REGISTERED PROPERTY TRANSACTION PROCEDURE - BUYER
ESSENTIAL ELEMENTS OF LAND LAW
5 STAGES
(1) Pre contract: buyer investigates title as there is very little the seller has to tell the buyer
(2) Exchange of contracts: seller holds one contract and buyer holds one contract
(3) Pre-completion
(4) Completion
(5) Post-completion
2 x Legal Landmarks – 5 stages, but 2 significant legal landmarks
(1) Exchange of contract – buyer gets a beneficial interest but seller still owns it
Contain all the agreed terms between the parties that will take effect in the Transfer
(2) Completion – legal interest transfers
Puts into effect all the terms from the Contract:
- cannot leave anything out
- cannot put anything new in
Contract – 2 sets
Standard Conditions of Sale (5th Edition – 2018 revision) (‘SC’) residential property
Standard Commercial Property Conditions (3rd Edition – 2018 revision) (‘SCPC’) commercial
Special conditions – those which are specific to that particular transaction (front and back pages)
Standard conditions – those which are common to many transactions (middle pages)
Principle of ‘Caveat emptor’
Undertaking lots of checks so they are confident in what they are buying, sellers always investigates
title when preparing pre-contract package they need to know what is put into the contract, the legal
terms, and buyers investigates too because of Caveat Emptor
Seller
• Limited duty of disclosure
• Duty to disclose incumbrances on the land that will continue to bind the land after completion
Buyer
Must ascertain the physical state of the property
Duty to carry out all necessary searches and enquiries
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, Seller’s duty to disclose incumbrances on the land is a contractual requirement (SC 3.1.1 / SCPC 4.1.1)
This means that the Seller is confirming they are selling the property free from incumbrances except
for those mentioned in SC 3.1.2 / SCPC 4.1.2.
NB: Under SC 3.1.2(d) / SCPC 4.1.2(d), the Seller is not obliged to disclose matters which would have
been disclosed by any by ‘any searches/enquiries which a prudent buyer would have made before
entering into the contract’ – this technically includes matters in the title documents.
However, if you are acting for the Seller, best practice is to disclose all incumbrances revealed by the
Seller’s solicitor’s investigation of title in a special condition except for:
a) physical defects; and
b) matters that will not bind the Buyer
so how does buyer mitigate risk go view the property with surveyors
Common Incumbrances
Restrictive Covenants
Easements
Mortgages
Equitable/Trust interests
Leases
Statutory interests (like family home rights)
Freehold Covenants
-Covenant is a promise, person who made the covenant has the burden
-Party with benefit of covenant = covenantee
-Party with burden of covenant = covenantor
This is a promise made about land which creates a right over the land. A minimum requirement is that
it is signed in writing (s.53(1)(a) Law of Property Act 1925) and it is usually created by deed. The
covenant is enforceable as a contract between the original parties and may be enforceable against
successors in title to the original parties.
Types of covenants:
Positive: these covenants do not ‘run with the land’ and they require doing something that involves
time/cost/effort. To ensure that this type of covenant is binding on a new owner, it must be dealt
with expressly on sale, by getting the Buyer to enter into a personal indemnity covenant (PIC) so
buyer contractually agrees to adhere to that covenant so if seller is sued they can try and recover
from the buyer from the indemnity covenant
Restrictive: these may ‘run with the land’ if certain conditions (in 3.1.1) are met and seek to limit
what the party can do with the land. (negative) must be restrictive to pass to successor
Example of positive v restrictive covenants
“The Transferee covenants with the Transferor for the benefit of each and every part of the Retained
Land and to the intent that the burden of the covenant will run with and bind the Property not to
allow any structure on the Property to fall into disrepair.” - POSITIVE
“The Transferee covenants with the Transferor for the benefit of each and every part of the Retained
Land and to the intent that the burden of the covenant will run with and bind the Property to use the
Property for the sale of non-alcoholic beverages only.” – RESTRICTIVE (stopping to sell alcoholic
beverages)
RESTRICTIVE WILL BIND ONLY IF REGISTERED AS A NOTICE ON CHARGES REGISTER
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, Tulk v Moxhay/ s.79 Law of Property Act 1925
The court held certain elements be satisfied for the burden of a covenant to pass to a successor:
1) covenant must be restrictive;
2) covenantee must have owned the land, for the benefit of which the covenant was taken;
3) original parties intended the burden to run with the land (either expressly or implied by s79 LPA);
4) covenant must benefit the land and not be personal;
5) i) pre-1926 covenants – successor must have notice
ii) post-1926 covenants – must be registered.
Restrictive Covenants in Registered Land
Restrictive covenant will bind a buyer of the land burdened by that covenant but ONLY if it has been
registered as a notice on the Charges Register of title (of the burdened land)
Easements
An easement is a right attached to one party’s land over another party’s land. There are two types of
easement – legal and equitable (equitable if not satisfy requirements)
Common types of easements:
Right of way, Light, Parking, Right of support (to not fall), Right to hang out washing, Right of drainage
May be Legal or Equitable:
- Legal easements ‘bind the world’ (no requirement to register)
- Tend to be equitable only because failed to satisfy requirements to create a legal easement
Creation of a Legal Easement
There are three options for creating a legal easement:
1) Expressly in a deed (this is the most common option);
2) Implied into the transfer deed (only possible on a sale of part) (e.g. sell part of garden) – 4 ways
1) By necessity – i.e. without an easement, owner cannot enjoy his land at all (wong v beumont)
2) By common intention – it is necessary to give effect to the common intention of the parties.
