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SQE 1- FLK 2- Property > Chapter One: The Key Elements and Structure of a Freehold Property Transaction > Flashcards

Chapter One: The Key Elements and Structure of a Freehold Property Transaction Flashcards

1
Q

What is conveyancing?

A

The process of transferring the ownership of property.

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2
Q

What are the two key milestones in a conveyancing transaction?

A

The Exchange of Contracts and Completion.

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3
Q

What are the three stages in a conveyance?

A

Pre-contract stage, Pre-completion stage, Post-completion stage

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4
Q

When are parties bound to the transaction?

A

When contracts are exchanged.

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5
Q

At what point should a buyer enter into a contract?

A

Once they have carried out out numerous searches, enquiries and a survey of the property.

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6
Q

What is caveat emptor?

A

‘Buyer Beware’. The seller is not obliged to disclose information about defects in the property, so the onus is on the buyer to discover as much about the property as possible before exchanging contracts and committing to the purchase.T

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7
Q

The Pre-Contract Stage

A

Conveyancing starts with both parties taking instructions from their client.
Any outstanding issues that may cause issues or delay must be bought to light.
Then, the seller’s solicitor submits a pre-contract package of documents to the buyer’s solicitor, including a draft contract and evidence of the seller’s title to the property being sold.
The buyer’s solicitor must check the documents of title carefully to ensure that the seller is entitled to sell the property and that there are no encumbrances.

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8
Q

What things will the buyer’s solicitor be concerned about?

A

The buyer’s solicitor will be concerned regarding matters such as boundaries, access, disputes, outgoings and previous works carried out at the property.

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9
Q

When and to whom is the deposit of a property paid?

A

On the exchange of contracts.
To the seller’s solicitor who will usually hold the deposit until completion.
Typically a deposit of 10%

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10
Q

The Pre- Completion Stage

A

Only once contracts are exchanged are the parties bound to complete. The pre-completion stage is spent making sure that all the correct documentation and the completion money will be available on the completion date.
The transfer deed will need to be prepared and executed in readiness for completion.
The buyer’s solicitor will carry out searches to check that pre-contract information is still correct.
On completion, the buyer will pay the remainder of the purchase price and the seller will hand over the keys.

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11
Q

The Post-Completion Stage

A

Both sides must complete administrative matters.
The seller’s solicitor must ensure that any mortgage the seller had is paid off and removed from the title.
The buyer’s solicitor must ensure that SDLT is paid off and must register the buyer as the new owner of the Land Registry.

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12
Q

What is the Law Society Conveyancing Protocol?

A

Applies to residential conveyancing only. Designed to standardise the residential conveyancing process.
A set of instructions to conveyancers as to how to carry out a residential sale and purchase, accompanied by a series of standard documents issued under the TransAction brand.

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13
Q

Seller’s solicitor: Pre-Contract Stage

A

Take instructions from the seller client
Check for conflicts of interest
Investigate title and produce evidence of title (deduce title) to the buyer
Reply to the buyer’s pre-contract enquiries
Exchange contracts
Draft the contract

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14
Q

Buyer’s Solicitor: Pre-Contract Stage

A

Take instructions from the buyer client (and possibly the lender client)
Check for conflicts of interest
Investigate title
Raise pre-contract searches and enquiries (and check buyer client has commissioned survey)
Approve draft contract
Prepare pre-exchange report to client
Exchange Contracts
Pay the deposit

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15
Q

Seller’s Solicitor Pre-Completion Stage

A

Approve the draft transfer deed
Reply yo the buyer’s pre-completion enquiries, including giving an undertaking to discharge the seller’s mortgage.
Completion transaction

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16
Q

Buyer’s Solicitor Pre- Completion Stage

A

Raise pre-completion searches and enquiries (updating, and, if acting for the lender, checking the buyer’s solvency)
Submit report on title/ certificate of title to lender and request mortgage advance, (if appropriate).
Complete transaction

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17
Q

Seller’s Solicitor Post-Completion

A

Discharging mortgage if necessary.

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18
Q

Buyer’s Solicitor Post-Completion

A

Paying SDLT
Registering the transfer of title with the Land Registry.

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19
Q

What is Paragraph 6.2 in the Codes of Conduct?

A

Subject to certain exceptions, a solicitor cannot act for both parties if there is a conflict of interest or a significant risk of one.
An exception is a ‘substantially common interest’ but this does not apply to conveyancing

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20
Q

Acting for joint buyers

A

Usually acceptable.
May be necessary to advise separately.

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21
Q

Acting for borrower and lender

A

Can not do so if there is a conflict of interest.
Risk of conflict is high if…
the mortgage is not a standard mortgage
the mortgage is a standard mortgage but you do not use the approved certificate of title.

