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2023 > Property Practice - Fundamentals > Flashcards

Property Practice - Fundamentals Flashcards

1
Q

1. Key Elements of Freehold Transactions

What are the two milestones in a conveyancing transaction?

A
  • Exchange of contracts
  • Completion
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2
Q

1. Key Elements of Freehold Transactions

Exchange of contracts is not compulsory, but why is it useful?

A
  • It fixes the completion date.
  • It gives the buyer time to make final preparations.
  • It records the agreed terms and can be relied upon if anything goes wrong.
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3
Q

1. Key Elements of Freehold Transactions

Around these two milestones, what are the three stages?

A
  1. Pre-contract
  2. Pre-completion
  3. Post-completion
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4
Q

1. Key Elements of Freehold Transactions

Parties are not bound to the transaction until…

A

…contracts are exchanged.

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5
Q

1. Key Elements of Freehold Transactions

The buyer should not enter the contract until they have…

A

…carried out numerous searches, enquiries and a survey of the property.

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6
Q

1. Key Elements of Freehold Transactions

At the pre-contract stage, the seller’s solicitor submits to the buyer a…

This includes two things:

Pre-contract stage

A

…pre-contract package.

  1. A draft contract
  2. Evidence of the seller’s title.
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7
Q

1. Key Elements of Freehold Transactions

Upon receiving the pre-contract package, the buyer’s solicitor must check two things:

Pre-contract stage

A
  1. That the seller is entitled to sell the property.
  2. That there are no encumbrances, such as restrictive covenants preventing the buyer from using the property as intended.
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8
Q

1. Key Elements of Freehold Transactions

It is important that the buyer’s solicitor is satisfied with the seller’s title before ____ because…

A

…exchange of contracts, because the contract will usually include a “requisitions” provision, which prevents the buyer from raising further queries on the title after exchange.

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9
Q

1. Key Elements of Freehold Transactions

The pre-completion stage is spent making sure that two things are made available on the completion date:

Pre-completion stage

A
  1. All the correct documentation and
  2. The completion money
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10
Q

1. Key Elements of Freehold Transactions

In the post-completion stage, the seller’s solicitor must ensure…
The buyer’s solicitor must ensure…

Post-completion

A

The seller’s solicitor must ensure that any mortgage is paid off and removed from the title.

The buyer’s solicitor must ensure that Stamp Duty Land Tax (England) or Land Transaction Tax (Wales) is paid on the transfer.

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11
Q

1. Key Elements of Freehold Transactions

At post-completion stage, the buyer’s solicitor must also…

Post-completion

A

… register their client as the new owner and register any new mortgage.

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12
Q

1. Key Elements of Freehold Transactions

What protocol applies to residential conveyancing?

A

The Law Society Conveyancing Protocol.

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13
Q

1. Key Elements of Freehold Transactions

Firms that undertake residential conveyancing must comply with the Protocol if…

A

…they want to be members of the Law Society’s Conveyancing Quality Scheme (CQS).

The CQS is essential if the firm wants to be approved by residential mortgage lenders.

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14
Q

Professional Conduct issues

The SRA’s Code of Conduct (para 6.2) states that, subject to certain exceptions, a solicitor cannot act for both parties if…

Acting for seller and buyer

A
  1. There is a conflict of interest
  2. Significant risk of such conflict.
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15
Q

Professional Conduct issues

What are the two exceptions to the rule against acting for two parties in conflict?

A

6.2(a) The parties have a “substantially common interest”
6.2(b) The clients are competing for the same objective.

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16
Q

Professional Conduct issues

The two exceptions in 6.2(a) and (b) do not apply to…

A

Buyer and seller situations.

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17
Q

Professional Conduct issues

Acting for a lender and borrower is possible unless there is a conflict of interest/significant risk of conflict of interest. The risk of conflict is high if:

2 bullets

A
  • The mortgage is not a standard mortgage.
  • It is a standard mortgage but you do not have the approved certificate of title.
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18
Q

Professional Conduct issues

The paragraph 6.2(a) (substantial common interest) exception applies to lender/buyer situations if the following conditions are met:

3 conditions.

