Property Flashcards
1
Q
What are the stages in the conveyancing process?
A
Stage one premarket
Stage two pre-contract
Stage three exchange of contracts
Stage four pre-completion
Stage five completion
Stage six post completion
2
Q
What is grant of a new lease?
A
Create a new lease
- the freehold owner is the landlord and the first tenant is the buyer.
- The terms can be negotiated between the seller and the buyer and the new lease is granted
-if it’s granted more than seven years must be registered at the land registry which creates a leasehold title.
3
Q
What is grant of a new lease?
A
Create a new lease
- the freehold owner is the landlord and the first tenant is the buyer.
- The terms can be negotiated between the seller and the buyer and the new lease is granted
-if it’s granted more than seven years must be registered at the land registry which creates a leasehold title.
4
Q
What is assignment of a lease?
A
The sale of the remainder of an existing list
Assignment is the transfer of a leasehold estate from one party to another and is also the name of the document that transfers the leasehold estate itself
5
Q
What is prescribed clauses?
A
If the lease term is more than seven years it’s subject to compulsory registration at HMLR.
The lease must contain prescribed clauses at the front of it.
These are a summary of the lease terms and they are in a standard form that HMLR can refer to and complete the registration more easily.
6
Q
What are some main lease provisions?
A
General provisions
- term
- easements and exceptions
- suspension of rent
- service charge
-management company
Typical covenants
- For the tenant to pay rent
- the tenants repair obligations, usually inside the building and landlord outside or common parts.
- The clause that covers alterations that can be made by the tenant and require landlords consent
- use
- insurance
- alienation
Landlord covenants
- Quite enjoyment
- Enforcing others covenants
- forfeiture
7
Q
What least terms are unacceptable?
A
Of course that permits an absolute prohibition against assignment is considered unacceptable in a long residential lease
To remedy should insist on it being removed and the lease amended by deed of variation if they won’t do this and should advise client to withdrawal
8
Q
What are some common provisions in a commercial lease?
A
In a commercial context rent is usually a lot higher than for a residential lease usually paid on a monthly or quarterly basis
Landlord will likely want the ability to review the rent and increase it in the term. This could only be done if there’s provision in the lease where review will take place at specified intervals and include valuation. at the time of the review date, the LL will serve notice on the tenant on the review date if they cannot agree, they should take the matter to arbitration if the lease allows them to
Use of the property we usually specify the permitted commercial uses for the property
9
Q
What is done at the very first stage of a conveyancing process?
A
Taking instructions from the client
Send a client care letter setting out the level of service to be provided and the costs in accordance with the code of conduct
Obtain appropriate identification evidence to satisfy that the client is legitimate
Carry out appropriate due diligence checks in accordance with anti-money laundering requirements
Advise a buyer client on whether a survey is appropriate
Ascertain whether client will have to pay capital gains tax on the profits made when they sell an asset
10
Q
We are acting for a buyer and lender what happens if there is a conflict between the buyer and the lender?
A
May arise where those issue that comes up and the buyer instructs solicitor not to tell the lender, for example they lost their job. A solicitor must cease to act the lender as the duty of confidentiality to the buyer is paramount.
11
Q
Why can a solicitor act for a buyer and a lender?
A
Because they have the same common interest to acquire a good marketable title
Can act for a buyer and the lender provided that:
- lender is an institutional lender providing loans in the ordinary course of business
- the standard certificate of title is provided and
- there is no conflict of interest or risk of conflict
but if a conflict does a rise a solicitor should cease to act for both
Conflict may arise where:
- the lender has agreed to lend money for the purchase of a house with the climates clear they intend to do something else with the money or
- the client doesn’t want the sol to disclose the to the lender facts which might material affect the decision to lend money such as impending bankruptcy or planning breach
12
Q
What should a solicitor advise client in relation to coownership?
A
If the buyers decide to hold it as tenants in common, they should enter into a declaration of trust which set the circumstances of the purchase and their contributions and shares for them to make a will as the doctrine of survivorship not apply
13
Q
When is an EPC not required?
A
Not required for list of buildings
Not required if the previous certificate is valid, they are valid for 10 years
14
Q
In a commercial context, what are the heads of term?
A
A commercial estate agent will negotiate the heads of term between the landlord of the commercial premises and the prospective tenant. The heads of term are the equivalent of a memorandum of sale.
15
Q
What is the code for leasing business premises?
A
It is a code produced by the Royal institution of chartered surveyors and it sets out best practice for landlords when negotiating the terms of a commercial of the tenant
Provides the landlords must make offers in writing which include clear terms regarding matters such as rent and length of term, any right to break the lease ,rent review arrangements, right to assign and repairing obligations
16
Q
What is license to assign?
