Chapter 1 - The Key Elements and Structure of a Freehold Property
Transaction
17 September 2025
Key elements and structure of freehold property transactions
• Two main stages: exchange of contracts, Completion
• Ideal for exchange of contracts to be made as soon as offer is made to avoid seller pulling out just
before the contract exchange
• NB - 'Caveat emptor’ ‘let the buyer beware’. The onus is on the buyer to discover
as much about the property as possible before exchanging contracts and committing to
the purchase.
Pre-Contract Stage
- Buyer needs to check documents from seller (pre-contract package) to ensure they are satisfied
with the title, ie no restrictive covenants
- Requisition: Contract may include a provision prohibiting the buyer from raising further queries on
the title, known as ‘requisitions’, after exchange of contract stage
- Buyer needs to enquire about boundaries, disputes, previous work-done, NB seller not obliged to
answer but likely to comply so sale goes ahead
- Pre-contract searches will be carried out, dependent on what is most relevant to the buyer’s
needs as they cost
- Buyer can sue for misrep if appropriate
- Approve draft contract
- On exchange of contracts the buyer will usually pay a deposit, typically 10% of the purchase price
Pre-Completion Stage
- Ensure documents and money are ready for completion date
- Transfer deed ready and executed for completion date
- Ensure no issues with registering buyers title at Land Registry
Money given in exchange for keys.
Post-Completion Stage
- Seller’s solicitor must ensure any mortgage on propery is paid off and removed from title
(undertaking given to allow this)
- buyer’s solicitor must ensure that land tax is paid on the transfer seller has to register new
owner/mortgage over the land
Law-Soc Conveyancing Protocol
- only concerns residential conveyancing
- used to standardise the process
Those who want to be members of The Law Society’s Conveyancing Quality Scheme (‘CQS’) are
required to comply with the Protocol, a Client Service Charter and mandatory training and
enforcement procedures
Professional conduct Issues
Acting for Buyer & Seller
- 6.2 states that, subject to certain exceptions, a solicitor cannot act for both parties if there is a conflict of
interest or a significant risk of conflict
- 6.2(a) (common interest) does not apply to a property purchase.
- 6.2(b) (competing interest) may apply to two buyers competing for same property
Property Practice Page 1
, Acting for Joint Buyers
- It is usually acceptable to act for joint buyers, provided that the solicitor can comply with paragraph 6.2 in
The Code of Conduct.
- It may be necessary to advise residential buyers separately about how they want to hold the equitable
interest in the property, particularly if
- they are not married or in a civil partnership
Acting for Borrower & Lender
- Possible to act for both unless risk of conflict is high:
o the mortgage is not a standard mortgage if property to be used as the borrower’s private residence
o the mortgage is a standard mortgage but you do not use the approved certificate of title
- in residential transactions, lender will often instruct borrower’s solicitor to act for them both
- 6.2(a) condition need to be met: informed written consent, safeguards for confidentiality, reasonable to
act
Large Commercial Transactions
- n large commercial property deals, lender and borrower usually have separate solicitors.
- This is because mortgage documents are negotiated, not standard.
- Lender’s solicitor often asks borrower’s solicitor to handle title investigation, searches, and enquiries.
- This avoids duplicated costs and delays.
Both parties share a common interest in ensuring the borrower gets good title and the property’s value is
protected.
Acting for Joint Borrowers
- Possible so long as no conflict, NB Married couples, civil partners, parent and child etc
- If the borrower mortgages the house for a business loan and fails to pay, house gets repossessed
- Spouse may claim (and has to prove) undue influence to set aside the mortgage
- Lender is put on enquiry as the transaction is not in the spouse’s advantage
- Lender can proceed if solicitor properly advises spouse and they are fully informed of risks
- if it is ‘glaringly obvious’ that the spouse is being ‘grievously wronged’, the solicitor should decline to
act
Lender, with borrower’s consent should supply info to solicitor:
(a) The purpose for which the loan is being made available;
(b) the current amount of the borrower’s indebtedness;
(c) the amount of the current overdraft facility;
(d) the amount and terms of the new loan; and
(e) a copy of any written application made by the borrower for the loan.
The solicitor should:
(I) explain to the spouse the purpose for which the solicitor has become involved;
(II) (ii) explain that the lender will rely on the solicitor’s involvement to counter any suggestion That the
spouse has been unduly influenced or has not fully understood the nature of the transaction; and
(III) (iii) obtain confirmation from the spouse that they wish the solicitor to act for them in the transaction,
and to advise them on the legal and practical implications of the transact
Contract Races
- Legitimate technique where seller client send pre-contract packages to several buyers who then race to
fulfil requirements to win the contract, no issue so long as buyers are informed of race
- Issue arises when seller client does not want buyers to know
- 1.4 – cannot mislead buys, solicitor must immediately inform buyers of sellers intention
If client refuses to consent to disclosure, solicitor must stop acting in the matter as they cannot breach
client confidentiality.
