of any variations adopted;
- the completion date;
- the deposit to be paid; and
- the identities of the parties to the conversation.
65
What is the Law Society formula B?
Formula B (most common formula) is where each conveyancer holds their own client’s part contract.
1. One conveyancer telephones the other.
2. They agree the completion date
3. They agree that their contracts are identical
4. They insert the completion date
5. They agree to exchange the contracts (binding moment)
6. They undertake to send out their client's signed contract that day
7. The buyer undertakes to send any deposit due.
8. They prepare a memorandum to record the exchange, including:
- the date and time of exchange;
- the use of Formula B and the exact wording of any variations adopted;
- the completion date;
- the deposit to be paid; and
- the identities of the parties to the conversation.
66
What is the Law Society formula C?
Formula C is designed for use in linked transactions (i.e. where there is a chain).
- Each conveyancer holds their own client’s signed parts of the contract and agrees to release the contracts for exchange for a specific period, so as soon as the party at the end of the chain is ready, all contracts can be exchanged almost simultaneously.
- Must obtain the client’s specific authority before exchanging contracts on a Formula C basis.
Part 1:
1. The two conveyancers confirm that they hold their clients’ signed contracts.
2. The buyer’s conveyancer undertakes to exchange if, by a set time that day, the seller’s conveyancer so requests.
Part 2:
1. When the seller’s conveyancer requests exchange by the agreed time, the contract is binding.
2. They undertake to send out their client's signed contract that day
3. The buyer undertakes to send any deposit due.
4. They prepare a memorandum to record the exchange, including:
- the date and time of exchange;
- the use of Formula C and the exact wording of any variations adopted;
- the completion date;
- the deposit to be paid; and
- the identities of the parties to the conversation.
67
Which Law Society formula would be used in no chain properties?
Formula B
68
Which Law Society formula would be used in properties with a chain?
Formula C
69
What steps must be immediately taken by the buyer’s conveyancer following exchange and when must they be done by?
They must do the following ON THE DAY of exchange (unless agreed separately):
- send their client's signed part of the contract
- send the deposit
- ring their client and confirm, maybe remind them to get buildings insurance on risk immediately.
70
What is an “estate contract” and when is it appropriate to register one?
Following exchange, the buyer is not yet the legal owner of the property but is now the owner in equity (via an estate contract). They may register their estate contract by way of a notice, usually if there is a long period of time between exchange and completion.
71
What is a TA13 form? Who fills it out?
The Completion Information and Undertakings Form. It is sent from the buyer's conveyancer to the seller’s conveyancer (at the same time as the draft TR1), who will return it with replies before Completion.
72
What is the OS1 and OS2 form? Who fills them out?
The two main pre-completion forms - official searches with priority. The buyer’s conveyancer fills them out and gets the results as an 'official search certificate'.
OS1 - when the buyer is purchasing the whole of the land in the registered title
OS2 - when the buyer is purchasing part of the land in a registered title (plot in a development)
73
What is form K15?
Land charges search for unregistered land, e.g. second mortgage.
74
What is form K16?
Bankruptcy search form.
75
What is form TR1 and who completes this?
Form TR1 is the transfer of the whole of land in a registered title form.
It is filled out by the buyer’s conveyancer and sent to the seller’s conveyancer in duplicate at the same time as the Completion Information and Undertakings Form (TA13).
76
When is a TR1 form not required?
When a new lease is created. There is no need for a transfer deed as it is a brand new title being created by the new lease. The new lease document will suffice.
77
What is the priority period for OS1/2 searches?
The OS1/2 priority period means that for 30 days after completion, no other party can make any changes to the title. You have priority to register your interest first for 30 days following the search.
Usually, this search is done the day before completion, so there are 29 days to register the interest.
78
What are the three methods of completion?
In person
By agent
By post (most common)
79
What must be received at least 3 working days before exchange?
The landlord's consent to sell a lease.
80
What must be received by the buyer at least 5 working days before completion?
Replies to TA13
A counterpart lease
81
What will the tenant's conveyancer receive on completion?
1. The lease
2. Copy docs marked as examined against original deeds
3. Consent from lender/landlord
4. Misc docs, like guarantees
82
What will the landlord's conveyancer receive on completion?
1. Purchase price (premium and any rent due at that time)
2. Counterpart lease
83
How is completion achieved by post? What is the name of the process?
The Law Society's Code for Completion by Post.
If completing by post, the seller's conveyancer will complete for both lawyers officially.
1. Seller's conveyancer confirms they are authorised by the seller to receive the money.
2. Buyer's conveyancer will send any relevant docs and undertakings (deeds, docs, mortgage discharge undertakings)
3. Seller's conveyancer will confirm that will complete as soon as these funds have arrived.
4. Seller's conveyancer undertakes that they will send written confirmation that completion has taken place and will send the deeds and docs to buyer's conveyancer.
84
When would a LTR form be used?
In notifiable cases, the buyer’s conveyancer must deliver a Land Transaction Return (LTR) to HM Revenue & Customs (HMRC) together with any duty payable (SDLT1).
85
What two types of SDLT needs to be paid for leasehold properties with new leases?
