Real estate workshop 1 (one) university of law (ULaw)
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REAL ESTATE
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By: selasikwamekutortse • 11 months ago
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LPCNOTES2021
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CONTENTS
1. CONDUCT AND TAKING INSTRUCTIONS
2. TITLE INVESTIGATION (All Register Entries with explanations)
3. REPORTING TO LENDER & THE MORTGAGE
4. SEARCHES AND ENQUIRIES
5. THE CONTRACT
6. COMPLETION
7. GRANT OF A LEASE
8. LEASEHOLD MANAGEMENT
9. LEASEHOLD COVENANTS
10. LEASE ALIENATION
11. LANDLORD’S REMEDIES & LEASE TERMINATION
, CONDUCT AND TAKING INSTRUCTIONS
Typical Conveyancing Transaction
Pre-contract stage Assuming that matters proceed smoothly, the pre-contract stage of a residential
transaction may take 4 – 6 weeks from the date when instructions are first received
Post-contract (or pre-
Often no longer than 2 weeks
completion) stage
Post-completion stage Tidying up after transaction e.g. submitting SDLT and application to HMLR
CONDUCT ISSUES RELEVANT TO CONVEYANCING
Exam structure: (1) identify the relevant principles and paragraphs of the code; (2) apply to the facts; (3)
advise.
ACTING FOR BUYER AND SELLER
Why might parties want this?
Cheaper and quicker when using one firm.
Existing client relationship with firm – firm understands clients and their needs well.
Relevant principle:
Principle 7: acting in best interests of client
Relevant paragraphs of code:
Principle 7, para 6.2 –subject to certain exceptions, a solicitor or firm cannot act if the solicitor or firm has a
conflict of interest or a significant risk of such a conflict
Decision as to whether acting for buyer and seller does or is likely to involve a conflict of interest rests with the
solicitor and the firm
Factors to take into account when determining whether a conflict of interest exists, or is likely to arise, include:
(1) The complexity of the matter and length of the conveyancing chain involved. The more complex
the transaction, the greater the risk of a conflict of interest;
(2) The likelihood of negotiations having to take place. In higher value or complex transactions, there
is a greater likelihood of substantial contract negotiations, increasing the risk of a conflict;
(3) The bargaining power of the parties and any particular vulnerability of either party.
IF there is a conflict or significant risk of one, the solicitor or firm can only act for both parties if one of the two
exceptions contained in para 6.2 applies
IF a decision is made at the outset of the transaction that there is no conflict of interest under para 6.2 then it is
advisable to:
(1) Inform clients in writing of the risks should a conflict arise and the firm have to cease acting;
(2) Obtain the client’s consent for the firm acting;
(3) Record the factors considered in reaching a decision to act;
(4) Ensure that each party is represented by a different fee earner within the firm
Should the firm act for both?
Higher value at stake – more risk of greater conflict.
If conflict arises later, both parties will have to find other solicitors to represent them the current firm would
cease to act.
Likely re-negotiation would occur later in the transaction - para 6.2(a): buyer’s interest is different from the
sellers.
Conclude: do not act for both.
Which party should be told to go find other legal representation?
, Apply to the facts: does the firm to that type of work already for a client? Which client has the most value to the
firm?
Mention issues of confidentiality if firm has acted for both clients previously. May not be an issue, however, and
likely to be mentioned in buyer’s due diligence.
Do we need more information?
ACTING FOR JOINT BUYERS
Usually acceptable to act for joint buyers provided that no conflict of interest exists or is likely to arise
May be necessary to advise residential buyers about their rights in the property, particularly when joint
buyers not married
ACTING FOR BORROWER AND LENDER
If a solicitor receives instructions to act for the lender, he is acting for both parties in one transaction
and owes a duty to both clients – Mortgage Express v Bowerman & Partners (A Firm)
Relevant principle:
Principle 7: best interests of the client.
Relevant paragraphs of code:
Para 6.2: conflict of interest/significant risk of one.
Has a (re)negotiation taken place on the facts?
If so, the firm can act for both as there is a substantially common interest.
If it still needs to be carried out, more likely to be a conflict.
Solution:
Lender asks borrower to act for both when doing searches; get independent advice when negotiating.
Good title = common interest; due diligence;
Negotiating terms = different interests.
ACTING FOR JOINT BORROWERS – UNDUE INFLUENCE
General Provided no conflict of interest exists or is likely to exist, there is no rule of law or conduct
that prevents the same solicitor acting for joint borrowers.
