This document contains High Distinction level LPC Prep and Workshop Notes for the Real Estate module at the University of Law for 2020/21.
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Real Estate Preparatory and Workshop Task Notes - Stuvia
Unit 1: Taking Instructions
Preparatory Task
Consider the plan, the Memorandum of Sale and the photograph.
Initial thoughts of Arcadian Investments Limited
• Don’t need to check identity because they’re an existing client
• Their name suggests they’re investors
• They won’t need their hand held, they’ve done this many times and likely
to be a slick operation.
• Will probably want to move quickly on this
• They will want a blank canvas and no existing tenants.
• Need to bear in mind planning permission
• Need to check current and proposed use and that they’re aligned.
Memorandum of Sale
• Prepared by estate agent
• Missing name of seller’s solicitor
Plan
• Building is physically stuck between 32 and 40
• Need to consider rights of way for Blake Alley – have we got rights over 32
and 40? Have they got rights over us?
• Who owns the side alley?
• The grey area doesn’t abut Fletton Street – who owns it? Could belong to
40 or 42? If we don’t own it we don’t have right of access over it.
o Apply the same logic to 30 – Blake’s Alley – who owns it?
Landlord obligations
• Basic health and safety
o Where are the fire exists?
Picture of building
• Where is the entrance? Is it easily accessible?
• Survey needs to be undertaken on behalf of our client
o This looks at the building’s current state
• Looks old – windows are single glazed
o Probably 1960/70s property
o Older properties are more expensive to heat
o Think about EPC – we need the EPC certificate (need at least a
rating of E for it to be letable)
o Issues it might face:
! Asbestos/Concrete cancer – would want to conduct a survey
for this
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, Real Estate Preparatory and Workshop Task Notes - Stuvia
• Really pertinent point is thinking about whether property is old or new:
o Consider purchase price (£1.175m)
o VAT (VERY IMPORTANT when dealing with old properties)
! If property is newer than 3 years, it has standard rate tax
! If property is older than 3 years it is exempt but subject to
the option to tax
! This means seller could opt to tax – we need to find this out.
If they have, VAT will be charged at standard rate. So here it
would be £235,000. This is additional to the purchase price.
o What if Arcadian aren’t happy with paying the VAT? We’re in
negotiating stage so could renegotiate purchase price OR just pull
out. But this is a significant issue that we need to flag to our client
now.
o This would not be an issue in residential property.
Exchange
• What needs to be in place?
o Risk passes on exchange, so insurance needs to be arranged at
point of exchange on behalf of buyer.
Refurbishment
• Synchronisation is not a problem here, but likely would be for residential
• We want to conduct refurbishments before we let it out to new people
• It looks like an occupied premises at the moment – do we want to take this
on at the moment while occupied and with fixtures and fittings? No. We
need security from seller that it will be sold with vacant possession.
Workshop Task 1
1. Explain why both clients might want G&W to act for both parties in this
transaction.
• Efficiency
• Expense – may be cheaper
• Good relations with the firm
• Could make communications easier
2. Which SRA principles, and paragraphs in the SRA Codes of Conduct 2019 are
relevant to this situation? Can G&W act for both Arcadian and Winter in this
transaction?
• SRA para 6.2 CoC for Solicitors – conflict of interests
o VAT issue could cause a conflict as we’re still in negotiations.
• Paras 6.2(a) (substantially common interest) and 6.2(b) (competing for same
objective) exceptions do not apply.
• Principle 7 – acting in the best interests of each client
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, Real Estate Preparatory and Workshop Task Notes - Stuvia
• Cannot act for both as there is a conflict of interest within the negotiation
stage
• On the face of it no, we cannot for both clients
• If they were further on in the process then maybe, but we’re still in the
negotiation stage.
o The deal has not yet been done.
• Substantially common interest – Law Society advice on interpretation
18/06/2020 not binding, but very persuasive – where two clients have a
substantially common interest does not apply to a property purchases.
o This limits our scope to use this exception. It doesn’t mean we can’t
use it, but persuades us not to.
3. If the firm decides not to act for both parties, which client should be told to
find legal representation elsewhere and why?
• Winter because we’ve got previous commercial property agreements with
Arcadian.
• Winter’s work is ‘bread and butter’ work – steady but not very high value
• Arcadian – higher value stuff and also want to rent out properties so could
get our ‘bread and butter’ from them too.
• Another determining factor: Winter could be big client elsewhere, i.e.
employment, pensions, litigation, etc. So this should be taken into account IN
PRACTICE (not necessarily in the exam).
Workshop Task 2
1. Explain whether you think that G&W can act for both Arcadian and HRC in
this transaction.
• Principle 7 – Act in the best interest of the client
• Para 6.3 CoC for Solicitors duty of confidentiality
• Under para 6.2 CoC for Solicitors, a solicitor/firm can act for borrower
and lender as long as there is no conflict of interest or a significant risk
of a conflict.
o Depends if Arcadian want to breach any of the terms of the
mortgage
o Need to check that the mortgage terms are fair to Arcadian
o Are the mortgage terms still in negotiation.
o Are the mortgage terms standard?
! If so, might be able to argue no conflict or substantially
common interest exception (para 6.2(a) CoC) because
both parties would want the property to be marketable.
• BUT… in commercial transactions the mortgage docs are likely to be the
subject of significant negotiation between the solicitors for the two
parties, so won’t be standard terms.
o So there’s a higher chance of a conflict of interest arising.
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, Real Estate Preparatory and Workshop Task Notes - Stuvia
o Would need to use a different firm to act on the loan
documentation/negotiation.
o But provided effective safeguards are in place we could
practicably do the due diligence for them and report to the
lender on this.
• Further advice from Law Society June 2020 – the risk of a conflict is
high if the mortgage is not a standard mortgage of the property to be
used as the borrower’s private residence.
o This means: Even if it were on standard terms, the risk of
conflict is high because it is a commercial property.
2. Arcadian is an existing client of the firm. If it had been a new client, explain
what steps the firm should have taken at the beginning of the transaction to
minimise the risk of becoming involved in a mortgage fraud.
• Mortgage fraud occurs where individuals defraud a lender through the
mortgage process.
• Verify identity of client and lender
o Go to Companies House
o Look at shareholdings for shareholder’s identity.
o Ensure you keep a keen eye on interactions with client throughout
the retainer (e.g. signing docs, not attending meetings, etc.)
• Ask questions when we receive unusual instructions
• Must seek consent from borrower to disclose the info to the lender, but if
that consent is not given the solicitor must refuse to continue to act for the
borrower and the lender.
• Enhanced due diligence
Workshop Task 3
1. Would you be able to reassure Arcadian that would not happen?
• This is a contract race and is very common with commercial properties
• Our obligations as solicitor and firm under the CoC:
o Para 1.2 do not abuse your position by taking unfair advantage of
clients or others
o Para 1.4 cannot mislead client, court or others, either by your own
acts or omission or allowing or being complicit in the acts or
omissions of others (including your client).
o Must disclose contract (only if buyer consents, due to confidentiality
issues) races to all parties, which means Winter’s solicitor must
disclose this info to all parties.
! If Winter didn’t consent to this disclosure, then their solicitor
would have to step down.
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