SQE: Property Practice

What should a solicitor do if they do not think they can provide a 'timely' service to a client?

Refer the matter to another lawyer

What should a solicitor do if they do not think a third party is not authorised to provide instructions on behalf of a client?

Verify if the third party is properly authorised to provide instructions on the client's behalf (eg direct consent from the client, check company hourse to confirm the identity of the third party)

What is an 'own interest conflict'?

Any situation where your duty to act in the best interests of a client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter

NO EXCEPTIONS

What is a 'conflict of interest'?

A situation where your separate duties to act in the best interests of two or more clients in the same or related matter conflict (eg you act for a seller, who's interest may be to sell the property at the full price as quickly as possible. However if you also act for the buyer, who's interest may be to take as long as necessary to investigate the deed before the exchange, this is a clear conflict of interest)

What are the 2 exceptions to a conflict of interest?

1. Substantially Common Interest - where there is a clear common purpose between the clients and a strong consensus on how it is to be achieved (eg you you represent both husband and wife in selling the matrimonial home under a divorce order. While they have a conflict of interest, they share a clear common purpose of selling the home and have a strong consensus on proceeding with the sale)

2. Competing for the Same Objective - any situation in which two or more clients are competing for an "objective" which, if attained by one client, will make that "objective" unattainable to the other client (eg in a structured competition process such as an auction, you may act for two or more clients, as the process itself will mean that only one of the clients will be successful)

What should you do if you represent two parties and they start to lose a clear common purpose/ strong consensus?

Withdraw from acting on behalf of both parties

What is a solicitor's duty of confidentiality?

You keep the affairs of current and former clients confidential, unless disclosure is required, and is permitted by law or the client consents

Does a solicitor's duty of confidentiality continue after the client has died?

Yes

What is a solicitor's duty of disclosure?

When you are acting for a client on a matter, you make the client aware of all information material to the matter of which you have knowledge

Name 3 aims of a solcitior when acting in the conveyancing process:

Ensure that:

1. The seller has the right to sell the property

2. You identify all the rights that the property enjoys

3. You identify all burdens that the property has

4. The property is free from any security interest (such as mortgages) or will be on completion

5. There are sufficient funds to finance the purchase

What are the 5 stages of the conveyancing process?

1. Pre-Exchange

2. Exchange

3. Pre-Completion

4. Completion

5. Post-Completion

Name 2 things that occur in the Pre-Exchange stage of the conveyancing process:

1. Surveyor surveys property and reports on its value and condition

2. Buyer's solicitor investigates and reports on the title of the property

3. Seller's solicitor deduces title

4. Buyer's solicitor completes necessary searches and enquiries

Name 2 things that occur in the Exchange stage of the conveyancing process:

1. The seller and buyer enter into a contract to sell and buy the property on the completion date

2. The buyer pays a deposit

Name 2 things that occur in the Pre-Completion stage of the conveyancing process:

1. Buyer's solicitor orders mortgage funds and ensures has full money from client in time for the completion date

2. Seller ensures that has all necessary paperwork to transfer the property on completion

3. Any necessary requisitions on title are made

4. Buyer's solicitor completed any necessary pre-completion searches and enquiries

Name 2 things that occur in the Completion stage of the conveyancing process:

1. The buyer's solicitors send the purchase price to the seller's solicitors

2. The seller's solicitors agree

3. The buyer gets the keys to the property

Name 2 things that occur in the Post-Completion stage of the conveyancing process:

1. Buyer's solicitor registers any charges on the property (eg mortgage)

2. Seller's solicitor pays off the seller's mortgage and pays balance to seller

3. Buyer's solicitor pays Stamp Duty Land Tax (SDLT)

4. Buyer's solicitor registers the buyer as the new owner at the Land Registry

What is the definition of 'Caveat Emptor'?

Means that the buyer alone is responsible for checking the quality and suitability of the property before a purchase is made

How does a buyer's solicitor find out information about the property?

1. Investigating the title of the property

2. The Seller's response to enquiries

3. Searches

4. A Survey of the Property

Can a buyer withdraw from the transaction after Exchange if they discover a subsequent problem with the property?