Property Practice Page 2
, Undertakings
- 1.3 deals with undertakings and says that solicitors should perform all undertakings, and do so within an
agreed timescale.
- Undertaking should not rely on a third party, they should instead be made in a way that ensures no
liability if for instance, payment will only be made if X condition is met.
Sources of finance for a property transaction
- solicitor is obliged to provide the client with the best possible information
about the likely overall cost of their matter, at the beginning and at appropriate points
throughout the transaction.
- Info on land tax, land registry fees and search fees.
- Letter of engagement sent from solicitor to client setting out the costings at the beginning of the
transaction
Financing Options
- Bank loan, insurance companies, financing houses
- Trust funds and relatives: parties must receive independent legal advise for such matters
Mortgages
A lender's top concern is securing the loan against a valuable asset, principally the property itself, typically
a mortgage, created by lender/lender + buyer solicitor)
Two main types:
- Repayment mortgages - monthly fees of original amount + interest
- Interest-only mortgages - monthly interest payments, but whole amount borrowed will be due at the
end of the mortgage term
- Other - Sharia compliant schemes with no interest, lender buys the property and sells it back at a
higher rate, the difference is what is paid off over the years.
Restrictions on Solicitors Providing Financial Advice
- Must be authorised under FSMA (2000) to carry out regulated work in relation to regulated mortgage
contracts
- Regulated mortgage contract includes one where the borrower is an individual, the lender takes a
first legal charge over property in the UK and at least 40% of the property is intended for occupation
by the borrower or a member of their immediate family
- Regulated activity includes arranging or advising on a regulated mortgage contract
- If the firm is not FCA authorised the solicitor can still arrange or advise on a regulated mortgage
contract by relying on the s 327 exemption for professional firms
- Solicitors can only deal with regulated mortgages if they follow SRA Financial Services (Scope)
Rules and SRA Financial Services (Conduct of Business) Rules.
- They cannot recommend a mortgage themselves.
- They can only endorse advice already given by a properly authorised financial adviser.
Property Taxation
- Property transaction tax depends on whether client buyer/seller whether property is
residential/commercial.
- Buyer pays land tax upon purchase, seller may not need to pay capital gains tax if property was their main
residence
Property Practice Page 3
, residence
- Buyer of commercial property may have to pay VAT
Stamp Duty Land Tax (‘SDLT’) in England and Land Transaction Tax (‘LTT’) in Wales
SDLT
Tax on property transactions
Paid to HMRC
○ Basis of charge for residential freeholds
First time buyers of residential freeholds can claim relief if property does not
exceed 500,000, no SDLT on first 300,000, 5% thereafter
- save SDLT by apportioning part of the purchase price to the chattels. However, any
apportionment must be a fair value or a fraud on HMRC is being committed
- Higher SDLT if second time/non-UK resident buyer
○ Basis of charge for non-residential/mixed-use freeholds
- If VAT is charged, SDLT Is payable on the VAT-inclusive sum
LTT
- No relief for first time buyers
- Higher rates is second time/non-UK resident buyers
- LTT payable on VAT inclusive sum
CGT & Private Residence Relief
Basis of charge
• CGT applies to chargeable assets – incl. freehold, leasehold, and co-owners’ interests.
• Covers disposals such as sales, gifts, and incidental land transactions (e.g.
easement/covenant payments).
• Calculation of gain = sale proceeds – (purchase price/base value + allowable
acquisition/improvement costs).
• Annual exemption reduces taxable gain.
• Rate of tax is set by the Government.
Private Residence Relief
- Seller must be dwelling there as main residence, trustees can apply if beneficiary
occupied property as principle residence
- Gains on garden excess over 0.5 hectares unless proved necessary for reasonable
enjoyment of land to HMRC
- Relief lost if property used exclusory for business.
- Questions you need to ask seller client:
Lived in her house continuously since purchase?
owned and/or lived in more than one house during this time?
garden more than 0.5 hectares?
used any part of the house for a business use?
VAT
Solicitor needs to know the VAT status of transaction in order to advise client on whether VAT
must be charged
(i) Most real estate transactions are exempt from VAT.
