LEVEL 6 UNIT 17 - CONVEYANCING SUGGESTED ANSWERS JUNE 2011 Nte t Candidates and Tutrs: The purpse f the suggested answers is t prvide students and tutrs with guidance as t the key pints students shuld have included in their answers t the June 2011 examinatins. The suggested answers d nt fr all questins set ut all the pints which students may have included in their respnses t the questins. Students will have received credit, where applicable, fr ther pints nt addressed by the suggested answers. ILEX is currently wrking with the Level 6 Chief Examiners t standardise the frmat and cntent f suggested answers and welcmes feedback frm students and tutrs with regard t the helpfulness f these Suggested Answers. Students and tutrs shuld review the suggested answers in cnjunctin with the questin papers and the Chief Examiners reprts which prvide feedback n student perfrmance in the examinatin. QUESTION 1 (a) The gd rt f title (dated 1976) did nt cntain any new cvenants, but it did cntain a reference t an earlier cnveyance in which restrictive cvenants were created. This is supprted by the fact that the 1976 gd rt cntains an indemnity cvenant and by the fact that the Central Land Charges search prvided by the sellers as part f the epitme f title cntained evidence f a D(ii) land charge being registered against the name f the cvenantr. As such, the cvenant will directly bind the buyers as a prprietrial interest by virtue f registratin f the D(ii) land charge and indirectly by virtue f the existence f the chain f indemnity cvenants (which the buyers will almst certainly be expected t cntinue). As the riginal cvenantr will be bund t cmply with the terms f the cvenant under the dctrine f privity f cntract (and remain liable even after dispsing f the prperty), he will have insisted n btaining an indemnity frm his buyer when he dispsed f the prperty. Each successive wner will have insisted n a similar indemnity frm his buyer. The facts indicated that the Standard Cnditins f Sale (4 th Edn) had been adpted and SCS 4.6.4 wuld require the buyers t give such an indemnity In rder t find ut mre details f the precise nature f the cvenants, a requisitin f the sellers shuld be raised n behalf f the buyers r an ffice cpy f the cvenant culd be btained frm the Central Land Charges Department. (b) Whilst the facts suggest that the buyers may abut t be in breach f cntract (as regards cmpletin) by being unable t execute the transfer in time fr cmpletin (as they are ut f the cuntry) it is als apparent that there is n breach by the sellers. As such, the questin revlved slely arund the remedies available t the sellers in the event the buyers are nt able t cmplete n time. Page 1 f 5
The facts indicated that the Standard Cnditins f Sale (4 th Edn) have been adpted in the cntract and s the sellers have the fllwing remedies available: First, it shuld be nted that time is nt f the essence fr cmpletin. By virtue f SCS 6, the sellers can make time f the essence (prviding they are themselves ready, willing and able t cmplete) by serving a ntice t cmplete. This gives the buyers 10 wrking days t cmplete. If the buyers fail t cmplete, the sellers may rescind and (a) frfeit the depsit, (b) resell and (c) claim damages (SCS 7.5). Whether this ptin will enable the sellers t terminate will depend n whether the buyers are able t return t execute the transfer within the 10 wrking day perid. If the sellers d nt want t frce cmpletin, SCS 7.3 prvides that the buyers will (as the party in default) be required t pay interest at the cntract rate n the purchase price less the depsit. Further, the sellers retain the right t sue fr damages, as this cnstitutes a breach f cntract, but any claim is t be reduced by any cmpensatin paid and if the buyer had nt paid a depsit r had paid part f the 10% depsit then the whle 10% depsit is immediately payable frm the buyer t the seller. QUESTION 2 (a) The cnveyance t the sellers indicates that they hld the prperty as tenants in cmmn. In rder t deal with the situatin where ne f tw tenants in cmmn f a prperty dies between exchange f cntracts and cmpletin, the fllwing steps need t be taken: A certified cpy f the deceased s death certificate shuld be btained as prf f death. In Equity the share f the deceased will devlve nt the deceased s estate. At law, the interest will have been held under a jint tenancy and s the survivr will nw be the sle legal wner. Prvided that the survivr appints a secnd trustee prir t cmpletin, the nging trust f land will be verreached. The effect f this is that the trust is remved frm the land and attaches t the prceeds f sale, enabling the buyers t acquire the prperty free f the trust. It might als be pssible t btain an expedited grant f prbate and transfer the deceased s beneficial share t the survivr (if the survivr is the beneficiary under the deceased s will r intestacy). The survivr culd then sell in her wn right as sle wner. Given the tight timescale suggested n the facts f the questin, this was nt a likely pssibility. (b) There are a number f steps that need t be taken fllwing cmpletin: Payment f SDLT. This must be paid within 30 days f cmpletin. A cpy f Frm SDLT1 (tgether with the apprpriate fee fr the SDLT, which, given that the purchase price was ver 250,000, wuld be calculated at the rate f 3%) shuld be sent t HMRC. HMRC will send a Frm SDLT5 by way f prf f payment. Failure t pay SDLT n time can lead t interest, fines and the dispsitin cannt be registered at Land Registry. First Registratin. The sale will trigger first registratin. Applicatin t register the dispsitin will need t be made within tw mnths f cmpletin. Failure t d s will mean that the legal title will revert back t the sellers. Page 2 f 5
