Legal Drafting (Property)

Question 1

When drafting the contract date, what should be includeed?

Answer 1

This needs to be left blank as it is added when the contracts are exchanged.

Often a post-it note printed “Do not date” is stuck here t

In your drafting exercise, you should add “to be inserted on exchange”

Question 2

If a property being sold has an occupier (in addition to the seller - for example, an adult daughter) how should they be treated contractually?

Answer 2

Any adult or entity in occupation of a property, and who is not the seller, should sign the contract, or make a written declaration which they sign and to which the contract should refer, that

• a) they agree to vacate on or before completion and
• b) they release any right(s) they may have in the property or any chattels in it.

You should include a clause to cover these points. Consequently, you should include them as a third party (Occupier)

Question 3

What is the contract rate?

Answer 3

The “Contract Rate” is used to work out how much compensation is payable if completion happens after the Completion Date as a result of the Buyer being at fault.

It should not be too high as it risks being found unenforceable as a penalty - 5% is a commercially acceptable upper limit for the seller’s solicitor to include in the first draft of the contract.

Question 4

If the contract rate is left blank, what happens?

Answer 4

If this was left blank, the SCS provide for the Law Society’s interest rate to be paid which is currently 4% above Barclays Bank’s interest rate. (Law Society interest rate)

Question 5

If the contract is drafted such that the seller has to insure after exchange what obligation does SCS 5.1.2 impose?

Answer 5

Obligations on the seller to maintain the policy and to cancel it on completion.

Question 6

What deposit is anticipated by the SCS?

How can this be amended in a contract?

Answer 6

The SCS anticipate a deposit of 10% and if that is not the case, SCS 2.2.1 needs amending.

In the standard form SCS, for example, this wording is used to vary a standard condition “Condition [X ] shall take e􏰀ect as if the [amount] specified in it was [ X]%”.

Question 7

How is title deduced according to the SCS?

How can this be altered?

Answer 7

The SCS work on the basis of title being deduced to the buyer after exchange.

If title has been deduced before exchange you expressly exclude SCS 4.1, 4.2 and 4.3.1.

Question 8

Provide an example of an occupiers consent clause

Answer 8

The Occupier agrees with the Seller and Buyer, in consideration of their entering into the contract, that the Occupier concurs in the sale of the Property on the terms of this contract, undertakes to vacate the Property on or before the Completion Date and releases the Property and any included fixtures and contents from any right or interest that the Occupier might have.

Question 9

What is the best way to alter the completion time from the SCSs 2pm default?

Answer 9

“Conditions 6.1.2 and 6.1.3 shall take effect as if the time specified in them were [ X] rather than 2.00 pm”.

Question 10

You are drafting a TR1 Deed

The property is unregistered

What do you insert in panel 2 ‘property’?

Answer 10

Describe the property as it was set out in the root of title document and if only part of the property is being sold, refer to a plan.

Question 11

You are drafting a TR1 Deed

The property is registered

What do you insert in panel 2 ‘property’?

Answer 11

Insert the address of the Property as written in the Property Register

Question 12

You are drafting a TR1 Deed

What do you insert in panel 3 ‘date’?

Answer 12

The TR1 is not to be dated yet as it is a draft version.

The TR1 will be dated on the actual completion day.

Question 13

You are drafting a TR1 Deed

What do you insert in panel 4 ‘name of transferor’ if you are instructed to act on the purchase of a property which was originally co-owned by two individuals and one of the co-owners passes away.

It was jointly owned.

Answer 13

If the co-owners were joint tenants, then the surviving joint tenant would be able to sell the property on their own according to the rule of survivorship.

Accordingly, their name alone will be stated in this panel.

Question 14

You are drafting a TR1 Deed

What do you insert in panel 4 ‘name of transferor’ if you are instructed to act on the purchase of a property which was originally co-owned by two individuals and one of the co-owners passes away.

It was owned as tenancy in common.

Answer 14

If the co-owners were tenants in common, then the surviving tenant in common would need to appoint a second trustee.

This would mean inserting the name of the surviving tenant in common and the second trustee

Question 15

You are drafting a TR1 Deed

What do you insert in panel 8 ‘purchase price’ if you tick the monetary consideration box?

Answer 15

The purchase price paid in** both words and figures** must be entered into this panel.

You should also specify whether the price is inclusive or exclusive of VAT.

If exclusive of VAT, you should have add the words, “plus VAT of [insert the amount of VAT payable]” after the purchase price.

Question 16

You are drafting a TR1 Deed

The purchase price is exclusive of VAT.

How do you record this?

Answer 16

If exclusive of VAT, you should have add the words, “plus VAT of [insert the amount of VAT payable]” after the purchase price in panel 8.

Question 17

You are drafting a TR1 Deed

The purchase price is inclusive of VAT.

How do you record this?

