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Property > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

Can a solicitor act for a seller and a buyer?

A

A solicitor cannot act for both parties if there is a conflict of interest or significant risk of conflict. (Unless one of the exceptions apply)

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2
Q

What are the key exceptions which allow a solicitor to act for seller & buyer?

A

Paragraph 6 2(b) = Competing for the same objective – Where two clients are competing for the same objective, the solicitor can act for both clients.

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3
Q

What exception does not apply to property transactions?

A

Paragraph 6 (2) (a) = Substantially common interest exception

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4
Q

What are the likely scenarios where a solicitor can act for both borrower and lender?

A

1) Mortgage is on a lender’s standard terms

If the mortgage is non standard, it will be high risk and so breach SRA Code of Conduct Para 6.2 (conflict of interests)

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5
Q

What are the Etridge guidelines?

A

Where a property jointly owned is being charged for a loan that is not being made to all property owners, the solicitors should follow the etridge guidelines.

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6
Q

What key things should the solicitor explain to the non-recipient of the loan?

A

(i) Explain to the wife the purpose for which the solicitor has become involved

(ii) Explain that the lender will rely on the solicitor’s involvement to counter any suggestion that the wife has been unduly influenced or has not fully understood nature of transaction and

(iii) Obtain confirmation from the wife that she wishes the solicitor to act for her in the transaction, and to advise her on the legal and practical implications of the transaction.

If solicitor thinks it is not in the wife’s best interests, they should give this advice and if the its ‘glaringly obvious’ that the wife is being wronged, the soliciotr should decline to act.

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7
Q

What is a contract race?

A

Contract race = a pre-contract package is sent to multiple buyers who then compete to be ready to exchange contracts first.

  • Legitimate selling technique, so long as all prospective buyers know they’re engaged in a race.
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8
Q

What is the issue when a seller wishes for prospective buyers to know they’re engaged in a contract race?

A
  • Solicitor should advise to inform all buyers immediately of the seller’s intention to deal with more than one buyer.
  • If the seller refuses to agree to disclosure, the solicitor cannot disclose the contract race to the prospective buyers because they have a duty of confidentiality to the seller client under paragraph 6.3. Solicitor should immediately stop acting in the matter.
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9
Q

What is a repayment mortgage?

A
  • Borrower makes monthly payments to the lender.
  • Made up partly of instalments of original amount borrowed with interest chargeable on the loan.
  • Borrower can choose to pay interest at lender’s standard variable rate (SVR), fix the interest rate for a set period or agree a tracker rate of a certain percentage above the UK base rate set by Bank of England.
  • With fixed rate or tracker rate, interest reverts back to SVR at end of agreed period.
  • By the end of the mortgage term, the borrower will have paid off everything they owe.
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10
Q

What is an interest only mortgage?

A
  • Borrower makes monthly payments to lender but those payments will only comprise of interest chargeable on the loan.
  • At the end of the mortgage term, they will still owe the whole of the original amount borrowed.
  • Can obtain a combined mortgage where part loan is interest only and part is repayment.
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11
Q

What is a sharia compliant mortgage?

A
  • Finance schemes that are ‘Sharia compliant’ and avoid payment of interest. E.g., bank buys the property and resells it to buyer at higher price. Buyer repays excess to the bank by instalments over a period of years.
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12
Q

When can first time buyers claim relief from SDLT?

A

1) if they intend to occupy the property as their main residence and

2) the purchase price is no more than £625,000.

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13
Q

Do first time buyers pay SDLT on purchases up to £425,000? (Residential)

A

No.

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14
Q

When do first time buyers pay SDLT? (Residential)

A

5% on purchases from £425,001 to £625,000

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15
Q

What rates do non-first-time buyers pay SDLT at?

A

For purchases of:

Up to £250,000 = 0%

Exceeds £250,000 but does not exceed £925,000 = 5%

Exceeds £925,000 but does not exceed £1,500,000 = 10%

Remainder = 12%

Example = SDLT payable on purchase of £275,000 home by second time buyer is £1,250 (0% on £250,000 and 5% on £25,000).

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16
Q

Is SLDT payable on chattels?

A

No. If a sale involves valuable chattels, it could be possible to save SDLT by apportioning part of the purchase price to the chattels – this must be fair value or it’s classed as fraud on HMRC.

