Chapter 1: Key elements and structure of freehold property transactions - overview

Question 1

what is a freehold?

Answer 1

ownership is capable of lasting indefinitely. Closest thing to absolute ownership.

Question 2

what is a leasehold?

Answer 2

specific period of time by a landlord to tenant

Question 3

what is conveyancing?

Answer 3

process of transfer of title (ownership) to property between the seller (transferor) and the buyer (transferee)

Question 4

what are the stages of conveyancing?

Answer 4

Taking instructions
Pre-contract (investigations/ enquiries)
Exchange of contracts
Pre-completion
Completion
Post- completion

Question 5

what is exchange of contracts?

Answer 5

when the deposit is paid (10% of the purchase price). Both parties become bound to complete the transaction on the agreed completion date.

Buyer gains equitable interest under a constructive trust (protection because not actually in possession)

Until this stage parties are free to withdraw from the transaction (subject to contract)

Once contracts have been exchanged and a party delays/ fails = remedies available.

Question 6

what is completion?

Answer 6

balance of the purchase price is paid. Keys are handed and transfer deed completed

Buyer is entitled to apply to become registered as the proprietor = legal ownership shift.

Land with registered title - transfer does not technically take place until it is registered.

Land with unregistered title - legal transfer does take place but will be void if not registered in 2 months of completion.

Question 7

what must a seller’s solicitor do in the pre-contract stage?

Answer 7

Carries out investigation of title

Undertakes deduction of title for buyer’s solicitor

drafts contracts, supporting documents, replies to standard pre-contract enquiries, respond to additional enquiries/ requisitions on title.

deal with draft amendments, clean copies for signature

request redemption statement from solicitor

Question 8

what does the buyer’s solicitor need to do at the pre-contract stage?

Answer 8

investigation of title

check, approve, amend draft contract

review results of standard pre-contract searches and enquiries

raise additional enquiries and requisitions on title.

Buyers solicitor reports to their client (and possibly their mortgagee) to obtain deposit for exchange of contracts.

Buyer advised to insure the property from exchange of contracts

Question 9

what must both solicitors do at the pre- contract stage?

Answer 9

Arrange for the contract to be signed

Question 10

What is investigation of title?

Answer 10

process where legal title to the property is checked/ examined to ensure that the seller is entitled to sell

Question 11

what does the investigation of title allow for?

Answer 11

Title must be good and marketable

All necessary rights

No materially adverse incumbrances (e.g burdens of easements/ covenants - impact on use/ enjoyment)

Seller’s solicitor completes this process to deduce title (check legal right/ validity) and pre-empt requisitions on title that may be raised

Question 12

what is deduction of title?

Answer 12

seller’s solicitor provides to the buyer’s solicitor proof of the seller’s title / ownership e.g copy of title deeds (unregistered land) or official copies of the register (registered land).

Question 13

what are pre contract searches/ enquiries?

Answer 13

made by the seller’s solicitor for further important information about the property that the seller should know. Pre- contract searches are made of third parties (e.g local authority/ local water).

Question 14

what are requisitions on title?

Answer 14

Part of the investigation of title process. Additional enquiries by the seller’s solicitor.

Results of pre-contract searches and enquiries

Specific questions about an issue that need a solution (e.g building works/ neighbour disputes).

Buyer not able to raise further questions once contracts have been exchanged.

Question 15

what is caveat emptor?

Answer 15

principle that the burden falls on the buyer to investigate title (seller has limited disclosure).

Question 16

What comes after exchange of contracts?

Answer 16

Pre-completion stage

Question 17

what must a buyer’s solicitor do in the pre-completion stage?

Answer 17

Prepare draft transfer deed for approval by seller.

prepare mortgage deed for execution

carries out pre-completion searches/ enquiries from seller / third parties

submits certificate/ report of title to the lender

requests mortgage advance

requests from buyer balance due to complete

deals with amendments to transfer deed from the seller and produces clean copy

Question 18

what does the seller’s solicitor do at the pre-completion stage?

Answer 18

approves draft transfer deed

requests clean copy with amendments

responds to completion information and undertakings form from buyer

arranges for clean copy of transfer deed to be executed by the seller

Question 19

what stage comes after pre-completion?

Answer 19

post- completion

Question 20

what does the seller solicitor do at post - completion stage?

Answer 20

discharges existing mortgages and provides buyer’s solicitor with proof

pay estate agent costs

accounts to client

Question 21

what does the buyer’s solicitor do at post-completion stage?