Yes - but they will suffer financial consequences and be sued for a breach of contract by the seller (unless the seller supplied misinformation regarding the problem in which case the buyer will have a claim against the seller)

What is an Energy Performance Certificate (EPC)?

An EPC is prepared by an accredited energy assessor and reports on the energy efficiency rating of the property and, if appropriate, recommends on how the energy rating could be improved

How long on average does a residential sale transaction take?

6-8 weeks

How long on average does a high value commercial sale transaction take?

Usually it will require exchange within 2 weeks and completion within 4 weeks

How can a co-ownership agreement be recorded?

Can be done via:

1. A Declaration of Trust of Land (in writing and signed by the declarants

2. The Land Registry Transfer Deed form (TR1)

What is the maximum number of legal owners of a property?

4

What is the definition of a 'joint tenancy'?

Two or more people own a property together, each with equal rights and obligations

What is the definition of a 'tenancy in common'?

Two or more people share ownership rights of a property

For what type of ownership does the right of survivorship apply to?

Co-Ownership (Joint Tenancy)

What might the buyer do upon discovering a physical defect with the property via a survey prior to exchange?

1. Re-negotiate the asking price

2. Require a contribution from the seller

3. Withdraw before the Exchange

What might the lender do upon discovering a physical defect with the property via a survey prior to exchange?

Potentially refuse to lend until it is put right, meaning that the buyer cannot proceed even if they want to

What are the 3 types of Survey?

1. Basic Valuation:

If a mortgage is being obtained, then the lender will insist on at least a basic valuation- it is the cheapest option and the surveyor will give a valuation and identify any major obvious defects

2. Homebuyer Report:

Much more detailed than the basic valuation, and will be suitable for most properties in reasonable condition aged less than 150 years

3. Full Structural Survey:

Although suitable for any property, it should especially be considered where the property is listed, has had extensive renovations, or where extensive alterations are planned

What are the 3 different taxes that could be payable in a property transaction?

1. Stamp Duty Land Tax

2. Capital Gains Tax

3. VAT

What are the 2 types of residential mortgages?

1. Capital Repayment Mortgage - the borrower repays the capital sum via monthly payments + interest added each month

2. Interest Only Mortgage - the borrower only pays the interest on the loan and the capital sum only being paid off upon the sale of the property

What type of interests appear on the charges register?

Burdens (eg restrictive covenants, mortgages etc)

What type of interests appear on the property register?

Benefits (eg ownership, rights etc)

What are 4 issues that need to be considered if a property has a registered right of way benefit?

1. It must also be registered as a burden against the servient land

2. The person using the right of way is obliged in common law to contribute towards its maintenance

3. The right of way must be adequate both legally and physically (eg a right of way by car is not legally adequate for lorries, nor perhaps physically adequate if a car cannot fit)

4. If it is a public highway, the land may be adoptable and thus maintainable by the local authority at its expense

What does the proprietorship register show?

The registered proprietor's (owner's) name and address, the class of title and entries affecting ownership

What is the definition of 'class of title'?

A classification given to a property when it's first registered at the Land Registry (there are 4 classifications)

The classification indicates how satisfied the Land Registry with the registered proprietor's proof of ownership to the property.

What are the 4 classes of title?

1. Title Absolute (Freehold or Leasehold) - the best class of title as the proprietor has satisfied the Land Registry that they are the true and proper owner of the property

2. Qualified Title (Freehold or Leasehold) - where there is a defect with the title

(eg where a deed known to contain covenants or easements were missing on first registration)

3. Possessory Title (Freehold or Leasehold) - granted when the registered proprietor has shown that they have physical possession of the property, but has no title deeds

(eg adverse possession)

4. Good Leasehold Title (Leasehold Only) - granted when the leaseholder cannot provide evidence of the landlord's title to the land

What should the solicitor do if the property does not have absolute title?

1. Report it to their client and explain what it means

2. Check the mortgage lender's requirements - they may not accept inferior classes of title

3. Consider and advise the client on obtaining title indemnity insurance in order to cover risks

4. Consider the possibility of upgrading the title

Why is it important for co-owners to notify the Land Registry if they are beneficial tenants in common?

