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Property > Steps in progressing a freehold and/or leasehold property transaction to exchange of contracts > Flashcards

Steps in progressing a freehold and/or leasehold property transaction to exchange of contracts Flashcards

1
Q

Key conditions in the standard conditions of sale (SCS):

A

*The SCS are a set of standard conditions to be incorporated into a contract for sale
OR a contract for the grant of a lease.
*The SCS are used in contracts relating to residential property
AND small commercial property transactions.
*The Law Society Conveyancing Protocol requires the seller to prepare a draft contract incorporating the latest edition of the SCS standard form of contract.

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2
Q

Amendments CAN be necessary to the SCS to reflect:

A

Current law
OR
Specific instructions from the client.
*Other amendments to the SCS that should be considered are:
Specified encumbrances – necessary to specify ALL restrictive covenants, easements,
AND other burdens on the property as the SCS states
the seller sells free from ALL encumbrances OTHER than those specifically listed in the SCS.
Title guarantee – the SCS provides, seller will sell full title guarantee UNLESS amended.
Full title guarantee implies a covenant that the seller is disposing of the land free from encumbrances (other than those it DOESN’T know OR couldn’t have reasonably known about).
Limited title guarantee, seller HASN’T encumbered the land AND ISN’T aware that anyone else has since the last disposition for value.
Seller should specify IF they are selling with full OR limited title guarantee.
Deposit amount AND method of holding a deposit – the SCS, 10% deposit payable on exchange of contracts AND seller’s solicitor SHOULD hold this as ‘stakeholder’.
If this amount AND/OR capacity is to be varied, the relevant SCS MUST be amended.

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3
Q

Key conditions in the Standard Commercial Property Conditions (SCPC):

A

*The SCPC are standard conditions MORE suitable for complex commercial property transactions where occupational leases are involved.
*The SCPC are based on the 3rd Edition of the SCS BUT were designed to reflect standard practice in commercial property transactions.

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4
Q

The SCPC is MORE suitable where:

A

Provisions regarding commercial leases involved such as, outstanding rent reviews.
OR
Options to deal with various tax positions.

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5
Q

Seller AND buyer to the contract CAN agree in the contract to accept the SCS in whole OR in part AND?

A

can agree to vary ANY of the SCS.

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6
Q

The SCPC been drafted to be a fair balance between?

A

a seller AND a buyer.

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7
Q

SCS 1:

A

General

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8
Q

SCS 1.1:

A

Definitions

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9
Q

SCS 1.2:

A

Joint parties

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10
Q

SCS 1.3:

A

Notices and documents

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11
Q

SCS 1.4:

A

VAT

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12
Q

SCS 1.5:

A

Assignment and sub-sales

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13
Q

SCS 1.6:

A

Third party rights

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14
Q

SCS 2:

A

Formation

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15
Q

SCS 2.1:

A

Date

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16
Q

SCS 2.2:

A

Deposit

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17
Q

SCS 2.3:

A

Auctions

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18
Q

SCS 3:

A

Matters affecting the property

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19
Q

SCS 3.1:

A

Freedom of encumbrances

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20
Q

SCS 3.2:

A

Physical state

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21
Q

SCS 3.3:

A

Leases affecting the property

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22
Q

SCS 4:

A

Title and transfer

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23
Q

SCS 4:

A

Title and transfer

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24
Q

SCS 4.1:

A

Proof of title

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25
Q

SCS 4.2:

A

Requisitions

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26
Q

SCS 4.3:

A

Timetable

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27
Q

SCS 4.4:

A

Defining the property

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28
Q

SCS 4.5:

A

Rents and rent charges

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29
Q

SCS 4.6:

A

Transfer

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30
Q

SCS 4.7:

A

Membership of company

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31
Q

SCS 5:

A

Risk, insurance, and occupation pending completion

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32
Q

SCS 5.1:

A

Risk and insurance pending completion

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33
Q

SCS 5.2:

A

Occupation by the buyer pending completion

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34
Q

SCS 6:

A

Completion

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35
Q

SCS 6.1:

A

Date

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36
Q

SCS 6.2:

A

Arrangements and place

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37
Q

SCS 6.3:

A

Apportionments

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38
Q

SCS 6.4:

A

Amount payable

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39
Q

SCS 6.5:

A

Title deeds

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40
Q

SCS 6.6:

A

Rent receipts

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41
Q

SCS 6.7:

A

Means of payment

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42
Q

SCS 6.8:

A

Notice of complete

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43
Q

SCS 7:

A

Remedies

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44
Q

SCS 7.1:

A

Errors and omissions

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45
Q

SCS 7.2:

A

Late completion

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46
Q

SCS 7.3:

A

After completion

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47
Q

SCS 7.4:

A

Buyer’s failure to comply with notice to complete.

