Unit 1: Freehold Property Transactions and Registered Land

Comprehensive practice flashcards covering freehold conveyancing transactions, professional conduct, property finance, taxation (SDLT, LTT, CGT, VAT), planning law, and registered land investigation.

What occurs at the exchange of contracts stage of a freehold property transaction?

The exchange of contracts fixes the completion date and binds the parties to the transaction. The buyer usually pays a $10\%$ deposit at this milestone.

What key events mark completion in a freehold property transaction?

The bulk of the purchase money is paid, the transfer deed is completed, and the keys to the property are handed over.

What is the doctrine of caveat emptor in property transactions?

Caveat emptor means "let the buyer beware." The seller is not obliged to disclose defects beyond title matters and is not liable for later-discovered defects, placing the onus on the buyer to investigate before exchange, though the seller cannot mislead.

What is the difference between gazumping and gazundering?

Gazumping occurs when the seller raises the agreed purchase price before exchange, whereas gazundering occurs when the buyer reduces their offer price before exchange. Neither party has legal recourse before contracts are exchanged.

Conventionally, which party's solicitor is responsible for drafting the transfer deed?

The buyer's solicitor conventionally drafts the transfer deed.

What are the core post-completion responsibilities for the seller's and buyer's solicitors?

The seller's solicitor discharges the existing mortgage, while the buyer's solicitor pays SDLT or LTT and registers the title and new mortgage.

What is the Law Society Conveyancing Protocol, and when is compliance required?

It is a standardised framework for residential conveyancing (current version issued 2019) using 'TransAction' documents (such as the TA06 Property Information Form). Compliance is mandatory for Conveyancing Quality Scheme (CQS) membership, which is required to join lender panels.

Why is a solicitor prohibited from acting for both the seller and the buyer under paragraph 6.2?

There is a high risk of conflict of interest, and neither exception applies because the Law Society confirms the buyer and seller do not have a "substantially common interest" and are not "competing for the same objective."

Under what circumstances is it generally permissible for a solicitor to act for both the borrower and the lender?

It is generally acceptable in residential transactions where a standard mortgage is used alongside an approved certificate of title, falling within the "substantially common interest" exception because both parties desire a good, marketable title.

What procedure must a solicitor follow under the Etridge (2001) guidelines when advising a non-borrowing spouse?

The solicitor must obtain loan details from the lender, meet the spouse face-to-face without the borrowing spouse present, explain the risks in plain language, confirm the spouse wants the solicitor to act, and decline to act if it is "glaringly obvious" that the spouse is being "grievously wronged."

What must a solicitor do in a contract race if the seller refuses to disclose the existence of the race to the buyers?

Under paragraph 1.4, a solicitor must not mislead buyers, but under paragraph 6.3, the solicitor cannot disclose without consent due to confidentiality duties; therefore, the solicitor must cease acting.

What are professional undertakings, and how should solicitors manage the risk of giving them?

An undertaking is a statement by a solicitor or firm promising that something will or will not be done, which is reasonably relied upon. Because undertakings are binding even if outside the solicitor's control, their wording should be conditional (e.g., "provided funds are received") where doubt exists.

What are the qualifying criteria for the Help to Buy scheme outlined in the notes?

The scheme is now Wales-only, restricted to new-build properties with a purchase price of $\le £300,000$, offering up to a $20\%$ equity loan.

What criteria define a regulated mortgage contract under FSMA 2000?

The borrower must be an individual, the loan must be secured by a first legal charge, and at least $40\%$ of the property must be intended for occupation by the borrower or their family.

What restriction applies to a solicitor relying on the section 327 FSMA 2000 exemption regarding mortgage advice?

The solicitor cannot recommend a specific mortgage product unless endorsing a recommendation made by an FCA-authorised person.

What are the mechanisms of repayment and interest-only mortgages?

In a repayment mortgage, the borrower pays both capital and interest, clearing the debt by the end of the term. In an interest-only mortgage, the borrower pays only interest, leaving the entire capital sum owed at the end of the term, requiring a separate repayment vehicle.

What SDLT relief is available to first-time buyers in England?

First-time buyers pay $0\%$ SDLT up to $£300,000$ and $5\%$ on the portion between $£300,001$ and $£500,000$. The relief is completely unavailable for properties priced above $£500,000$.

What are the standard residential SDLT rates and consideration bands in England?

Up to $£125,000$: $0\%$; $£125,001$ to $£250,000$: $2\%$; $£250,001$ to $£925,000$: $5\%$; $£925,001$ to $£1,500,000$: $10\%$; and the remainder above $£1,500,000$: $12\%$.

