PROPERTY PRACTICE NOTES
Unit 1: Due diligence 1
Chapter 1: The key elements and structure of a freehold property transaction
Introduction - Recognised procedure for buying, selling and leasing land and buildings in
England and Wales
- ‘Conveyancing’- process of transferring the ownership of a property
Key elements 1. Two Main Milestones:
and structure - Exchange of Contracts:
of freehold o Not compulsory but beneficial.
property o Fixes the completion date and gives time for final preparations.
transactions o Ensures parties are committed to the agreed terms.
o Allows fulfilment of any agreed conditions before completion.
o Can be done simultaneously with completion, or the transaction
can go straight to completion without an exchange.
- Completion:
o The final stage where the bulk of the purchase money is paid.
o Transfer deed is completed, officially transferring ownership to the
buyer.
2. Stages of the Transaction:
- Pre-Contract Stage:
o Before contracts are exchanged, both parties' solicitors carry out
tasks such as negotiations, title checks, and property surveys.
o Important because the parties are not legally bound to the
transaction until exchange.
- Pre-Completion Stage:
o After exchange, final preparations take place.
o Buyer makes arrangements for financing and ensures conditions of
the contract are fulfilled.
- Post-Completion Stage:
o Involves registration of the transfer and other administrative
formalities.
o The buyer formally becomes the registered owner.
3. Caveat Emptor (Buyer Beware):
- Principle means that the seller has no duty to disclose defects in the
property.
- The buyer must perform thorough searches, enquiries, and surveys before
exchanging contracts.
- Buyers are responsible for ensuring the property is free of defects unless
misrepresentation by the seller occurs.
4. Exchange Timing Considerations:
- While early exchange secures the transaction, buyers should avoid
committing too soon.
- Premature exchange without conducting proper searches or surveys may
expose buyers to risks such as undiscovered defects.
- The need to avoid “gazumping” (seller accepting a higher offer) is a key
,PROPERTY PRACTICE NOTES
reason to aim for a timely exchange but not before due diligence.
5. Buyer's Risks Without Exchange:
- Sellers can withdraw before exchange, leading to frustration and financial
loss for the buyer.
- No legal commitment exists between the parties until the exchange of
contracts takes place.
The pre-contract stage
- Solicitors take instructions from their clients (buyer and seller) at the
outset.
- Establish consensus between parties and identify any issues that might
cause delays or frustration later.
- Solicitors also focus on boundaries, access, disputes, outgoings, and prior
works on the property.
- While the seller is not obligated to answer enquiries, providing accurate
replies facilitates the sale. Incorrect responses can lead
to misrepresentation claims by the buyer.
- The buyer’s solicitor conducts searches with statutory, public, and private
bodies to gather important information.
- Cover various aspects like land registry checks, environmental factors,
planning permissions, etc.
- As most searches incur fees, the solicitor decides which are most
appropriate based on the property and client’s needs.
- Results of these searches may necessitate changes to the draft contract.
- Investigation of Title:
o Seller’s solicitor submits pre-contract package to the buyer’s
solicitor. This includes the draft contract and evidence of the
seller’s title.
o Buyer’s solicitor reviews the title carefully to ensure:
Seller has legal entitlement to sell the property.
No encumbrances (e.g., restrictive covenants) hinder the
buyer’s intended use of the property.
o The buyer’s solicitor must be fully satisfied with the title before
exchange since further queries (requisitions) are typically
prohibited after exchange.
- The buyer’s solicitor may request amendments to the draft
contract based on search results and title investigation.
- At exchange of contracts, the buyer usually pays a deposit, typically 10%
of the purchase price, though it can be negotiated.
- This deposit is typically held by the seller’s solicitor until completion.
- Caveat Emptor (Buyer Beware):
o The burden is on the buyer to investigate the property thoroughly
before exchange.
o Once contracts are exchanged, the buyer is generally bound by
the terms of the contract and can no longer raise new issues
,PROPERTY PRACTICE NOTES
related to the title.
The pre-completion stage
- Parties are legally bound to complete the transaction once contracts are
exchanged.
- The transfer deed, which transfers legal title to the buyer, is prepared and
executed before completion.
- Buyer’s solicitor conducts pre-completion searches to ensure the pre-
contract information remains accurate and there are no issues with Land
Registry registration.
- Completion Day:
o Buyer pays the balance of the purchase price.
o Seller hands over the keys to the property, finalizing the
transaction
The post-completion stage
- Seller’s solicitor ensures any mortgage on the property is paid off and
removed from the title.
- Buyer’s solicitor must ensure Stamp Duty Land Tax (England) or Land
Transaction Tax (Wales) is paid on the transfer.
- Registration:
- Buyer’s solicitor registers the buyer as the new property owner and any
new mortgage with the Land Registry.
The Law Society Conveyancing Protocol
- Standardises the residential conveyancing process with a clear set of
instructions for conveyancers.
- Issued in 2019, replacing earlier versions (original from 1990).
- Provides a procedural checklist for straightforward residential
transactions.
- Accompanied by standard documents, such as the Property Information
Form (TA06) for freehold properties.
