These are comprehensive, in-depth and brilliant LPC notes that cover the entire Real Estate module including workshop examples.
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Acting for a Seller ❖ Overview: Highly unlikely that a solicitor could act for both. This will almost
and a Buyer certainly be a breach of O3.5 of the Code (conflict of interests) to which the
exceptions in O3.6 and O3.7 will not apply.
❖ O3.5 - provides that a solicitor must not act if there is a client conflict or a
significant risk of a client conflict.
➢ “Client conflict” is defined Handbook Glossary (p189) as “any situation
where you owe separate duties to act in the best interests of two or more
clients in relation to the same or related matters, and those duties conflict,
or there is a significant risk that those duties may conflict”.
➢ IB3.3 provides that the Outcomes may be complied with by “declining to act
for clients where you may need to negotiate on matters of substance on
their behalf, for example negotiating on price between a buyer and seller of
a property”.
❖ Where O3.5 is breached, you can only act in a situation where O3.6 or O3.7 applies.
➢ O3.6 - provides that it may be possible to act for two clients with a
“substantially common interest” in relation to a matter, providing the
safeguards at para 3.6a to 3.6d are met.
▪ A “substantially common interest” is defined in the Handbook
Glossary as “a situation where there is a clear common purpose in
relation to any matter or a particular aspect of it between the clients
and a strong consensus on how it is to be achieved, and the client
conflict is peripheral to this common purpose”.
• It could be argued that a seller and buyer in a property
transaction do have a substantially common interest, in that
they both wish for the property to be successfully conveyed,
however it is unlikely that there will be a “strong consensus
on how it is to be achieved” e.g. the parties are likely to have
opposing views on terms of the contract.
▪ Moreover, IB 3.11 provides that acting for two or more clients under
O3.6 where the client’s “interests in the end result are not the same”
will indicate that the Outcomes have not been complied with. “A
seller transferring property to a buyer” is listed as a specific
example of this situation.
➢ O3.7 – Cannot apply
▪ Only covers situations where the clients are “competing for the same
objective”, which is not the case here.
Acting for a ❖ Overview – it is possible to act for both under O3.6, though this is largely
Borrower and dependent on whether the terms of the mortgage are “standard” or negotiable.
Lender
❖ O3.5 - provides that a solicitor must not act if there is a client conflict or a
significant risk of a client conflict.
➢ “Client conflict” is defined by the Handbook Glossary (p189) as “any
situation where you owe separate duties to act in the best interests of two
, or more clients in relation to the same or related matters, and those duties
conflict, or there is a significant risk that those duties may conflict”.
➢ There is a risk of a client conflict arising when acting for a lender and buyer
as there is the potential that we may have to negotiate on matters of
substance between them, for example the terms of the mortgage, resulting
in our duty to act in both parties best interests conflicting. If this occurs per
IB3.3, acting for both is not likely to be in compliance with the Code.
❖ Where O3.5 is breached, you can only act in a situation where O3.6 or O3.7 applies.
➢ O3.7 does not apply; the buyer and the lender are not “competing for the
same objective”.
➢ O3.6 - provides that it may be possible to act for two clients with a
“substantially common interest” in relation to a matter, providing the
safeguards at para 3.6a to 3.6d are met.
▪ A “substantially common interest” is defined in the Handbook
Glossary as “a situation where there is a clear common purpose in
relation to any matter or a particular aspect of it between the clients
and a strong consensus on how it is to be achieved, and the client
conflict is peripheral to this common purpose”.
▪ It is possible that a lender and borrower will have a substantially
common interest because both parties will have a common interest
in wanting to ensure that the property is taken free from defects
which may adversely affect the value of the property, has good
title, and is sellable in the future.
➢ HOWEVER, it is unlikely that you can act for both client’s under O3.6 unless
the mortgage is on the standard terms of the lender. This is because if the
mortgage is not on standard terms, it is an inevitable corollary that the
parties will need to negotiate. The difficulty is thus:
• O3.6 requires the parties to have a “substantially common
interest”. Part of the definition of a “substantially common
interest” is that the “conflict is peripheral to this common
purpose”. A conflict is unlikely to be considered to be
“peripheral” where the parties have the potential to come
into conflict on the terms of the mortgage.
• O3.6 para (c) requires you to be “satisfied that it is reasonable
for you to act for all the clients and that it is in their best
interests”. It is unlikely for acting for both clients in such a
scenario to be in their best interests.
• O3.6 para (d) requires that “you are satisfied that the benefits
to the clients of you doing so outweigh the risks”.
