Freehold Transactions Flashcards
(35 cards)
What are a solicitor’s aims when acting for the buyer?
A solicitor acting for a buyer must ensure:
- the seller has the right to sell the property
- the physical condition of the land and buildings is adequate for the buyer’s needs and the property is worth the money being paid
- they identify all the rights that the property enjoys
- they identify any third party rights affecting the property
- the property is free from any security interest (such as mortgages) or will be on completion
- the contract reflects the terms agreed between the parties
- there are sufficient funds to finance the purchase
Why is there no conflict of interest for the solicitor acting for both the buyer and lender in a domestic property transaction?
No conflict of interest because the buyer and lender have common interest. There will also be no negotiations as the lender will have a set of standard documents and there is no room for negotiation
What is the aim of the lender in a property transaction?
- that the property is marketable (easy to sell on open market)
- that the property’s value is sufficient to cover any losses if the buyer does not repay the mortgage
What is a solicitor’s aim when acting for the lender?
Ensure that:
- seller has the right to sell the property
- the physical condition of the land and buildings is adequate for the lender’s needs and the physical is worth enough to cover any losses if the buyer fails to repay the mortgage
- they identify all the rights that the property enjoys
- they identify any third party rights affecting the property
- the property is free from any security interest (such as mortgages) or will be on completion
- the contract reflects the terms agreed between the parties
- there are sufficient funds to finance the purchase
- there are no discrepancies in the lender’s understanding of the transaction and the borrower’s circumstances
- the security document (mortgage) is valid and enforceable
What are the seller’s aims in a freehold transaction?
Sell the property and receive the money as soon as possible
What are a solicitor’s aims when acting for the seller?
- the contract reflects the terms agreed between the parties
- provide the buyer’s solicitor with what they need to proceed with the purchase
- tie the timing of the sale of any related purchase
- transfer legal ownership (and responsibility) of the property to the buyer
- collect money from the sale, repay the mortgage and account to the seller for the balance
What are the stages of the conveyancing process?
1) Pre-exchange
2) Exchange
3) Pre-completion
4) Completion
5) Post-completion
What happens at pre-exchange?
- the buyer decides to buy the property and agrees the price
- the buyer’s surveyor surveys the property and reports on its value and condition
- the buyer’s solicitor investigates and reports on title (the complete legal picture of the property) - this is usually the most time-consuming element for buyer’s solicitor
- only when the buyer is satisfied will they proceed to exchange
What happens on exchange?
- the seller and buyer enter into a contract to sell and buy the property on the completion date
- the buyer pays a deposit (usually 10% of the full price)
- from this point on (the pre-completion stage) neither seller nor buyer can pull out without serious financial consequences
What happens on pre-completion?
- the buyer’s solicitor order mortgage funds and ensures has full money from client in time for completion date
- the seller and buyer book removal vans for completion date if appropriate
- seller’s solicitor ensure that they have all the necessary paperwork to transfer the property on completion
What happens on completion?
- the buyer’s solicitors send the purchase price to the seller’s solicitors
- the seller’s solicitors agree to send the necessary paperwork to transfer the property to the buyer’s solicitors
- the buyer gets the keys
- the buyer and seller physically move house
What happens on post-completion?
- the seller’s solicitor pays off the seller’s mortgage and pays balance to seller
- buyer’s solicitor pays Stamp Duty Land Tax (England) or Land Transaction Tax (LTT) and registers the buyers as the new owners at the land registry
What does the principle in caveat emptor in the property context?
The buyer takes the property as they find it which means they cannot return the property if it turns out to be unsuitable in some way.
The seller is also under no general obligation to give the buyer all the relevant information that the buyer may require.
When can the buyer withdraw from the purchase?
Anytime before exchange. There is no legal liability at that point.
How can the buyer’s solicitor find out more about the property?
By raising pre-contract searches and enquiries.
Examining title to the property at Land registry or through deeds.
Asking enquiries of the seller.
Making searches.
Having a survey of the property done.
What are the two exceptions to the principle caveat emptor?
- misrepresentation
- latent encumbrances and defects in title
What is a misrepresentation?
This is false statement which induces a buyer to enter into a contract to buy
How could a misrepresentation arise?
- estate agent’s particulars of sale
- remarks made by the seller on viewing the property
- any communication from the seller or the seller’s solicitors to the buyer
Under the standard conditions of sale, if there is a misrepresentation does the buyer need to prove they were induced into contract by relying on conduct or statement?
No - they just need to prove there was an error or omission
What must the seller do in relation to latent encumbrances and defects in title?
They must disclose those that they are aware of or have the means to know to the buyer (acting diligently and reasonably in doing so)
What is a latent encumbrance?
Something that is not apparent or cannot be discovered when inspecting the property.
What is a defect in title?
Something that brings into question the seller’s ownership of the property, or the rights and burdens that affect the property
Will normally be as a result of missing title deeds
What initial advice should solicitor’s give on taking instructions?
- advise about likely timescales and costs (whether fixed or time basis)
- co-ownership - how title should be held and how to record that
- advice on what surveys to get and costs
- advice on any tax implications of sale
What three potential surveys can a buyer instruct?
- basic valuation
- homebuyer report
- full structural report