A
Existing tenant assigning their lease will almost always need the landlords consent. The lease will contain details of how to obtain this. The landlord will need to be satisfied that the incoming tenant is of good standing, can afford and pay rent. might require the incoming tenant to provide references
The landlord satisfied that they will be able to make commitments. The landlord will draft the license to assign setting out the conditions. The document will be signed by all parties to create privity of contract between them.
17
Q
What extra security might a landlord require when a lease is being assigned?
A
May require rent deposit
May require a guarantor to guarantee the rent payments in the event of default gives an extra security and potential remedy
May require the outgoing tenant to enter into an authorise guarantee agreement where they will act as guarantor for the immediate successor
18
Q
What does a sellers solicitor do after they address the preliminary matters?
A
Solicitor investigates the sellers title
- obtain the title deeds. If registered will be on the HM LR portal if I’m registered must locate the title deeds maybe with a bank.
- Remedy any defects in the title protocol says that the seller should do this as part of investigation of title
- If the seller has a mortgage, they would obtain a redemption figure to see if there is any negative equity
- Obtain confirmation of the title plan
- Sending a copy of the title to the buyers solicitor this is deducing title
19
Q
What is the sellers duty of disclosure?
A
The seller is under unlimited duty to disclosure in relation to the contract for sale
In the contract, the seller must disclose latent defects and latent burdens of the land known as in encumbrances but does not need to disclose defects or encumbrances
Latent defects and encumbrances are things that would not be apparent from inspection of the property for example an underground pipe or restrictive covenant
Patent defects are ones which are revealed by inspection such as a visible right of way over the land
20
Q
What happens if a seller breaches their duty of disclosure?
A
The buyer may have the right to withdraw from the contract after exchange and claim damages for losses
However the duty to disclose latent defects does not extend to physical defects in the property due to the doctrine of caveat emptor - buyer beware
However, although not under duty to disclose, if a client tries to cover up a patent defect for example by painting over cracks on a wall, this will amount of wilful deceit and the seller could be sued by the buyer in tort
21
Q
What must seller disclosed when completing the property information form and responses to the buyers enquiries?
A
Obligation to disclose information when filling these forms out
if make any misrepresentation in the form or their responses may be sued by the buyer for misrepresentation
22
Q
What does a solicitor send in the contract package?
A
The draft contract in duplicate
Property information form
Fittings and contents form
Copy of title any relevant documents and title plans
Copies of any guarantees or copy planning permissions
23
Q
What does the seller send in the contract pack for a lease hold property?
A
If the parties are granting a new lease
Will send:
- landlord produces title
- Contract will include the contract with draft lease annex
- Landlords freehold title
- Property information form
- Replies to standard precontracting enquiries
- Permission and building regulations
- Service charge budget if it’s a new building development and details of any management company
Assignment of existing lease
- Check if consent is required for assignment if so must apply for consent at the sellers expense and use all reasonable endeavours to obtain this consent note it cannot be unreasonably withheld
- Contract include leasehold register of title, copy of the existing lease
- property information form and
- lease information form
-copies of the last three years service charge
- copy of the landlords freehold title and
- if the house is less than 10 years old copy of the new build warranty plan permissions and building regs
24
Q
What contract is used?
A
Contract incorporating the standard conditions of sale
Divided into three parts
Particulars of sale
- Includes the date names of the parties details of the property whether it’s freehold or leasehold any specified in conferences title guarantee completion date purchase price contents price
Standard conditions of sale
Special conditions of sale
- conditions are specific to that particular transaction some of them are pre-printed on the back
In commercial transactions, the standard commercial property conditions will be used
Two parts
Part one contains general conditions covering issues such as service of notices in conferences VAT title risk insurance completion and remedies
Part two contains provisions that apply only if expressly incorporated this includes more detail on VAT transfer businesses as a concern and taxation allowances
25
What do the standard conditions of sale include?
- Cover issues such as formation of contract, service of notices, matter subject to which property is sold, the physical condition of the property, the right of the buyer to occupy the premises between exchange and completion, details regarding completion and remedies for late completion or no completion.
- Standard conditions that the purchase price and contents price include any VAT.
- require the buyer to pay 10% of the purchase price on exchange parties can however agreed different amount however if the buyer breaches the contract they are liable for the full 10%
- The deposit can be used for related purchase for their residence only in England and Wales cannot be used for buy to let
- the deposit is held by the sellers solicitor as stakeholder. This means that it stays in the client account on behalf of both parties and cannot be paid over until completion. However this can be changed to agent
- The seller provides the property with full title guarantee included guarantee that the seller is entitled to sell the property but they will let their own cost do all their power to transfer the title to the buyer and the seller is selling the property free from all charges or encumbrances other than those disclosed in the contract This is given when the seller owns the full legal and equitable title and has lived in the Home., limited title guarantee is more narrow and the seller warrants that the seller has not created any charges or granted any rights during their period of ownership that is not been disclosed usually given when you’ve got less knowledge or involvement for example if it’s a PR sale no title guarantee the seller has no knowledge of property for example a lender who has taken possession of someone who is disposing the property by way of gift
- include an identity covenant that the buyer agreed to perform the obligation and indemnify the seller if the buyer breaches the obligation in the future
- provisions on risk and insurance the risk passes on exchange of contract and the seller does not have to ensure the property between exchange and completion but the buyer does
- Completion if there is no date inserted into the contract at exchange, provides that completion will take place 20 working days after exchange
26
What are some common special conditions?
