Real Estate Law + Practice Multiple Choice Question's with Answers and Explanations
Contains all MCQ's (Test + Feedback) contained in the Real Estate module on the LPC at ULaw - with the correct answers highlighted + full explanations.
Exam ready notes - very useful to go in exam folder to help a...
Mr Crabtree of Stanley Marsh Solicitors acts for a landlord. He requires that a prospective tenant uses a solicitor other
than Cartman and Sons because he knows that Cartman and Sons have already advised another prospective tenant that
the lease contains unfavourable terms.
This is a breach of professional conduct - true or false?
A. True
B. False
Response Feedback:
- Mr Crabtree is not acting with integrity and he may be behaving in a way that is likely to diminish public trust and
confidence places in the solicitors' profession: read the SRA Principles, particularly Principle 2 and Principle 5.
- Arguably, he may also be using his position to take unfair advantage of third parties, in which case he will not be able
to demonstrate that he has acted in accordance with paragraph 1.2 of both Codes of Conduct.
You are a newly qualified solicitor in your firm's Real Estate Department.
A new client instructs you on the purchase of a freehold property for £895,000. He tells you that the transaction will
proceed to completion swiftly and therefore gives you a cheque drawn on a foreign bank for £940,000, to cover the price
of the property and disbursements.
Two days later, he calls you to say that the transaction has fallen through and asks you to return the £940,000 to him.
Which of the following steps should you take?
A. Immediately contact your firm's nominated officer for money laundering purposes.
B. Immediately contact the Serious Organised Crime Agency ("SOCA").
C. Immediately contact your client and advise him that you are concerned he is money laundering and that you intend
to share your concerns with the relevant authorities.
D. You should return the £940,000 and should not disclose any concerns you may have as to do so would be to breach
the solicitor's duty under paragraph 6.3 of the Code to keep the affairs of clients and former clients confidential.
Response Feedback:
- It is for the nominated officer to decide whether an external report to SOCA should be made.
- You should not advise the client that you have disclosed your concerns to the firm's nominated officer as to do so may
prejudice an investigation (and could result in you committing the offence of 'tipping off' under s.333 of The Proceeds
of Crime Act 2002).
- The 2002 Act makes it clear that a disclosure (for example to the firm's nominated officer) will not breach a solicitor's
duty under paragraph 6.3 of the Code.
Your client is selling an investment property and wants a quick completion.
It has two separate parties interested in buying the property and therefore instructs you to send contracts out to each of
them. At the same time, the client instructs you to inform each potential buyer that contracts are being sent out to the
other potential buyer and that it will exchange with the first one to return a properly executed contract together with a
10% deposit.
"This is not a breach of the rules of professional conduct." - True or False?
A. True
B. False
Response Feedback:
- The answer is "True". The seller has instructed you to start a "contract race". Its instructions to disclose to each buyer
that contracts have been sent out to more than one party and also inform them of the terms of the contract race,
comply with paragraph 1.4 of both Codes of Conduct.
You have just been instructed by a client regarding the purchase of a property. In an initial email the seller stated that he
does not intend to instruct a solicitor but he studied A-level law (fifteen years ago) and so he feels able to handle the
transaction himself. The seller also confirmed that he is going to send you a draft sale contract and he warned you that
your client should be in a position to exchange within a couple of weeks if your client does not want the property to go
back on the market.
How should you respond?
A. Write to the seller, warning him that you cannot accept the draft contract unless he provides evidence that no
offence will be committed.
B. Proceed with the transaction as soon as possible, pointing out any obvious errors made by the seller.
C. Proceed with the transaction as soon as possible but only correct any errors to make the contract favourable for
your client.
, D. Refuse to communicate with the seller and ask your client to speak with the seller, requesting that the seller instruct
a solicitor.
Response Feedback:
- The correct answer is A. As the seller appears to be unqualified, he will commit an offence under The Legal Services
Act 2007 if he drafts the sale contract. You should write to the seller and ask him for satisfactory evidence that no
offence will be committed. You should also inform your client about the situation.
You act for McCormick Limited. Your client is selling its existing offices and buying new premises. Your client is under
pressure to exchange on the purchase but the company buying your client's existing property is not yet ready to proceed.
Your client is very keen to acquire the new premises. You are therefore instructed to exchange contracts immediately.
The deposit payable on exchange will be provided by way of bridging finance. However the bank providing the finance
wants you to give the following undertaking:
"We undertake to repay the Loan out of the proceeds from the sale of the Property"
Should you give such an undertaking?
A. Yes
B. No
Response Feedback:
- The golden rule regarding undertakings is not to undertake to do anything which is beyond your control. Here there
is no guarantee that the sale of your client's existing property will actually take place, or that you will receive the
proceeds, and therefore you cannot undertake to repay the bridging loan out of the proceeds of sale. The
undertaking could be amended to read:
o "We undertake to repay the Loan out of the proceeds from the sale of the Property following receipt by us of
such sale proceeds."
A solicitor could act for both the seller and the buyer in a property transaction if:
A. There is no conflict of interest between the seller and the buyer and no significant risk of such a conflict arising.
B. There is a conflict of interest between the seller and the buyer but the exception in paragraph 6.2(a) which allows
the solicitor to act where there is a substantial common interest between the clients may apply.
C. The seller wants to charge VAT on the sale and the buyer does not want to pay VAT.
D. The seller is conducting a contract race.
Response Feedback:
- Statement A is correct as in these rare circumstances there is no breach of paragraph 6.2 of both SRA Codes of
Conduct 2019.
- Statement B is incorrect. There is an exception in paragraph 6.2(a) which allows the solicitor to act where there is a
client conflict but there is a substantial common interest between the clients. However, the Law Society has clarified
that this will not apply to buyers and sellers in a property transaction.
- In the circumstances set out in Statement C, there is a clear conflict of interest as neither the firm nor the solicitor can
act in the best interests of both clients in this situation. It would not be reasonable to act under paragraph 6.2.
- In the contract race envisaged in Statement D, there is a clear potential for conflict of interest between the seller and
the buyer. It would be very difficult for the solicitor to satisfy the conditions for acting set out in paragraph 6.2(a) in
particular paragraph 6.2(iii). For example, it could be argued that every time you replied to a query from a solicitor to
one of the other buyers in the race in your capacity as the seller's solicitor, you are acting against the interests of your
buyer client.
Your client is buying a commercial property for £259,000. Included in the sale are some chattels worth £4,000. Your client
has suggested that £10,000 should be allocated to the chattels so reducing the price of the land and buildings to £249,000.
In this way, the transaction will be brought within the 2% SDLT band instead of the 5% which would otherwise have been
payable for all amounts over £250,000. Which one of the following courses of action is correct?
A. The client's suggestion is perfectly legal and you can continue to act.
B. The contract for the sale of the property will have to be amended but otherwise the client's suggestion is perfectly
legal and you can continue to act.
C. You should advise your client that the suggestion is potentially a criminal offence and that unless the client changes
his instructions, you must cease to act.
D. You must make it clear in a letter to your client that you advise against this course of action but otherwise you can
continue to act.
Response Feedback:
- The client's suggestion is potentially a criminal offence since it will be a fraud on HM Revenue & Customs.
- A solicitor must not act, or must cease to act further, where the instructions would involve the solicitor in a breach of
the law or a breach of the SRA Principles (see SRA Principles 1, 2, 4 and 5), unless the client is prepared to change his
or her instructions.
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