• IB3.5 provides that “declining to act for clients under O3.6 or
O3.7 where the client cannot be represented even-handedly
or will be prejudiced by a lack of separate representation”
indicates compliance with the code.
Acting for Joint ❖ Overview: Be mindful of the steps you need to take to protect against undue
Borrowers (E.g. influence where co-owners seek a mortgage. If a co-owner has been subject to
,Husband and undue influence and a mortgage is defaulted upon, that mortgage may be able to
Wife) – Consider be set-aside by the co-owner who was subject to undue-influence.
Undue Influence
❖ RBS v Etridge [2001] 4 All ER 449 – provided detailed guidance as to what solicitors
should do when acting where a husband and wife who seek to use co-owned
property as security. The solicitor should:
1. Explain to the wife why the solicitor has become involved
• i.e. to protect against a risk of undue influence.
2. Explain that, if necessary, the lender will rely on the solicitor’s involvement
to counter a suggestion that the wife has been unduly influenced.
3. Obtain confirmation from the wife that she wishes the solicitor to act, and
advise as to the legal and practical implications of the transaction.
4. The advice will depend on the facts of each case, but should include:
• An explanation of the nature of the documents and practical
consequences of signing them.
• A warning as to the seriousness of the risks involved.
5. The solicitor must then check if the wife wishes to proceed and if the wife is
happy for the solicitor to write to the lender to confirm that matters have
been explained to her.
6. The solicitor should check that the following financial information has been
made available from the lender, and refuse to make confirmation until they
are received:
• The purpose for which the loan is being made available;
• The current amount of the husband’s indebtedness;
• The amount of the current overdraft facility;
• The amount and terms of the new facility; and
• A copy of any written application made by the husband for the
facility.
7. The solicitor’s discussion with the wife should take place at a face-to-face
meeting in the absence of the husband, and the advice should be given in
non-technical language.
8. It is not for the solicitor to veto the transaction, but if the solicitor thinks
that the transaction is not in the wife’s best interests, he should give
reasoned advice to that effect. Ultimately, the decision is one for the wife.
9. If it is ‘glaringly obvious’ that the wife is being ‘grievously wronged’, the
solicitor should decline to act.
Mortgage Fraud ❖ Where individuals misrepresent information about themselves in order to obtain a
mortgage, or a larger mortgage than they otherwise could obtain.
❖ Where an individual either:
(See Law Society o Fails to disclose information which he has a legal duty to disclose or
Practice Note o Falsely represents information, either explicitly or implicitly.
o They commit an offence of Fraud under the Fraud Act 2006.
❖ The value of a mortgage obtained through fraud is the proceeds of crime.
❖ Under the Proceeds of Crime Act 2002, a solicitor risks committing a money
laundering offence if they acquire, use, have possession of, enter into an
arrangement with respect to, or transfer this criminal property.
, Steps to Protect Your Firm from Mortgage Fraud – Due Diligence
❖ Verify the identity of the client:
o You should take steps to identify your client and any beneficial owners of the
property. You should ensure that the information given to you corresponds
with the information on any mortgage documents/bank accounts relating
to the transaction.
o This is required in most cases by Regulation 7 of the Money Laundering
Regulations 2007.
▪ If you have suspicions, check the identity given to you against a
register of deaths or a list of known fraudsters.
▪ Where the client is a company, conduct a search of the Companies
Register to find out the names and addresses of the directors and the
shareholders, which can be cross referenced with the names of those
connected with the client.
❖ Ideally, meet the Client:
o Reg 14(2) of The Money Laundering Regulations 2007: where a solicitor has
not met a client face to face, a solicitor must undertake “enhanced due
diligence”.
▪ This involves obtaining further information to establish the client’s
identity, and taking steps such as ensuring the first payment from the
client is from a bank account in the client’s name.
❖ Be wary that fraudsters may pose as solicitors:
o Occasionally fraudsters will make up solicitor’s firms, and use fake letter
heads on correspondence etc.
o Use the “Find a Solicitor” database or the Directory of Licensed
Conveyancers to check on the identity of the other parties’ solicitor.
❖ Consider any inconsistencies with a previous retainer:
▪ E.g. if you do a conveyance of a modest family home and then a few
years later instruct you to buy an expensive holiday home, where has
the money come from?
❖ Ask questions particularly with regards how the client is funding their purchase.
Contract Races ❖ Where a seller enters into the conveyancing process with two or more prospective
buyers at the same time.
❖ Where this happens, a seller’s solicitor is required under O11.3 to “inform all buyers
immediately of the seller’s intention to deal with more than one buyer”.
o A buyer cannot stop a seller entering into the conveyancing process with
another person until exchange, when the parties have actually entered into
a binding agreement. However, he can be sure that he will be put on notice
where this happens.