Where the property is being sold with vacant possession on completion or whether they will be in tenant in situ
Whether a different time for completion has been agreed
Whether there are any occupiers in the property
27
What does the property information form cover?
Boundaries
Disputes with neighbour
Building works or alterations
Notices received about the property
Guarantees or warrantees
Property insurance details
Any flooding
Anyone exercising right over the property?
Any services across the property
Parking arrangements
Occupiers
And utility providers
28
How should you deal with with a non-owning occupier?
They must sign the contract to confirm they will relinquish any rights they have and move out the property on completion
29
What does the fittings and contents form list?
List what is included in the sale and what are included an extra price
30
Who raises requisitions on title?
The buyers solicitor will investigate title and then raise requisitions on title
31
What does indemnity insurance do?
Can cover future losses that may arise defect in title may cover specific issues such as an undisclosed covenant and missing deed in the chain of title breach of covenant or adverse possession
32
How is title investigated?
The solicitor will check the title to ensure the seller is entitled to sell the property
Solicitor will look at the different sections of the title register to look for entries which correspond with the information provided for example right of way or mortgages
In unregistered land the solicitor will look at if land should have been registered previously, whether there is a good root of title and whether there is an unbroken chain of ownership, whether any document has been correctly stamped and whether the seller has the ability to sell the property, any parties may have right in relation to the land
The buyers solicitor will examine the documents in the epitome to spot any defects that need to be remedied
33
What are the requirements of a good root of title?
The document must
- Deal with the whole legal and equitable interest in the property
- Contain an adequate description of the property
- Be at least 15 years old at the date of the contract and
- nothing to cast out on the title
Conveyance of sale is usually the best document
34
What is epitome of title?
Is a chronological list of all documents with copies of each document attached original sent on completion
35
What are triggering events?
Event which should have triggered compulsory registration after 1 December 1990
If there has been the seller would need to make an application to the lab registry to register before drafting the contract
36
What are some pre-contract searches that are done in each case?
Local search
2 parts
1- local land charges search reveals whether there are any local registrations made against the property.12 types that may appear, most common are general and specific financial charges to the local authority, may be in relation to the property this could include things like care home fees, planning charges, agreements or entries, any tree preservation orders, any listed building
2 - enquiries of the local authority which include issues such as roads public rights of way, planning info, any proposed roads rail or traffic scheme, any outstanding planning or enforcement notices, conservation area or whether the properties subject to compulsory purchase
Optional enquiries of the local authority are questions that they will answer if requested and additional fears paid.
- common ones include any road proposals, any major gas pipelines, property as a house in multiple of occupation, any environmental pollution orders and whether the property abuts common land
Water and drainage search
Environmental search
37
When should a common land in town or country village enquiry be made?
If the property above or is adjacent to land that has been designated common land or a town or village green
There may be restrictions on the land, in addition to restrictions on developing or enclosing. It may also give people in the locality the right to use the land for recreational purposes.
Must be reported to buyer and lender
If the property abuts or next to a village green or is a new build, then it must be marked as an optional enquiry
38
What are some transactions specific searches?
Such of the index map made if the title is are registered
Bankruptcy search if the buyer is getting a mortgage
Company search if the seller is a company
Coal mining search if the property is an area where coal mining is or has been carried out
Chancellor liability search
Buyer must also undertake a physical inspection of the property and consider the property information form as it forms part of the contract package
39
What is the commercial property standard enquiries?
Commercial version of the property information form use for commercial freehold or leasehold and transactions includes pre-printed enquiries that the buyer will send to the solicitor on the other side to complete in return
Covers boundaries rights benefiting a burden in the property, physical condition and utilities and services fire safety and means to escape building and planning regulations of environmental issues occupies an employees insurance and any disputes regarding the property
40
When is planning permission required?
Under the Town & Country planning act 1990 planning permission is required for the development of land:
- development is defined as carrying out building engineering mining or other operations in over or under land or
- making any material change of use to any buildings or other land
41
When is planning permission deemed?
Town and country planning act general permitted development order 1995 allows certain types of developments without the need for express consent as deemed permission is given.
This includes small home extensions within certain limits porches fences or conservatories.
However if an article 4 direction is passed this did applies the deemed permission and express permission must be sorted
42
What is express permission?
Application must be made to local authority, 2 types:
Outline permission
- Gives broad permission as to the principal of development subject to reserved matters.