A
  1. Both clients have given their informed written consent.
  2. Effective safeguards have been put in place to protect client confidential information.
  3. The solicitor is satisfied that it is reasonable for them to act for both clients.
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19
Q

Professional Conduct issues

In large commercial property transactions, why does the lender usually have a different solicitor?

A

The documents are likely to be subject to negotiation, therefore they will not be on standard terms.

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21
Q

Professional Conduct issues

In what circumstances do the “Etridge guidelines” apply?

Acting for joint borrowers

A

Where a matrimonial home is jointly owned by a married couple and one of them agrees to mortgage it as security for a business loan.

Applies to civil partners, cohabitees, parent and child, any other situation in which the property is being charged in return for a loan that is not being made to all property owners.

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21
Q

Professional Conduct issues

According to the Etridge Guidelines, what information must the lender provide, and to whom?

5 bullets

Suppose “husband” means the party needing the loan, and “wife” means the other spouse.

A

The lender must, with the consent of the husband, provide the wife’s solicitor with the following information:

(a) the purpose for which the loan is being made.
(b) the current amount of husband’s indebtedness.
(c) amount of current overdraft facility
(d) amount and terms of the new loan.
(e) a copy of any written application made by the husband for the loan.

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22
Q

Professional Conduct issues

Upon receiving this information, the wife’s solicitor should explain to her two things:

Etridge Guidelines

A

(i) the purpose for which he is involved.
(ii) That the lender will rely on the solicitor’s involvement to counter any suggestion of undue influence .

He will then obtain confirmation from the wife that she wishes the solicitor to act for her and to advise her on the legal and practical implications.

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23
Q

Key Elements of Freehold Transaction

The solicitor’s discussion with the wife should…

3 bullets

Etridge Guidelines

A
  1. Take place at a face-to-face meeting.
  2. Be in the absence of the husband
  3. Be given in non-technical language.
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24
Q

Professional Conduct issues

In confirming that the wife wishes to proceed, she should be asked whether:

Etridge Guidelines

A

She wants the solicitor to write to the lender confirming that matters have been explained to her.

The solicitor must not write to the lender unless they received relevant documents from the lender and have express instructions from the wife.

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25
Q

Professional Conduct issues

  1. If the solicitor believes the transaction isn’t in the wife’s best interest, what should they do?
  2. If it is “glaringly obvious” that the wife is being “grievously wronged”, what should the solicitor do?
A
  1. Give reasoned advice to that effect.
  2. Decline to act.
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26
Q

Professional Conduct issues

What is a contract race? What are the relevant professional conduct considerations?

A

A pre-contract package is sent to multiple prospective buyers who then compete to be ready to exchange contracts first.

If the seller refuses to disclose to prospective buyers that they are engaging in a contract race, the solicitor cannot disclose this, but must decline to act.

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27
Q

Sources of finance

If the solicitor is carrying out a ____ in relation to a ____, then they must be authorised to so under the Financial Services and Markets Act 2000.

A

Regulated activity
Regulated Mortgage Contract

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28
Q

Sources of finance

What is a regulated mortgage contract?

3 points

A

A mortgage contract in which:

  1. The borrower is an individual
  2. The lender takes a first legal charge over UK property.
  3. At least 40% of the property is intended for occupation by the borrower or immediate family.
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29
Q

Sources of finance

In relation to mortgages, what is a regulated activity? What is not regulated activity?

A
  1. Arranging or advising on a regulated mortgage contract is a regulated activity.
  2. Giving generic advice is not.
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30
Q

Sources of finance

If a regulated activity is involved and the firm isn’t authorised by the FCA to carry out such activities (which most firms will not be), what exemption can the solicitor rely upon to carry it out?

A

The s.327 exemption (FSMA 2000) for professional firms. This allows the solicitor to carry out regulated activities that are incidental to the provision of professional services that are regulated by the SRA.

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31
Q

Sources of finance

The s.327 exemption is subject to the solicitor compying with the SRA Financial Services (Scope) Rules and SRA Financial Services (Conduct of Business) rules. How are these relevant to regulated mortgage contracts?

A

The solicitor cannot recommend the client to enter into a regulated mortgage contract, but they can endorse a recommendation made to the client by an authorised person.