So the Land Registry can add a restriction to the proprietorship register

This prevents the Land Registry from registering certain dealings (eg sale by a sole owner, mortgaging) against the title unless the terms of the restriction are complied with

What is the purpose of a Land Registry restriction and how does it arise?

The restriction prevents the Land Registry from registering certain dealings (eg sale by a sole owner, mortgaging) against the title unless the terms of the restriction are complied with

It arises from the co-owners of the property notifying the Land Registry that they are beneficial tenants in common

What happens to the beneficial and legal title of the land if there is a death of a joint proprietor who was a joint tenant?

By survivorship, the surviving joint proprietor takes the beneficial title to the property

The Land Registry will also register the the surviving joint proprietor as the sole legal owner (as there should be no restriction against the register)

What happens to the beneficial and legal title of the land if there is a death of a joint proprietor who was a tenant in common?

The surviving joint proprietor keeps their share of the property, whilst the other share (and thus legal and beneficial title) passes to the deceased person's beneficiaries

What is the process of 'overreaching'?

If a surviving beneficial tenant in common is selling the property:

1. They will need to appoint a second trustee (often their solicitor) to sign the contract and execute the transfer deed with them

2. The purchaser must pay the purchase money to at least two trustees

This to 'overreach' the beneficial interests on the property and free the property of any beneficial interests for the buyer

Name 3 rights that burden the property and thus would be on the Charges Register:

1. Mortgages

2. Easements

3. Leases

4. Covenants

In almost all cases, the parties' intention is for the property to be sold free of mortgage, but what must the buyer's solicitor do to ensure this happens?

1. Ensure early on that the seller has sufficient funds to clear the mortgage

2. Ensure that it is a term of the buyer / seller contract that the mortgage will be redeemed on completion

3. Obtain an appropriate undertaking from the seller's solicitor to redeem the mortgage from the proceeds of sale on completion

What is a restrictive covenant?

A promise not to do something, from one landowner to another (eg not to use the property other than for residential purposes)

Are restrictive covenants binding on the property and if so, why?

Yes

They are binding on the property because they limit what a property owner can do with their property

What is a positive covenant?

A promise to do something, from one landowner to another (eg oblige a party to maintain a shared fence)

Are positive covenants binding on the property and if so, why?

No

They are NOT binding on the property because they are against a specific landowner and not the property itself

What is the chain of indemnity?

Because positive covenants do not pass with the property, the seller will include an indemnity covenant in the buyer agreement - this means that if the buyer breaches a positive covenant and the person with interest objects to the breach, the buyer will be liable and not the seller, despite the positive covenant being bound to the seller

What automatically breaks a chain of indemnity?

Death of somebody within the chain

What is advisable to do if the land's current use is in breach of the covenant, but no objection has been received?

Obtain an indemnity insurance policy

What 3 options are available to the landowner if the land's current use is in breach of the covenant?

1. Obtain an indemnity insurance policy (if no objection has been received)

2. Approach the person with benefit (PWB) for consent to the breach of covenant

3. If the covenant meets certain grounds (eg the covenant is archaic), then an application can be made to the Upper Tribunal (Lands Chamber) to discharge the covenant

What is 'deducing title'?

The process of proving ownership to a would-be buyer

What stage in the conveyancing process does deducing title take place at?

Pre-Exchange

What is the process of deducing title for registered land?

The seller's solicitor gets together the title documents, checks them to ensure that the seller is entitled to sell the property, and sends them to the buyer's solicitor

What are the 'title documents' and what are their purpose?

Used to deduce title and demonstrate ownership via:

1. Property Register

2. Proprietorship Register

3. Charges Register

4. Title Plan

What is compulsory first registration?

The mandatory registration of land which is triggered on a dealing with a property (eg a sale, a lease being established)

What was the date that unregistered land had to be registered before to avoid having a defect in title?

