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FLK 1 > Property - freehold transactions > Flashcards

Property - freehold transactions Flashcards

(86 cards)

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1
Q

What are the buyer’s aims in a freehold transaction?

A

Time and cost

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2
Q

What are the solicitor’s aims when acting for the buyer

A

The solicitor ensures the property is safe to buy, checks legal documents, searches for hidden issues, and manages payments and registration

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3
Q

Lender’s aims in a freehold transaction

A

Same as buyer’s aims - with addition of:
- property is marketable
- property’s value is sufficient to cover any losses if the buyer does not repay the mortgage
- security document is valid and enforceable
- no discrepancies in the lender’s understanding of the transaction and the borrower’s circumstances

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4
Q

What are the two types of property ownership in England and Wales?

A

Freehold (ownership of land and buildings forever) and leasehold (ownership of buildings for a fixed term but not the land).

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5
Q

What checks must a solicitor do before accepting a client’s instructions

A

Verify the client’s identity with original documents, confirm the source of funds (especially if cash), and comply with anti-money laundering regulations

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6
Q

Three stages of the conveyancing process

A

Pre-exchange –> pre-completion –> post completion

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7
Q

In which of the stages in a conveyancing transaction does most of the work take place?

A

Pre-contract to exchange

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8
Q

At what point in a property transaction do the parties become contractually committed to the deal?

A

Exchange of contracts

Buyer pays depost - and legally binding contract comes into existence

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9
Q

At what stage in a property transaction is the buyer recognised as the new legal owner?

A

Registration of the buyer at the Land Registry - this is when legal title passes

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10
Q

At which stage in the property transaction is SDLT paid?

A

Post completion

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11
Q

At which stage in a property transaction does the buyer’s solicitor request mortgage funds from the buyer’s mortgage lender?

A

Pre-completion to completion

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12
Q

Principle of caveat emptor from Hardy v Griffiths

A

There is no onus on the seller to disclose any physical defects, its is for the buyer to discover them

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13
Q

What happens at completion?

A

Buyer’s solicitor pays the balance of the purchase money to the seller.
Seller’s solicitor agrees to send the necessary paperwork to the buyer’s solicitor
Buyer gets keys
In residential transaction - buyer and seller physically move

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14
Q

What is the purpose of an OS1 search?

A

To check for any changes to the title or new entries since the initial investigation, valid for 30 working days.

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15
Q

What is the risk if an OS1 search is expired?

A

New interests may have been registered after the search was done, leaving the buyer or lender with an interest in an encumbered property.

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16
Q

What are the consequences of not submitting SDLT/LTT on time?

A

HMRC penalties and interest, plus the Land Registry will not register the buyer as the new legal owner until SDLT/LTT is paid.

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17
Q

What steps should the solicitor take if a restrictive covenant is identified?

A

Report it to the buyer, explain the implications, and advise on the possibility of seeking release or modification if necessary.

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18
Q

What is a pre-completion statement?

A

A breakdown of all financial amounts due on completion, including purchase price, deposit, mortgage funds, SDLT/LTT, fees, and any adjustments.

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19
Q

What searches should a buyer’s solicitor conduct?

A

Local authority search, water and drainage search, environmental search, chancel repair search, and any others relevant to the property.

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20
Q

Why is a chancel repair search necessary?

A

To check if the property carries a medieval liability to contribute to church repairs.

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21
Q

Who orders pre-contract searches?

A

The buyer’s solicitor.

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22
Q

How is a transfer of title effected?

A

By executing a TR1 form, signed and dated by both parties.

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23
Q

What is the typical deposit on exchange of contracts?

A

10% of the purchase price, unless varied.

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24
Q

What is a Notice to Complete?

A

A formal notice served if a party fails to complete, giving 10 working days to complete or face termination and damages.