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32
Q

Property Taxation

For residential properties, what tax does the buyer pay?

A

Stamp Duty Land Tax (SDLT) or Land Transaction Tax in Wales.

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33
Q

Property Taxation

For residential properties, the seller will not pay Capital Gains Tax (CGT) where…

A

They have used the property as their only or main residence.

(Private Residential Relief)

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34
Q

Property Taxation

A buyer of commercial property pays tax on:

A
  • SDLT/LTT
  • VAT
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35
Q

Property Taxation

Who can claim relief from SDLT? What is their SDLT rate?

A

First time buyers of residential property of £500,000 or less.

Their rate is as follows:

£0 - £300,000 = 0%
£300-001 - £500,000 = 5%

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36
Q

Property Taxation

What is the SDLT rate for residential buyers who are not first-time buyers?

A

£0 - £125,000 = 0%
£125,001 - £250,000= 2%
£250,001 - £925,000 = 5%
£925,001 - 1,500,000 = 10%
The remainder = 12%

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37
Q

Property Taxation

What is the SDLT payable on a £275,000 for a second-home buyer?

A

£3750 (0% on 125,000, 2% on £125,000, 5% on £25,000).

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38
Q

Property Taxation

Priya’s price is £575,000 but asks you to apportion £10,250 to the carpets and curtains (chattels are not subject to SDLT). What do you need to ensure?

A

That this is a fair reflection of the value of those chattels, otherwise it could be treated as fraud.

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39
Q

Property Taxation

What is the SDLT rate for non-residential/mixed use freehold properties?

A

£0 - 150,000 = 0%
£150,001 - £250,000 = 2%
<£250,000 = 5%

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40
Q

Property Taxation

What is the SDLT payable on a £275,000 commercial property for a buyer?

A

£3,250 (0% on £150,000, 2% on 100,000, 5% on £25,000).

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41
Q

Property Taxation

How is SDLT paid?

A

Paid to HMRC, accompanied by form SDLT1.
Paid within 15 days of completion.

42
Q

Property Taxation

What is the consequence of not paying SDLT on time?

A

The buyer will not be registered until it is paid, and penalties/interest will apply.

43
Q

Property Taxation

CGT is charged on…
This includes:

4 bullets

A

…gains made on “chargeable assets”. This includes:
- Freehold property
- Leasehold property
- Interests of joint owners.
- Gifts

44
Q

Property Taxation

For a seller to claim private residential relief from CGT, they must:

Private Residential Relief

A
  • have occupied the dwelling house as their only or main residence throughout the period of ownership.

There is much more to this, but I leave it for now.

45
Q

Property Taxation

VAT is a tax on… i.e.

VAT

A

…taxable supplies. i.e. some goods and services provided by a taxable person in the course of business.

46
Q

A taxable person is someone whose…

A

turnover over the past 12 months exceeds the registration limit (currently £85,000)

47
Q

The VAT charged by a supplier is called the…
The VAT that a customer pays is called the…

A

Output tax.
Input tax.

48
Q

Input tax is only recoverable if…

A

…attributable to the output supply. There must be an immediate and direct link.

49
Q

#

VAT is charged at different rates depending on the supply. What are the three different rates?

A
  1. Standard rate (currently 20%)
  2. Zero-rated - taxable but charged at zero.
  3. Exempt. Not taxable, unless the supplier of land has the option to tax.
50
Q

What is a “new commercial property?”

VAT

A

Commercial property which is less than three years old.

51
Q

While commercial land is generally exempt, what 3 commercial supplies give the seller the option to tax?

A
  • sale of a greenfield site
  • sale of an old freehold building.
  • grant of a lease.
52
Q

Which three commercial supplies are standard rated?

A

Supply of construction services.
Professional services.
Sale of a new freehold building.

In other words, it is compulsory to tax on these supplies.

53
Q

You act for Bankridge Estates Limited, a developer that specialises in renovation. In 2018, Bankridge purchsaed Victoria House, a 1930s warehouse.

Bankridge has completed its planned works to renovate Victoria House and has decided to sell the freehold to raise capital for other projects. It has found a buyer.

Bankridge wants to ensure that it recoups as much of the cost of the renovation works as possible.

