Summary LPC Real Estate - full module notes units 1-15 (82% DISTINCTION awarded)
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Course
LPC Real Estate
Institution
University Of Law (ULaw)
This document provides full notes in order to successfully take the exam for the Real Estate LPC.
These are summarised notes for all units 1-15 of the module. Explaining all principles and set out exam structure to help in the exam.
Professional conduct questions and answers.
Short MCQ Questi...
SPOT ISSUE, STATE APPLICABLE LAW AND CONCLUDE BY ADVISING CLIENT
Taking instructions
Preliminary issues: Analyse a buyer client’s initial instructions and identify and follow up issues
arising at the instruction stage.
The transaction will begin with the seller putting the property on the market. EPC minimum
standard rating E received within 7 days of marketing property.
Full name, addresses and contact details of buyer and seller. (identity for money laundering
issues).
Estate agents contact.
Name and address of other parties’ solicitors.
Full address of property being bought.
Fixtures and fittings being bought?
Tenure? Freehold/leasehold.
Price?
Deposit? Paid yet? Customary for deposit to be 10%, if it is lower then seller should be
advised of consequences of this. How will it be paid and who is it payable to, also buyer
solicitor see how buyer is funding deposit.
Funding/costs: make seller aware of costs of transaction and ensure buyer has sufficient
money to purchase the property and pay related costs eg land registry fees and SDLT.
Mortgage required?
Chain transaction – is the transaction dependent on the sale/purchase of another property?
Anticipated completion date? Useful to know each parties’ timetable and if they have any
constraints or deadlines.
Issues arising out of the sale particulars – requisitions addressed to seller asking him to
resolve any issues with title. Pre-contract searches made. Buyer’s solicitor sends draft
transfer deed to seller’s solicitor for their approval.
Enquiries/searches:
- seller expected to answer any enquiries made. For residential property- If Law Society
Conveyancing Protocol used the seller should be asked to complete the Property
Information Form.
- Buyer: check seller’s title, EPC? Planning permissions or restrictions? 3 rd party rights eg
easements, covenants, anyone other than seller in occupation. Protected areas?
Buyer should commission survey of property to ensure structurally sound and in good
condition. If it is in a specific location may indicate need for special surveys, eg if near canal
or river have contamination survey done.
The present and intended use of the property?
Terms: whether any terms already agreed.
VAT: does the transaction attract VAT? Most residential properties don’t attract VAT. But in
the case of a commercial property less than 3 years old, it is mandatory for VAT to be
charged on the sale. in the case of commercial properties over 3 years old, the seller may
elect to charge VAT. (Ensure provision is in the contract).
CGT: if CGT payable pointed out to seller asap.
Title deeds are accessible.
Mortgage:
- sellers outstanding mortgage, contact lender to obtain title deeds.
- Buyer: is the property in joint names? Free from incumbrances of the lender. Also have
undertaking from seller’s solicitor to discharge seller’s mortgage.
,Pre-contract stage
This is the due diligence.
SELLER BUYER
Take instructions – obtain clients ID for money Take instructions – obtain clients ID for money
laundering purposes. Instructions from client. laundering purposes. Instructions from client.
Pre contract package: Commission a survey (this tells you what state
- What land the seller is selling and on of repair the house is in and the value of the
what terms house).
- Evidence of seller’s legal title to
property
- If relevant, the results of pre-contract
searches seller has made.
Pre-contract searches and enquiries: caveat
emptor principle makes them necessary.
Investigate title: seller entitled to sell property?
Any queries raised by requisitions? Must ask
Q’s before contract entered.
Approve terms of draft contract. Check client
financially able to proceed with transaction.
Then contract prepared for signing, 2 copies
printed off.
Identify and resolve issues of professional conduct that may arise when you are instructed on a new
commercial property transaction.
ACTING FOR SELLER AND BUYER
Law Society guidance June 2022 – ‘there is a high risk of a conflict of interest if you act for
both buyer and seller’. Conflict of interest or significant risk of one in para 6.2 SRA codes of
conduct.
Principle 7 acting in the best interests of the client.
Things to consider: Complexity of matter, length of conveyancing chain, likelihood of
negotiations, bargaining powers of parties, vulnerabilities of parties.
For example, the solicitor will want to get the best price for the seller and lowest price for
the buyer, choosing to charge VAT from seller to buyer and investigating any issues with
title, would all prevent the solicitor from acting in the best interests of the client and would
cause a conflict. Would suggest one party to seek alternative legal representation.
Is there an exception? Eg substantially common interest- para 6.2(a), must comply with
6.2(i)-(iii). (i) clients given informed consent, (ii) effective safeguards to protect clients
confidential information, (iii) reasonable for you to act, ie common purpose between clients
and strong consensus on how it is to be achieved. – BUT, Law Soc guidance issued in 2011
clarified that this will not apply to buyers and sellers in a property transaction.
Conclude: Not advised to act for both. Advise one party to instruct another firm.
JOINT BUYERS
Usually acceptable provided no conflict/both parties are seeking to purchase a property on
the same terms. → May be necessary to advise residential buyers separately about their
rights, particularly if not married/civil partnership.
Problems – husband and wife: information of documents and consequences of them. Etridge
guidelines on advice given regarding undue influence. But, usually not an issue to act for
both unless undue influence is present.