- If there are reserved matters there will have to be a full application within three years of the outline permission to obtain approval of those matters
- work must then start within two years from approval of the reserved matters.
Detailed permission
- More complex and costly application involves submission of full plans
- if approved will allow the development to commence will likely to a subject to a number of conditions that need to be met before development starts or during the build, may continue after
- Development must start within three years from the date of permission
43
What happens if a development lacks planning permission or does not comply with a condition?
Authority can take enforcement action against the owner or occupier of the affected land or any other interested party
May involve significant expense if needs to be rebuilt
Current owner liable for breach so very important to find out before exchange contracts whether requirements have been complied with
If the local authority decides to take enforcement action for the breach, it must serve an enforcement notice which must state the nature of the breach, the steps required to remedy and the time limit to complete the work.
The local authority could also apply for an injunction to prevent work from taking place or issue stop notice which requires the party carrying out the work to stop immediately.
The time limit for enforcement of a breach of planning permission is 10 years
44
What is a listed building?
Building place on a statutory list and it’s likely to be old building of special architectural interest cannot be demolished extended altered without listed building consent required in addition to planning permission and changes of more restricted
Includes the property and the garden
Listing applies to structures and land around the property
No time limit for enforcement
45
What is building regulations?
Statutory standards in place to ensure that things are built according to standards governed by building control within local authority concerned with health and safety
Need planning permission and building regulations
Once inspected a completion certificate is awarded
Covers things such as insulation of windows electrical works or installation of boiler
The local authority can take enforcement action against a person who does not comply with building regulations 10 years of the day of the breach
Even after the local authority may still obtain injunction to force the owner to bring the property up to standard
46
When is planning permission required for change of use?
If the change is within the same class, no planning permission is needed
Permission is needed when there is a change between different classes
Some changes from one class to another I can covered by permitted development rights however if the properties with a conservation area or is a listed building, any permitted development rights will be removed and an application will be required
47
What should I buy solicitor out if their client is purchasing in cash?
Accordance with money laundering requirements
Source of funds need to be checked need to say that money has been in a UK based account in the clients name the last 3 to 6 months
Source of wealth checks also need to be carried out to determine where the money came from should provide documentary evidence
48
What is a mortgage and what are the different types?
Agreement to use the property to secure another obligation usually alone the proceeds of which are used to purchase the property
Person who grants the mortgage is the mortgagor
The lender is known as the mortgagee
If the borrower fails to repay the mortgage, the lender can use the property to recover the sum plus any interest on the loan
A repayment mortgage is where the borrower repays capital and interest each month
An interest only mortgage is where the borrower pays only interest and then repay the capital sum at the end of the term usually use alongside some form of investment plan
Endowment mortgage is a mortgage combined with a life insurance policy. The borrower plays monthly premiums with the intention that the life insurance policy will release efficient funds at the end to repay the loan and provide the borrower with additional funds risky and generally not used.
Pension mortgages the loan is linked to pension policy instead of a policy. The proceeds of the pension policy are used to discharge the loan.
Sharia Compliant mortgages offer Islamic compliant alternatives
49
What is contained in the mortgage offer?
Prior to issuing the mortgage offer the lender will obtain a mortgage valuation report to confirm the property represents good security and require the buyer to provide evidence that they can repay the loan. Once satisfied the lender will issue a mortgage offer which details of terms of the offer the lender will issue to the buyer and the solicitor.
50
What are the lenders instructions?
If the solicitor is acting for lender, the lender will issue a set of instructions explaining what they require the solicitor to do,
The UK finance mortgage lenders handbook contains standardised instructions that are required by particular lender, best practice guidance on issues that may arise. Need to check the relevant lenders requirements when acting for the borrower and the lender on a mortgage to ensure that it’s complied with.
The handbook requires solicitors to be careful about identification procedures and fraud prevention details. Several fraud prevention measures for the buyers solicitor carry out
- must ensure all documentation signed. - The seller is legally represented
- check how long the sellers owned the property and
- how the buyer is funding the rest of the purchase.
The handbook also contains instructions regarding checks that should carry out with respect to title issues for example
- they must ensure that there is no discrepancy between description of the property and the lenders valuation and
- all usual necessary searches have been carried out and
- the lender is named as applicant in the pre-completion searches
- And all searches are no more than six months old at completion and
- do not release the mortgage advance unless they have sufficient funds to pay all stamp duty land tax and HMLR fees
51
What is the mortgage deed?
Lego mortgage must be by deed and be executed prior to completion. This is usually done just before exchange of contracts.
52
What is the certificate of title and what is the purpose of it?
A clear certificate of title confirms the property has a good and marketable title. The form is usually standard and involves a solicitor confirming a few statements.
Purpose is to
- Confirm title is good and marketable and
- Access request for the release of mortgage advance
53
What must the lender be advised of?