When you buy a new leasehold you pay SDLT on both the:
- purchase price of the lease (the ‘lease premium’)
- value of the annual rent you pay (the ‘net present value’)
If you buy an existing (‘assigned’) lease, you only pay SDLT on the lease price (or ‘consideration’/premium).
86
In relation to a leasehold buyer, what are the current (from September 2022) SDLT rates?
Up to £250,000 - 0%
Over £250,000 to £925,000 - 5%
Over £925,000 to £1.5 m - 10%
Over £1.5 m - 12%
87
What is the position with first time buyers and SDLT?
No SDLT is payable on the purchase price up to £425,000 and 5% is payable on any portion from £425,00 to £625,000.
If the property is over £625,000, then they will not qualify for the relief.
88
What is the percentage rise in SDLT for additional residential properties?
3% above the normal rates for each value band.
89
What is the percentage rise in SDLT for non-residents?
2%
90
How do you work out the SDLT due for the rent of a new lease?
You work out the Net Present Value (NPV), based on the value of the total rent over the life of the lease.
91
What is the SDLT rates for the net present value of the rent rates for new leases?
Up to £125,000 = 0%
Over £125,000 = 1% of the value that exceeds £125,000
92
What is the deadline for submitting an LTR for a lease?
The buyer's conveyancer must submit a LTR + any SDLT due within 14 days of the date of the lease.
HMRC will issue a SDLT5 certificate to evidence compliance with SDLT requirements, when registering the property.
93
How is LTT in Wales different to SDLT in England?
The Welsh government has set the following rates and bands which apply in relation to LTT for freehold residential property. The rates apply to the portion of the price paid in each band.
£0 to £225,000 - 0%
£225,000 to £400,000 - 6%
£400,000 to £750,000 - 7.5%
£750,000 to £1.5 m - 10%
£1.5 m + - 12%
94
What is the deadline for submitting an LTT return?
LTT returns must be filed and any tax paid within 30 days from the day after the completion date.
The LTT certificate will issued to evidence compliance with LTT requirements, when registering the property.
95
Does a buyer become the legal owner on completion?
No, the buyer will not yet be the legal owner of the land. Until registration, the transfer will take effect only in equity and the buyer will only have a beneficial interest in the property.
96
When must a lease be registered?
If it is:
1. granted for more than 7 years
2. granted for a term of years 3 months from the grant of lease (e.g. student signs tenancy agreement in June but doesn't take possession until October)
3. granted out of registered land where the right to possession is discontinuous (e.g. holiday timeshares)
97
How long does a tenant have to complete a first registration?
2 months, using FR1 form.
98
Identify and explain the different documents which will be sent with the registration application for an existing lease.
Form AP1 must be accompanied by:
- certified copy of the lease
- certified copy of the mortgage deed
- form DS1 to discharge a mortgage by electronic means if there is a mortgage to be discharged;
- form DI for disclosable overriding interests
- form TR1 (certified copy of the transfer to the buyer);
- LTR certificate (SDLT5 or LTT certificate for properties in Wales);
- form JO (joint ownership form)
99
Do original documents need to be sent to HMLR?
From June 2014, HMLR has only required certified copies with form AP1.
Originals can be sent if wished but they will be scanned and destroyed. This has brought the requirements for postal applications into line with the requirements for electronic AP1 applications through e-DRS.
100
If a lease is not required to be registered, but it has express easements in favour of the tenant, can they be registered?
Yes, they must be registered against the landlord's title as a notice (agreed or unilateral), even if the lease is not registered.
101
What is a TID?
A TID stands for title information document (TID). Following completion of a registration, HMLR issues a TID.
102
In a chain transaction, does it matter whether the sale or the purchase comes first?
YES. The sale must be completed before the purchase, so that the funds are available for use on the purchase.
103
What is a means of parcel clause?
It explains exactly the subject of the lease, e.g. which parts of the structure of the building are to be let. The plan will outline the boundaries of the premises. Easements will be accurately defined in the same way.
104
Can a landlord forfeit a lease on the ground that service charges have not been paid?
No, not without prior court approval of the lawfulness of the service charge.
105
What is the checklist for a conveyancer checking the draft contract package for the buyer?
Check access
Services
Amenities
Check communal services (entry phone, heating)
Service charges
Covenants
Management company
Restrictions on alientation
106
What extra checks would a buyer's conveyancer do before exchange for a new development and lease, on top of the usual searches and enquiries?
Check:
- developer's info sheet
- s38 agreement for roads to new development
- s104 agreement for sewers and water to new development
- Lenders' Handbook
- Companies House if landlord is a company to see if they are solvent
- NHBC cover
107
What does NHBC stand for?
National House Building Council
108
What length of lease is difficult to get a mortgage on?
80 years or fewer.
109
Who deals with the apportionments of rent and service charge and how will they be apportioned?
The seller's conveyancer. It will be apportioned on a daily basis, with the day of completion being allocated to the sellers.
110
If the seller's title is unregistered, how will searches be made?
They will be made against the owners of the leasehold title and the original landlord and against the owners of the freehold estate if that title has been deduced.
111
If the seller's title is registered with good leasehold title, what searches are required?
Land Registry searches (OS1)
AND
Usual unregistered searches in respect of the freehold title if deduced
112
What is the transfer document called in an unregistered transaction?
An assignment