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17
Q

What are the rates for non-residential or mixed use freehold property? (SDLT)

A

Up to £150,000 = 0%

Exceeding £150,000 but not exceeding £250,000 = 2%

Exceeding 250,000 = 5%

Example = SDLT payable on purchase of £275,000 commercial property by a buyer is £3,250 (0% on £150,000, 2% on £100,000 and 5% on £25,000).

If VAT is charged, SDLT is payable on the VAT-inclusive system.

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18
Q

What are the requirements for paying SDLT?

A
  • Paid to HMRC, online or bank transfer, accompanied by a form called SDLT 1.
  • Must be paid 14 days of completion and if not paid, the transfer of the property to the buyer will not be registered by the Land Registry.
  • Failure to file and pay on time attracts penalties and interest.

Note – Not ‘working days’ – just ‘days’.

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19
Q

When is Land Transaction Tax used?

A

Property transactions in Wales.

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20
Q

Is there relief for first time residential buyers on LTT?

A

No.

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21
Q

What are the LLT rates for residential freehold property?

A

Up to £225,000 = 0%

Exceeds £225,000 but does not exceed £400,000 = 6%

Exceeds £400,000 but does not exceed £750,000 = 7.5%

Exceeds £750,000 but does not exceed £1,500,000 = 10%

Remainder = 12%

Example = LT payable on purchase of £275,000 home is £3,000 (0% on £225,000 and 6% on £50,000).

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22
Q

What are the LTT rates for non-residential or mixed use freehold properties?

A

Up to £225,000 = 0%

Exceeds £225,000 but does not exceed £250,000 = 1%

Exceeds £250,000 but does not exceed £1m = 5%

Exceeds £1m = 6%

Example = LTT payable on purchase of £275,000 commercial property by a buyer is £1,500 (0% on £225,000, 1% on 25,000 and 5% on £25,000).

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23
Q

What is the process for paying LTT?

A
  • If VAT is charged, LTT is payable on the VAT inclusive sum.
  • LTT must be submitted to the Welsh Revenue Authority within 30 days of completion.
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24
Q

What are the requirements for private residence relief? (for capital gains tax)

A

1) you have one home and you’ve lived in it as your main home for all the time you’ve owned it

2) you have not let part of it out - this does not include having a lodger

3) you have not used a part of your home exclusively for business purposes (using a room as a temporary or occasional office does not count as exclusive business use)

4) the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total

5) you did not buy it just to make a gain

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25
Q

When is no VAT chargeable in property transactions?

A
  • Vast majority of residential transactions
  • Sale of new build houses by a developer is zero rated so buyer will not pay VAT
  • Sale of residential property by private individual will not be in the course of business, so seller will not be charging VAT to the buyer in addition to the purchase price.
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26
Q

For new commercial properties, can the seller ‘opt to tax’ VAT?

A

No. New commercial properties must charge VAT.

New commercial property = Is within 3 years of being built.

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27
Q

Is VAT always charged on old commercial properties?

A

No. The seller has an option to tax the supply of old commercial properties. The seller should do this if they have paid VAT that it wants to recover.

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28
Q

On an old commercial property can the buyer recover the VAT paid?

A

Yes if it makes taxable supplies. However, if the buyer makes only exempt supplies, it may be unable to recover fully VAT it has to pay.

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29
Q

What is a buyer who makes exempt supplies likely to do with regards to the seller’s option to tax?

A

1) seek to resist their option to tax

2) seek compensatory reduction in purchase price

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30
Q

What is the statutory definition of development? S 55 TCPA 1990

A

carrying out of building, engineering, mining or other operations in, on, over or under land, or the making of any material change in the use of any buildings or other land.

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31
Q

What does not constitute development?

A
  • Carrying out of maintenance, improvement or other alteration of any building or works which affect only the interior of a building, or do not materially affect the external appearance of a building
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32
Q

Does a change of use within the same class of use constitute ‘development’? (S 55(2) Town and Country Planning (use classes) Order 1987

A

No. This does not require planning permission.

Change of use from one class to another requires planning permission.

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33
Q

What is a Sui Generis Use?

A
  • Uses which could potentially have adverse effects on their locality and include entertainment establishments (such as cinemas and bingo halls), drinking establishments (i.e., pubs and wine bars) and hot food takeaways (for sale of hot food for consumption off the premises).
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34
Q

Does change of use to or from a sui generis use require planning permission?