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48
Q

SCS 7.5:

A

Seller’s failure to comply with notice to complete

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49
Q

SCS 8:

A

Leasehold property

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50
Q

SCS 8.1:

A

Existing leases

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51
Q

SCS 8.2:

A

New leases

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52
Q

SCS 8.3:

A

Consent

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53
Q

SCPC 1:

A

General

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54
Q

SCPC 1.2:

A

Joint parties

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55
Q

SCPC 1.1:

A

Definitions

56
Q

SCPC 1.3:

A

Notices and documents

57
Q

SCPC 1.4:

A

Assignment and sub-sales

58
Q

SCPC 1.5:

A

Third party rights

59
Q

SCPC 2:

A

VAT standard rate supply

60
Q

SCPC 2.1:

A

Standard rate supply

61
Q

SCPC 2.2:

A

VAT to be paid

62
Q

SCPC 3:

A

Formation

63
Q

SCPC 3.1:

A

Date

64
Q

SCPC 3.2:

A

Deposit

65
Q

SCPC 3.3:

A

Auctions

66
Q

SCPC 4:

A

Matters affecting the property

67
Q

SCPC 4.1:

A

Freedom of encumbrances

68
Q

SCPC 4.2:

A

Physical state

69
Q

SCPC 5:

A

Leases affecting the property

70
Q

SCPC 5.1:

A

General

71
Q

SCPC 5.2:

A

Property management

72
Q

SCPC 5.3:

A

Continuing liability

73
Q

SCPC 6:

A

Rent reviews, and pending lease renewals

74
Q

SCPC 6.1.2:

A

Rent review (who has conduct of the process}

75
Q

SCPC 6.1.3:

A

Reviewed rent payable for a period after completion only

76
Q

SCPC 6.1.4 and 6.1.5:

A

Reviewed rent payable for a period beginning before completion

77
Q

SCPC 6.1.6 – 6.1.8:

A

Costs of rent review process

78
Q

SCPC 6.2.3, 6.2.4, and 6.2.5:

A

Conducting negotiations and proceedings

79
Q

SCPC 7:

A

Title and transfer

80
Q

SCPC 7.1:

A

Proof of title

81
Q

SCPC 7.2:

A

Requisitions

82
Q

SCPC 7.3:

A

Timetable

83
Q

SCPC 7.4:

A

Defining the property

84
Q

SCPC 7.5:

A

Rents and rent charges

85
Q

SCPC 7.6:

A

Transfer

86
Q

SCPC 8:

A

Risk and insurance

87
Q

SCPC 8.2.1:

A

Seller’s responsibility

88
Q

SCPC 8.1:

A

Buyer’s responsibility

89
Q

SCPC 8.2.5:

A

Leasehold property insured by a reversioner or other third party

90
Q

SCPC 8.2.7:

A

Contractual purchaser’s loss of rent

91
Q

SCPC 9:

A

Completion

92
Q

SCPC 9.1:

A

Date

93
Q

SCPC 9.2:

A

Arrangements and place

94
Q

SCPC 9.3:

A

Apportionments

95
Q

SCPC 9.4:

A

Amount payable

96
Q

SCPC 9.5:

A

Title deeds

97
Q

SCPC 9.6:

A

Rent receipts

98
Q

SCPC 9.7:

A

Means of payment

99
Q

SCPC 9.8:

A

Notice of complete

100
Q

SCPC 10:

A

Remedies

101
Q

SCPC 10.1:

A

Errors and omissions

102
Q

SCPC 10.2:

A

Recession

103
Q

SCPC 10.3:

A

Late completion

104
Q

SCPC 10.4:

A

After completion

105
Q

SCPC 10.5:

A

Buyer’s failure to comply with notice to complete

106
Q

SCPC 10.6:

A

Seller’s failure to comply with notice to complete

107
Q

SCPC 11:

A

Leasehold property

108
Q

SCPC 11.1:

A

Existing leases

109
Q

SCPC 11.2:

A

New leases

110
Q

SCPC 11.3:

A

Consent

111
Q

SCPC 12:

A

Contents

112
Q

SCPC 12.1:

A

Operates to incorporate

113
Q

SCPC 12.2, 12.3, AND 12.4:

A

Into the contract when content (chattels) are included in the sale

114
Q

Part 2 conditions only apply if?

A

incorporated by special condition

115
Q

SCPC A:

A

Certain conditions on VAT

116
Q

SCPC B:

A

capital allowances

117
Q

SCPC C:

A

reversionary interests in flats

118
Q

Special conditions are added to the standard contract for either:

A

*Accommodate the particular circumstances of a transaction
OR
*To vary the standard contract positions of the SCS OR SCPC

119
Q

Special condition conflicts with a standard condition -
which prevails?

A

special condition

120
Q

Special conditions are often included with:

A

*Disclosing a defect in the title.
*Listing of all encumbrances that affect the property.
*Seller transferring title with limited OR no title guarantee (as opposed to full title guarantee).
*Payment of a deposit that is less or more than the stipulated 10%.
*Deposit being held as agent rather than stakeholder.
*Payment of VAT if the sale of the property attracts VAT.
*Removal of fixtures and fittings by the seller that would OTHERWISE automatically pass with the land.
*The express inclusion of an indemnity covenant to be given by the buyer.

