Contract of Sale: Contents, Standard & Special Conditions, and Related Conveyancing Issues

Contract Package: Structure & Drafting Process

  • Seller’s solicitor prepares and issues the contract package in duplicate ➜ two identical originals are sent to buyer’s solicitor.
    • Buyer’s solicitor inserts client details in both copies, returns one approved copy and keeps the other.
    • During exchange of contracts both solicitors cross-check the two copies line-by-line to confirm they are identical.
  • Golden rule: Only the terms written in the contract are binding.
    • Any oral / email / side-letter promise that is not written in the contract is unenforceable.
    • EXAM FLAG: Look for facts where the parties “agreed” something (e.g. seller to leave wardrobes) but it never appears in the contract ➜ seller will have no contractual obligation, therefore no breach.

Standard Forms Used

  • Nobody drafts from scratch; parties adopt a pre-printed form that is then customised.
    • Residential freehold/leasehold: Contract incorporating the Standard Conditions of Sale (“Standard Residential Conditions”).
    • Commercial freehold/leasehold: Contract incorporating the Standard Commercial Property Conditions (“SCPC”) – adds clauses on:
      • Existing tenancies
      • Business transfer as a going concern
      • VAT and wider tax issues.
  • Despite sector differences, each form is split into the same three parts:
    1. Particulars of Sale (transaction “cover sheet”).
    2. Standard Conditions of Sale (general “small print”).
    3. Special Conditions of Sale (tailor-made clauses for this deal).

1. Particulars of Sale (the Basics)

  • Contains headline data:
    • Names & contact details of seller, buyer, and both firms of solicitors.
    • Description of the property + whether it is freehold or leasehold.
    • Agreed price.
    • Any reference numbers (e.g. title number, plan ID).

2. Standard Conditions of Sale (Core Default Rules)

Deposit

  • Buyer must pay a 10 % deposit on exchange:
    \text{Deposit} = 0.10 \times \text{Purchase Price}
  • Default position: deposit held as stakeholder by buyer’s solicitors = held for both parties; cannot be released to seller until completion.
  • Seller can negotiate amendment via special condition so that deposit is held as agent (common on new-builds) ➜ allows seller to receive money immediately.
    • Buyer risk: if seller defaults after receiving funds, recovery may be difficult.

Risk & Insurance

  • Risk passes to the buyer on exchange.
    • Buyer must still complete even if the property is damaged between exchange and completion.
  • No party is obliged under the standard conditions to insure, but a prudent buyer will arrange cover from exchange; otherwise buyer must purchase a “charred ruin.”

Completion Mechanics

  • Exchange merely creates mutual obligations; title does not pass.
  • Buyer pays remaining 90 % (balance) on the specified completion date/time.
  • Seller’s solicitor hands over the executed transfer deed only on completion, effecting the legal transfer.

Remedies for Default (overview)

  • Standard conditions set out:
    • Notice to complete procedure
    • Contractual interest rates on late monies
    • Forfeiture of deposit (if buyer in default)
    • Specific performance / damages (if seller in default).

3. Special Conditions of Sale (Deal-Specific)

  • Used to:
    • Opt-in/opt-out of built-in provisions (e.g. vacant possession, fixtures list).
    • Add unique promises (e.g. seller to repair roof pre-completion, buyer to accept existing tenancy, etc.).
  • Rule of thumb: anything negotiable must appear here, otherwise it is unenforceable.
  • Typical clauses frequently examined:
    • Inclusion/exclusion of fittings & contents.
    • Vacant possession confirmation.
    • Existing tenancy terms.
    • Non-owning occupier to vacate and sign contract (see below).
    • Requirement for seller to purchase indemnity insurance (see later).

Property Information Form (PIF) – Residential Focus

  • Completed personally by the seller; covers practical matters:
    • Boundaries, neighbour disputes, flooding, utilities, alterations, guarantees, etc.
  • Buyer is entitled to rely on the answers; dishonest or misleading answers ➜ seller liable for misrepresentation.
  • Critical question: Are there any occupiers aged 17+ who will stay after completion?
    • Such persons may have an overriding interest (Schedule 3 Para 2 LRA 2002) and bind the buyer if not cleared.
    • If disclosed, buyer will insist on a special condition: occupier must sign the contract acknowledging obligation to vacate on completion.
  • Conduct point: seller’s solicitor cannot also act for the non-owning occupier ➜ conflict of interest; occupier advised to seek independent advice.

Seller’s Initial Administrative Tasks

  • Obtain an up-to-date mortgage redemption figure from the lender early on.
    • Essential because seller’s solicitor will later give an undertaking to the buyer’s solicitor to discharge all mortgages from sale proceeds.
    • Must verify that sale price ≥ outstanding mortgage + costs; otherwise problem (negative equity).

Indemnity Insurance for Title Defects

  • Used where a title defect cannot be remedied practically (missing easement, breach of restrictive covenant, absent planning permission, etc.).
  • Insurance shifts the financial risk to an insurer; buyer proceeds despite defect.
  • Common exam context:
    • Seller agrees to purchase policy at own cost.
    • Buyer’s solicitor must add a special condition obliging the seller to deliver the policy at completion; without it, promise is not enforceable.

Practical / Ethical / Exam Tips

  • Memorise the trio: Particulars – Standard – Special.
  • Always ask: “Is the promise written in the contract?” If not, insert it as a special condition.
  • Identify risk transfer date (exchange) and link to insurance advice.
  • Know deposit mechanics and stakeholder v. agent distinction.
  • Spot non-owning occupiers ➜ require signed consent to vacate.
  • Monitor mortgage redemption figures to protect solicitor’s undertaking.
  • If unfixable title defect arises ➜ propose indemnity insurance, insert binding clause.

Quick Formulae & Numbers to Retain

  • Deposit on exchange: 10\% of price.
  • Balance on completion: 90\% of price.
  • Stakeholder = funds held pending completion; Agent = funds released immediately.

Real-World Connections & Implications

  • The standard conditions reflect market customs and Law Society guidance, minimising bespoke drafting and reducing transaction risk.
  • Stakeholder rule protects consumer confidence; agent modification shows bargaining power of developers.
  • Risk-in-property rule drives insurance market for pre-completion cover.
  • PIF disclosure obligations align with consumer protection and misrepresentation law.
  • Use of indemnity insurance mirrors broader trend of risk transfer by contractual agreement rather than perfect title.

“Checklist” for Buyer’s Solicitor After Receiving Contract Package

  • [ ] Verify duplicates are identical.
  • [ ] Confirm all negotiated points appear in Special Conditions.
  • [ ] Check deposit clause ➜ stakeholder vs agent.
  • [ ] Advise client on immediate insurance cover.
  • [ ] Scrutinise PIF for disputes, flooding, occupiers.
  • [ ] Insert clause binding any non-owning occupier to vacate.
  • [ ] Ensure seller commits (via special condition) to provide indemnity insurance if required.
  • [ ] Calendar agreed completion date/time; diarise notice to complete deadline windows.

Summary Sentence

In every conveyancing exam scenario: locate the form of contract, split its contents into the Particulars, Standard Conditions, Special Conditions, and ask whether each risk, promise or payment has been expressly locked into the correct section—if it isn’t in writing, it isn’t binding.