A

Always. Yes.

35
Q

What is the timeframe of planning permission once obtained?

A
  • Once planning has been obtained, it continues to exist for the benefit of the land and of all persons for the time being interested in it (unless otherwise specified in the planning permission itself).
  • Planning usually needs to be implemented within a certain timeframe and will lapse if not done. England = 3 years from date of permission. Wales = 5 years of date of permission.
36
Q

What are the two acts in england and wales relating to planning permission which is automatically granted?

A

England

  • Permitted development rights are set out in Town and Country Planning (General Permitted Development) Order 2015 (GDPO 2015)

Wales

  • Permitted development rights are set out in the Town and Country Planning (General Permitted Development) Order 1995 (GPDO 1995)
37
Q

What are the two permitted forms of development under the GDPO where planning is automatically granted?

A

Permitted Development under GDPO

(1) Developments within the curtilage of a dwelling house (such as extensions below a certain size)

(2) Minor operations (like painting the exterior of a building or installing a CCTV camera).

38
Q

What are the Article 4 directions?

A
  • Secretary of state in charge of Town and Country Planning (or the LPA) can exclude the effect of relevant GPDO by issuing an ‘article 4 direction’ negating the relevant concession.
  • Necessary, therefore, to check latest version of GPDO to make sure that no article 4 direction had taken place.
39
Q

What should a client/ solicitor do ifthere is an article 4 direction has taken place?

A

Apply for a certificate of lawfulness of proposed use or development under s 192 TCPO 1990.

If this is not obtained, then express planning permission must be obtained.

40
Q

What are the enforcement options of a local planning authority?

A

1) Enforcement notice

2) Stop notice

3) Breach of condition Notice

4) Injunction

41
Q

When can an enforcement notice be issued by the LPA?

A
  • Can be issued where there has been breach of any kind of planning control & is expedient to issue the notice in light of its planning policies for the area.
  • Must be served on the owner, occupier and any other person having an interest in the land, i.e., mortgagee. Becomes effective by 28 days after service.
  • Notice must specify the alleged breach and the steps to be taken, or the activities to be discontinued to remedy the breach and the timescale.
  • Any person interested in the land can appeal an enforcement notice.
  • In Wales, the warning notice must give details of the breach and warn that further enforcement action may be taken if an application for planning permission is not made within the period specified in the notice.
42
Q

When can a stop notice be issued by the LPA?

A
  • As an enforcement notice isn’t effective until 28 days after it has been served (and its effect is suspended if the recipient appeals it) the LPA can serve a stop notice to bring the activities to an end before the enforcement notice takes effect.
  • Stop notice cannot be served as a method of enforcement in its own right. An enforcement notice must be served first..
  • LPA can serve a temporary stop notice, effective for 28 days only, which gives time for further investigation.
  • In extreme cases LPA can apply to court for an injunction.
43
Q

When can an injunction be applied for by the LPA?

A
  • LPA can apply to court for an injunction to restrain an actual or apprehended breach of planning control.
  • LPA must show that an injunction is (a) expedient and (b) necessary and (c) that the remedy is appropriate in the circumstances.
44
Q

What does the LPA need to show for an injunction to be granted?

A

Injunction is:

1) expedient
2) necessary
3 appropriate remedy in the circumstances

45
Q

What are the relevant time limits for enforcement by the LPA to be taken?

A
  1. Four years for operational development carried out without planning permission
  2. Four years for change of use to a dingle dwelling house
  3. Ten years from date of breach for all other breaches (such as any other material change of use or breach of a planning condition).
46
Q

When must enforcement be taken for 1) an operational development carried out without planning permission?

A

4 years.

47
Q

When must enforcement be taken for 2) Change of use to a single dwelling house?

A

4 years.

48
Q

When must enforcement be taken for all other breaches (e.g., material change of use or breach of planning condition)?

A

10 years.

49
Q

Who is responsible for breach of planning permission?

A

current owner of the property is held responsible and not necessarily the person who, for example, obtained the planning or failed to obtain it.

50
Q

If the LPA doesn’t take action within the relevant time period, can further action be taken in respect of the breach?

A

No.

51
Q

What are building regulations?