What are the VAT implications of this scenario?

A
  • Sale of old freehold = exempt, subject to the option to tax. Bankridge may opt to tax to recover any VAT paid to the construction team on refurbishment.

The downside is that the buyer will probably not be able to recover the VAT as it is an insurance company (doesn’t make taxable supplies in the course of business) so they may not agree to this.

54
Q

Planning Law

Planning permission is required for…

A

Carrying out development of land.

55
Q

Planning permission

Planning permission is required for development, which is defined as:

A

Carrying out building, engineering, mining or other operations in/on/over/under land.

56
Q

Planning permission

What are the two types of development?

A
  1. Operational development
  2. Material change of use
57
Q

Planning permission

What is excluded from the definition of development, thus not requiring permission?

A

Maintenance, improvement or interior alterations.

If it does not materially affect the external appearance, it will be exc

58
Q

Planning permission

What material changes of use are excluded from development, thus not requiring permission?

A

Change of use within the same class of use.

59
Q

What are the use classes under the Use Classes Order? Would planning permission be required for a change of use from C1 to C3?

A

B2 - General industrial
B8 - Storage and distribution
C1 - Hotels and Guest Houses
C3 - Dwelling houses
C4 - Houses in Multiple Occupation
E - Commercial uses

Each of these are separate use classes, therefore a change from C1 to C3 would require planning permission.

60
Q

In use class E, what are the four subcategories? Would a use from one subcategory to another (e.g. E(a) to E(g) require planning permission?

A

E(a) Retail sale of goods other than hot food.
E(b) Sale of food and drink for consumption on premises
E(c) Financial and Professional services
E(g) Offices, research and development.

No planning permission required between these subcategories.

61
Q

What are sui generis uses? Provide three examples.

A

Uses that could have adverse affects on their locality. E.g. entertainment establishments, drinking establishments, hot food takeaways

62
Q

Would a change to and from a sui generis use require planning permission?

A

Yes.

63
Q

Planning law

Once planning permission is obtained, it exists…

A

…for the benefit of the land and of all persons interested for the time being.

64
Q

If planning permission is obtained but the development is not completed within a reasonable time, what can the Local Planning Authority do?

A

Serve a completion notice that permission will cease if completion does not take place within the time given.

Rarely used.

65
Q

Planning Law: Permitted Development

When is development *automatically granted *permission under the Town and Country Planning (General Permitted Development) Order 2015 (GDPO)?

In these cases, no application is required.

A
  • Developments within dwelling;
  • Minor operations (e.g. painting exterior)
  • Specified use class changes.
  • Changes from some sui generis uses
66
Q

Planning Law

What is the effect of an Article 4 Direction from the Secretary of State of Town and Country Planning or the Local Planning Authority?

A

Excludes the effect of the GDPO.

For the avoidance of doubt, the solicitor should apply for a Certificate of Lawfulness of Proposed Use or Development before works are commenced.

67
Q

Planning Law: Enforcement

What are the Local Planning Authority’s four powers of enforcement?

A
  • Enforcement notice
  • Stop notice
  • Breach of condition notice
  • Injunction
68
Q

When would the Local Authority use an enforcement notice and when would it take effect?

A

When there is a breach of planning control and it is expedient to issue the notice. It takes effect 28 days after service.

A right of appeal exists against an enforcement notice.

69
Q

What is a stop notice and when would the Local Authority use a stop notice?

A

It is served alongside an enforcement notice. It prevents a breach for the 28 day period that the enforcement notice is not yet effective.

Also useful where the recipient appeals an enforcement notice, which suspends the effect of the enforcement notice.

70
Q

Can a stop notice be served by itself?

A

No. Unless it is a temporary stop notice of 28 days, allowing for further investigation.

71
Q

Breach of condition notice is the equivalent of an enforcement notice but for breaches of condition, but in what other way do they differ?

A

No appeal against this notice.

72
Q

Planning permission

When would the Local Planning Authority be successful in their application to the court for an injunction?

A
  • Injunction is expedient, necessary and appropriate.
73
Q

Planning Law; Enforcement

(1) What are the time limits for taking enforcement action by a local authority?
​
(2) When unauthorised building work/change of use was deliberately concealed, what can the Local Authority do?