Any occupiers
Whether the borrower is buying money from a private source, if this is to be repaid, it’s likely that the lender will not be willing to lend
54
How is the mortgage perfected?
The process of registering the property after completion and ensuring the lenders charge is registered as the first legal charge is known as perfecting the mortgage
Registration periods
In registered land the registration must be completed within the OS1 priority search period of 30 working days
In unregistered land, the mortgage will most likely trigger first registration and the buyers solicitor has two months to complete the registration
If the borrower is a company the solicitor must also register the mortgage company’s house within 21 days of completion, certificate of registration of the mortgage companies must accompany the HMLR application
55
What provisions are binding on exchange?
Only what is contained in the contract
56
What are the methods of exchange?
In person
- solicitors exchange contracts in person becomes binding at the point. They agree the exchange has happened rare due to time and distance.
By post
- Solicitor post their client sign part of the contract to each takes place when the sellers part is posted to the buyers solicitor but it’s never used in practice due to uncertainty
By phone
- Telephone conversation where go through contracts insert the completion date and exchange takes place at that point. Most common.
57
What are the law societies formula for exchange of contracts?
Required list of steps that solicitors must take during the telephone conversation. Solicitors must keep a fine note of the conversation. Formula used depends on who holds the signed contract and whether there is a chain of transactions
Formula A
- Used where one solicitor holds both signed parts of the contract and the deposit check, usually the seller solicitor
- solicitor will confirm that both parts of the contract are the same during the telephone call and agrees to insert the date of exchange and completion into both
- after exchange, the solicitor who holds both parts of the contract will send the contract signed by their client to the other solicitor
Formula B
- Where each solicitor hold their own client part of the contract and the buyers solicitor has clear funds for deposit
- The solicitors will confirm the versions are the same once ,exchange has taken place will send client signed part of the contract to the other and the buyers solicitor will send the agreed deposit to the sellers solicitor
Formula C
- Where there is a chain of transactions and deposit monies are to be sent directly from another firm further up the chain
- Relies on undertakings
- 2 stages
- the first part confirms the solicitors are ready to exchange and provide a release
- The second part is when the actual exchange happens
58
What must the memorandum of exchange contain
Their names of the solicitors who exchanged
The date and time of exchange
The formula used
The completion date
Any amount of deposit paid
59
What should the solicitor do if there is a gap between exchange and completion?
If more than a few weeks, the solicitor should protect their clients position by registering an estate contract
If the title is registered, a unilateral notice will be placed on the sellers charge register
If I’m registered a class C (iv) charge will be registered against the sellers full name
60
Can a contract be varied after exchange?
Generally not through conversation letter or exchange of emails.
To vary contract, the parties must exchange again with the amendment included must also be in writing and signed by the party for it to be changed
61
What does the seller solicitor do during the pre-completion stage?
- Prepare a completion statement
- Obtain redemption figures from the lender
- Obtain estate agent fees
- Complete the completions information and undertakings’s form this gives details of the client account to which purchase money must be sent to on the day of completion. Confirms the amount due on completion and where the keys will be available for collection in this seller. Solicitor gives an undertaking to pay off the mortgages out of the sale proceeds and provide evidence of discharge.
- Obtain the client signature of the purchase deed
- If it is a new lease parties must also execute the lease and engrossments
62
What does the buyers solicitor do Pre-completion?
- check the completion information and undertaking form received from the sellers solicitor
- Carry out pre-completion searches
- Prepare a completion statement showing the sum required from the buy to complete including any stamp duty, land registry fees, legal fees, indemnity insurance fees.
- Obtain clients execution of the purchase deed the buyer will need to sign if the transfer includes covenants by the buyer or there is more than one buyer
- If leasehold, check license to assign and service charge apportionments
63
What pre-completion searches are carried out by the buyers solicitor in registered land?
The official search with priority deals with the registration gap and it’s done on behalf of the buyer or a lender after exchange. They should carry out an official search of the register using the properties title number form.
OS1 is an official search with priority against the whole registered title
OS2 is the official search with priority against part of registered title
The purpose is to discover recent entries since the search date, which is the date of the official copies
Also confers a priority period of 30 working days from the date the official search was lodged ,any application for an entry in the priority period is held until the priority period has expired and it will fall away if the buyer completes and register the transaction within the priority period. If cannot complete the transaction and carry out registration within the priority period the search will need to be renewed to preserve priority
64
What pre-completion searches are completed in unregistered land?
A full charges must be carried out against the full name of the current estate holder for the full period of their ownership
Should’ve been done before exchange and will be repeated again before completion
If the search reveals anything uninspected the solicitor must require the sellers solicitor to deal with it and undertake to remove the entry
The search result confers a priority period of 15 working days within which the transaction must complete
65
What searches will be repeated before completion?
If the buyers attaining a mortgage a bankruptcy searches carried out
If the seller is a company a company is carried out
66
What is the purchase deed?