To charge and collect the VAT, the supplier must be a ‘taxable person’. A taxable person
is a
person whose turnover over the past 12 months has exceeded the registration limit,
currently
£85,000
Property Practice Page 4
Transaction
17 September 2025
Key elements and structure of freehold property transactions
• Two main stages: exchange of contracts, Completion
• Ideal for exchange of contracts to be made as soon as offer is made to avoid seller pulling out just
before the contract exchange
• NB - 'Caveat emptor’ ‘let the buyer beware’. The onus is on the buyer to discover
as much about the property as possible before exchanging contracts and committing to
the purchase.
Pre-Contract Stage
- Buyer needs to check documents from seller (pre-contract package) to ensure they are satisfied
with the title, ie no restrictive covenants
- Requisition: Contract may include a provision prohibiting the buyer from raising further queries on
the title, known as ‘requisitions’, after exchange of contract stage
- Buyer needs to enquire about boundaries, disputes, previous work-done, NB seller not obliged to
answer but likely to comply so sale goes ahead
- Pre-contract searches will be carried out, dependent on what is most relevant to the buyer’s
needs as they cost
- Buyer can sue for misrep if appropriate
- Approve draft contract
- On exchange of contracts the buyer will usually pay a deposit, typically 10% of the purchase price
Pre-Completion Stage
- Ensure documents and money are ready for completion date
- Transfer deed ready and executed for completion date
- Ensure no issues with registering buyers title at Land Registry
Money given in exchange for keys.
Post-Completion Stage
- Seller’s solicitor must ensure any mortgage on propery is paid off and removed from title
(undertaking given to allow this)
- buyer’s solicitor must ensure that land tax is paid on the transfer seller has to register new
owner/mortgage over the land
Law-Soc Conveyancing Protocol
- only concerns residential conveyancing
- used to standardise the process
Those who want to be members of The Law Society’s Conveyancing Quality Scheme (‘CQS’) are
required to comply with the Protocol, a Client Service Charter and mandatory training and
enforcement procedures
Professional conduct Issues
Acting for Buyer & Seller
- 6.2 states that, subject to certain exceptions, a solicitor cannot act for both parties if there is a conflict of
interest or a significant risk of conflict
- 6.2(a) (common interest) does not apply to a property purchase.
- 6.2(b) (competing interest) may apply to two buyers competing for same property
Property Practice Page 1
, Acting for Joint Buyers
- It is usually acceptable to act for joint buyers, provided that the solicitor can comply with paragraph 6.2 in
The Code of Conduct.
- It may be necessary to advise residential buyers separately about how they want to hold the equitable
interest in the property, particularly if
- they are not married or in a civil partnership
Acting for Borrower & Lender
- Possible to act for both unless risk of conflict is high:
o the mortgage is not a standard mortgage if property to be used as the borrower’s private residence
o the mortgage is a standard mortgage but you do not use the approved certificate of title
- in residential transactions, lender will often instruct borrower’s solicitor to act for them both
- 6.2(a) condition need to be met: informed written consent, safeguards for confidentiality, reasonable to
act
Large Commercial Transactions
- n large commercial property deals, lender and borrower usually have separate solicitors.
- This is because mortgage documents are negotiated, not standard.
- Lender’s solicitor often asks borrower’s solicitor to handle title investigation, searches, and enquiries.
- This avoids duplicated costs and delays.
Both parties share a common interest in ensuring the borrower gets good title and the property’s value is
protected.
Acting for Joint Borrowers
- Possible so long as no conflict, NB Married couples, civil partners, parent and child etc
- If the borrower mortgages the house for a business loan and fails to pay, house gets repossessed
- Spouse may claim (and has to prove) undue influence to set aside the mortgage
- Lender is put on enquiry as the transaction is not in the spouse’s advantage
- Lender can proceed if solicitor properly advises spouse and they are fully informed of risks
- if it is ‘glaringly obvious’ that the spouse is being ‘grievously wronged’, the solicitor should decline to
act
Lender, with borrower’s consent should supply info to solicitor:
(a) The purpose for which the loan is being made available;
(b) the current amount of the borrower’s indebtedness;
(c) the amount of the current overdraft facility;
(d) the amount and terms of the new loan; and
(e) a copy of any written application made by the borrower for the loan.
The solicitor should:
(I) explain to the spouse the purpose for which the solicitor has become involved;
(II) (ii) explain that the lender will rely on the solicitor’s involvement to counter any suggestion That the
spouse has been unduly influenced or has not fully understood the nature of the transaction; and
(III) (iii) obtain confirmation from the spouse that they wish the solicitor to act for them in the transaction,
and to advise them on the legal and practical implications of the transact
Contract Races
- Legitimate technique where seller client send pre-contract packages to several buyers who then race to
fulfil requirements to win the contract, no issue so long as buyers are informed of race
- Issue arises when seller client does not want buyers to know
- 1.4 – cannot mislead buys, solicitor must immediately inform buyers of sellers intention
If client refuses to consent to disclosure, solicitor must stop acting in the matter as they cannot breach
client confidentiality.