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22
Q

Acting for joint borrowers

A

Usually acceptable to act for joint borrowers as long as no conflict of interest.
Problems where it is a joint matrimonial home.

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23
Q

What happens when one spouse wants a loan using the joint matrimonial home as security?

A

If this happens and the business fails, the spouse can seek to have the mortgage set aside on the basis of undue influence.
Although there is no rebuttable presumption of undue influence between married people, the lender is put on enquiry because the transaction is not to the spouse’s advantage.

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24
Q

What are the ETRIDGE Guidelines?

A

Regarding joint matrimonial borrowers
The lender is entitled to proceed on the basis that the solicitor advising the spouse has done so properly

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25
Q

What information should the lender provide the wife’s solicitor (joint borrowing)?

A

a) the purpose for which the loan is being made available
b) the current amount of the husbands indebtedness
c) the amount of the current overdraft facility
d) the amount and terms of the new loan
e) a copy of any written application made by the husband for the loan.

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26
Q

What should the solicitor do on behalf of the wife (joint borrowing)

A

a) explain why the solicitor has become involved
b) explain that the lender will use the solicitors involvement to counter any suggestion of undue influence or that the wife has not fully understood the nature of the transaction
c) obtain confirmation from the wife that she wishes the solicitor to act for her in the transaction, and to advise her on legal and practical implications of the transaction

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27
Q

How should the meeting between the solicitor and wife take place?

A

In a face-to-face meeting
In the absence of the husband
Using non-technical language
Should include an explanation of the nature of the documents, the practical consequences to the wife signing them and a warning to the seriousness of the risks.
The wife must know that she has a choice.

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28
Q

What is a contract race?

A

A pre-contract package is sent to multiple buyers who then compete to be ready to exchange contracts first.
This is legitimate as long as all buyers are aware.

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29
Q

What does Paragraph 1.4 of the Code of Conduct say?

A

A solicitor acting for a seller of a property must not mislead or attempt to mislead the buyers, either by their own acts or omissions, or by being complicit in the acts or omissions of others.

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30
Q

What is an undertaking?

A

A statement made by or on behalf of a solicitor, or the firm, to someone who reasonably places reliance on it, that the solicitor or the firm will do something, cause something to be done or will not do something.

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31
Q

When should a solicitor inform a client of their likely costs?

A

At the beginning and at appropriate points throughout the transaction.
Best possible information about the likely overall cost.
A solicitor has to send a letter of engagement to their client setting out the costings at the beginning of the transaction.

32
Q

What are the restrictions on when solicitors should provide financial advice?

A

a) regulated mortgage contract- they must be authorised to do so under the Financial Services and Markets Act 2000 (FSMA)
b) A regulated mortgage contract includes one where the borrower is an individual, the lender takes a first legal charge over property in the UK and at least 40% of the property is intended for occupation by the borrower or a member of their immediate family.
c) Regulated activities include arranging or advising on a regulated mortgage contract, but not giving generic advice
d) s 327 exception- solicitors can carry out regulated activities if they are incidental to the provision by the firm of professional services
e) arranging or advising using the s327 exception is subject to the solicitor complying with the SRA Financial Services.

33
Q

What is a repayment mortgage?

A

Monthly installements
Partly instalments of the original amounts, partly the interest chargeable

34
Q

What is an interest only mortgage?

A

Monthly payments of interest only.
At the end of the mortgage term, the borrower will still owe the full amount.

35
Q

What are other types of mortgage?

A

Sharia compliant ones, finance schemes

36
Q

Who can claim relief from SDLT?

A

First time residential buyers, if they intend to occupynthe property a their main residence and the purchase price is no more than £625,000
They pay nothing up to £425,000 and pay 5% up to £625,000

37
Q

SDLT rates for non-first time residential buyers

A
  • £250,000 = 0%
    £250,000 - £925,000 = 5%
    £925,000 - £1, 500, 500 = 10%
    Remainder = 12%
38
Q

What is SDLT payable on?

A

Land NOT chattels

39
Q

What is SDLT on non-residential property

A
  • £150,000 = 0%
    £150,000 - £250,000 = 2%
    £250,000 + = 5%
40
Q

What are the rates of LTT for residential property?

A

No relief for first time buyers
- £225,000 = 0%
£225,000 - £400,000 = 6%
£400,000 - £750,000 = 7.5%
£750,000 - £1,500,500 = 10%
Remainder = 12%

41
Q

What are the LTT for non-residential property?

A
  • £225,000 = 0%
    £225,000 - £250,000 = 1%
    £250,000 - £1 mil = 5%
    £ 1 mil + = 6%
42
Q

What is Capital Gains Tax

A

CGT is charged on gains made on ‘chargeable assets’.
The gains are calculated by educating the purchase price of the proper from its current sale price.
Certain forms of expenditure incurred in acquiring or improving the property can be deducted sometimes.
The gain his chargeable at a rate set by the government after allowing for the individual’s annual exemption.