How does the apportionment of purchase price between land and chattels impact SDLT liability?

SDLT applies only to land and not to chattels (e.g., carpets, curtains). A fair apportionment can reduce the SDLT payable, but the apportionment must reflect true market value to avoid committing fraud on HMRC.

What is the filing and payment deadline for SDLT compared to LTT in Wales?

SDLT must be filed (using an SDLT1 form) and paid to HMRC within $14\text{ days}$ of completion, whereas LTT must be filed with the Welsh Revenue Authority within $30\text{ days}$ of completion.

What are the residential Land Transaction Tax (LTT) rates and bands in Wales?

There is no first-time buyer relief. The bands are: $0\%$ up to $£225,000$; $6\%$ from $£225,001$ to $£400,000$; $7.5\%$ from $£400,001$ to $£750,000$; $10\%$ from $£750,001$ to $£1.5\text{m}$; and $12\%$ on the remainder.

What are the limitations on Private Residence Relief (PRR) regarding garden size and commercial use?

Relief applies to gardens up to $0.5\text{ hectares}$; any excess garden area may be taxable unless strictly necessary for the reasonable enjoyment of the property. Relief is also lost on any parts of the property used exclusively for business.

What is the VAT treatment for new versus old commercial freehold buildings?

A new commercial freehold building ($\le 3\text{ years}$ old) is subject to compulsory standard-rate VAT ($20\%$). An old commercial freehold building ($> 3\text{ years}$ old) is exempt from VAT, subject to the option to tax.

Why might a commercial property seller exercise an "option to tax," and what is its disadvantage to buyers?

The seller exercises it to charge VAT and recover their own input tax (e.g., refurbishment costs). The downside is that it increases the effective purchase price for buyers who cannot recover input VAT (e.g., financial institutions) and increases the SDLT/LTT liability since SDLT is calculated on the VAT-inclusive price.

What is the statutory definition of "development" under section 55 of the Town and Country Planning Act 1990 (TCPA 1990)?

Development means Building, Engineering, Mining, or Other operations ("BEMO") in, on, over, or under land, or the making of any material change in the use of any buildings or other land.

Which activities do not constitute "development" under planning law?

Interior-only alterations or maintenance that do not materially affect the external appearance of the building, and changes of use where both the existing and proposed uses fall within the same use class under the Use Classes Order 1987.

What uses are encompassed within Class E under the English Use Classes Order?

Class E covers Commercial, Business, and Service uses, including retail (a), food and drink consumption on the premises (b), financial and professional services (c), and offices (g).

What is an Article 4 Direction?

A direction issued by a Local Planning Authority (LPA) or the Secretary of State that withdraws permitted development rights granted under the General Permitted Development Order (GPDO), requiring full planning permission instead.

What are the time limits for the implementation of planning permissions in England versus Wales?

Once planning permission is granted, it must be implemented within $3\text{ years}$ in England, or within $5\text{ years}$ in Wales.

What are the planning enforcement time limits in England following the changes on 25 April 2024?

The enforcement period is generally $10\text{ years}$ for all breaches. The previous $4\text{ years}$ limit applies only to BEMO and single-dwelling-house changes completed before 25 April 2024.

What are the time limits for prosecution and enforcement notices for Building Regulations breaches in England?

Since 1 October 2023, there is no time limit for prosecution in England, and an enforcement notice can be served within $10\text{ years}$ of completion.

What age requirement applies to the official copies supplied by a seller when deducing title?

The seller must supply official copies that are less than $6\text{ months}$ old at their own expense.

What information is found in the Property Register of a registered title?

It shows the postal address, the title plan reference, the legal estate (freehold or leasehold status), easements/rights benefiting the land, and any exclusions of usual rights (such as light or air).

What information does the Proprietorship Register contain?

It identifies the current registered owner(s) and their address, the class of title, the price paid (if transferred on or after 1 April 2000), indemnity covenants, and restrictions on the owner's power to dispose of the land.

What are the three classes of freehold title granted by HM Land Registry?

Absolute title (the best and most common title), Possessory title (where the owner is in possession but has lost the title deeds or claims adverse possession), and Qualified title (where a specific defect cannot be cured).

What encumbrances are entered in the Charges Register of a registered title?

Restrictive and positive covenants, easements burdening the land (e.g., rights of way), financial charges (most commonly mortgages), leases granted over the whole or part of the property, and third-party notices.