A

All building works must comply with the building regulations – these are separate and in addition to planning permission. They apply in all circumstances (even if the GDPO exempts the need for planning permission).

52
Q

What are the requirements of the developer in applying for building regulations approval?

A

1) servce notice to LPA before commencement of the work

2) Pay fee for obtaining approval & certificate

3) Recieve a certificate of compliance after inspection

4) Once approval has been obtained, complete within 3 years of building regulations approval

53
Q

For a breach of building regulations, what can the LPA do?

A

1) Bring prosecution in the magistrates’ court within 2 years of the completion of the work

2) unlimited fine

3) apply for injunction at any time for the removal or alteration of any work in breach – means there is no time limit for enforcement

54
Q

Who should supply the deduction of title (freehold registered land)?

A

– Seller, should supply copies which are less than 6 months old at their own expense.

55
Q

What does the charges register contain?

A

Identifies incumbrance (e.g., covenants, easements, leases, notices).

56
Q

What does the property register contain?

A

Contains a description of the land by referring to the postal address and title plan and indicates whether the title is freehold or leasehold.

Also indicates:

(i) There are easements or rights benefitting the land and, if so, that those easements/rights are subject to obligations.

(ii) Certain things one might usually expect to come with the land (e.g., rights of light and air over adjacent land) have been excluded from the title.

57
Q

What does the proprietorship register contain?

A
  • Identifies the current owners and their address.
  • Identifies the class of the title. (State guarantees the title and compensation is payable where there are defects/errors found in a registered title).
58
Q

What is absolute title?

A
  • The registered proprietor has vested in them the legal estate subject only to the entries on the register, overriding interests and if the proprietor is a trustee, minor interests of which they have notice, such as the interests of the beneficiaries under the trust.
59
Q

What is possessory title?

A
  • Granted where the proprietor is in possession of the property but has lost the title deeds or is claiming through adverse possession.
  • Means that the proprietor is also subject to all adverse interests existing at the date of first registration
60
Q

What is qualified title?

A
  • Granted where there is a specific identified defect which the Registrar feels cannot be overlooked or ‘cured’ by the grant of absolute title.

– E.g., co-ownership restriction, lender restriction.

61
Q

How to investigate title to freehold property for registered land?

A

Check land registry.

62
Q

Investigation to title to freehold property for unregistered land?

A

Title deeds.

63
Q

What is the root of title?

A
  • “root of title” = the document from which to begin the investigation. Once root is identified, any older documents that pre-date the root can be ignored.
64
Q

What is the epitome of title?

A
  • “Epitome of title” = a schedule of all the documents from and including the root up until the present day. Only includes copies.
65
Q

What are the requirements for good root of title?

A
  • Deal with or show who owns the entire interest (legal and equitable) that is being sold by the current owner.
  • Contain a recognisable description of the relevant land.
  • Do nothing to cast doubt on the seller’s title.
  • Be at least 15 years old.
66
Q

Restrictive covenants on unregistered will only bind if there are correctly registered as a land charge at Central Land Charges Deparment:

A

C(iv) = Estate contract

D(ii) = A restrictive covenant

D (iii) = Equitable easement

F = A home right

67
Q

Where there is any mention of mines / mining under the property, what searches should a solicitor carry out?

A

1) Index Map Search on form SIM

68
Q

If a co-owner of a property dies what must the seller’s solicitor provide?

A
  • Seller’s solicitor needs to provide copy of death certificate
69
Q

Where the co-owner holds equitable interest as joint tenants (and one of them dies) how is the property conveyed?

A

If equitable interest was also held as JTs, then the surviving co-owner can transfer the property alone.

Registered land = buyer can assume that the equitable joint tenancy was not severed (i.e., turned into a TiC).

Unregistered land = buyer will be entitled to assume that the joint tenancy was not severed if the following three conditions are met (set out in the Law of Property (Joint Tenants) Act 1964:

  1. There is no memorandum (written record) of severance endorsed on the conveyance of the property to the joint tenants
  2. There are no bankruptcy proceedings registered against either of the joint tenants at the Land Charges Registry
  3. The transfer by the surviving joint owner to the buyer contains a statement that the survivor is solely and beneficially entitled to the land.
70
Q

Where a co-onwer holds equitable interest as tenants in common, and one of them die what is necessary?