IMPORTANT

A

(1)

  • 4 years from the date of breach for operational development without planning permission.
  • 4 years from the date of an unauthorised change of use to a single private dwelling house.
  • 10 years from the date of breach for any other breach (i.e. Other unauthorised material changes of use or breaching a condition)

(2) Apply to the Magistrate’s Court within 6 months of discovery of the breach.

74
Q

If a previous owner breached a planning permission, are they still liable if the property changes hands?

A

No. The new owner is liable (if within the enforcement action time limit).

75
Q

Building Regulation Control

These controls are concerned with:

A

Health and safety aspect of buildings being constructed or altered.

They control the materials and construction methods used.

76
Q

Local authorities can prosecute for breach of building regulations control. What is the time limit for them to start proceedings?

When can they issue an enforcement notice?

When can they take out an injunction?

A

Within two years of the relevant work being completed.

Enforcement notices: within one year of work being completed requiring the work to be altered or removed.

Injunction is not time limited if the work is unsafe.

77
Q

If a buyer finds that consent hasn’t been granted, what can they do?

A

They can ask the seller to obtain a regularisation certificate from the local authority or obtain insurance.

78
Q

Listed Buildings

What are listed buildings and how are they addressed differently to other buildings?

A
  • Buidlings of special architectural or historic interest.
  • Owner is likely to need building consent even for internal alterations.
  • Several permitted developments under GDPO require planning permission in respect of listed buildings.
79
Q

Planning Law: Conservation Areas

What are conservation areas? Give three examples of planning permission being more stringent in relation to conservation areas.

A

Areas designated as being of special architectural or historic interest.

  • Changes to external appearances - some GDPO permitted developments are curtailed.
  • Demolition will always require planning permission.
  • Any work planned to a tree in a conservation area requires notification to the LPA six weeks in advance.
80
Q

Investigation of Title: Registered Land

Deducation of title =
In order to deduce title, the seller should supply…

A

Seller’s obligation to prove to the buyer their ownership of the property.
…official copies that are less than six months old.

81
Q

Investigation of Title: Registered Land

The offical copies show the entries on three registers:

A

(a) Property Register
(b) Properietorship Register
(c) Charges Register

82
Q

Investigation of Title: Registered Land

The property register contains two things:
Additionally, it may show 2 other things:

Property Register

A

Description of the land and whether the title is freehold or leasehold.

It may also show

(i) easements or rights benefiting the land;
(ii) things which are excluded that might be expected to come with the land.

83
Q

Investigation of Title: Registered Land

The Proprietorship Register identifies three things:

Proprietorship Register

A
  • Identity of current owners and their address
  • Class of title
  • Restrictions on the owner’s ability to sell.

It may also indicate the price paid for land by the owners and whether the owners gave an indemnity covenant when they bought the land

84
Q

Investigation of Title: Registered Land

What are the three possible classes of title for freehold land?

A

(1) Absolute Title
(2) Possessory Title
(3) Qualified Title

Absolute = best title. Legal estate vests in proprietor subject only to entries on the register and overriding interests.

Possessory = Proprietor lost the title deeds or claiming through adverse possession.Legal title vests subject to adverse interests existing at the date of registration.

Qualified Title = Specific identified defect.

85
Q

Investigation of Title: Registered Land

The two types of entries for the protection of third party interests are…

Most third party interests are protected in the ______ Register as ______

Which third party interest is the outlier and how is it protected?

A

Notices and Restrictions.

Most third party interests are protected in the Charges Register as Notices.

Beneficial interests under trust are the outlier, protected as a Restriction in the Proprietor Register.

86
Q

Investigation of Title: Registered Land

The Chargers Register identifies…

What are the five which might be revealed in this register?

A

The incumbrances.

i. Covenants (Restrictive or Positive)
ii. Easements affecting the land.
iii. Mortgages
iv. Leases
v. Notices

86
Q

Investigation of Title: Unregistered Land

In unregistered land, title is proved by…

A

The title deeds.

Seller gives copies of the title deeds to the buyer typically before exchange.
If it is a sale of whole property, the Seller gives the original title deeds to the buyer on completion.
If it is a sale of part of the property, the Seller hands over certified copies only.