In rder t register the dispsitin, the fllwing need t be sent t Land Registry: Fee. FR1. Dcument list (Frm DL). SDLT 5 DI TR1 (r cnveyance) Searches, cpies f the cntracts and/r enquiries f the seller. Evidence f title cmprising: 1976 Cnveyance as gd rt f title. 1956 Cnveyance t disclse details f the restrictive cvenants (see Questin 1) and because this cnveyance cntains a plan which mre particularly delineates the extent f the prperty being sld. As the gd rt f title was executed pursuant t a pwer f attrney, a certified cpy shuld be prvided as evidence f the attrney s authrity. Central Land Charges Department Search. Credit was given fr any ther valid pints. QUESTION 3 (a) The facts indicated that the prperty in questin has the benefit f the NHCB Buildmark scheme, the cver being granted in 2010. In terms f cver, in the first tw years, the develper is respnsible fr rectifying structural defects. In the event f default, the NHBC will step in and carry ut any necessary wrks. During the next 8 years, the NHBC prvides an insurance-style guarantee t rectify specified structural defects. In summary, the prperty in questins benefits frm a year f the initial 2 years prtectin fllwed by the secnd (less extensive) 8 year f prtectin. (b) In terms f searches and enquiries, the facts indicate the fllwing shuld be undertaken: Lcal Search (LLC1 and Cn 29R and Cn 29O) t reveal general infrmatin abut the prperty such as whether Byker Hill Terrace is an adpted rad. An Envirnmental Search t reveal whether the River Dee is liable t flding and because the prperty is near t a petrl statin in case there are issues relating t cntaminatin frm it. Finally, a Cal Mining search shuld be undertaken as the fficial cpies indicate the presence f mining (because there is a reservatin f mines and minerals in the Prperty Register). The result wuld give an indicatin cncerning the prximity f any mining activities and whether any claims in respect f subsidence damage have been made. Credit was als given fr: (c) Chancel check/reprt, British Waterway/Rivers search, Water and drainage search, and Fld check at HMLR. In rder t carry ut the buyers plan t carry ut a sub-divisin f the prperty they wish t acquire and als stp up the right f way t the East Page 3 f 5
f the prperty in rder t prvide private car parking fr the prspective tenants, the fllwing issues shuld have been addressed: First, planning permissin will be needed fr a material change f use frm a single private dwelling huse int flats. It is unlikely that the prpsal will materially affect the external appearance f the prperty and s planning permissin is unlikely t be needed fr this aspect f the buyers prpsals. Secndly, althugh the cvenants affecting the title allw residential use (and s there is n issue in terms f cmpliance as regards cvenants), there is an easement t allw the wner f a neighburing prperty t use the alleyway t the East f the prperty. It will therefre nt be pssible t blck up this accessway as prpsed. Instead, it wuld be necessary t apprach the wner f the dminant tenement fr a variatin/waiver. QUESTION 4 (a) As prpsed, the purchase price is currently 253,000 and s attracts SDLT at 3%. Hwever, the seller s replies t enquiries indicate that 3,000 f this relates t chattels. The value f these items has been independently verified as crrect. If this is the case, it wuld be pssible t apprtin the 3,000 fr chattels t take the price fr the prperty dwn t 250,000 which will attract SDLT at the lwer rate f 1%, thus saving the buyers a cnsiderable sum. (b) In rder t btain the mrtgage advance, it will be necessary t send a Certificate f Title t lender. This shuld cnfirm (amngst ther things) that all the usual and necessary searches have been undertaken, that the prperty has a gd and marketable title and that the advance will nly be released fr the purchase f the prperty. Finally, it shuld cnfirm that there are sufficient funds t perfect the lender s security. In terms f frmalities, the mrtgage needs t be created by deed. In rder t cmply with s1 Law f Prperty (Miscellaneus Prvisins) Act 1989 (and ensure that the relevant frmalities have been cmplied with), the mrtgage must state that is a deed, be signed by the parties and their signatures witnessed. In additin t cmpliance with frmalities, in rder t take effect at law, the mrtgage must be registered at Land Registry within the pririty perid f the pre-cmpletin search at Land Registry that shuld be carried ut n the buyers and the lender s behalf. Credit was als given fr suggesting bankruptcy searches against the brrwers t prtect the lender s interest, ensuring the existing charge is discharged by receiving undertakings frm the seller s slicitrs, and btaining an OS1 in the name f the lender and making the applicatin t register the transfer and charge within the pririty perid. (c) The TR1 is made up f 12 bxes which, in rder t cmply with the instructins that have been received, shuld be cmpleted as fllws: Bxes 1 & 2: The title number and address f the prperty. Bx 4: The name f the transferr. Bxes 5 & 6: The name f the transferees and their address (which was given in the Case Study Materials). Page 4 f 5
Bx 8: The cnsideratin fr the prperty (nt chattels), s the relevant sum (see Questin 4(a) abve) shuld be 250,000 and stated in bth figures and wrds. Bx 9: The title guarantee that has been agreed between the parties, which is indicated in the facts t be full. Bx 10: The instructins indicate that the buyers are t hld as tenants in cmmn as t 55% fr ne f the business partners and 45% fr the ther. Bx 11: Credit given fr stating there shuld be an indemnity cvenant in respect f Entry 1 f the Charges Register, even thugh the wner did nt give an indemnity cvenant when she purchased the prperty. Bx 12: The TR1 shuld have been executed by the seller and by bth buyers (because f the indemnity cvenant abve). Page 5 f 5