Transfers legal estates to the buyer normally drafted by the buyers solicitor. Who will then send two copies to the sellers who will approve or amend, seller must sign the purchase deed.
Types
Conveyance is an old document that’s not really used in practice
Transfer most commonly used purchase deeds, two types of TR1which transfers the whole of the title or a TP1 which transfers part of the land
Both forms require the title number and address the date of the transfer the full names of the transfer and the transfer consideration paid the title guarantee given and if more than one person will hold title a declaration of trust
Assent is used when a personal representative transfers land to a beneficiary applies to freehold leasehold registered or unregistered. It must be in writing but need not be indeed unless it contains a covenant by the asentee
67
What are the methods of completion?
Personal attendance
- by solicitor attends the solicitor office in person rare
By agent
- Buyers solicitor appoint a local firm to attend the completion at the sellers office rare
By post
- Seller solicitor act as the buyers agent on completion and posts all relevant deeds and documents to the buyer after completion has taken place
68
What is the code for completion by post?
Law Society established
Relies on undertakings, if parties adopted the protocol they must follow the code for compliance by post
Key Steps
- Sellers solicitor gives a warranty that they act for the true seller of the property and the buyers solicitor is entitled to rely on this promise
- The sellers solicitor must confirm in writing which mortgages are to be redeemed on completion
- The completion monies will be sent by bank transfer
- The buyers solicitor must provide the sellers solicitor with a list of those documents to be marked as examined
- If they are unable to comply with the code the seller solicitor must provide a statement to this effect to the buyers solicitor before 4 pm on the day before completion
- The seller solicitor must consider the undertaking to discharge mortgages carefully and list only those that they can discharge
- The seller solicitor must agree to complete the transfer documents upon receipt of the sum required to complete
- The sellers solicitor must also agree to confirm the date and time of completion to the solicitor and whoever holds the keys. This can be given by telephone fax or email as soon as possible after completion.
- Must also agree to send the executed transfer document and any other relevant information to the buyers solicitor. These should be sent by first class post or DX as soon as possible and then any event later than the end of the next working day.
- Once deeds are posted, they are held at risk of the buyer
69
What is the effect of completion?
- If the land is unregistered title passes on completion
- If the land is registered title passes when the purchaser becomes registered at the land registry
On completion, the contract merges with the purchase deed which means that the buyer can no longer sue on contract terms unless the contract states of any clauses will not merge. The standard conditions of sale contains a non-merger clause that states the completion will not cancel liability to perform any outstanding obligation under the contract, so if not performed then the buyer may still sue on this term under contract .
70
What should a sellers solicitor do post completion?
- Report to client that completion has taken place and provide written confirmation
- Discharge any mortgages using the appropriate land registry form or method depending on the type of charge and the lenders instructions if the property is unregistered the original mortgage should be sent to the lender for them to acknowledge receipt. This is then sent back to the sellers solicitor who should then send the mortgage deed to the solicitor to comply with their undertaking to redeem the mortgage.
- Pay the estate agent
- Bill and close the file
71
What should the buyers solicitor do Post completion?
- Report to client send written confirmation of completion and bill
- register any company charge within 21 days
- Pay any stamp duty
- Register at HML within the 30 working day period for registered land or two month period for unregistered land
If leasehold transaction
- Register list if the term is over seven years
Apply for Sharon management company
Notice of the assignment on the landlord
- Transfer any share in a management company
72
When must stamp duty be paid?
Stamp duty tax return completed within 14 days and payment made within 14 calendar days of completion
Stamp duty land tax return must be completed even if no stamp duty land tax is actually due
73
What is stamp duty based on?
Based on money or money is worth
Based on the consideration exchanged for the property, normally money but can be value of work performed an exchange for the property, value of other property exchange for the property or the money left owing on a mortgage taken over by the transfer
If the land are transferred to a company which is connected to the transferor in exchange for shares, the transaction is deemed to be made for the market value of the land. The company will have to send stamp duty tax return on completion and pay stamp duty land tax if the fair market value exceeds the applicable threshold .
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What is exempt from stamp duty?
Property transferred as a gift
Property transferred to a spouse
Property transferred to a former spouse upon divorce
Property transferred under a variation of a will changing the beneficiary entitled to the property within two years of the descendants death
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What are the penalties of late payment of stamp duty?
Interest, maybe payable
If form submitted late:
- If it filed up to 3 months late fix penalty of £100 automatically imposed
- If the form is submitted over three months late fix penalty of £200 is automatically imposed
This is imposed regardless of whether the stamp duty is actually payable on the transaction
If the form is submitted over a year late tax penalty up to the amount of the stamp duty land tax may be imposed
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How is stamp duty calculated?
Is a tiered tax, the rate applicable on how much money falls within that year
Additional charge for additional residential purposes 3% extra on each band however not charged for transactions under £40,000 or where the property replaces the purchases own residence
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How is stamp duty calculated for a lease?