Undertakings ❖ Undertakings are promises by a solicitor to do something, cause something to be
done, or refrain from doing something
❖ When given, these are binding on the solicitor.
❖ If the solicitor fails to comply with the undertaking, they will be:
o Personally liable for completing the undertaking.
o In breach of O11.2 of the Code.
,❖ Definition:
o Provided by the Handbook Glossary (p239).
o An undertaking is:
▪ A statement
▪ Given orally or in writing – it is not necessary for an undertaking to
be written down.
▪ Whether or not it includes the word “undertake” or “undertaking” –
it is not necessary to say “I undertake” to make an undertaking
binding.
▪ Made by or on behalf of you or your firm.
▪ In the course of practice
▪ OR by you outside the course of practice, but as a solicitor.
▪ To someone who reasonably places reliance on it, that you or your
firm will do something, or cause something to be done, or refrain
from doing something.
❖ O11.2:
o Requires a solicitor to “perform all undertakings given by you within an
agreed timescale or within a reasonable amount of time”.
❖ The introduction to Chapter 11:
o Provides that there is “no obligation to give or receive an undertaking on
behalf of a client but, if you do, you must ensure that you achieve the
Outcomes listed in this chapter”.
❖ Where a solicitor undertakes to perform an act that is outside a solicitor’s control,
and that act does not occur, they will still be in breach of the undertaking. The fact
the solicitor could not perform it is no defence
o Consider the wording of the undertaking. E.g. use “reasonable endeavours”
to complete a task.
,VAT in Property Transactions Property Law and Practice, p63
VAT may, in certain circumstances, be charged by a seller on a property transaction, at a rate of 20%.
When is VAT ❖ Must be charged on a property constructed within 3 years of sale.
Charged? ❖ Seller has DISCRETION to charge VAT where property was constructed MORE
than 3 years before the sale.
Why Charge ❖ A seller is likely to charge VAT to recover “input tax” i.e. VAT he has been
VAT on Old charged when making alterations to the property
Property? o e.g. if the seller had to pay VAT on, for example, building works such as an
extension, he can minimise his tax liability by recouping this through
charging VAT on sale.
❖ If the seller is not seeking to recoup VAT, there is little point in charging VAT, as
this will make the property unattractive to VAT sensitive buyers.
VAT Sensitivity ❖ Charging VAT has the biggest impact on VAT sensitive buyers i.e. buyers who do
not charge VAT on the products they supply because they are exempt or zero-
rated:
o Banks
o Building Societies
o Insurance Companies
❖ This is because any VAT they pay on the purchase price, will be irrecoverable
because their supply does not attract any input tax.
, Investigation of Title
➢ IDEA etc
Identify the ➢ State in which register the entry appears.
Issue ➢ What numbered entry is it?
Describe the ➢ What does the entry say, in your own words?
issue
Explain the ➢ Why is the entry an issue for this particular client?
Issue to the ➢ Bear in mind the client’s objectives.
Client
Action ➢ Identify the appropriate action in the circumstances which will be:
➢ Enquiry: Is a further search, a request of the Land Registry, or a further enquiry
of the seller needed?
➢ Tell the Client: Advise the client what the issue is and, if necessary, what
further action they need to take e.g. a survey.
➢ Cure the Defects: Can we get the defect remedied by inserting a term into the
contract with the seller? If not, will we need insurance?
Common Issues on the Title Register
The Property ➢ Describes the property.
Register ➢ Refers to any easements which benefit the land
o e.g. Rights of way over someone else’s land.
Benefit of a Right of Way:
➢ This provides that the property comes with a right for the seller to travel over land
belonging to someone else.
➢ Assess this by reference to the plan.
➢ Does the easement cover the entirety of the physical route needed?
▪ If not: we will need to make a requisition of the seller to ask whether he has
acquired an easement through long use (prescription) under the Prescription
Act 1832.
▪ If he has: we will need to obtain a Statutory Declaration from the seller which
confirms this.
▪ If he has not: we will need to conduct a search with the Local Authority to
determine whether any of the way has been adopted as public highway.
▪ If it has not: we will need Defective Title Indemnity Insurance.
• Does the seller already have it?
• Is it assignable?
• If not, client will need to buy this themselves.
➢ Does the easement come subject to conditions which need clarifying?
▪ Will need to ask the seller where terms are ambiguous e.g. during “normal
work hours”?
▪ When can the way be exercised? Is this appropriate for our client?
▪ Is it vehicular?
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