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25
Can the buyer’s solicitor act for the lender?
Yes, if the lender consents and there is no conflict of interest. The solicitor must follow the lender's requirements.
26
Why must restrictive covenants be reported to the lender?
Because they can affect the property's value and marketability, which impacts the lender's security.
27
What must be done about the seller’s mortgage?
The buyer's solicitor must obtain the seller's solicitor's undertaking to redeem the mortgage and confirm it has been repaid post-completion.
28
What are pre-completion checks?
OS1 and bankruptcy searches, mortgage arrangements, completion statement, and checking TR1 is signed.
29
Can the buyer pull out after exchange?
Only if the seller breaches the contract; otherwise, the buyer loses their deposit and may owe damages.
30
How long does the buyer have to register the title at HM Land Registry?
Within 30 working days of completion.
31
How long does the buyer have to pay SDLT/LTT?
Within 14 days of completion.
32
Where does information about the property come from?
a. The title to the property (Land Registry official copies - if registered. Deeds if not) b. seller's replies to enquiries c. searches - fro various bodies d. survey of the property
33
Caveat emptor - what does the seller have to disclose
No onus to disclose patent incumbrances or physical defects But obliged to disclose latent incumbrances and defects in title
34
What are the three different taxes that could be payable?
SDLT/LTT CGT VAT
35
When is SDLT payable?
Buyer buys property or land over a certain price. Threshold depends on if residential or commercial
36
1 April 2018
If property or land is in Wales - LTT payable if sale completed on or after this date
37
If property or land is in Wales - LTT payable if sale completed on or after this date
1 April 2018
38
When is CGT payable?
Tax on profit when you sell certain assets that have gained value. Not payable on many residential sales - if client is selling their own home - they can use Private Residence Relief (PRR)
39
When is VAT payable?
Existing residential properties are VAT exempt Some commercial property purchases are subject to VAT. Buyer must pay VAT on sale price to seller
40
How long is an Energy Performance Certificate (EPC) valid for, and where can it be found?
10 years - public online register.
41
What is an Energy Performance Certificate (EPC)?
A report prepared by an accredited energy assessor on a property's energy efficiency and recommendations for improvement, required before marketing a property. It remains valid for 10 years and is available on a public online register.
42
Who should check that an EPC has been provided?
Both the seller's and buyer's solicitors.
43
What should a solicitor discuss with the client regarding timescale and costs?
The likely timescale of the transaction (6-8 weeks for residential, or faster for commercial) and the basis of costs (fixed fee or time basis with estimate).
44
Legal title in co-ownership has what features?
Owners named on the Land Registry, max of 4 owners, over 18, can be sole or joint tenancy, holding the property on trust for beneficial owners.
45
Beneficial title has what features?
Owners may not be the same as legal owners, not registered at Land Registry, no max number, any age, can be sole, joint tenancy, or tenants in common.
46
What is a joint tenancy in beneficial ownership?
A form where co-owners own the whole estate collectively, with right of survivorship, unsuitable if someone wants to leave their share in a will.
47
What is tenancy in common in beneficial ownership?
Each co-owner owns a distinct share, no right of survivorship, shares can be in any proportion and pass under will or intestacy.
48
What document records co-ownership arrangements?
A declaration of trust of land in writing and signed, often recorded in the TR1 transfer deed with specific options.
49
What are the options in the TR1 transfer deed for co-ownership?
Trust for joint tenants, trust for tenants in common in equal shares, or custom declaration with trust details or referring to a separate declaration of trust.
50
Why is clear co-ownership recording important?
Failure to record correctly can lead to disputes or professional negligence claims.
51
Why should a buyer be advised to obtain a physical survey?
To identify physical defects early, which can affect price, create negotiation opportunities, or justify withdrawal before exchange. It may also affect mortgage approval.
52
What are the three types of property surveys?
Basic valuation: Cheapest, required by lenders, checks for major defects to protect lender's security, not detailed, intended for lender purposes. homebuyer report: More detailed, suitable for most properties in reasonable condition under 150 years old. full structural survey: Most detailed and expensive, suitable for all properties, especially listed, renovated, or those planned for extensive alteration.
53
You are acting for the seller of a property. Which of the following types of tax do you need to consider may be payable by your client depending upon the circumstances?
Capital Gains Tax and VAT
54
What funds are needed by a buyer to complete a purchase?
Cash for deposit on exchange, balance of price on completion, agreed price for extras, taxes (SDLT/LTT, CGT, VAT as appropriate), solicitor’s fees (with VAT), solicitor’s disbursements (search and Land Registry fees).