Answer 17

If inclusive of VAT, you should have add the words, “inclusive of VAT” after the purchase price in panel 8.

Question 18

You are drafting a TR1 Deed

The property is sold by a bank which has re-possessed the property

What title gurantee do you give in panel 9?

Answer 18

Limited Title Guarantee

This is because the property is sold sold by a party who was not the registered owner

Question 19

You are drafting a TR1 Deed

The property is sold by a Personal Representative

What title gurantee do you give in panel 9?

Answer 19

Limited Title Guarantee

This is because the property is sold sold by a party who was not the registered owner

Question 20

You are drafting a TR1 Deed

The charges register shows a positive covenant and chain of indemnity. The SCPC is incorporated.

What must you do in panel 11?

Answer 20

If the property is burdened by a positive covenant and the transferor gave an indemnity, if SCPCs were incorporated into the sale contract then the transferee must covenant in the TR1 to indemnify the transferor against liability for any future breach of that obligation and covenant to perform it from the date of the TR1

This indemnity covenant should be inserted in panel 11

Question 21

You are drafting a TR1 Deed

When must the transferor execute?

Answer 21

A TR1 will always need to be executed by the transferor

Question 22

You are drafting a TR1 Deed

When must the transferee execute?

Answer 22

The transferee must also execute if there:

(a) Are transferee’s covenants or declarations or applications in the TR1; or

(b) If there is more than one transferee and panel 10 of the TR1 has been completed.

Question 23

You are drafting a TR1 Deed for a company.

What is the default company execution clause?

Answer 23

Executed as a deed by (name of company) acting by [a director and its secretary] or [two directors]

Signature of Director:…………………………..

Signature of [Secretary/[Director]: ………………………..

Formula: Signature of Director; Signature of Director or Secretary

Question 24

You are drafting a TR1 Deed for a company.

What execution clause should you use if there is only one director available?

Answer 24

Executed as a deed by (name of Company) acting by a director

In the presence of:

Signature of Director:……………………….

Signature of witness::……………………….
Name (in BLOCK CAPITALS)::……………………….
Address::……………………….

Formula: Signature of Director; Witness signature; Witness name; Witness Address

Question 25

You are drafting a TR1 Deed for a company. What execution clause should you use if your client is an **individual**?

Answer 25

Signed as a deed by (full name of individual) in the presence of Signature:............... Signature of witness::............... Name (in BLOCK CAPITALS)::............... Address::............... ## Footnote *Formula:* Signature of Transferor; Witness signature; Witness name; Witness Address

Question 26

You are drafting a land contract. What should you do with the date section?

Answer 26

This should be left blank until exchange, when it will be inserted.

Question 27

You are drafting a land contract. Who should be included in the section entitled 'seller'?

Answer 27

Names those who will be on the **legal title**. Remember, there is a space only for a **maximum of 4** names here, regardless of how many people own the land in equity

Question 28

Under the SCS and SCPC, what title guarantee is given as default?

Answer 28

**Full title guarantee** will be given unless: * Front page is amended and under SCS * Special conditions are added in SCPC

Question 29

Under the SCS and SCPC, what is the default position for completion?

Answer 29

**20 working days** after date of contract **2pm.** Time NOT of the essence until notice to complete is served

Question 30

You are considering the issue of VAT whilst drafting a contract for an exchange of property. The property is **residential** Is VAT payable?

Answer 30

Usually an exempt supply or a zero rated supply = No VAT is payable by the buyer

Question 31

You are considering the issue of VAT whilst drafting a contract for an exchange of property. What is the default VAT position under the **SCS used for residential properties**?

Answer 31

Under SCS, the purchase price is **inclusive** of VAT Buyer doesn’t need to worry about the possibility of VAT on top of the purchase price | Note, this differs for SCPC

Question 32

You are considering the issue of VAT whilst drafting a contract for an exchange of property. What is the default VAT position under the **SCPC used for commercial properties**?

Answer 32

SCPC default position is a **standard rated supply (20%) payable on top** of purchase price. If an exception applies, parties should amend SCPC with a special condition.

Question 33

You are considering the issue of VAT whilst drafting a contract for an exchange of property. The property is **commercial** Is VAT payable?

Answer 33

**VAT always needs to be considered with commercial property** (A) Property less than 3 years old: Subject to VAT (b) Property is 3+ years old and seller has NOT made an option to tax: No VAT. (c) Property is 3+ years old and seller HAS made an option to tax: Subject to VAT

Question 34

You are drafting a contract for the sale of property. What is the obligation regarding **chains of indemnity** under the SCS and SCPC?

Answer 34

If the chain is **unbroken**, then the seller can require the buyer to give an indemnity covenant and continue the chain. Both SCS and SCPC make this an obligation of the contract. However, if the seller did not give an indemnity covenant, then this obligation does not apply. The parties may want to agree the wording and set this out in a special condition.

