Real Estate Notes
, DRAFTING EXEMPLARS
FOR SELLER
To be made by the mortgagee or seller’s solicitors:
UNDERTAKING “In consideration of your today completing the purchase of [PROPERTY], we hereby undertake
TO RELEASE forthwith to pay over to [BANK] the monies required to redeem the mortgage dated [DATE] at
MORTGAGE entry [X] of charges register on the title number [NUMBER] and to forward Form DS1 to the
lender for execution and to forward the executed form to you immediately upon receipt, and at
any rate within two working days”
APPOINTING A To enable a disposal by a single surviving trustee
SECOND “[SELLER] appoints [NEW TRUSTEE] to act as a trustee in the sale of the Property under powers
TRUSTEE appointed in s36(1) Trustee Act 1925, who will enter into the transfer. [SELLER] gives full title
guarantee and [TRUSTEE] gives [full or more likely no] title guarantee in the transfer”
INSURING “The transferor covenants to, prior to completion and at its own expense, arrange a restrictive
AGAINST A covenant indemnity insurance policy for an insured sum of at least [VALUE OF PROPERTY] in
RESTRICTIVE respect of the covenants in the conveyance dated [DATE] and the restrictive covenant in the
COVENANT conveyance dated [DATE] referred to in entries [X] of the charges register”
FOR BUYER
In Form TR1 (box 11)
INDEMNITY “The transferee covenants with transferor that it will observe and perform the covenants
COVENANT referred to in entry [X] of the charges register of the title number [NUMBER] as at [TODAY’S
DATE] and to indemnify the transferors against any liability for their future breach or non-
observance”
FOR TENANT
“On receipt of a valid invoice, and in all circumstances, we undertake to pay your firm’s
UNDERTAKING reasonable legal costs incurred by your client in relation to the proposed alterations to the
FOR COSTS FOR Property, subject to a maximum of [£500] plus VAT, or in proportion to works done, if works are
A LICENSE TO not completed. This is provided that your client does not unreasonably revoke or refuse to give
ALTER such license. ”
1
, CONDUCT, PRELIMINARY, PLANNING
PERMISSION
MONEY LAUNDERING REGULATIONS 2007
Requires due diligence to be carried out.
Verifying client identity
Verifying any beneficiary’s identity
GENERAL RULE Ascertain intended nature of business relationship
It is for the nominated officer to decide whether an external report to SOCA should be made
TO CLIENT Should not inform a client that you have disclosed concerns to the firm's nominated
officer as to do so may prejudice an investigation (and could result in committing the
offence of 'tipping off' under s.333 of The Proceeds of Crime Act 2002)
CONDUCT The 2002 Act makes it clear that a disclosure (for example to the firm's nominated officer)
will not breach a solicitor's duty under Rule 6.3 of the Code
8ui
CONDUCT ACTING FOR SELLER & BUYER
Principle 7: separate duties to act in the best interest of each client
RULE 6.2(a): cannot act where there is a client conflict or a significant risk of a client
GENERAL RULE conflict
Apply to the facts; there is a conflict here because the buyer will want the lowest
price for the property and the seller will want to get the highest price for it
There are exceptions under Rule 6.2(b) – (i), (ii), (iii)
WHETHER CONFLICT Entirety of Rule 6.1 and 6.2
OR SIGNIFICANT RISK
OF ONE
SUBSTANTIALLY
COMMON INTEREST Rule 6.2(a)
Rule 6.2(b) with exceptions (i), (ii), (iii)
Always apply it to the facts & consider whether a conflict could arise in the transaction
Decision is ultimately the solicitor’s to make
CONCLUDE Consider age of the seller/buyer, bargaining power, mental capacity, history of purchases,
undue influence
Not many firms will act for both in commercial transactions
NOTE:
Where two or more Principles come into conflict, the Introduction to the SRA Code of Conduct states that
the one that takes precedence is the one which best serves the public interest in the circumstances.