A

If equitable interest is held by co-owners as TiCs, a ‘second trustee’ needs to be appointed to overreach the equitable interest of the deceased co-owner.

Can be made in the transfer of the property or by separate deed of appointment.

Provided the buyer pays the purchase price to at least two trustees on completion, the equitable interest of the deceased co-owner will be overreached and the buyer will take the property free of it.

  • Alternatively, where the equitable interest is as TiCs, the deceased co-owner’s interest may have passed to the surviving co-owner by will or under the intestacy rules; this can be proved by producing copies of probate and the assent from the PRs to surviving co-owner as beneficiary.

Note – No need to appoint a second trustee where there are two or more legal owners remaining, as the purchase price will be paid to at least two trustees on completion so overreaching will take place.

71
Q

Where do restrictive covenants appear?

A

Registered land = Charges register.

Unregistered land = conveyance.

72
Q

In unregistered property, when will a restrictive covenant be binding against the buyer?

A

Registered as a D(ii) Land Charge.

73
Q

What are the 3 options when dealing with restrictive covenants?

A

1) Negotiation

2) Indemnity insurance

3) Upper tribunal (Lands Chamber)

74
Q

1) negotiation of restrictive covenants – benefits / disadvantage

A

Find and ask person with the benefit of the restrictive covenant if they can permanently release the covenant or give a one-off consent. (Note – This solution is not appropriate where the covenant is very old and the person with the benefit of the covenant cannot be easily identified as the land has been sold off in parts).

Note – where it’s an old covenant, approaching the successor in title who has the benefit will not be in the client’s best interest as they may not be aware of the covenant and this will exclude the possibility to get indemnity insurance.

75
Q

2) Indemnity insurance – restrictive covenant

A

Obtain restricted covenant insurance policy for proposed breach of covenant. Most cost-effective solution but may not be appropriate if the person with the benefit of the covenant is likely to know that they have the benefit and object to the proposed use (e.g., an immediate neighbour).

76
Q

3) Upper tribunal lands chamber – restrictive covenant

A

apply for modification or discharge of the covenant under s 84 Law of Property Act 1925 on the grounds that the covenant is obsolete or confers no practical benefit of substantial value or advantage (or is contrary to the public interest) and loss of covenant can be compensated in money (this may not be a quick or cost-effective option and the outcome is at the discretion of the tribunal).

77
Q

Example of indemnity covenant in registered land =

A
  • Entered in the proprietorship register.

Example:
“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.”

78
Q

Example of indemnity covenant in unregistered land =

A
  • Entered in the conveyance.

Example:

“THE Purchaser hereby COVENANTS with the Vendors to observe and perform the covenants contained in the Conveyance and shall indemnify the Vendors from and against all actions costs proceedings and claims in respect of any future breach thereof.”

79
Q

What is the best way to deal with an unknown covenant?

A

(a) Assume Restrictive = Safest to assume the covenants are restrictive and will be binding on the buyer, even though the details are unknown and to apply the options stated earlier for restrictive covenants.

(b) Indemnity Insurance Policy = most cost-effective. Seller should take care to disclose this defect in title in the contract so that the buyer cannot object to it and use it as a reason to complete the purchase.

80
Q

For registered land, how does a mortgage to a title appear?

A

To determine whether a registered property is subject to a mortgage there will be two entries in the Charges register, (a) one giving the date and purpose of the charge and (b) the other stating the identity of the lender.

81
Q

For unregistered land, how does a mortgage appear?

A

Mortgage will appear as one of the title deeds listed in the epitome of title.

  • Buyer is only concerned with a mortgage which has not been discharged (i.e., paid off): a mortgage that has been discharged will have on the back page, a ‘vacating receipt’:
82
Q

Overview of home rights?

A

Statutory home right = a right created under Family Law Act 1996 for a non-owning spouse of civil partner to occupy the matrimonial home.

  • Home right does not create an interest in land.

Registered Land = A home right will bind a buyer if it is protected by a notice in the Charges register by the date when the transfer of the property to the buyer is registered.

Unregistered Land = A home right must be protected as a class F land charge in order to be binding on a buyer.

83
Q

How to deal with a home right?

A
  • If investigation of title reveals Home Rights, seller should be required to obtain from the non-owning occupier a release of all rights in the property and agreement to vacate on or prior to completion.
  • Usually dealt with in the contract.

Property (10 decks)

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