- Firms involved in residential conveyancing must comply with the Protocol,
a Client Service Charter and mandatory training and enforcement
procedures to be part of the Conveyancing Quality Scheme (CQS).
- CQS membership is essential for firms wanting to be on mortgage lender
panels.
Professional - Solicitors must obtain clear instructions from clients at the outset to avoid
conduct issues delays, stress, and extra expenses during the transaction.
in a property - Key Questions:
transaction o Can we act for this client?
o Can we carry out the client’s instructions?
- Solicitors are governed by the Solicitors Regulation Authority (SRA) Code
of Conduct for Solicitors and Firms.
- Breaches of the Code may result in disciplinary actions and
potential negligence claims.
- SRA Principles:
o Includes acting with integrity and in the best interests of clients.
o These principles underpin the SRA Standards and Regulations.
, PROPERTY PRACTICE NOTES
Acting for seller and buyer
- Solicitors may be asked to act for both buyer and seller to
save costs and time.
- This carries a high risk of conflict of interest, particularly when issues arise
(e.g., price negotiations or problems from searches).
- SRA Code of Conduct – Paragraph 6.2:
o Solicitors cannot act for both parties if a conflict of interest exists
or there is a significant risk of one.
o Acting for both is especially risky when clients have unequal
bargaining power (e.g., developer vs. first-time buyer) or when
price negotiations are involved.
- Exceptions to Conflict Rules:
o Substantially common interest (paragraph 6.2(a)): Solicitors can
act for both parties if their interests align, but this exception does
not apply in property purchases due to differing interests.
o Competing for the same objective (paragraph 6.2(b)):
Theoretically applies when acting for two buyers competing for the
same property, but not in buyer-seller situations.
Acting for joint buyers
- Acting for joint buyers is generally acceptable, provided there is
compliance with paragraph 6.2 of the SRA Code of Conduct (no conflict of
interest).
- Solicitors may need to advise joint buyers separately on how they wish to
hold the equitable interest in the property, especially if they are not
married or in a civil partnership.
Acting for borrower and lender
- Acting for both borrower and lender in the same transaction is common,
provided there is no conflict of interest as per paragraph 6.2 of The Code
of Conduct.
- Conditions for Dual Representation:
o Informed written consent from both clients is required.
o Effective safeguards must be in place to protect client
confidentiality.
o The solicitor must determine that it is reasonable to act for both
clients.
- There may be a conflict between the duty of confidentiality to one client
and the duty of disclosure to the other, as highlighted in paragraph 6.3 of
The Code of Conduct.
- In large commercial transactions, lenders often have separate
solicitors due to the non-standard nature of mortgage documents.
Unit 1: Due diligence 1
Chapter 1: The key elements and structure of a freehold property transaction
Introduction - Recognised procedure for buying, selling and leasing land and buildings in
England and Wales
- ‘Conveyancing’- process of transferring the ownership of a property
Key elements 1. Two Main Milestones:
and structure - Exchange of Contracts:
of freehold o Not compulsory but beneficial.
property o Fixes the completion date and gives time for final preparations.
transactions o Ensures parties are committed to the agreed terms.
o Allows fulfilment of any agreed conditions before completion.
o Can be done simultaneously with completion, or the transaction
can go straight to completion without an exchange.
- Completion:
o The final stage where the bulk of the purchase money is paid.
o Transfer deed is completed, officially transferring ownership to the
buyer.
2. Stages of the Transaction:
- Pre-Contract Stage:
o Before contracts are exchanged, both parties' solicitors carry out
tasks such as negotiations, title checks, and property surveys.
o Important because the parties are not legally bound to the
transaction until exchange.
- Pre-Completion Stage:
o After exchange, final preparations take place.
o Buyer makes arrangements for financing and ensures conditions of
the contract are fulfilled.
- Post-Completion Stage:
o Involves registration of the transfer and other administrative
formalities.
o The buyer formally becomes the registered owner.
3. Caveat Emptor (Buyer Beware):
- Principle means that the seller has no duty to disclose defects in the
property.
- The buyer must perform thorough searches, enquiries, and surveys before
exchanging contracts.
- Buyers are responsible for ensuring the property is free of defects unless
misrepresentation by the seller occurs.
4. Exchange Timing Considerations:
- While early exchange secures the transaction, buyers should avoid
committing too soon.
- Premature exchange without conducting proper searches or surveys may
expose buyers to risks such as undiscovered defects.
- The need to avoid “gazumping” (seller accepting a higher offer) is a key
,PROPERTY PRACTICE NOTES
reason to aim for a timely exchange but not before due diligence.
5. Buyer's Risks Without Exchange:
- Sellers can withdraw before exchange, leading to frustration and financial
loss for the buyer.
- No legal commitment exists between the parties until the exchange of
contracts takes place.
The pre-contract stage
- Solicitors take instructions from their clients (buyer and seller) at the
outset.
- Establish consensus between parties and identify any issues that might
cause delays or frustration later.
- Solicitors also focus on boundaries, access, disputes, outgoings, and prior
works on the property.
- While the seller is not obligated to answer enquiries, providing accurate
replies facilitates the sale. Incorrect responses can lead
to misrepresentation claims by the buyer.