87
Q

Investigation of Title: Unregistered Land

After the seller’s solicitor obtains the title deeds, he deduces title by…

A

Finding the document that represents the “root of title”.

Document from which to begin the title investigation.

88
Q

Investigation of Title: Unregistered Land

Once the root of title is identified, older documents can be ignored. What is the exception?

A

Where the root document refers back to a third party right created in an earlier conveyance: the buyer will be entitled to call for that earlier conveyance.

89
Q

Investigation of Title: Unregistered Land

After finding the root of title, the solicitor will then prepare the… which is a

A

…epitome of title, which is a schedule of all the documents from and including the root until the present day.

Attached to the epitome are copies (not originals) of each of these documents.

90
Q

Investigation of Title: Unregistered Land

What represents a good root of title according to section 44 of the LPA 1925?

4 conditions

A

A document that:

  • deals with/shows ownership of the whole legal and equitable interest in the land.
  • contains a recognisable description of the land.
  • Does nothing to cast doubt on the seller’s title.
  • Is at least 15 years old.
91
Q

Investigation of Title: Unregistered Land

The two most acceptable roots of title are:

A

Conveyances of sale and mortgages.

Because for each of these, the buyer/lender would have held similar investigations.

92
Q

Investigation of Title: Unregistered Land

Once the root of title is identified, the solicitor carefully investigates the root and all the subsequent title deeds. What matters does the solicitor focus on?

6 matters

A
  • Unbroken chain of ownership
  • Description of the land
  • Stamp duties
  • Incumbrances
  • Execution
  • Land charges searches
93
Q

Investigation of Title: Unregistered Land

Some incumbrances such as restrictive covenants only bind unregistered land if they are correctly registered as a land charge at the Land Charges Department. It is important that it is registered against…

Land Charges Search

A

…the name of the estate owner at the time.

94
Q

Investigation of Title: Unregistered Land

What are the four most important land charges?

A

C(i) - Puisne Mortgage
C(iv) - Estate contract
D(ii) - Restrictive Covenant
D(iii) Equitable easement
F - Home right

95
Q

Investigation of title: general issues

In registered land, easements burdening the property appear in the ____ Register.

A

Charges Register.

In unregistered land, they are usually granted/reserved in the first paragraph.

96
Q

In registered land, it is asssumed that the equitable interest of a jointly held estate is held as a ____ unless

A

joint tenancy, unless a restriction appears in the Proprietorship register.

RESTRICTION: No Disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court

In unregistered land, the conveyance will state whether equitable interest is held as joint tenancy or tenancy in common.

97
Q

Suppose an unregistered estate is co-owned but one of the owners dies. If the surviving owner sells the property, can the buyer assume that the joint tenancy was not severed (therefore the whole property passed to the survivor)?

A

Yes, provided that:

  1. There is no record of severance on the conveyance.
  2. No bankruptcy proceedings against either joint tenant.
  3. Transfer contained a statement that the survivor is solely and beneficially entitled to the land.
98
Q

Investigation of Title: General issues

In unregistered land, a post-1925 restrictive covenant will only be binding against the buyer if it was…

(where land in question is the servient tenement)

A

…validly registered as a D(ii) Land Charge against the name of the original covenantor.

99
Q

Investigation of Title: General issues

In registered land, what are the effects of the folowing entry: “The transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof”?

A

This is an indemnity covenant. If it is in the contract, it means the buyer will be bound not only to restrictive covenants, but also positive covenants by virtue of indemnity.

(without the indemnity the positive covenant would not have run with the land)

100
Q

Investigation of Title: General issues

There is a lease with more than seven years to run affecting the freehold estate, but it is not registered. The buyer of the freehold estate wants to know whether they will be bound?

A

No, unless the tenant is in occupation, in which case an overriding interest may have arisen.

101
Q

Does a Notice in the charges register give the person who registered it any rights in the land?

A

Not necessarily. It serves to ensure that the priority of the interest is protected against any subsequent interests.

Whether it is valid is another question. Buyer should require seller to get it cancelled by the Land Registry before exchange of contracts. If it is a valid interest, then this will be a concern.

2023 (23 decks)

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