43
Q

What is Private Residence Relief?

A

Can be claimed if it is the sale of an individual’s dwelling house used as their only or main residence.
To qualify, the seller must have occupied the dwelling house as their only or main residence throughout the period of ownership.

44
Q

How big can an individual’s garden be before they have to prove it was necessary to HMRC to benefit from PRR?

A

0.5 Hectares

45
Q

Basis of Charge (VAT)

A

VAT is a tax on ‘taxable supplies’.
Ultimately, it os borne by the consumers, but charged by the supplier who adds it to the price of goods or services.

46
Q

What is a taxable person?

A

A person whose turnover the past 12 months has exceeded the registration limit, currently £85,000

47
Q

How is VAT collected?

A

VAT is collected by HMRC from each supplier.
It is collected at the end of each VAT period (usually every three months) but the supplier completing a VAT return to HMRC online

48
Q

What is output tax?

A

The VAT charged by the supplier o its goods or services

49
Q

What does the supplier do with the output tax?

A

It delineates this output VAT separately on its invoices when charging its customers

50
Q

What is input tax?

A

The customer, the recipient of the goods or services, pays the VAT

51
Q

What is standard VAT?

A

Currently 20%
Reduced rate of 5% for items such as domestic fuel supplies and certain construction, conversion and renovations services.

52
Q

What are zero-rated supplies

A

Still taxable supplies, but are charged at a zero rateA

53
Q

What are exempt supplies?

A

Non VATable. However, sometimes a supplier of land has the option to charge VAT

54
Q

What constitutes a taxable supply in property transactions?

A

The vast majority of residential transactions do not involve the payment of VAT

55
Q

What is considered an ‘old’ commercial property?

A

3 years or older (from completion of the building)

56
Q

What has the option to tax?

A

Sale of a Greenfield site
The sale of an old freehold building
The grant of a lease

57
Q

What are standard rate in terms of tax?

A

The supply of construction services
Professional services
The sale of a new freehold building

58
Q

Why might someone choose to impose VAT when they don’t have to?

A

For example, the seller of an old freehold building.
To enable recovery of the input tax incurred in relation to the building.
Disadvantage- the seller has to charge VAT on top of the purchase price.

59
Q

What is planning law?

A

Planning law affects whether a building can be built, altered or extended and specifies the particular use to which property can be put.

60
Q

How does planning permission usually run?

A

With the land

61
Q

What is the s55 definition of development?

A

‘The carrying out of building, engineering, mining, or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land.’

62
Q

What are the two strands of controlled development?

A

Operational development- building, engineering, mining or other operations (BEMO)
Material change of use

63
Q

What are some matters that do not constitute development?

A

The carrying out of maintenance, improvement or other alteration of any building or works which affect only the INTERIOR of a building, or do not materially affect the external appearance of a building

64
Q

Are B2 and B8 (for example) in the same or different class?

A

Separate use classes- requires permission

65
Q

Are E(a) and E(b) in the same or different class?

A

The same class- does not require permission

66
Q

Define Sui Generis

A

Latin for ‘the only one of its kind’.

67
Q

What is the effect of planning permission?

A

Once granted, planning permission continues to exist for the benefit of the land and of all persons for the time being interested in it.

68
Q

What is the usual implementation limit of planning permission?

A

In England, this is usually within three years.

69
Q

What does the Town and Country Planning (General Permitted Development) Order 2015 (GDPO) set out?

A

GDPO sets out automatically permitted development

70
Q

What are the most common categories of development that are granted automatic planning permission?

A

Developments within the curtilage of a dwelling house, eg extensions below a certain size, and minor operations such as painting and installing CCTV.
Also automatic planning permission for changes within the same use classes.

71
Q

What is an Article 4 Direction?

A

The Secretary of State in charge of. Town and Country Planning can exclude the effect of the relevant GDPO.

72
Q

When can an enforcement notice be issued?

A

Where it appears to the LPA that there has been a reach of any type of planning control. The notice must be served on the owner, occupier and people with an interest in the land and will become effective 28 days after service.
The notice must state the alleged breach and the steps to be taken or the activities to be discontinued.

73
Q

When must enforcement action be taken?

A

Four years for operational development carried out without planning permission
Four years for change of use to a single dwelling house
Ten years from the date of the breach for all other breaches

74
Q

What are building regulation controls?

A

They are concerned with the health and safety aspects of buildings being constructed or altered and they control the materials and construction methods used.
They are a separate issue

75
Q

When must the seller make an Energy Performance Certificate available to the buyer?

A

At the earliest possible stage. Preferably within 7 days and 28 days at the latest.

SQE 1- FLK 2- Property (3 decks)

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