Question 35

Provide an example of an **assignment clause** in a deed of assignment.

Answer 35

In **consideration** of the Premium paid by the Assignee to the Assignor the Assignor assigns the Property to the Assignee for the **unexpired residue** of the term granted by the Lease subject to the payment of the Rent and the Lease Obligations. ## Footnote Think: (1) In cosnideration of the premium.... (2) Unexpired residue of the term (3) Subject to payment and obligations

Question 36

Provide an example of an **indemnity clause** in a deed of assignment.

Answer 36

The Assignee covenants that the Assignee will from the date of this deed **until the end of the term** granted by the Lease pay the Rent and observe and perform the Lease Obligations and **keep the Assignor indemnified** against all proceedings, costs, claims and expenses arising because of any failure to do so. ## Footnote Think (1) Indemnify and keep indemnified (2) Aginsts costs, claims and expenses (3) Until end of term

Question 37

Provide an example of a **entire clause** in a deed of assignment.

Answer 37

This deed constitutes the **whole agreement** between the parties and **supersedes all previous discussions**, correspondence, negotiations, arrangements, understandings and agreements between them relating to its subject matter. ## Footnote Think: (1) Whole agreement (2) Supersedes previous disccussions, negotiations

Question 38

You are drafting a lease. Draft a **term** clause.

Answer 38

The lease term shall commence on [Start Date] and shall continue for a period of [Duration in Months/Years].

Question 39

You are drafting a lease. Draft a **self help** clause.

Answer 39

If the Tenant does not start to rectify any breach of obligation notified to it within one month of notice, the Landlord may enter the Property to rectify the breach concerned and the Tenant shall pay to the Landlord on demand as a debt the costs and expenses of doing so.

Question 40

You are drafting a licence to assign. Draft a **primary function** clause.

Answer 40

In consideration of the covenants on the part of the Assignee in this Licence, the **Landlord consents to the Assignor assigning to the Assignee all his estate and interest in the Premises on the terms set out in this Licence**, subject to the completion of the assignment within a specified timescale of [insert timeframe].

Question 41

You are drafting a licence to assign. Draft a **direct covenant** clause.

Answer 41

The Assignee covenants with the Landlord that, from the date of the assignment to be made pursuant to this Licence during the residue of the Term, the Assignee will pay the Rent and comply with the Lease Covenants.

Question 42

You are drafting a licence to assign. Draft a **AGA** clause.

Answer 42

The Assignor will execute and deliver to the Landlord an authorised guarantee agreement before any assignment.

Question 43

You are drafting a licence to assign. Draft an **undertaking as to costs** clause.

Answer 43

The Assignor shall pay all reasonable costs and expenses exclusive of VAT of the Landlord and appropriate agents of the Landlord in relation to this Licence.

Question 44

You are drafting a licence to assign. Draft an **indemnity** clause.

Answer 44

The Assignor and the Assignee each agree to indemnify and keep indemnified the Landlord against all liabilities, costs, expenses and losses suffered as a consequence that may arise as a result of any breach of the terms of this Licence.

Question 45

You are drafting a s.26 tenant notice to renew. How should this commence?.

Answer 45

This notice relates to the following property:**[Insert Address]** I am giving you notice under section 26 of the Landlord and Tenant Act 1954 that I request a new tenancy beginning on **[Date]**. You will find my proposals for the new tenancy, which we can discuss, in the Schedule to this notice.

Question 46

You are drafting a s.26 tenant notice to renew. How should this incorporate effects of opposal?.

Answer 46

You may oppose my request for a new tenancy only on one or more of the grounds set out in section 30(1) of the Landlord and Tenant Act 1954. You must set out your grounds for refusing my renewal request **within two months of receiving this notice**. If you miss the deadline, you will not be able to oppose renewal of my tenancy and you will have to grant me a new tenancy.

Question 47

You are drafting a **report on title.** What formula should you adopt?

Answer 47

* Search Heading * Explain purpose of search * Specify Results * Explain impact of the results

Question 48

You are drafting a **report on title.** Provide an example of a section dealing with flooding and subsidence.

Answer 48

**Environmental Search** The environmental data search was provided by [Provider] on [date]. The result of the search showed that the Property is unlikely to be classed as contaminated land but revealed the following information: The village… has been affected by flooding in [List Years]. On each occasion the level of water did not exceed three inches…. You should inform the insurance company… There is a [low/medium/high] risk of subsidence.

Question 49

You are drafting a **report on title.** How can you draft a clause limiting liabiltiy?

Answer 49

We express **no opinion on the commerciality** of the transaction. We are unable to advise on the value of the Property. **We have not inspected the Property** and are unable to advise on the physical condition of the Property. We would **advise you to arrange for a survey of the Property** to be carried out, if this has not already been arranged.