University of Law LPC Real Estate Law and Practice Notes for Units 1 - 15.
This includes FULL comprehensive completed workshop notes for the entire module, which includes answers for the preparatory tasks and the in-workshop tasks, that will leave you 100% ready for your workshops, learning and...
This Unit addresses one of the key tasks that a solicitor will perform in transferring a
freehold registered property from a seller to a buyer.
In this Unit, you will be taking instructions and identifying some key issues about the
client and the property, some of which (such as those relating to professional
conduct) may need to be addressed at the outset and some of which will need to be
followed up in later stages of the transaction.
A property lawyer needs to ask the right questions in the early stages of the
transaction because if important issues are missed, the client may end up with a
property that has a defective title, or cannot be used for the purposes the client
intended, or is not worth what the client paid for it.
Outcomes
By the end of this Unit you should be able to:
1. Analyse a buyer client’s initial instructions and identify and follow up issues
arising at the instruction stage.
2. Identify and resolve issues of professional conduct that may arise when you are
instructed on a new commercial property transaction.
1. View the Real Estate Recorded Lecture “The Commercial Property Market”.
2. Read chapters 1, 2, 5, 6.2.1 to 6.2.5 (inclusive) and 8 and 9 of the Property Law
and Practice textbook.
3. Optional reading: If you want a fuller understanding of how VAT is charged,
read Chapter 1 of the Legal Foundations textbook.
4. Under your Unit Workshop 1 materials on Elite, find and read the Law Society’s
practice note: Mortgage fraud.
Make notes on:
• The nature of a mortgage fraud.
• The various ways in which a mortgage fraud may be committed.
• The warning signs to look out for when carrying out a property transaction.
• The steps a firm can take to minimise the risk of becoming involved in a
mortgage fraud
5. Complete Test & Feedback – Unit Workshop 1 (Preparation).
6. Complete the Preparatory Task
Materials required for the Unit Workshop
1. Your notes on your reading and the Preparatory Task.
2. The Property Law and Practice textbook.
3. The Legal Foundations textbook.
4. This Guide.
Consolidation after Unit Workshop
It is important that you consolidate your learning. In particular you should:
1. Revise your answers to the Preparatory Task and the Unit Workshop Tasks in
the light of the feedback you received in the Unit Workshop.
2. Complete Test & Feedback – Unit Workshop 1 (Consolidation).
You are a trainee in the firm of Gibson & Weldon LLP (“G&W”). You are currently
sitting in the Real Estate Department and your supervising solicitor is Teresa
McKillop.
Teresa has received instructions to act for Arcadian Investments Limited
(“Arcadian”), an existing client of the firm. Arcadian is a property company with a
portfolio of commercial properties all over the country. Arcadian specialises in the
acquisition of underperforming investment properties, which it then refurbishes and
lets to new tenants, mainly in the office sector.
Arcadian wants G&W to act on its behalf in the purchase of Kenulf House in
Peterborough. On the following pages, you will find a plan of the property, the
Memorandum of Sale from the agents marketing the property for the seller and a
photograph of the property.
Bearing in mind the nature of the client’s business, consider the plan, the
Memorandum of Sale and the photograph.
Identify and make a list of:
1. any issues arising out of these documents which you will need to follow
up; and
2. any further instructions you will need about the client, the property and/or
the transaction.
Answer
A memorandum of sale is a document recording a prospective buyer’s interest in
purchasing a property and the seller’s terms of the sale. It relates to the ‘sale agreed’
step when purchasing a property. While it’s not a legally binding contract, it acts as
written confirmation that a price has been agreed and declares the intention of both
parties to complete the sale.
1.
Possible rights of way
Our client will want to know about any rights the property is subject to and to make
sure it has sufficient rights for its intended use. In this case, would no.32, no.40,
people from Victoria House and the public have access to Blake’s Alley.