55
What are the main sources of funding in residential property transactions?
Client’s own resources, proceeds of any related sale, and mortgage loan.
56
What are the funding options in commercial property transactions?
High-value funding from a group of lenders (syndicate) to spread risk; development finance where a lender provides funds to buy and develop the land, with step-in rights if the buyer fails to complete.
57
What are the two main types of residential mortgage?
Capital repayment mortgage and interest-only mortgage.
58
What is a capital repayment mortgage?
The borrower repays both capital and interest monthly; at the end of the term (e.g., 25 years), the loan is fully paid.
59
What is an interest-only mortgage?
The borrower pays only interest; capital remains outstanding until the end of the term, usually repaid by sale of the property or with accumulated equity.
60
What are the risks of an interest-only mortgage?
The borrower may not have sufficient funds to repay the capital at the end of the term, especially if property value falls or insufficient equity is built.
61
What is an endowment mortgage?
An old-style mortgage where monthly interest payments are combined with payments into an investment policy (endowment) intended to repay the capital at term-end. Many underperformed, leaving borrowers with a shortfall.
62
Are endowment mortgages still common?
No, they are rare and mostly historical in the UK.
63
What key risk does commercial development funding carry?
If the buyer fails to complete the development, the lender may step in to complete development and secure their investment.
64
What are the SRA principles expected of solicitors?
Act in a way that upholds the rule of law, public trust, independence, honesty, integrity, equality, diversity, and inclusion, and act in the best interests of each client.
65
What key professional conduct issues should you consider when accepting instructions for a property matter?
Competence and timely service, confidentiality, authority to act, conflict of interest, and duty of disclosure.
66
How can a solicitor ensure they provide competent and timely service?
Have necessary skills and experience, ensure timely delivery, refer to others if necessary, and consider workload.
67
How can you confirm you’re authorised to act for a client?
Check client instructions, verify ID, confirm authority (e.g., from company or spouse).
68
What is an own interest conflict?
A situation where your duty to act in the client's best interest conflicts with your own interests or related matters.
69
Give an example of own interest conflict.
Acting for a developer whose site is near your partner’s cottage; acting for a buyer where seller is your best friend.
70
Can you act if there’s an own interest conflict?
No, there are no exceptions.
71
What is a conflict of interest?
Where duties to act for two or more clients conflict in the same or related matter.
72
What is the general rule for acting with conflicts of interest?
Do not act if you have a conflict or significant risk of conflict.
73
What are the two exceptions to acting with conflicts of interest?
Substantially common interest or competing for the same objective.
74
What is a substantially common interest?
A clear common purpose and strong consensus on how to achieve it. Example: Two developers asking for a report on title to the same site, with shared goals and agreement on process.
75
When do you lose substantially common interest?
When clients fall out and start negotiating against each other.
76
What is competing for the same objective?
Where clients compete for an objective (e.g., asset, contract) where only one can succeed, such as in an auction.
77
Conditions for exceptions (SCI/CFSO) to apply?
Informed consent, confidentiality safeguards, and reasonableness of acting for both clients.
78
When can a solicitor act for a buyer and lender?
Common in residential, rare in commercial due to conflict risk; possible with standard certificate of title and no conflicting negotiations.
79
What is the duty of confidentiality?
Keep affairs of current and former clients confidential unless disclosure is required or permitted.
80
What is the duty of disclosure (to a client)?
Inform the client of all material information you know about the matter.
81
When does the duty of confidentiality override disclosure?
When disclosure is prohibited by law or causes serious risk to client or others.
82
What is the duty of disclosure (reporting to a client)?
Provide information in a clear, understandable way. For complex reports, go through them with the client if needed.
83
How should a solicitor handle conflicting duties?
Review principles, decline to act if conflicts can’t be managed, prioritise the client’s best interests.
84
Example of a conduct dilemma?
Acting for buyer and lender; mortgage offer with wrong price; duty to disclose to lender but confidentiality owed to buyer.
85
What should you do if a client (the buyer) asks you to withhold information from the lender (your other client) in a property transaction?
Your duty of confidentiality to the buyer overrides your duty to disclose. You must inform the lender that you cannot now act for professional reasons.
86

FLK 1 (21 decks)

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