121
Q

Methods of holding a deposit:

A

*10% deposit UNLESS otherwise agreed of the purchase price is payable by the buyer on exchange of contracts to the seller.
*The SCS and SCPC requires that the deposit is paid by electronic means
such as, BACS OR CHAPS from a solicitor’s account to the seller’s solicitor’s bank account.
*Held by the seller’s solicitor EITHER as stakeholder OR agent for the seller.
*Buyer fails to complete the transaction, the seller can forfeit AND keep the deposit.
*Deposit is held by a solicitor as stakeholder OR agent, interest is payable under the SRA account rules.

122
Q

Stakeholder (most common capacity):

A

*Deposit held by the seller’s solicitor as a stakeholder, means that the seller CAN’T pay over the deposit together with accrued interest UNTIL completion.
*The SCS allows the seller to use the deposit as a deposit on a related purchase of a house for the residence of the seller provided it is held on the same terms (as stakeholders).
*Interest on deposit WILL be payable to the seller on completion.

123
Q

Agent:

A

*Deposit held by the seller’s solicitor as an agent, means the deposit can be released to the seller on exchange of contracts (before completion) AND used by the seller for any purpose.
*Special condition WILL be required to state that the seller’s solicitor is to hold the deposit as agent.
*Should the transaction fail to complete, there is a risk that the seller CAN fail to return the deposit.

124
Q

Insurance and risk:

A

*Risk of damage AND destruction to the property passes to the buyer on exchange (under the SCS AND SCPC).
*Buyer SHOULD insure the property from exchange of contracts.
*Seller under no obligation to insure the property from exchange
UNLESS required by its mortgage lender, lease, OR a special condition in the contract of sale.
*Dual insurance in place over the property, by the buyer AND seller,
contract SHOULD be drafted to protect the buyer AGAINST the possibility of the buyer’s insurer reducing the pay-out because the seller has also insured the property.
Purchase price would be reduced by equivalent sum (in this situation).

125
Q

Basics of VAT in a contract:

A

*Residential property transaction
Sale OR lease of a dwelling by a private individual),
DOESN’T involve payment of VAT since they aren’t made in the course of a business.
*New build property, sale OR lease of a new home is zero-rated AND no VAT payable.
*Sale of a new commercial property standard rate for VAT.
*Sale of an old commercial building
More than 3 years old, is exempt for VAT BUT subject to option of tax.
*Purpose of the option to tax is to allow the person to convert an exempt supply into a taxable one, allowing him to recover any input tax incurred.
*VAT chargeable on property acquisition, contractual provisions MUST be included to state whether the buyer WILL have to pay VAT in addition to purchase price.

126
Q

Timing for issuing a certificate of title:

A

*Certificate of Title, given to lender (signed and dated by the buyer’s solicitor) immediately BEFORE completion of the purchase
AND the drawdown of the loan monies.
*Confirm to the lender that the property is proper security for the loan
AND has good and marketable title.

127
Q

The practice, method, and authority to exchange:

A

*Solicitor should obtain their client’s express written authority BEFORE exchanging contracts, as they will no longer be able to withdraw from the contract.
*Contract must be signed by either:
Both parties sign one contract
OR each sign identical copies.
*Exchange using Formula A, B, OR C (either by telephone, post/DC OR in person).

128
Q

Formula A:

A

One solicitor holds both contracts:
Solicitor holding both signed parts of the contract undertake they will, that same day, send their client’s signed part of the contract to the other side by 1st class post, DX or by hand, duly dated.

129
Q

Formula B:

A

Each solicitor holds their client’s contract:
Each solicitor will, that same day, send the signed part of the contract that they are holding to the other side by 1st class post, DX or by hand, duly dated.

130
Q

Formula C:

A

For a chain of transactions in residential properties, each solicitor holds their client’s contract
AND exchange is by telephone to synchronise the exchanges.

131
Q

Following exchange, an attendance note SHOULD be made noting the following:

A

Date, time, AND parties involved in the exchange of contracts.
*Formula used (and any variations) AND the undertakings given have been complied with
AND discharged.
*Record that the deposit has been paid as per the Solicitor Accounts Rules.

132
Q

Consequences of exchange:

A

*Neither party CAN withdraw with incurring breach of contract.
*Property is now at the buyer’s risk AND should be insured from this moment.
*Solicitor should notify client, estate agent, lender, AND insurer exchange has taken place.

133
Q

Register the contract if:

A

Long interval between exchange AND completion
Dispute arises between the buyer AND seller.
Doubts as to seller’s good faith.
Completion is delayed BEYOND the agreed date.

134
Q

Register as follows -
Unregistered land:

A

class C4 land charge (an estate contract)

135
Q

Register as follows -
Registered land:

A

notice on the register as a minor interest in land.

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