1 December 1990

Name 3 trigger events which mandate the registration of unregistered land:

1. Transfer of the freehold estate by sale, gift, or court order

2. Grant of a lease for a term of more than 7 years

3. A first legal mortgage of the freehold or of a leasehold with more than 7 years to run

4. Assignment of a lease of unregistered land with more than 7 years to run

Does a grant of a 6 year lease on unregistered land act as a trigger event for the land to be registered?

No - only a grant of a lease for a term of more than 7 years mandates the registration of unregistered land

What is the process of deducing title on unregistered land?

1. The seller's solicitor must identify which deeds are relevant, and find a good 'root of title'

2. The seller's solicitor then creates an epitome of title - a list of relevant title deeds that prove the ownership history of a property that is not yet registered with the Land Registry

3. Then, copies of the listed documents are provided to the buyer's solicitor, and the seller's solicitor will typically undertake to provide the originals to the buyer's solicitor on completion

What is an epitome of title?

A list of relevant title deeds that prove the ownership history of a property that is not yet registered with the Land Registry

What is good 'root of title'?

A document which:

1. Is at least 15 years old

2. Deal with or show the ownership of the whole legal and equitable interest in the land

3. Contain a recognisable description of the property

4. NOT contain anything that casts any doubt on the title

What is 'investigating title' and what is its purpose?

The buyer's solicitor investigates registered title by checking the Land Registry official copies, title plan and other documents referred to on the register with the purpose of:

1. Check that the seller has the legal right to sell the property

2. Ensure that the property is adequate for the buyer's intended use

3. Ensure that there are no title defects that could affect the value of the property or the ability to sell in future

4. Ensure the root of title and chain of title deeds are validly executed (correct formalities have been followed and stamp duty as been paid on each transfer of the property)

What is the process of investigating title on unregistered land?

1. The buyer's solicitor investigates unregistered title by checking the epitome of title and the copy documents provided by the seller's solicitor

2. The buyer's solicitor should ensure that the epitome of title will be sufficient to register the property with title absolute at the Land Registry

What is the difference between searches and enquiries?

Searches: usually requested from third party organisations

Enquiries: usually requested from the seller / seller's solicitor

What are the 6 standard searches the buyer's solicitor should undertake pre-exchange?

1. Local Search - covers all matters relating to the property within the knowledge/records of the local authority

(eg local land charges, planning and building regulations etc)

2. Drainage and Water Enquiries - dealt with by the relevant water service company for the area

3. Desktop Environmental Search - based on historical records and will indicate if the property has been used for potentially contaminative land uses

4. Chancel Repair Search - for properties that may be registered as a local parish house so will require maintenance

5. Land Charges Search (K15) - only applicable for unregistered land

6. Conduct an Index Map Search (IMS) - only applicable for unregistered land

When should the buyer's solicitor undertake searches and enquiries?

Pre-Exchange

What 2 pre-contract searches are critical to be used when dealing with unregistered land?

1. Land Charges Search - only applicable for unregistered land

2. Conduct an Index Map Search (IMS) - only applicable for unregistered land

What are the 4 optional searches the buyer's solicitor may undertake pre-exchange?

1. CON290 - a more detailed version of the local search (eg shows noise abatement zones, areas of natural beauty etc)

2. Highways Search - will show whether roads included in the search are adopted highway (maintained by the local authority at its expense for public use)

3. Flood Search

4. Utility Providers Search - checks that the property has the benefit of utility connections

What is the role of the of the National Land Information Service (NLIS)?

Acts as an intermediary between solicitors and the various institutions that solicitors have ordered searches from

What would happen if the seller supplies misinformation / incorrect information to a pre-contract enquiry?

The buyer could bring action against the seller

What are pre-contract enquiries?

Questions asked of the seller to elicit information which will assist the buyer in their due diligence of the property

Is the seller obliged to reply to pre-contract enquiries?

Generally No,

HOWEVER, a seller is under a duty to disclose any "latent incumbrances" in the title to the property of which it is aware of and are not apparent on inspection (eg a right of way etc)

ALSO, a seller not replying to enquiries would discourage the buyer from proceedings, however sometimes the lack of response is justified (eg an executor of a deceased's estate does not know the property well)

What are the seller's duties when responding to enquiries?