Property Practice Page 2
, Undertakings
- 1.3 deals with undertakings and says that solicitors should perform all undertakings, and do so within an
agreed timescale.
- Undertaking should not rely on a third party, they should instead be made in a way that ensures no
liability if for instance, payment will only be made if X condition is met.
Sources of finance for a property transaction
- solicitor is obliged to provide the client with the best possible information
about the likely overall cost of their matter, at the beginning and at appropriate points
throughout the transaction.
- Info on land tax, land registry fees and search fees.
- Letter of engagement sent from solicitor to client setting out the costings at the beginning of the
transaction
Financing Options
- Bank loan, insurance companies, financing houses
- Trust funds and relatives: parties must receive independent legal advise for such matters
Mortgages
A lender's top concern is securing the loan against a valuable asset, principally the property itself, typically
a mortgage, created by lender/lender + buyer solicitor)
Two main types:
- Repayment mortgages - monthly fees of original amount + interest
- Interest-only mortgages - monthly interest payments, but whole amount borrowed will be due at the
end of the mortgage term
- Other - Sharia compliant schemes with no interest, lender buys the property and sells it back at a
higher rate, the difference is what is paid off over the years.
Restrictions on Solicitors Providing Financial Advice
- Must be authorised under FSMA (2000) to carry out regulated work in relation to regulated mortgage
contracts
- Regulated mortgage contract includes one where the borrower is an individual, the lender takes a
first legal charge over property in the UK and at least 40% of the property is intended for occupation
by the borrower or a member of their immediate family
- Regulated activity includes arranging or advising on a regulated mortgage contract
- If the firm is not FCA authorised the solicitor can still arrange or advise on a regulated mortgage
contract by relying on the s 327 exemption for professional firms
- Solicitors can only deal with regulated mortgages if they follow SRA Financial Services (Scope)
Rules and SRA Financial Services (Conduct of Business) Rules.
- They cannot recommend a mortgage themselves.
- They can only endorse advice already given by a properly authorised financial adviser.
Property Taxation
- Property transaction tax depends on whether client buyer/seller whether property is
residential/commercial.
- Buyer pays land tax upon purchase, seller may not need to pay capital gains tax if property was their main
residence
Property Practice Page 3
, residence
- Buyer of commercial property may have to pay VAT
Stamp Duty Land Tax (‘SDLT’) in England and Land Transaction Tax (‘LTT’) in Wales
SDLT
Tax on property transactions
Paid to HMRC
○ Basis of charge for residential freeholds
First time buyers of residential freeholds can claim relief if property does not
exceed 500,000, no SDLT on first 300,000, 5% thereafter
- save SDLT by apportioning part of the purchase price to the chattels. However, any
apportionment must be a fair value or a fraud on HMRC is being committed
- Higher SDLT if second time/non-UK resident buyer
○ Basis of charge for non-residential/mixed-use freeholds
- If VAT is charged, SDLT Is payable on the VAT-inclusive sum
LTT
- No relief for first time buyers
- Higher rates is second time/non-UK resident buyers
- LTT payable on VAT inclusive sum
CGT & Private Residence Relief
Basis of charge
• CGT applies to chargeable assets – incl. freehold, leasehold, and co-owners’ interests.
• Covers disposals such as sales, gifts, and incidental land transactions (e.g.
easement/covenant payments).
• Calculation of gain = sale proceeds – (purchase price/base value + allowable
acquisition/improvement costs).
• Annual exemption reduces taxable gain.
• Rate of tax is set by the Government.
Private Residence Relief
- Seller must be dwelling there as main residence, trustees can apply if beneficiary
occupied property as principle residence
- Gains on garden excess over 0.5 hectares unless proved necessary for reasonable
enjoyment of land to HMRC
- Relief lost if property used exclusory for business.
- Questions you need to ask seller client:
Lived in her house continuously since purchase?
owned and/or lived in more than one house during this time?
garden more than 0.5 hectares?
used any part of the house for a business use?
VAT
Solicitor needs to know the VAT status of transaction in order to advise client on whether VAT
must be charged
(i) Most real estate transactions are exempt from VAT.
To charge and collect the VAT, the supplier must be a ‘taxable person’. A taxable person
is a
person whose turnover over the past 12 months has exceeded the registration limit,
currently
£85,000
Property Practice Page 4
