3): Steps in Progressing a Freehold and/or Leasehold Property Transaction to Exchange of Contracts Flashcards
What are the Standard Conditions of Sale (SCS)?
Standardised terms for sale/lease contracts (residential & small commercial).
Latest edition used per Law Society Conveyancing Protocol.
May be amended to reflect:
Current law.
Client instructions.
What key amendments to the SCS might be needed?
- Specified encumbrances:
seller must list restrictive covenants/easements. - Title guarantee:
Full: land is unencumbered.
Limited: seller not aware of other interests.
- Deposit & holding method:
Usually 10% deposit.
Held by seller’s solicitor as stakeholder (unless amended).
What are the SCPC and when are they used?
Based on SCS (3rd Ed.) but tailored for complex commercial transactions.
Used where:
Occupational leases involved (e.g. rent reviews).
Tax flexibility/options needed.
Parties may adopt/modify them fully or partly.
Aims to balance interests of buyer and seller.
What topics are covered in General (SCS 1)?
Definitions, joint parties, notices, VAT, sub-sales, 3rd party rights.
What is covered under Formation (SCS 2)?
Date, deposit, auctions.
What falls under Matters Affecting the Property (SCS 3)?
Encumbrances, physical state, leases.
What does Title and Transfer (SCS 4) include?
Proof of title, requisitions, timetable, defining property, rents, transfer process.
What is covered under Risk, Insurance & Occupation (SCS 5)?
Insurance responsibility (5.1).
Buyer’s occupation before completion (5.2).
What’s included under Completion (SCS 6)?
Completion date, arrangements, title deeds, rent receipts, payment methods.
What is covered in Remedies (SCS 7)?
Errors, late completion, post-completion, notices to complete (buyer & seller failures).
What is in Leasehold Property (SCS 8)?
Existing leases, new leases, consents.
What do Part 1 SCPC conditions include?
Apply unless varied.
Cover:
SCPC 1: Definitions, notices, assignment.
SCPC 2: VAT.
SCPC 3: Formation (date, deposit, auctions).
SCPC 4: Encumbrances, property condition.
SCPC 5: Leases (management, liability).
SCPC 6: Rent reviews, lease renewals.
SCPC 7: Title & transfer (proof, requisitions).
SCPC 8: Insurance (responsibility, reversioner).
SCPC 9: Completion (payment, notice, deeds).
SCPC 10: Remedies (omissions, late completion).
SCPC 11: Leasehold property.
SCPC 12: Contents (fixtures/chattels).
What are Part 2 SCPC conditions?
Apply only if expressly incorporated.
Cover:
VAT (SCPC A)
Capital allowances (SCPC B)
Reversionary flat interests (SCPC C)
What are special conditions and why are they added?
Tailor contract to specific circumstances or vary standard terms.
Prevail over conflicting standard conditions.
What do special conditions often cover?
Title defects/disclosure.
Full list of encumbrances.
Limited/no title guarantee.
Deposit variation (e.g. not 10%).
Stakeholder vs agent deposit holding.
VAT treatment if applicable.
Fixtures/fittings exclusion.
Indemnity covenants by buyer.
How much deposit is usually payable and how?
Normally 10% of price on exchange.
Paid electronically (solicitor to solicitor).
Who holds the deposit and in what roles?
Held by seller’s solicitor as either:
Stakeholder: can’t release until completion.
Agent: may release earlier (unless restricted).
What happens if the buyer fails to complete?
Seller may forfeit deposit if held as agent.
Interest payable under SRA Accounts Rules.
What is the stakeholder position on deposit use and interest?
Can’t release deposit before completion.
Can use it for seller’s house purchase if buyer agrees & terms match.
Interest paid to seller on completion.
What does it mean if deposit is held by seller’s solicitor as agent?
Can be released to seller on exchange for any use.
Needs special condition in the contract.
Risk: buyer may lose deposit if seller fails to return it on failed completion.
When does risk pass to the buyer and what should they do?
Risk passes on exchange under SCS/SCPC.
Buyer should insure the property from exchange.
Is the seller obliged to insure the property?
No obligation (unless required by lease, lender or contract).
What if both buyer and seller have insurance?
Contract should prevent buyer’s insurer reducing payout.
Price may be reduced by dual cover value.
When is VAT not payable in property transactions?
Residential sales (private sellers).
New homes = zero-rated.
Old commercial property (over 3 yrs) = exempt unless option to tax exercised.