If the seller does provide replies to enquiries, it must answer truthfully and accurately to avoid any risk of being held liable for misrepresentation or fraud

Does the seller have a duty to update their reply to an enquiry if it becomes 'out of date'?

Yes - the duty to update arises because replies to enquiries are not fixed on the date they are given, but instead they are treated as continuing representations given up to the point the contract is entered into

What 2 forms should be used by the buyer's solicitor for residential enquiries?

Form TA6 - contains information about boundaries, alterations, work done, neighbour disputes, occupiers, utility providers etc

Form TA10 - contains information about items that are included or not in the sale such as curtains, light fittings, carpets

What 2 forms should be used by the buyer's solicitor for commercial enquiries?

Form CSPE1 - covers a range of matters (eg rights benefiting and burdening the property, physical condition, planning and building regulations etc)

Form CSPE2 - applies where the property is subject to commercial tenancies

What is 'development' on land?

Means carrying out of certain building works on land or a material change of use of the land

When is planning permission required?

Whenever there is any development on land (eg change of use class, an extension)

UNLESS:

1. The building works only affect the interior of the building

2. The building works do not materially affect the external appearance of the building

3. Changes of use of the building are within the same use class

What are the 3 exceptions where planning permission is not required?

1. The building works only affect the interior of the building

2. The building works do not materially affect the external appearance of the building

3. Changes of use of the building are within the same use class

What is required to change a 'use class'?

Planning Permission (change of use within the same class does not require it)

Name 3 'use classes':

B2: general industrial use

C1: hotels

E: commercial and business use

What is a property classed as if it is not eligible to fit within a use class?

Sui Generis (eg theatres, amusement parks, pubs and nightclubs)

If unsure whether a development falls within the GPDO, what should be applied for to help with clarification?

A Certificate of Lawfulness - this is not planning permission but confirms that the work either does not constitute "development" or if it does, that it falls within the GPDO.

What is the primary governing statute for planning permission?

Town and Country Planning Order 2015 (GDPO)

What is required to demolish, alter or extend a listed building?

1. Planning Permission

2. Listed Building Consent

What are the 2 types of listed building?

Grade 1: listed buildings of exceptional interest

Grade 2: listed buildings of particular importance and more than special interest

Is planning permission is needed to demolish an unlisted / listed building within a conservation area?

Yes

Is consent needed to chop down trees within a conservation area?

Yes

What is the purpose of building regulations?

To regulate issues that affect health and safety (eg the structural integrity of the building, fire escape, water supply)

What is the primary governing statute for building regulations?

Building Regulations 2010 (BR2010)

What type of building work requires an application to be made to BR2010 to gain building regulations consent?

1. Erection or extension of a building

2. Installation or extension of a service or fitting that is controlled under the Building Regulations (eg a boiler or windows)

3. Work required where there is a material change of use of the whole building

What is required following the completion of building works granted by BR2010?

Either a:

1. Certificate of Compliance - awarded by a building control inspector if the work is in accordance with building regulations

2. Self-Certification - exists for certain types of work (eg a window installer registered with FENSA will certify that the windows comply with the outlined building regulation)

When would a breach of planning permission occur?

A breach of planning control occurs when:

1. A development has taken place without planning permission

2. A condition or limitation of planning permission has been breached

Name 3 options the local authority has to prevent any breaches of planning permission:

1. Enforcement Notice - requires the land to be restored to condition it was in before the breach / comply with any conditions or limitations imposed by planning permission

2. Stop Notice - it requires that specified activity stop immediately (can serve a stop notice only after serving an enforcement notice)

3. Breach of Condition Notice - requires any breach of conditions or limitations to be ceased

4. Injunction - the local authority can apply to court for an injunction to halt the breach of planning permission

What is a planning permission enforcement notice?

The local authority gives 28 days notice for:

1. The land to be restored to condition it was in before unauthorised development or,

2. Compliance with any conditions or limitations imposed by planning permission

If not adhered to within 28 days, the land owner may be fined + the local authority can enter the land to enforce the planning permission and also recover its expenses from the land owner

How many days notice does the local authority have to provide for the landowner to comply with the requirements in a planning permission enforcement?

28 days