Preparation for and Exchange of Contracts

Flashcards covering the legal principles, standard conditions, and procedural requirements for the preparation and exchange of property contracts under the SQE1 syllabus.

Exchange of contracts

The point in a property transaction when the agreement becomes legally binding and the parties are committed to transferring the property at the agreed price and date.

Standard Conditions of Sale (SC)

A set of standard conditions, currently in the 5th edition – 2018 Revision, primarily used for residential transactions and some simple commercial transactions.

Standard Commercial Property Conditions (SCPC)

A set of standard conditions, currently in the 3rd edition – 2018 Revision, used for high-value commercial properties and transactions involving occupational leases.

Particulars of sale

The section on the front page of a contract containing unique details of the transaction, such as the description of the property, the parties, and the financial terms.

Specified incumbrances

Third-party rights that will survive the transfer of the property, such as restrictive covenants and easements, which must be listed in the contract to avoid a seller breach of SC 3.1.1 or SCPC 4.1.1.

Full title guarantee

A commitment given by a seller who owns the entire legal and equitable title, implying covenants that they have the right to dispose of the land and it is free from all incumbrances except those they could not reasonably know about.

Limited title guarantee

A commitment given by a seller with limited knowledge of the property, such as an executor or trustee, implying they have not incumbered the title and are unaware of others doing so since the last disposition for value.

Contract rate

The interest rate charged if a party is late in completing, often defined as the Law Society's interest rate, which is $4\%$ above the base lending rate of Barclays Bank plc.

Stakeholder

A method of holding a deposit where the seller's solicitor cannot hand the funds over to the seller until completion, though SC 2.2.5 allows its use for a related house purchase.

Agent

A method of holding a deposit where the funds can be released to the seller immediately after exchange for any purpose, posing a risk to the buyer if the seller becomes insolvent.

Indemnity covenant

A covenant given by the buyer to observe covenants affecting the title and to protect the seller against liability for future breaches, especially relevant for positive covenants.

Certificate of title

A document issued by a solicitor to a lender confirming that the property has a 'good and marketable title' and disclosing any legal problems identified during investigation.

UK Finance Mortgage Lenders’ Handbook

A manual providing comprehensive, standardised instructions for conveyancers acting for member mortgage lenders in residential transactions.

Section 2(1) Law of Property (Miscellaneous Provisions) Act 1989

The statutory provision requiring contracts for the sale of land to be in writing, incorporate all agreed terms in one document (or each copy), and be signed by the parties.

Law Society Formula A

A telephone exchange procedure used when one solicitor already holds both parts of the signed contract.

Law Society Formula B

The most common telephone exchange procedure, used where each solicitor holds their own client's signed part of the contract.

Law Society Formula C

A complex telephone exchange procedure designed to synchronise exchanges in a chain transaction.

VAT-sensitive buyer

A buyer, such as an insurance company, that makes exempt supplies and may be unable to recover VAT paid on the purchase price of a property.

Option to tax

A choice made by a seller of a commercial property that makes a normally exempt supply of land chargeable to VAT at the standard rate.

SCPC Part 2, Condition A1

An optional standard condition that prevents a seller from opting to tax before completion but allows them to charge VAT if a change in law makes the supply chargeable.