Restrictive covenants
A restrictive covenant is a type of restriction which could affect your land for the
benefit of neighbouring land. For example, in this case, it could stop Arcadian
carrying out an activity on Blake’s Alley without first getting the consent of the
neighbouring owners. If the restriction has been breached, for example by carrying
out a specific activity, then the client could face legal action. Can it only be accessed
by foot? Can lorries enter Blake’s alley? Is there a time period it can be accessed?
All of this can affect the client?
,Parking
There is a car parked so we need to know if parking is allowed. Parking restrictions
on Fletton Street?
Deposit
We will need the deposit on accounts before completion as it is paid on exchange.
Client needs to be aware when we need it and how much it will be.
Fixtures and chattels
Need to know if any of the equipment in the building are part of the property and will
stay, or leave with the seller/previous occupiers.
Survey
Get a surveyor to carry out a survey on the building i.e. asbestos check etc. So, the
client would have an accurate cost amount.
Index map search
We need to find out about number 40 and the land to the right of it.
Planning permission
Research how this affects commercial property. You need Local Authority consent.
Check register that there is not a restrictive covenant on planning permissions/use.
Fixtures are those goods which belong as part of the land. Chattels are the personal
effects of their owner and can be removed at any time by their owner. Fixtures
examples … ceiling lights, built-in bookcases. Chattels examples … chairs. The
seller might want to charge additional fees for items that they are leaving. These
additional fees would be added to the contract.
2.
You will need to follow up on who the seller’s solicitor is, as that is who you will be
liaising with on behalf of the seller.
The buyer’s solicitor must check that the client is financially able to proceed with the
transaction. Unless the client has sufficient cash to purchase the property, there must
be a satisfactory offer of finance. I
Some Memorandums of Sale provide an expected completion and exchange dates.
This is not always met due to delays such as waiting for replies from Land Registry.
The Land registration number of the property is needed to carry out title investigation.
Confirmation of Winter Estate Limited’s ownership via HM Land Registry is required
(title plan and register). This is proof that the seller owns the land and is entitled to
sell the land.
Check what the present use of the property is – check against planning purposes and
restrictive covenants.
,Intended use of the property matches the permission.
Is VAT payable?
On residential property, generally no. On commercial property, if its new – yes. If it is
old, more than 3 years – possibly. The seller has the option to pay. Seller normally
only does this where it has paid VAT in the past which it wants to recover.
Mortgage
Is there a mortgage? If yes, when will the legal charge be discharged? This is
removing the mortgage and getting it removed from the mortgage. An undertaking
must be received. Has there been any agreements between the borrower and the
lender?
Insurance
Once exchange is completed, risk lies with the buyer. The buyer will need to insure
the property. The lender in a mortgage will insist that the buyer has insurance in
place. Since the buyers own multiple properties, will they add this property to the
block insurance?
When getting a new client, you need to:
- Do a conflict of interest check
- Finance check
- Do a source of funds check (money laundering)
1. Who is the client?
2. Can we act?
3. How is it being financed?
Then we’ll send out a client engagement letter and get monies on account to start to
act.
1. Who are the seller’s solicitors? We were asked to act for both Arcadian Investments
Limited and Winter Estates Limited. This is a conflict
of interest.
It is noted that we are acting for Arcadian
Investments Limited, and Winter Estates Limited
have been asked to appoint another firm to act in
relation for the sale of Kenulf House to our client
(Arcadian).
2. Has a preliminary deposit been None has been requested or paid.
paid?
A 10% deposit will need to be paid by the buyer on
exchange of contracts, in the amount of £175,000.
3. Are there any fixtures or Nothing has been noted in the initial documents.
fittings?
We will need to double check but it seems
unlikely as the buyer will be refurbishing the
Property on completion.
4. When is the proposed Within 3 months. The precise date is to be
completion date? confirmed prior to exchange of contract.
5. Will VAT be payable in No, but the seller may have the option to opt to
addition to the purchase price? do so if they have renovation costs to recover.
The building is more than 3 years old.
6. Has there been any other There are none at present.
terms agreed between the
parties?