Answer 21

submits SDLT or LTT return with payment of tax

registration at HM Land registry

registration at CH (if applicable)

Question 22

when/ why do solicitors take instructions?

Answer 22

Detailed instructions at the beginning of the transaction.

Most firms provide a checklist.

Compliance with costs obligations - providing information to clients.

Pre - empt any issues.

Question 23

what instructions are taken from both solicitors in all cases?

Answer 23

full details

estate agent details

details of solicitors acting for other side

property address/ tenure

agreed purchase price/ deposit

fixtures removed/ fittings included

anticipated completion date

details of related sale/ purchase for related sales

EPC

details of occupiers

details of use/ past alterations to property

advise on costs and disbursement - land registry fees

non-residential properties - look at VAT

Question 24

what instructions should the seller’s solicitor take?

Answer 24

estate agents commission/ costs

details of existing mortgages

ask client to complete standard property forms

joint tenants/ tenants in common

liability on CGT or corp tax for companies

Question 25

what instructions should the buyer's solicitor take?

Answer 25

details on proposed mortgage to give generic advice details of the property to advise on survey details of prosed use/ alterations physical situation of the property advise on co-ownership and equitable interest future tax liability

Question 26

what is synchronisation?

Answer 26

cases with sale/ purchase. Contracts on the sale must be exchanged at the same time as contracts on the purchase (same completion date).

Question 27

What is an EPC? Who produces an EPC?

Answer 27

Energy performance certificate From an accredited energy assessor Details: cost, efficiency, recommendations to improve, valid for 10 years. Made available by the seller (before or within 7 days of marketing and in any event within 28 days). listed properties are EXEMPT newbuilds - a PREDICTED energy assessment must be valid

Question 28

who can a solicitor act for in most cases?

Answer 28

the buyer and mortgage lender

Question 29

what can solicitors do in relation to mortgages?

Answer 29

only give generic advice concerning TYPES of mortgage

Question 30

What are the 2 types of mortgage?

Answer 30

Repayment mortgage: Monthly payments of interest and capital. Interest-only mortgage: Monthly payment of interest only Full amount not paid at the end of the term - capital amount remains outstanding.

Question 31

what does a buyer's solicitor need to advise before exchange of contracts?

Answer 31

advised on whether to complete a survey before exchange of contracts

Question 32

what are the 3 types of survey?

Answer 32

Basic valuation Full structural survey Homebuyer's valuation and report/ survey

Question 33

what are the key elements of a basic valuation?

Answer 33

Does NOT assess physical state/ condition of property General purpose to give mortgagee assurance of value, property is worth more than its security - auth by them Simple & cheap - limited value to buyer.

Question 34

what are the key elements of a full structural survey?

Answer 34

Most comprehensive. Details physical assessment of state/ condition Most expensive Worth expense if the property is old, valuable, past/ proposed alterations Used to renegotiate purchase price Results/ any reduction in purchase price must be reported to the lender.

Question 35

What are the key elements of a home buyer's valuation and report/ survey?

Answer 35

In between the above 2 surveys Refers to needs for repairs/ maintenance Physical inspection can be limited to exposed/ accessible areas May not be as useful to a buyer due to limitations ^

Question 36

what factors are considered for a survey?

Answer 36

Age (more than 100 years old) Value Extensions/ alterations Buyer’s plans for construction Whether it is of non-standard construction Former mining area or affected by subsidence (gradual sinking area of land)

Question 37

what happens if defects are found following a survey?

Answer 37

A buyer can withdraw, require completion of works or seek price reduction Reduction must be reported to the the buyer’s mortgagee (may withdraw, offer less, retain part of the money until works are carried out).

Question 38

what type of survey is suitable for a new build?

Answer 38

basic survey

Question 39

What is provided instead of a survey for a property not yet constructed?

Answer 39

structural defects insurance policy

Question 40

What is structural defects insurance policy?

Answer 40

Covers defects in design/ construction for 10 years Taken out by the builder/ developer. National House Building Council (NHBC) = most common type of policy First 2 years from construction (initial liability period) - builder is responsible remedying defects. Final 8 years from construction (structural liability period) covers specific parts of the property (mainly construction/ builder quality) - NHBC is responsible. Having NHBC in pace for properties under 10 years old is a requirement of most lenders.

Question 41

What is the law society conveyancing protocol?

Answer 41

Standardise residential conveyancing process Does not usually apply to the sale of newbuilds

Question 42

what is the law society's conveyancing quality scheme?

Answer 42

provides a recognised quality standard for residential conveyancing practices aim - improve customer confidence membership usually required to act for lenders