Elements + Structure of freehold transactions

Question 1

‘Caveat emptor’

Answer 1

Buyer must do full investigation of property and its title

Question 2

Must the seller disclose property info?

Answer 2

No but cannot give misleading answers

Question 3

What happens in pre-contract stage?

Answer 3

Seller sends pre-contract package (draft contract + evidence of title)

Buyer investigate:
- title
- incumbrance on property
- enquiries to seller
- pre-contract searches

Potentially negotiate upon results

Question 4

What happens on exchange of contracts?

Answer 4

Buyer pay deposit (10% purchase price) + seller’s solicitor hold as stakeholder

Question 5

What happens at completion?

Answer 5

Buyer pay purchase price + seller hand over keys + draft transfer deed

Question 6

Post- completion

Answer 6

Pay SDLT/LTT

Remove seller’s title + add buyer to Register

Remove seller’s mortgage + add buyer

Question 7

Can you act for both buyer and seller?

Answer 7

No (conflict of interest) with no exception

Question 8

Can you act for joint buyers?

Answer 8

Yes - ‘substantially common interest’

Question 9

Can you act for borrower and lender?

Answer 9

Yes if not a significant risk of conflict where:
- not a standard mortgage
- not approved certificate of title

Residential transaction - yes

Commercial transaction - no (negotiate)

Question 10

What safegaurds are needed to act for 2 parties?

Answer 10

• informed written consent of both
• solicitor thinks its reasonable to act

Question 11

Can you act for joint borrowers?

Answer 11

Yes - substantially common interest

Question 12

Dangers of acting for married couple as joint borrowers?

Answer 12

Potential of undue influence

Question 13

Safeguards when acting for married joint borrowers?

Answer 13

• Take spouse aside and get consent to:
• amount of loan
• terms of overdraft
• terms of new loan
• explain why solicitor is here
• lender will rely on solicitor to show no undue influence
• lender will get spouse confirmation that they want solicitor to act for them
• know practical implications
• do you want to proceed?
• can i tell the lender to proceed?

Question 14

What should you do if you suspect undue influence?

Answer 14

Decline to act

Question 15

What are contract races?

Answer 15

Seller wants to give multiple buyers pre-contract package

Question 16

Can seller take part in contract race?

Answer 16

Yes as long as all participating buyers know

Question 17

What if seller does not want to inform buyers in contract race?

Answer 17

Cannot mislead buyer - we need to tell buyer + decline to act if refuse

Question 18

What if you fail to perform an undertaking?

Answer 18

Personally liable

Question 19

What is a repayment mortgage?

Answer 19

Monthly payment to lender made up parts of of original amount + interest = pay off everything by the end

Question 20

What is an interest only mortgage?

Answer 20

Monthly instalments made up of interest payment only (lower repayment but OG amount still due)

Question 21

Who pays SDLT?

Question 22

When is Capital Gains Tax (‘CGT’) not paid?

Answer 22

Use property as your main residence

Question 23

When is SDLT not paid?

Answer 23

• First time buyer
• main residence
  less than £625,000

Question 24

When can seller claim private residence relief?

Answer 24

main residence throughout ownership periof

Question 25

Who charges VAT?

Answer 25

Taxable person

Question 26

What is a Taxable person?

Answer 26

Turnover is at least £85,000 in the last year

Question 27

Which properties MUST charge VAT?

Answer 27

new commercial built (last 3 years) or old commercial building and opted to tax

Question 28

Pros v Cons of charging VAT?

Answer 28

Pros: seller can reclaim VAT paid expenses Cons: higher purchase price for VAT-sensitive buyers