7. What is the present planning It is unknown but the photo indicates that it may
use of the property? be offices. This needs to be clarified.
The buyer intends to let the Property as offices:
- Will this be a change of use?
- Check Local Authority search results.
8. Is the Property being sold with Yes – the property is currently vacant.
vacant possession?
9. Does the seller have a This is unknown. Raise enquiries with the seller
mortgage? and check office copies.
10. How is the buyer financing the 75% from a new loan from HRC Private Bank
purchase? Limited and 25% from the buyer’s own funds.
11. Is synchronisation required? No, unless the seller has a related sale. This
needs to be checked.
12. Has a survey taken place? This is unknown. The property is old and
requires refurbishment.
13. Has any works been carried No, only routine maintenance.
out to the Property?
14. Has the buyer been given the This was provided to the buyer with the Sales
EPC? Particulars.
15. What are the insurance The buyer will put the Property on its block
arrangements? policy on exchange of contracts.
,Other points to consider:
• The buyer will be sensitive to anything which may affect the capital value of the
property
• They specialise in refurbishment of underperforming properties, so they may have
some of the characteristics of a developer.
• They will want to refurbish quickly, so the property should be empty.
• They may need planning permission for the refurbishment.
Issues arising out of the plan, memorandum of sale and photo:
• Access to the back seems to be via Blake’s Alley. What is round the back? Car
parking? Fire escape?
• What does the grey hatching mean? Why does it not go all the way to Fletton
Street?
• What is to the left of 32 Fletton Street? Why does the hatching not extend beyond
no.32 to behind no.30?
• How does the owner of 32 Fletton Street get access to the back of its building?
Does it have a right of way over Kenulf House?
• Current and proposed use of the property?
• Planning issues?
• Occupation? Vacant possession?
• Age and physical state of the property?
• Any works needed to the property?
Arcadian Investments Limited (“Arcadian”) and Winter Estates Limited (“Winter”) are
both existing clients of the firm. Teresa has acted for Arcadian on several purchases
of commercial property in the past and another solicitor in the department, Stephanie
Patterson, acts for Winter in the management of its leasehold properties, issuing
landlord’s licences to Winter’s tenants who want to assign their leases or carry out
alterations.
Both clients have asked whether Gibson & Weldon LLP (“G&W”) can act for them in
this transaction. Both clients are happy for the firm to act for the other.
1. Explain why both clients might want G&W to act for both parties in this
transaction.
2. Which SRA principles, and paragraphs in the SRA Codes of Conduct 2019
are relevant to this situation? With reference to these, explain whether
you think G&W can act for both Arcadian and Winter in this transaction.
3. If the firm decides not to act for both parties, which client should be told
to find legal representation elsewhere and why?
Answer
1. Both clients may feel as they could save time and money if one firm does the
work of both the buyer’s and seller’s solicitors. As clients of the same firm, neither
party may want to instruct a new firm.
2. Paragraph 6.2 of the SRA Code of Conduct supports Principle 7 and states that a
solicitor/law firm cannot act where there is conflict of interest or a significant risk
of one arising.
SRA Glossary
Conflict of interest: ‘a situation where your separate duties to act in the best
interests of two or more clients conflict’.
The decision as to whether acting for buyer and seller does or is likely to involve a
conflict of interest rests with the solicitor and the firm. Whilst the SRA codes do not
prohibit acting for both buyer and seller, it is worth noting that guidance issued by the
SRA in relation to the SRA code states that one client selling or leasing an asset to
another client is an example of a circumstance that can give rise to a conflict of
interest or a significant risk of one.
The guidance goes on to say that ‘you should not normally act for two or more clients
in these scenarios’. Law Society guidance issued on 18 th of June 2020 states that
there is a high risk of a conflict of interest if you act for both a buyer and the seller’.
The firm would have to take into account the following factors:
(a) The complexity of the matter and length of the transaction. The more complex the
transaction, the greater the risk of a conflict of interest.
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