CONDUCT ACTING FOR BORROWER & LENDER
A duty is owed to both clients independently (Mortgage Express), but the solicitor may act
GENERAL RULE for both the borrower and lender unless there is a conflict of interest or a significant risk of
one arising
WHETHER CONFLICT Rule 6.2(a) states that generally there will be conflict where:
OF SIGNIFICANT RISK The terms of the mortgage are negotiable
OF ONE The buyer wants a cheap and flexible mortgage whereas the lender wants
profitability and good security
Rule 6.2(b) - this is applicable because both the buyer and the lender want the buyer to
obtain good title to the property and ensure that there are no problems that could decrease
its value
2
, If the exception is established, then put in safeguards:
SUBSTANTIALLY i) Explain relevant issues to client
COMMON INTEREST ii) Have a reasonable belief they understand the issues
iii) Both lender and borrower give informed, written consent to you acting
iv) Satisfied that the benefits of you acting for both outweigh the risks; and that
v) It is reasonable for you to act in all the circumstances
O6.2(b) with the exception of (i), (ii), (iii) is never relevant (parties are not competing)
COMMERCIAL PROPERTY RESIDENTIAL PROPERTY
Mortgages will usually be negotiated, so It will be fine if it is on the standard
separate representation is required mortgage terms: (
and advisable Provided in normal course of lender’s
CONCLUDE A solicitor may do title investigation for activities
both parties and then cease to act A significant part of those activities
is lending; and
Material terms are not negotiated by
the parties
Immediately decline to act for both
WHERE THERE IS A OR
CONFLICT
Continue to act for one with the other’s consent
Do not reveal the nature of the conflict without consent (Halifax Mortgages v Stepsky)
CONDUCT UNREPRESENTED PARTY
Must act with integrity (P2) and maintain public trust (P6) - using position to take unfair
advantage of third parties in a sale (e.g. an unrepresented seller) will fail to meet these
WHERE THERE IS AN principles and will tend to demonstrate that a practitioner has failed to achieve Outcome
UNREPRESENTED (RULE 1.2)
PARTY An unqualified seller will commit an offence under The Legal Services Act 2007 if they draft
a sale contract themselves.
CONTRACT RACE
3
, DRAFTING EXEMPLARS
FOR SELLER
To be made by the mortgagee or seller’s solicitors:
UNDERTAKING “In consideration of your today completing the purchase of [PROPERTY], we hereby undertake
TO RELEASE forthwith to pay over to [BANK] the monies required to redeem the mortgage dated [DATE] at
MORTGAGE entry [X] of charges register on the title number [NUMBER] and to forward Form DS1 to the
lender for execution and to forward the executed form to you immediately upon receipt, and at
any rate within two working days”
APPOINTING A To enable a disposal by a single surviving trustee
SECOND “[SELLER] appoints [NEW TRUSTEE] to act as a trustee in the sale of the Property under powers
TRUSTEE appointed in s36(1) Trustee Act 1925, who will enter into the transfer. [SELLER] gives full title
guarantee and [TRUSTEE] gives [full or more likely no] title guarantee in the transfer”
INSURING “The transferor covenants to, prior to completion and at its own expense, arrange a restrictive
AGAINST A covenant indemnity insurance policy for an insured sum of at least [VALUE OF PROPERTY] in
RESTRICTIVE respect of the covenants in the conveyance dated [DATE] and the restrictive covenant in the
COVENANT conveyance dated [DATE] referred to in entries [X] of the charges register”
FOR BUYER
In Form TR1 (box 11)
INDEMNITY “The transferee covenants with transferor that it will observe and perform the covenants
COVENANT referred to in entry [X] of the charges register of the title number [NUMBER] as at [TODAY’S
DATE] and to indemnify the transferors against any liability for their future breach or non-
observance”
FOR TENANT
“On receipt of a valid invoice, and in all circumstances, we undertake to pay your firm’s
UNDERTAKING reasonable legal costs incurred by your client in relation to the proposed alterations to the
FOR COSTS FOR Property, subject to a maximum of [£500] plus VAT, or in proportion to works done, if works are
A LICENSE TO not completed. This is provided that your client does not unreasonably revoke or refuse to give
ALTER such license. ”
1
, CONDUCT, PRELIMINARY, PLANNING
PERMISSION
MONEY LAUNDERING REGULATIONS 2007
Requires due diligence to be carried out.