, Royal Bank of Scotland v Etridge: If the transaction is not to one borrower’s advantage, the
lender is put on enquiry.
Solicitor should ensure person fully aware of mortgage, consequences of signing, risks
involved etc.
ACTING FOR BORROWER AND LENDER
Rule: A duty is owed to both clients independently (Mortgage Express v Bowerman &
Partners). Principle 7 act in best interests of both.
Is there a conflict of interest under para 6.2. Client conflict is ‘a situation where your
separate duties to act in the best interests of two or more clients in relation to the same or a
related matter conflict’.
Examples of conflict arising: if terms of mortgage are unfair to the borrower, instructions
reveal that the buyer may be in breach of one of the terms, the buyer is unable to comply
with the lender’s terms, the mortgage documentation requires negotiation between the
parties.
Law Society says risk of conflict is high ‘if the mortgage is not a standard mortgage… of
property to be used as the borrower’s private residence’. Mortgage documents in
commercial transaction likely to be subject to significant negotiation so will not be on
‘standard terms’. (p52).
Exceptions? (see above regarding 6.2(a)). Example of substantially common interest
(supported by Law Soc guidance) – both borrower and lender want to ensure that the
borrower will have good title to the property and that the property itself does not have any
problems/‘good and marketable title’.
6.2(b) clients competing for same objective.
Contract races and undertakings.
CONTRACT RACE
Contract race = occurs when a seller enters into the conveyancing process with 2 or more
prospective buyers at the same time. The buyers are competing with each other, and the
winner of the race is the buyer who is ready to exchange contracts first. Law Society practice
note advises that it would be sensible to inform all buyers immediately of seller’s intention
to deal with more than one buyer. The solicitor and firm are required to comply with para
1.2 not to abuse their position by taking unfair advantage of others and 1.4 must not mislead
others by their acts or omissions. Duty of confidentiality to client if seller does not want
solicitor to disclose contract race but if solicitor feels 1.2 and 1.4 would be breached they
must decline to act.
UNDERTAKINGS
“A statement given orally or in writing, whether or not it includes the word ‘undertake’ or
‘undertaking’ to someone who reasonably places reliance on it, that you or a third party will
do something or cause something to be done, or refrain from doing something”.
An undertaking must be performed in the agreed timescale or within a ‘reasonable amount
of time’ (para 1.3 codes).
Example: by sellers’ solicitor that they will discharge their client’s mortgage over the
property. Failure to honour an undertaking constitutes professional misconduct.
If a solicitor breaches, they are personally liable for any loss caused (Udall v Capri Lighting).
Impossibility: if undertaking becomes impossible to perform solicitor still bound by it unless
recipient agrees to release them.
Mortgage Fraud.
, Mortgage fraud occurs when individuals defraud a lender through the mortgage process. Eg
borrower overstates his income to obtain a higher mortgage or husband forges wife’s
signature or price shown not actually price paid by buyer.
Fraud Act 2006: covers fraud by false representation and by failure to disclose information
where there is a legal duty to disclose.
Solicitor must uphold the rule of law (principle 1) and act with integrity (principle 5). To
continue to act would breach SRA codes of aiding and abetting fraud. Proceeds of Crime Act
2002 risks committing money laundering offence. If solicitor is aware his buyer client is
attempting to perpetrate a mortgage fraud, he must stop acting for that client immediately
and duty of confidentiality is discharged.
Law society mortgage fraud practice note – to help spot the signs.
Solicitor has duty of confidentiality if acting for both borrower and lender. Duty of
confidentiality to borrower only discharged where solicitor is satisfied of a strong prima facie
case that the borrower is using them to further a fraud or other criminal purpose. Eg client
makes deliberate misrepresentation on their mortgage application.
Warning signs: unexplained long distances between buyers current address and new
property, buyer seems disinterested in purchase (may not be real purchaser), client does not
usually engage in property transactions of this scale, seller does not give specific info about
property that indicates they are familiar with property, never met client and always deal
with 3rd party eg family member. Large unexplained increase in purchase price, funds left
over from sale not going to seller but to a 3 rd party.
Check the individuals identity, if acting for a company do a Companies house search.
A solicitor must carry out due diligence under the Money Laundering, Terrorist Financing
and Transfer of Funds (Information on the Payer) Regulations 2017. ✓ Reg 18 assess the
risks. ✓ Reg 21 – thereafter maintain written policies, controls and procedures to manage
the identified risks ✓ Reg 21(3) – to appoint a ‘nominated officer’ to receive reports from
within the firm concerning any instances of suspected money laundering and to liaise, if
necessary with the National Crime Agency.
Tax – VAT
VAT is chargeable in respect of a supply of goods or services in the course of business.
Supplies can be exempt, zero-rated, or standard rated.
▪ Standard rated are subject to VAT at current standard rate (currently 20%)
▪ Zero-rated are taxable but are subject to VAT at 0%.
▪ Exempt supplies are not subject to tax.
‘New’ freeholds are standard rated meaning VAT must be charged.
Option to tax: eg if seller carried out works/repairs, may want to recover his input tax by
setting it off against the output tax being charged to the buyer as VAT.
VAT sensitive buyers:
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