Payable on the grant of a new lease or assignment
Maybe payable on either or both of the lease premium paid and the net present value of the rent payable to the landlord over the entire lease term, each part is calculated separately
Rates payable on the lease premium are the same as the rates on residential property but the rates on the net present value are lower
The tax due on rent is based on the present value of the rent rather than the actual full value
Add the two together
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What stamp duty relief are there?
Relief the first time purchase
- Purchase of first property as main or only residence
- Only available for property up to £625,000
- Rates are 0% on anything up to £425,000 with 5% on any remainder
Linked transactions
- Relief available for purchases of residential property who acquire more than one dwelling via link transactions the rate of stamp duty is determined by the mean consideration
Six or more residential properties
- six or more residential properties are purchased in a single transaction the purchase or can choose to apply the non-residential property rates instead
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What are the stamp duty rates?
Stamp Duty Land Tax (SDLT) - England
Residential Property Rates:
Up to £250,000: 0% (no tax)
£250,001 to £925,000: 5%
£925,001 to £1.5 million: 10%
Above £1.5 million: 12%
First-Time Buyers:
Up to £425,000: 0%
£425,001 to £625,000: 5%
Above £625,000: Standard residential rates apply
Additional Property (e.g., buy-to-let):
Up to £250,000: 3%
£250,001 to £925,000: 8%
£925,001 to £1.5 million: 13%
Above £1.5 million: 15%
Commercial Property Rates:
Up to £150,000: 0%
£150,001 to £250,000: 2%
Above £250,000: 5%
Land Transaction Tax (LTT) - Wales
Residential Property Rates:
Up to £180,000: 0%
£180,001 to £300,000: 7.5%
£300,001 to £500,000: 10%
Above £500,000: 12%
Additional Property (e.g., buy-to-let):
Up to £180,000: 3%
£180,001 to £300,000: 10.5%
£300,001 to £500,000: 13%
Above £500,000: 15%
Commercial Property Rates:
Up to £150,000: 0%
£150,001 to £250,000: 1%
Above £250,000: 5%
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What are the remedies for delayed completion?
Any delay will entitle the innocent party to damages however will not have the right to cancel the contract unless completion was of the essence
Under the standard conditions of sale time is not of the essence unless specified in a contract however it can be made of the essence by adding a special condition but this is rare
Even though the contract doesn’t provide that time is of the essence, any delay still amounts to breach for which damages are available if funds are sent after the time specified in the contract completion has taken place as the next working day and the seller is entitled to interest at the contract rate on the outstanding balance for the number of days that completion was delayed
Interest is calculated on the purchase price less any deposit paid
If the property is being purchased has a tenant in situ, innocent party can elect to take the rental income until completion instead of compensation by notifying the other party
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How is time made of the essence?
The innocent party must serve and noticed to complete on the other party which makes time of the essence
Requirements :
- Can be served by any time after the completion date by a party who is ready able and willing to complete
- Can only be served when completion has not taken place
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What is the effect of serving a notice to complete?
The defaulting party has 10 working days excluding the date of service to complete
If the buyer has paid a reduced deposit, they must pay any balance necessary to bring it up to the full 10%
Complete is not complied with the standard of conditions of sale dictate what will happen depends on which party is in default
If the buyer is in default
The seller may resend the contract and may also retain the buyers deposit resell the property and claim damages
If the seller is in default
The buyer may resend the contract we claim their deposit money with interest at the contract rate and claim damages
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What the remedies are available for breach before completion?
Different depending on whether the breach arises before or after completion
If arises before completion
Specific performance
- Equitable remedy given a discretion of the court compels the default party to perform and complete the contracts
- can be sought together with a claim for recision and damages but the claimant would have to decide more option to pursue by the time of the hearing
Claim for compensation by way of damages
- Innocent party may make a claim for damages based on losses flowing naturally from the breach plus reasonably foreseeable consequential losses
- Measure of damages is the standard measure and credit must be given any deposit sums forfeited by the seller
- innocent seller is limited to recovering the difference in value between the contract price and the value of the property on resale. If the resale price is higher the seller should be advised to retain the deposit and not pursue claim for damages as well.
Rescission
- two meetings 1) an order of the court that puts parties back in the position as if the contract had never existed made where there is fraud misrepresentation or mistake 2) the innocent parties acceptance of the repudiation of the contract when the defaulting party breaches a major term
Under the standard conditions of sale rescission is permitted in two specific circumstances
- Where there has been a misrepresentation because of an error or a mission and
- When the landlords consent for an assignment is required, but the license to assign is not forthcoming
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When does the standard conditions rescission of a contract for misrepresentation?