3) Under the rule in Wheeldon v Burrows – for this to apply, the right in question must be:
Continuous
Apparent
Necessary for the reasonable enjoyment of the land
In use by the owner (as a ‘quasi-easement’) at the time of sale
4) Under s.62 LPA 1925, which provides that a conveyance of land shall be deemed to include ‘…
all buildings, erections, fixtures…liberties, privileges, easements, rights and advantages
whatsoever, appertaining to the land’. This has two effects, the first being that it passes the
benefit of an existing right to the Buyer and second, it creates new easements.
Effect of s.62 LPA 1925?
1) Passes benefit of an existing right to the buyer and
2) Has a magic effect – creates a new easement
converts existing licences to an easement
3) Acquired through long use – at least 20 years (‘Prescription’).
Even though options 2 & 3 above are implied, they will still automatically bind the land. This is
dangerous for the Buyer as it is difficult to discover because there are no written records to check – as
a result, it is important to make enquiries of the Seller / inspect the land.
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, Co-ownership
This arises where more than one person has an interest in the same estate in the land at the same
time. If more than one person expressly owns the land, two forms of ownership arise simultaneously:
legal ‘ownership’ and equitable/beneficial ‘ownership’.
Land=
-Equitable (interest under a trust)
-Legal ownership (freehold/leasehold) legal estate= first 4 hold on legal title (s.24-36 LPA 1925)
‘Ownership’ of Legal estate and Equitable interest
E.g. Ron & Mary = trustees of legal estate
Ron & Mary = beneficiaries of equitable interest
Equitable interest – held as joint tenants or tenancy in common
JTs= both own whole EQ. interest - A dies, B owns whole equitable interest (‘right of survivorship’)
Tenants-in-Common = i.e. A & B both hold EQ interest in distinct shares. If A dies, B does NOT own the
whole of the EQ interest, just his share. A’s share passes to her heirs/ nearest family members
Sale where equitable co-owners
-If held as JTs, S can sell alone, but must produce Death Cert of other co-owner
-If held as T-i-Cs, S cannot sell alone=appoint a 2 nd trustee to overreach other co-owner’s interest
Overreaching
Buyer of a legal estate from co-owners need not enquire about the beneficial interests in that estate.
As long as buyer pays purchase price in good faith to at least two trustees (co-owners) or a trust
corporation, beneficial interests are ‘overreached’ and the buyer will acquire good title (s.27 LPA
1925)
Mortgages
Security for a loan –mortgage is granted by borrower (mortgagor) in favour of the lender (mortgagee).
It is created by deed and if it is registered against title on sale, it will be binding upon successors.
Buyer needs to make sure sellers discharges mortgage at completion can have multiple
Other types of security
-Fixed charge: may be over various assets
-Floating charge (companies only)
E.g. buy commercial property, charge on assets with property need lenders consent cannot sell
So can have a mortgage attached to the property which gives lender a power of sale and sell the
property (repossess it) or assets in property can be subject to a fixed or floating charge
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, PRELIMINARY MATTERS
Professional conduct
Principles
1. uphold the rule of law and the proper administration of justice;
2. in a way that upholds public trust and confidence in the solicitors profession and in legal
services provided by authorised persons
3. With independence
4. With honesty
5. With integrity
6. In a way that encourages equality, diversity and inclusion
7. In the best interests of each client
Acting for buyer and seller*
E.g. You have been instructed by Cheung Li to act on the sale of his house to Pippa Brookes. In order
to save money and also speed things up a little, Ms. Brookes has phoned you to ask if you can act for
her as well as Mr. Li during the transaction.
• Principle 7 (acting in the best interests of each client) applies
• Codes do not prohibit a solicitor from acting for Buyer and Seller…BUT
• Para 6.2 says you cannot act if there is a ‘client conflict or a significant risk of such a conflict’
• So you can act provided there is no conflict (or a significant risk of one) OR
• If there is a conflict but one of the exceptions under para 6.2 (a) or (b) is available AND you meet
all of the conditions in para 6.2(i)-(iii) 6.2a ‘substantially common interest’ is met
• There is likely to be a conflict under 6.2 to which the exceptions under 6.2(a) or (b) are unlikely to
apply = we should not act for B and S
• Acting in the best interests of each client act for buyer + seller is very hard to happen want
the best price and terms for buyer + seller is very difficult to happen cannot act for both
Acting for buyer and lender*
E.g. Instructed by Sarah Paige to act on the purchase of her new house. Ms. Paige will be buying the
house with the aid of a mortgage from Midwest Society who would also like you to act on its behalf
Principle 7 - must act in best interest of each client
Conflict of interest (6.2) unless 6.2a applies and the three conditions are also met (consent in
writing, information barriers and reasonably advising considering the circumstances)
Para 6.2(a) - exception: where parties (e.g. B & L) have a ‘substantially common interest’ [SCI]
AND 6.2 (i)-(iii) ALL met
Conflict of interest – acting for buyer and lender happens sometimes for small property
transactions so possible but in certain ways both have an interest in ensuring property has a
good title, need to see if the mortgage is in standard terms, which can then consider 6.2a but still
meet conditions so information barriers still there but best not to act for both
Need a clear common purpose (SCI) regarding the matter and a strong consensus on how it is to
be achieved here 6.2a exception may not be available as B + L not have an SCI
This is because the mortgage may not be on ‘standard terms’ (as it is a commercial matter) and
therefore could be subject to negotiation by the parties
Need to obtain further instructions
-Define client conflict - 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.
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