Summary
Summary PROPERTY PRACTICE Notes
PROPERTY PRACTICE comprehensive notes for SQE 1 exams
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PROPERTY PRACTICEFREEHOLD PROPERTY TRANSACTIONS
1. Seller
a. Pre-contract stage
i. Exchange of contracts
1. Pre-completion stage
a. Completion
i. Post-completion stage
1. Buyer
2. Parties not bound under contracts are exchanged
3. Caveat Emptor= let the buyer beware
Pre-Contract Stage
- Sellers solicitor submits a pre-contract package of documents to the buyers
solicitor
o Which includes draft contract and evidence of the sellers title
- Buyers solicitor must check the documents very carefully
o Also carry out additional searches and enquiries
o Investigation of title, pre-contract searches and enquiries
Pre-Completion stage
- When contracts are exchanged then the parties are bound to complete.
- Transfer Deed will need to be prepared and executed
- Buyers solicitor carries out pre-completion searches
Post-completion Stage
- Mortgage the seller had should be paid off and removed from title
- Buyers solicitor must do SDLT and register the sale and any mortgage
Law Society Conveyancing Protocol
- Standardises the residential conveyancing process
- Such as the TA06 – property information form which is part of pre-contract
stage
Acting for Buyer & Seller
- Para 6.2 Code of Conduct
o A solicitor cannot act for both parties if there is a conflict of interest or a
significant risk of such a conflict
o Acting for a buyer and seller carries a high risk of conflict of interests
- Exception Para 6.2(a)
o Can act where parties have a substantially common interest
,Acting for Joint Buyers
- Acceptable to act for joint buyers
Acting for borrower and lender
- Possible to act for borrower and lender
o However there may be a conflict of interest where the risk of conflict is
high if:
1. The mortgage is not a standard mortgage of property to be used
as the borrower’s private residence
2. The mortgage is a standard mortgage but you do not use the
approved certificate of title
Acting for Joint Borrowers
- Usually acceptable to act for joint borrowers provided no conflict of interest
exists or is likely to arise
- Where a husband and wife own a matrimonial home and one of them agrees
to mortgage it as security for a business loan.
o ‘The Etridge Guidelines’ – the lender is entitled to proceed on the basis
that the solicitor advising the spouse has done so property, the lender
should provide the solicitor with the following info:
1. (a) the purpose for which the loan is being made available
2. (b) the current amount of the husband’s indebtedness
3. (c) the amount of the current overdraft facility
4. (d) the amount and terms of the new loan and
5. (e) a copy of any written application made by the husband for
the loan
o The solicitor should:
1. Explain to the wife the purpose for which the solicitor has
become involved
2. Explain that the lender will rely on the solicitor’s involvement to
counter any suggestion that the wife has been unduly influenced
or has not fully understood the nature of the transaction and
3. Obtain confirmation from the wife that she wishes the solicitor to
act for her in the transaction and to advise her on the legal and
practical implications of the transaction
o Advice should be given face to face without the husband present.
o If the solicitor thinks the transaction is not in the wife’s best interest,
they should give reasoned advice and if it is glaringly obvious that the
wife is being grievously wronged, the solicitor should decline to act
Finances
- Solicitor should send a letter of engagement to the client setting out the
costings at the beginning of the transaction – clearly explaining the fees, when
they are likely to change and warning the client about other payments like for
SDLT.
,TYPES OF MORTGAGES
1. Repayment Mortgages
a. The borrower will make monthly payments to the lender made up partly
of instalment of the original amount borrowed and partly of interest
chargeable on the loan
b. Fixed rate interest or standard variable rate
2. Interest-only mortgages
a. Borrower will make monthly payments to the lender but those payment
will only comprise interest chargeable on the loan
Solicitors who are not authorised by the Financial Conduct Authority
are only permitted to give generic financial advice as generic advice is
outside the scope of the Financial Services and Markets Act 2000.
Therefore, you can advise on the different types of mortgage available
but you cannot advise on whether a specific mortgage is the most
suitable for the client is not generic advice.
PROPERTY TAXATION
- For residential property
o SDLT in England and Land Transaction Tax LTT in Wales
o Seller may have to pay Capital Gains Tax if they sold the property for
more than they bought it for and it was not their only or main residence
- For Commercial Property
o SDLT or Ltt
SDLT
- The basis of charge for residential freehold property
o First time buyers of resi property for £625,000 or less can claim relief
from SDLT
1. They do not pay anything on purchases up to £425,000 and pay
5% on the portion from £425,001 to £625,000
o For those who are not first time buyers
1. Up to £250,000 = 0%
2. £250,000 to £925,000 = 5%
3. £925,000 to 1,500,000= 10%
4. the remainder 12%
o SDLT only payable on land and not the chattels
- The basis of charge for non-residential or mixed use freehold property
o SDLT:
1. £150,000= 0%
, 2. £150,000 - £250,000= 2%
3. over £250,000= 5%
LTT
- no discount for first-time buyers
- for Residential property the rates are:
o £225,000 = 0%
o £225,000 - £400,000 = 6%
o £400,000 - £750,000 = 7.5%
o £750,000 - £1.5m = 10%
o the remainder= 12%
- For Non-residential or mixed use freehold, the rates are:
o £225,000= 0%
o £225,000 - £250,000 = 1%
o £250,000 to £1m = 5%
o exceeds £1m = 6%
CGT and Private Residence Relief
- Capital Gains Tax is charged on gains made on chargeable assets within the
meaning of Taxation of Chargeable Gains Act 1992
o Includes freehold and leasehold property
o Includes gifts
- The gain of a sale of property is calculated by deducting the purchase price of
the property from its current sale price
o Certain forms of expenditure incurred in acquiring or improving the
property can be deducted
Private Residential Relief
- A seller of residential property may be able to claim benefit of private
residence relief if it is the sale of an individuals dwelling house used as their
only or main residence
o Must be sole or main residence throughout the period of ownership
- If own more than 1 property can chose which one benefits from PPR
- Certain periods of absence allowed
o Such as if you are an employee and have to live abroad
- If seller has a garden more than 0.5 hectares, the gain on the excess is
chargeable to CGT unless the seller can show that the extra garden was
necessary for the reasonable enjoyment of the house.
VAT
- VAT is tax on taxable supplies
- Value Added Tax Act 1994
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