Scenario However, problems can exist if (typical scenario)
Husband needs to borrow money for his business and uses matrimonial home (in
joint names) as security
If wife agrees to a mortgage over the house for her husband’s business, but the
husband defaults, the bank may seek to enforce its security to the wife’s detriment
Wife may seek to have the mortgage set aside on basis of undue influence
Presumptions There is no presumption of undue influence for husband / wife (but there is a rebuttable
presumption of UI for solicitor / client etc.)
Therefore a) If the transaction is not to the borrower’s advantage, the lender is put on enquiry –
Royal Bank of Scotland v Etridge
b) Lender must take reasonable steps to satisfy itself that the person has been
conducted without undue influence.
, c) Lender will normally rely on the solicitor’s confirmation that they have advised both
borrowers properly. The solicitor should:
Explain the purpose for which he is involved
Explain that the lender will rely on their involvement to counter any
assertions of undue influence or that the wife has not understood the nature
of the transaction
Obtain confirmation that she wishes the solicitor to act in the transaction
d) Discussion should:
Be face to face (without the other borrower present)
Use non-technical language
Give reasoned advice as to the disadvantages of the transaction
Get express authority from person to write to the lender confirming the
steps have been taken
If it is obvious the person has been wronged, decline to act
CONFIDETIALITY
Para 6.3 SRA Codes – solicitor must keep the affairs of clients confidential unless disclosure is required or
permitted by law or the client consents
Ch. 5.12 – problems arise when the solicitor has been acting for borrower and lender and has information that
the lender would consider relevant to granting the loan but the borrower does not want the solicitor to tell the
lender
CONTRACT RACES
Occurs where 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.
Solicitor and firm required to comply with para 1.2 and must not abuse their position by taking unfair
advantage of clients or others
Under para 1.4 the solicitor and firm must not mislead others, either by their own acts or omissions or
allowing or being complicit in the acts or omissions of the seller
Warnings to give to seller:
Danger of losing all the prospective buyers if a race is commenced
Ensure they are aware that solicitor required to comply with para 1.2 and 1.3
Warnings to give buyer:
Can you reassure a client that they will not lose out to another buyer in the case of contract races?
You are under a duty to tell the client this is a possibility
Para 1.4: should not mislead client, the court or others. Make aware that it is possible that they will
lose out to another buyer
…cannot entirely reassure a client.
Safeguards: It is the seller’s obligation and they should tell the buyer’s solicitor if the contract race is
ongoing.
UNDERTAKINGS
Should the solicitor give an undertaking?
NB: personal liability attaches to a solicitor if you give an undertaking.
Para 1.3 of both Codes: must perform all undertakings within a reasonable time.
A solicitor is not obliged to give one, but if you do, then if you breach it, then you are breaching your
professional contract.
,TEST: is the undertaking something that is personally out of your control? Is the undertaking ambiguous? Is the
timescale achievable?
If breached: solicitor personally liable. Also, a breach of professional conduct and can be disciplined by SRA.
You cannot perform an undertaking within the ‘reasonable time’ and you should not give an undertaking.
, VAT
General VAT is chargeable in respect of a supply of goods or services made in the course of a
business
Depending on the circumstances, supplies can be (for reference only)
Exempt (not subject to tax)
Zero-rated (taxable, but subject to VAT at 0%)
Standard-rated (20%)
What type of E.g. this is an old freehold commercial property
property is it and Old = completed more than three years prior to the sale
why?
What does this Seller has the choice as to whether or not to opt to tax
mean for the Can only recover some or all of the VAT it has paid to builders and such during the
seller? renovation works (from the output tax chargeable on the sale price) if it opts to tax
What does this Will not be an impact if the buyer / tenant makes standard-rated or zero-rated
mean for the supplies, as they can recover the VAT
buyer (are they BUT will affect VAT sensitive buyers (banks, building societies, insurance
VAT sensitive)? companies)
Opting to tax means that VAT would be charged on the PP of the sale and
the buyer:
Would not be able to recover any of this as it doesn't make
VATable supplies in the course of its business
May face cash flow problems
The buyer may therefore
Object to opting to tax; or
Seek a reduction in the PP to compensate
What Client will have to weigh up the benefit of recovering the refurbishment VAT
considerations against the potential loss of sale proceeds or even the sale itself
will client need to
make?
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