Verifying client identity
Verifying any beneficiary’s identity
GENERAL RULE Ascertain intended nature of business relationship
It is for the nominated officer to decide whether an external report to SOCA should be made
TO CLIENT Should not inform a client that you have disclosed concerns to the firm's nominated
officer as to do so may prejudice an investigation (and could result in committing the
offence of 'tipping off' under s.333 of The Proceeds of Crime Act 2002)
CONDUCT The 2002 Act makes it clear that a disclosure (for example to the firm's nominated officer)
will not breach a solicitor's duty under Rule 6.3 of the Code
8ui
CONDUCT ACTING FOR SELLER & BUYER
Principle 7: separate duties to act in the best interest of each client
RULE 6.2(a): cannot act where there is a client conflict or a significant risk of a client
GENERAL RULE conflict
Apply to the facts; there is a conflict here because the buyer will want the lowest
price for the property and the seller will want to get the highest price for it
There are exceptions under Rule 6.2(b) – (i), (ii), (iii)
WHETHER CONFLICT Entirety of Rule 6.1 and 6.2
OR SIGNIFICANT RISK
OF ONE
SUBSTANTIALLY
COMMON INTEREST Rule 6.2(a)
Rule 6.2(b) with exceptions (i), (ii), (iii)
Always apply it to the facts & consider whether a conflict could arise in the transaction
Decision is ultimately the solicitor’s to make
CONCLUDE Consider age of the seller/buyer, bargaining power, mental capacity, history of purchases,
undue influence
Not many firms will act for both in commercial transactions
NOTE:
Where two or more Principles come into conflict, the Introduction to the SRA Code of Conduct states that
the one that takes precedence is the one which best serves the public interest in the circumstances.
CONDUCT ACTING FOR BORROWER & LENDER
A duty is owed to both clients independently (Mortgage Express), but the solicitor may act
GENERAL RULE for both the borrower and lender unless there is a conflict of interest or a significant risk of
one arising
WHETHER CONFLICT Rule 6.2(a) states that generally there will be conflict where:
OF SIGNIFICANT RISK The terms of the mortgage are negotiable
OF ONE The buyer wants a cheap and flexible mortgage whereas the lender wants
profitability and good security
Rule 6.2(b) - this is applicable because both the buyer and the lender want the buyer to
obtain good title to the property and ensure that there are no problems that could decrease
its value
2
, If the exception is established, then put in safeguards:
SUBSTANTIALLY i) Explain relevant issues to client
COMMON INTEREST ii) Have a reasonable belief they understand the issues
iii) Both lender and borrower give informed, written consent to you acting
iv) Satisfied that the benefits of you acting for both outweigh the risks; and that
v) It is reasonable for you to act in all the circumstances
O6.2(b) with the exception of (i), (ii), (iii) is never relevant (parties are not competing)
COMMERCIAL PROPERTY RESIDENTIAL PROPERTY
Mortgages will usually be negotiated, so It will be fine if it is on the standard
separate representation is required mortgage terms: (
and advisable Provided in normal course of lender’s
CONCLUDE A solicitor may do title investigation for activities
both parties and then cease to act A significant part of those activities
is lending; and
Material terms are not negotiated by
the parties
Immediately decline to act for both
WHERE THERE IS A OR
CONFLICT
Continue to act for one with the other’s consent
Do not reveal the nature of the conflict without consent (Halifax Mortgages v Stepsky)
CONDUCT UNREPRESENTED PARTY
Must act with integrity (P2) and maintain public trust (P6) - using position to take unfair
advantage of third parties in a sale (e.g. an unrepresented seller) will fail to meet these
WHERE THERE IS AN principles and will tend to demonstrate that a practitioner has failed to achieve Outcome
UNREPRESENTED (RULE 1.2)
PARTY An unqualified seller will commit an offence under The Legal Services Act 2007 if they draft
a sale contract themselves.
CONTRACT RACE
3
