This document summarises the contents and process of creating the contract covering the special conditions which are appropriate in the contract. It goes on further to summarise the deposit, insurance, preparing to exchange, the exchange, and consequences of exchange chapters.
Notes on the transf...
- Current standard rate is 20%
- There is an option to tax to enable individual to covert exempt supply into a taxable one enabling input
tax to be recovered
- SEE MOCK ANSWER
- Developers incurring VAT on construction etc getting it ready for sale.
- COMMERCIAL PROPERTY:
new = standard rate (completed within 3 years prior to sale) – seller needs to ensure the
contract allows him to charge VAT. Contract for sale likely to incorporate one of 2 SC –
SC1.4.1 states price is inclusive of tax and so SC would need incorporating to allow seller to
charge. SCPC 2 provides VAT at standard rate payable by buyer. So under SCPC seller can
require buyer to pay VAT in addition without special condition.
more than 3 years old or grant of lease = exempt but subject to option to tax. Seller/LL
would do so to enable him to recover any input tax incurred. 6.2.6.2 TB page 66
if there has been no works then they are unlikely too because it looks unattractive to VAT
sensitive buyers.
If it has been exercised and buyer wants to let it out then could treat sale as transfer of
business as a going concern.
Might have a VAT sensitive buyer
- Generally, VAT inclusive.
THE DRAFT CONTRACT
Intro Seller drafts
Contract terms open to negotiation – from searches and surveys etc
Seller solicitor will have taken instructions and they will always have to investigate title
Seller Capacity Check the seller is entitled to sell the whole
- Trustees – is a second needed? (chapter 16)
- PRs – 16.3
- Mortgage lenders selling
- Companies – check powers
- Persons with mental disability – potentially voidable
Elements of a Contract will state the seller agrees to sell and buyer to buy
contract
S2 LP(MP)A 89 any contract must be IN WRITING, SIGNED by all parties and contain ALL TERMS expressly or
being incorporated.
Normally 3 distinct elements – particulars of sale, SC of sale and special conditions.
PARTICULARS Describe the estate – freehold? And the physical extent
OF SALE PAGE 199 TB
Plans One must be used on sale of part or to help see boundaries
Show features on the plan
There should be no discrepancy between verbal description and the plan
Easements and Seller investigation would have revealed if there were other rights
rights benefitting All must be included in the contract
STANDARD They set out the terms of the sale and normally are incorporated into the contract.
CONDTIONS Appendix 2 and 3 SCs and SCPCs
For SCPCs there is part 1 and 2 and part 2 conditions are only applied if specifically incorporated by special
condition
SCs are less extensive and designed for lower value residential use.
Up to solicitor advising parties to decide which of the sets of conditions to incorporate into sale and purchase
contract.
SPECIAL PURPOSE:
CONDTIONS Those conditions drafted by solicitor to deal with particular circ of the transaction. Like defective title insurance
this would be dealt with via one. Purchase price and any contents coming with it needs one.
Might need one to vary the current standard condition position.
, CONFLICT WITH STANDARD CONDITIONS:
There is a special condition that contradicts the standard? Which should prevail? (sc 1.1.4 and scpc 1.1.4(a))
special ones prevail. But best to expressly exclude the SC for certainty.
MATTERS TO BE COVERED BY SPECIAL CONDITIONS
SELER DUTY TO SC 3.1.1 and SCPC 4.1.1 – sell free from incumbrances other than those listed in 3.1.2
DISCLOSE and 4.1.2(SCPC)
INCUMBRANCE Sol must list all those incumbrances not covered in a special condition
S
Listing all incumbrances avoids risk of non-disclosure when dealing with both conditions
and provided they are listed the buyer takes property subject to them due to SC3.1.2(a)
and SCPC 4.1.2(a)
If there is non-disclosure and it is not listed then buyer might have right to rescind
contract and or claim damages.
Incumbrances SC 3.1.2(b)-(f) deemed disclosed if SCs are used
under the SCs
PAGE 202 TB AND 463
Incumbrances SCPC 4.1.2(b)-(e) deemed disclosed IF SCPCs are used
under the SCPC
PAGE 203 TB AND 476
Defects in title
SC 3 and SCPC 4 provide that seller is selling free from incumbrances other than those
mentioned above. Implies there are no other flaws or defects in title.
If there are any defects then they should be specifically disclosed by special condition
- Failure might give buyer remedy for non-disclosure
PAGE 204
Green deal
Matters that do not require disclosure
Insurance for breach of restrictive covenant or other title defect – after negotiations
a special condition should be entered into the contract.
Deduction of title SC 4.1 SCPC 7.1 – documentary evidence required by seller to send but should be
done before exchange in practise
Title guarantee Including ‘seller sells with full title guarantee’ gives buyer benefit of the full range of
covenants implied by 94 Act (18.8.3.1)
Where contract is silent – both conditions say seller will sell with full title guarantee – SC
4.6.2 and SCPC 7.6.2
- Would need amendment if they did not want
Covenants implied with FTG
- Right to dispose of land
- Seller will do all he reasonably can to transfer the title
- Land disposed of free from incumbrances
- Lease is subsisting at time it is disposed of
Cov implied into limited – PAGE 206 TB
Matters that will not breach implied cov – s6 1994 Act
- Expressly made
- Buyer knows about
- Entered on registers of title
Deciding upon title guarantee – circ of seller and state of his title
- FTG = good title and knowledge
- LTF = little knowledge (trustees, PRs)
- Seller has no title or questionable one = special con entered to negate the
implied promise the seller has good title. (Donor of gift, receiver/administrator
selling assets of insolvent). (Lenders – check instructions)
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