- The buyer’s solicitor conducts searches with statutory, public, and private
bodies to gather important information.
- Cover various aspects like land registry checks, environmental factors,
planning permissions, etc.
- As most searches incur fees, the solicitor decides which are most
appropriate based on the property and client’s needs.
- Results of these searches may necessitate changes to the draft contract.
- Investigation of Title:
o Seller’s solicitor submits pre-contract package to the buyer’s
solicitor. This includes the draft contract and evidence of the
seller’s title.
o Buyer’s solicitor reviews the title carefully to ensure:
Seller has legal entitlement to sell the property.
No encumbrances (e.g., restrictive covenants) hinder the
buyer’s intended use of the property.
o The buyer’s solicitor must be fully satisfied with the title before
exchange since further queries (requisitions) are typically
prohibited after exchange.
- The buyer’s solicitor may request amendments to the draft
contract based on search results and title investigation.
- At exchange of contracts, the buyer usually pays a deposit, typically 10%
of the purchase price, though it can be negotiated.
- This deposit is typically held by the seller’s solicitor until completion.
- Caveat Emptor (Buyer Beware):
o The burden is on the buyer to investigate the property thoroughly
before exchange.
o Once contracts are exchanged, the buyer is generally bound by
the terms of the contract and can no longer raise new issues
,PROPERTY PRACTICE NOTES
related to the title.
The pre-completion stage
- Parties are legally bound to complete the transaction once contracts are
exchanged.
- The transfer deed, which transfers legal title to the buyer, is prepared and
executed before completion.
- Buyer’s solicitor conducts pre-completion searches to ensure the pre-
contract information remains accurate and there are no issues with Land
Registry registration.
- Completion Day:
o Buyer pays the balance of the purchase price.
o Seller hands over the keys to the property, finalizing the
transaction
The post-completion stage
- Seller’s solicitor ensures any mortgage on the property is paid off and
removed from the title.
- Buyer’s solicitor must ensure Stamp Duty Land Tax (England) or Land
Transaction Tax (Wales) is paid on the transfer.
- Registration:
- Buyer’s solicitor registers the buyer as the new property owner and any
new mortgage with the Land Registry.
The Law Society Conveyancing Protocol
- Standardises the residential conveyancing process with a clear set of
instructions for conveyancers.
- Issued in 2019, replacing earlier versions (original from 1990).
- Provides a procedural checklist for straightforward residential
transactions.
- Accompanied by standard documents, such as the Property Information
Form (TA06) for freehold properties.
- Firms involved in residential conveyancing must comply with the Protocol,
a Client Service Charter and mandatory training and enforcement
procedures to be part of the Conveyancing Quality Scheme (CQS).
- CQS membership is essential for firms wanting to be on mortgage lender
panels.
Professional - Solicitors must obtain clear instructions from clients at the outset to avoid
conduct issues delays, stress, and extra expenses during the transaction.
in a property - Key Questions:
transaction o Can we act for this client?
o Can we carry out the client’s instructions?
- Solicitors are governed by the Solicitors Regulation Authority (SRA) Code
of Conduct for Solicitors and Firms.
- Breaches of the Code may result in disciplinary actions and
potential negligence claims.
- SRA Principles:
o Includes acting with integrity and in the best interests of clients.
o These principles underpin the SRA Standards and Regulations.
, PROPERTY PRACTICE NOTES
Acting for seller and buyer
- Solicitors may be asked to act for both buyer and seller to
save costs and time.
- This carries a high risk of conflict of interest, particularly when issues arise
(e.g., price negotiations or problems from searches).
- SRA Code of Conduct – Paragraph 6.2:
o Solicitors cannot act for both parties if a conflict of interest exists
or there is a significant risk of one.
o Acting for both is especially risky when clients have unequal
bargaining power (e.g., developer vs. first-time buyer) or when
price negotiations are involved.
- Exceptions to Conflict Rules:
o Substantially common interest (paragraph 6.2(a)): Solicitors can
act for both parties if their interests align, but this exception does
not apply in property purchases due to differing interests.
o Competing for the same objective (paragraph 6.2(b)):
Theoretically applies when acting for two buyers competing for the
same property, but not in buyer-seller situations.
Acting for joint buyers
- Acting for joint buyers is generally acceptable, provided there is
compliance with paragraph 6.2 of the SRA Code of Conduct (no conflict of
interest).
- Solicitors may need to advise joint buyers separately on how they wish to
hold the equitable interest in the property, especially if they are not
married or in a civil partnership.
Acting for borrower and lender
- Acting for both borrower and lender in the same transaction is common,
provided there is no conflict of interest as per paragraph 6.2 of The Code
of Conduct.
- Conditions for Dual Representation:
o Informed written consent from both clients is required.
o Effective safeguards must be in place to protect client
confidentiality.
o The solicitor must determine that it is reasonable to act for both
clients.
- There may be a conflict between the duty of confidentiality to one client
and the duty of disclosure to the other, as highlighted in paragraph 6.3 of
The Code of Conduct.
- In large commercial transactions, lenders often have separate
solicitors due to the non-standard nature of mortgage documents.
