Introducing Property Practice notes from The SQE Hub specifically tailored by addressing each of the assessment specifications listed on the SRA website. These high yield notes are an amazing revision aid and address the following:
- Investigation of a registered and unregistered freehold title;
...
SQE 1 Assessment specification: Law Society Conveyancing Protocol
- Applies to residential conveyancing only. Current issue in 2019 – designed to
standardise residential conveyancing process. Set of instructions to conveyancers as
to how to carry out a residential sale and purchase – accompanied by series of
standard documents issued under TransAction brand.
- Form of standard pre-contract enquiries to the seller that SS will ask client to
complete freehold property - called Property Information Form TA06.
- All firms that undertake residential conveyancing and want to be members of The
Law Society’s Conveyancing Quality Scheme, required to comply with protocol, client
service charter and mandatory training and enforcement procedures.
Professional conduct:
Acting for Seller and Buyer
Solicitors may be asked to act for Buyer and Seller – may save time and be cost effective.
Parties may have no issue with this however parties may argue later, (i.e. an issue in
searches and enquiries causing buyer to seek reduction).
Code 6.2 states subject to certain exceptions, a solicitor cannot act for both Buyer and Seller
if there is a conflict of interest or significant risk of such conflict.
- High risk of conflict – especially if parties have unequal bargaining power such as in
a commercial sale.
- Exception set out in 6.2(a) - allows a solicitor to act for more than one party, even if
there is a conflict of interest, where parties have a ‘substantially common interest’
in relation to the matter, providing certain conditions are met.
- Law Society states – two clients who have a ‘substantially common interest’ does not
apply to property purchases – since both parties have different interests, one is
buying and one is selling.
- 6.2(b) – solicitor can act even if there is a conflict of interest where clients are
‘competing for the same objective’. Possible to act for 2 buyers who are competing
against each other to buy the same property but this does not apply in a buyer and
seller situation.
- Joint Buyers – usually acceptable if Para 6.2 is complied with i.e. may be necessary
to advise residential buyers separately about how they want to hold equitable interest
in the property particularly if they’re not married or in a civil partnership.
- Borrower and Lender - possible unless, under Para 6.2 there is a conflict-of-interest
or a significant risk of a conflict. Law society have stated that risk of conflict is high if:
mortgage is not a standard mortgage terms of property used in borrowers’ private
residence and if the mortgage is a standard mortgage but you do not use the
approved cert of title.
- In residential transactions, lender will frequently instruct borrowers solicitor to act for
them and borrowers in connection with a mortgage = this is because mortgage is a
standard mortgage and the approved cert of title will be given to the lender.
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Also possible to act for more than one party under exception granted Para 6.2(a)
even if there is a conflict of interest, where there is ‘substantially common interest’ in
relation to matter and provided certain conditions are met. Conditions are: both
parties have given their informed consent, effective safeguards have been put in
place to protect any client confidential information and solicitor is satisfied that it is
reasonable for them to act for both clients.
Acting for Joint Borrowers – Etridge guidelines
- Usually acceptable to act for joint borrowers, providing no conflict of interest exists or
likely to arise.
- Key for solicitors to follow the Etridge guidelines, which set out a guideline for lenders
to provide a solicitors, with the husbands consent, with the purpose of the loan,
current amount of the husbands indebtness, amount of overdrafts facility, amount
and terms of new loan and copy of the written application made by one party for the
loan.
- This is important in cases where one party secures a business loan secured by a
matrimonial home owned jointly by a husband and wife.
- Solicitor should explain to the wife, purpose to which solicitor has become involved,
lender will rely on Solicitors involvement to counter any assumption of undue
influence or not fully understanding the transaction; and obtain confirmation from wife
that she wished for solicitor to act for on the transaction – and advise on the legal
and practical implications on transaction.
- This discussion should be face-to-face, in the absence of husband and advice should
be given in a non-technical language.
- If it is glaringly obvious that wife is being grievously wronged - solicitor should decline
to act.
Contract races
- Seller client is selling a property using a marketing strategy aka contract race – pre
contract package sent to multiple buyers who then compete to be ready to exchange
contract first.
- Legitimate selling technique as long as all prospective buyers are aware they are
engaged in a race.
- Problem = seller instructs solicitor that they don’t want prospective buyers to know.
- Para 1.4 of the Code is relevant. Where a solicitor acts for a seller of land, they must
not mislead or attempt to mislead buyers, either by their own acts or omission or by
being complicit. Means Solicitor should inform all buyers immediately of the sellers
intention to deal with more than one buyer if seller refuses to agree to such
disclosure, solicitor has a duty of confidentiality to the seller under Para 6.3 so cannot
disclose this but should immediately stop acting in the matter.
Undertakings = statement made by or on behalf of a solicitor, or the firm, to someone who
reasonable places reliance on it, that the solicitor/firm will do something/cause something to
be done//not do something.
Para 1.3 states Solicitors should perform all undertakings, and do so within an agreed
timescale.
Failure to honour an undertaking is a professional misconduct – so a solicitor should always
ensure what they undertake is within their control.
SQE 1 Assessment specification: Finance
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Sources of Finance for a property transaction:
- Important to inform the client of all the likely overall cost of their matter, at the
beginning and at appropriate points throughout the transaction.
- Includes payments such as SDLT/Land Transaction Tax, Land Registry fees and
search fees.
Types of mortgages:
Repayment and Interest.
Repayment mortgages = monthly instalments to the lender made up of instalments
of the original amount borrowed and partly interest chargeable on the loan.
Interest only mortgages = monthly payments to the lender but only comprise of the
interest chargeable on the loan.
SQE 1 Assessment specification: Stamp Duty Land Tax and Land Transaction Tax
Basis of charge in both England and Wales for: residential property and non-residential
freehold property:
SDLT
- SDLT payable on purchase price of property or land over a certain value therefore,
paid when you buy freehold or leasehold.
- SDLT paid when purchase price exceeds a certain threshold and is then paid in
slices i.e. rates. SDLT threshold is:
→ £250K for residential properties
→ £150k for non-residential land and properties i.e., shops, woods, farmland,
offices
- For leaseholds = SDLT is payable on sum paid to assign; on grant of new lease or
sub-lease, SDLT paid on premium paid for the lease and if no premium - based on
rent.
- Rule: SDLT must be paid within 14 days of completion and an SDLT return must be
sent to HMRC. Cert confirming payment of SDLT from HMRC (SDLT 5) is sent to the
Land Registry on app for registration.
SQE 1 Assessment specification: Value Added Tax
Basis of charge: what constitutes a taxable supply, differences between standard, exempt
and zero-rated supplies and reasons why a client would make an option to tax and the effect
that has:
VAT in Property Transaction:
- General Rule: VAT is not payable on sale of land/buildings.
- Exemption: sale (including sale of freehold or grant of lease) of “new” commercial
buildings - buildings less than 3 years old - are taxed at standard 20% rate.
→ Purchasers of commercial land can choose to “opt-in” to paying VAT.
Means the buyer:
1. Charges VAT on rent, if they rent out the building after buying it; and
2. Charges VAT on the sale of the building (if it is more than 3 years old).
- Buyer of a new commercial building likely to opt-in to VAT to recover VAT spent on
purchase of property.
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