Under SCS
- when has been an element of fraud or recklessness or
- If the innocent party took the property, it would be substantially different from what the property the innocent party is expected to take
Remedies available for misrepresentation depend on the type:
Fraudulent - involves making the statement knowingly or recklessly as to whether it was true or false, the remedy is damages and rescission, must prove fraud which is hard so it’s not common
Negligent - statement which turns out to be un true and made carelessly. the remedy is to sue for damages and or rescission of contract
Innocent - misrepresentation is made but mistake, remedies are rescission or damages and rescission, cannot claim both
If the property has been misdescribed and it is significant, the innocent party will be entitled to rescind the contract and claim damages
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What remedies are available for a breach after completion?
Few remedies as the majority of contract terms match with the purchase deed so not actionable
Breach of title guarantee covenants the three classes are full title limited title and no title may be able to make a claim for breach of title guarantee
The remedy for breach of covenant is damages however soon for breach of title guarantee as rare
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What statutory protection is available for a commercial tenant at the contractual end of their lease?
The landlord and tenant act 1954 gives Ives protection by providing the tenant does not have to vacate the property at the end of the term unless the landlord uses one of the statutory methods for terminating the lease
Applies to business tendencies only but does not apply to certain tenancies. These include fixed term tenancies not exceeding 6 months, service tenancies and tenancies where the act has been contracted out.
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What is required to contract out of the landlord and tenant act 1954?
To contract out the landlord tenant must satisfy three statutory requirements. Failure to comply makes the contract out void meaning the tenancy will be protected by the security of tenure provisions.
- The landlords health warning. Landlord must serve on the tenant of health warning notice, explains what the security of tenure is and that the potential tenant will be giving up these, rights the consequences of this and that they should seek professional advice. Should be served 14 days before the tenant completes the lease, the landlord can serve the health warning less than 14 days before if the tenant signs a statutory declaration in front of an independent solicitor confirming waiver of the 14 day notice period
- The tenants declaration. The tenant must sign a declaration confirming they have received the health warning and that they agreed to contract out of the act and the consequences. This declaration does not need to be signed in front of a solicitor.
- And a reference in the lease to the requirements. The lease must contain reference to the health warning the tenants declaration or statutory declaration and the agreement contract out. These are usually contained in a separate clause in the lease.
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What is a section 25 notice?
It is a notice given by the landlord who wants to end or enter into a new lease with a tenant who is protected by security of tenure.
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What are the requirements of the landlord section 25 notice?
Inform the tenant that the landlord requires the premises back at the end of the term or they wish to enter into a new lease with the tenant
The landlord must serve the notice between six and 12 months before they wish the existing tenancy to end
The notice must specify one of the stat grounds upon which possession is claimed
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What are the statutory grounds for a landlord to recover possession?
A) the tenants failure to carry out repair obligations
B) the tenants, persistent delay in paying rent
C) the tenants substantial breaches of other obligations
D) the availability of suitable alternative accommodation for the tenant
E) applies of part of the property has been selected by the tenant. The landlord requires the whole property for subsequent letting.
F) the landlord intends to demolish or reconstruct the premises and cannot do this with a tenant in occupation
G) the landlord intends to occupy the whole building
Grounds AB and a discretionary which means that even if the landlord establishes the ground of the court may decide to order a new tenancy and any event
Ground and Amanda tree meaning if the landlord establishes the ground, the court must refuse to order a new tenancy
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What is a section 26 notice?
A notice is a request by the tenant for a new lease
Must be served on the competent landlord or their agent and request that the landlord grants a new lease to the tenant and outline the required terms
The tenant must serve the notice between six and 12 months before they wish to start
Upon receipt of this notice the landlord has two months during which to inform the tenant whether they intend to oppose the request, if they don’t want to agree a new lease they must specify one of the statutory grounds as the basis of their opposition
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What compensation is available for the tenant?
If the landlord establishes a no-fault ground, then the tenant has a right to compensation from the landlord on quitting the premises the basis for this is that the tenant has been denied a tenancy through no fault of their own
If the landlord has established a fault ground, the tenant has no right to compensation
If the landlord can provide a suitable alternative accommodation, there is also no compensation available because the tenant has suffered no loss
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How how is compensation calculated?
If the landlord terminates due to requiring the whole premises, intending to demolish the building or intending to occupy the whole building. The tenant is entitled to damages calculated as follows:
- If the tenant has occupied the premises for at least 14 years or took the business from someone and their combined occupancy is at at least 14 years they are entitled to twice the ratable value of the holding or
- If the tenant has occupied the premises for less than 14 years, the ratable value of the holding
The ratable value of the property by the UK valuation office agency
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Can the court order a new lease?
Yes, can order a new lease if the landlord has failed to establish an opposition ground or the landlord does not oppose the tenants application
New lease is negotiated between the tenant and landlord solicitor
Key provisions the existing premises, if the landlord cannot agree the new term the maximum term at the court order is 15 years
If the parties can’t agree, the court may set the terms but this is rare if this happens the new lease will not commence until three months after the court proceedings have ended
