Transactional differences between freehold and leasehold Flashcards
What should you always do when faced with a property scenario?
In property transactions, always check the type of transaction (freehold / leasehold), where you are in the transaction and whether you are acting for the buyer or seller!
What are the key documents in a freehold pre-contract package?
Draft contract, Property Information Form, official copies of the title register (if registered) or epitome of title (if unregistered)
What are the key documents in a leasehold pre-contract package?
Same as freehold documents PLUS:
Leasehold Property Information Form, copy of the lease (assignment) or draft lease (if being granted), or draft underlease (if subletting), copy of the head lease or landlord’s title, if required
What searches are made in a freehold transaction?
Local search, drainage, environmental, physical inspection of property - common to all properties
Commons, chancel repair, Land Charges department, and Land Registry priority search - depending on property
What searches are made in a leasehold transaction?
Same as freehold PLUS:
Company search if landlord is a company
What enquiries are made in a freehold transaction?
Standard form pre-contract enquiries (PIF or CPSE) about, for example, boundaries, third party rights, disputes, and notices. Enquiries and review of seller’s title.
What enquiries are made in a leasehold transaction?
Same as freehold PLUS:
Leasehold enquiries re 3 years’ service charge accounts, rent, and insurance
May enquire of managing company about, for example, sinking fund (that is, an account where the landlord or managing agents are saving money to be utilised for large payments which may be needed for major repairs etc in the future), or any repairs planned for near future
Review of leasehold title
Review of landlord’s freehold title, and
Whether lease is new or old (1995 Act) and consider liability for breach of tenant covenant on assignment
How is a draft contract prepared in a freehold transaction?
Usual form of contract incorporating Standard Conditions or SCPS and any special conditions.
How is a draft contract prepared in a leasehold transaction?
As for freehold, PLUS:
Contract (agreement for lease) may have attached to it a draft lease in the form to be granted by the seller, if your client is buying a new lease.
Relevant standard conditions are: * SC 6.3.1 (apportionments) * SC 8.1 (existing leases) * SC 8.2 (new leases), and * SC 8.3 (consent to assignment of lease). There are similar provisions in a commercial contract under the SCPC.
Also consider: * buyer’s solicitor should review draft lease/existing lease to ensure covenants are acceptable and not too onerous * you may need to review/prepare licence to assign, and * stock transfer form, if needed.
How are finances reviewed in freehold transactions?
Review the mortgage offer. Check your client is happy with the terms. Review the Handbook, to ensure the title and search results comply. Arrange for the mortgage deed to be signed. Submit the certificate of title to the lender.
How are finances reviewed in leasehold transactions?
As for freehold, PLUS:
* check the Handbook terms re leases and clauses that are unacceptable, and
* check the length of the term of the lease is adequate for the lender
How is exchange done in a freehold transaction?
Usual Law Society exchange of contracts (Formula A, B, C)
How is exchange done in a leasehold transaction?
As for freehold, PLUS:
If there is a grant of a new lease, once exchanged the lease should be engrossed and issued for signature as an original and a counterpart.
What are the pre-completion steps in a freehold transaction?
Usual Land Charges Department and/or Land Registry searches. Prepare transfer deed. Reply to Completion Information and Undertakings. Prepare completion statement.
What are the pre-completion steps in a leasehold transaction?
As for freehold, PLUS:
* obtain the landlord’s consent (if required)
* engross the lease ready for signature, if granting/taking a new lease, and
* prepare a detailed completion statement, including apportionments of rent, service charge and any other sums due.
How is completion done in a freehold transaction?
Transfer or receive funds. Date transfer deed. Send or receive documents of title.
How is completion done in a leasehold transaction?
As for freehold, PLUS:
* Complete licence to assign (if required), and
* Complete and date lease and counterpart or TR1 if assignment of existing lease.
What are the post-completion steps in a freehold transaction?
Pay estate agents’ fees. Pay SDLT/LTT and file the return. Register the transfer and the mortgage (if any) at HMLR.
What are the post-completion steps in a leasehold transaction?
As for freehold, PLUS:
- prepare the notice of assignment to serve on the landlord
- prepare the notice of charge (also referred to as a notice of mortgage) to serve on the landlord, if the buyer has a mortgage, and
- send the stock transfer form to the landlord/management company to obtain a new share certificate for the buyer.
The HMLR fees are based on the same scale of fees as those for the premium paid for the lease.
