Ch3: Drafting the contract Flashcards
What are the 3 requirements for a binding contract for the sale of land?
Law of Property (Miscellaneous Provisions Act 1989)
• be in writing
- incorporate all the terms which the parties have expressly agreed (either in one document or, if contracts are exchanged, in each document);
- be signed by, or on behalf of, each party to the contract
What does SCPC 1.4 say?
Assignment
The contract is personal to the buyer, which means the buyer cannot transfer the right to buy the property to a third party.
What does SCPC 1.5 say?
Third Party Rights
The Contracts (Rights of Third Parties) Act 1999 does not apply to the contract.
What does SCPC 7.6.5 say?
Indemnity from buyer
Requires the buyer to give an indemnity to the seller in the transfer deed.
This is when if there is a Note in the Proprietorship Register of the title to the property confirming that the seller gave an indemnity covenant.
What does SCPC 9.8 say?
Notice to Complete
Time is not of the essence for a contract under the SCPS.
To force the completion of the sale a seller may serve a notice to complete on the buyer if the buyer has not completed on the completion date set out in the contract.
What does SCPC 10 say?
Sets out the remedies available to the seller and the buyer in the event of default by the other party.
What does SCPC 10.1 deal with?
Deals with remedies available in the case of misrepresentation
What does SCPC 10.3 deal with?
Remedies available in the case of late completion
What does SCPC 3.2.1 say?
The buyer will pay on exchange a deposit of 10% of the purchase price.
How should you draft the clause if you don’t want the SCPC apply?
‘SCPS 3.2.1 shall not apply and on or before the date of this contract …..’
What should you look out for on the Proprietorship Register relating to that the seller must have legal title to the property?
The ‘registered proprietor’ showing on the Proprietorship Register may not be the legal owner.
What are the 3 requirements for the seller in a sale of property contract?
1) The seller must have legal title to the property
2) All legal owners must be parties to the contract
3) The seller must have a legal personality
What should you check when a non-limited liability partnership is a seller?
That is not a legal entity and does not have a legal personality.
The Seller in the contract would be a maximum of four named individual partners
The appropriate partners will be determined by the partnership agreement.
What should you check about the buyer on a contract?
It is essential that you include all buyers in the draft contract, or the seller could refuse to add buyers after exchange of contracts.
What happens if the contract did not clearly describe the land?
The contract could be void for uncertainty
What does s.62 of the LPA 1925 say?
The land and everything attached to it and benefitting the property will pass automatically on the sale of the land without having to be set out in the contract and transfer deed.
What’s an incumbrance
Something which burdens the land and may restrict the owner or occupier from using the land in a certain way or may restrict the ability to seller freely.
Examples of latent incumbrance:
Covenants (both positive and restrictive)
Easements burdening the land being sold
An obligation not to cause a nuisance
A neighbour having a right to use pipes under the land being sold (an easement burdening the land)
What are defects in title?
Matters that bring into question the seller’s ownership of the property, or the rights and burdens that affect the property.
How are defects come about?
Missing title deeds.
If a deed containing restrictive covenants has been lost it will not be clear how the buyer’s use of the property might be restricted.
What does the seller not have a duty to disclose to the buyer?
Patent incumbrance
Physical defects
i.e physical problems with the property such as rising damp or subsidence.
The buyer should be able to ascertain such problems from their survey.
Which SCPS contains a list of the incumbrance the property is being sold subject to?
SCPC 4.1.2
What are the incumbrances subject to which the property is sold?1
- 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
- matters, other than mortgages, disclosed or which would have been disclosed by the searches and enquires which a prudent buyer would have made before entering into the contract
- public requirements
What do you need to ensure for the seller’s mortgage pre-exchange of contract?
SCPS 4.1.2(d) gives effect that the buyer will buy free of any mortgage the seller has on the property, so there is no need for a special condition in the contract saying that the seller will release the mortgage.
