Property
Property – Unit 1. Due Diligence 1
Key elements
- Exchange of contracts: not compulsory (useful as it fixes completion date and gives time for final
preparations)
- Completion: stage when the bulk of the purchase money is paid to the seller and transfer deed is completed
- Stages
1. Pre-contract stage: investigation of title, additional searches
2. Exchange of contracts
3. Pre-completion stage: now bound to complete
4. Completion
5. Post-completion stage: finalise administrative matters
Professional conduct
- Cannot act for a seller and buyer subject to certain exceptions (CoC para 6.2)
o ‘substantially common interest’ – does not apply to a property purchase
o ‘competing for the same objective’ – eg. 2 buyers competing against each other to buy a property
- Usually acceptable to act for joint buyers
- Acting for a borrower and lender unless there is a risk of a conflict if:
o The mortgage is not a standard one
o The mortgage is a standard one but you do not use the approved certificate
- Acting for joint borrowers of a matrimonial home (section 1.3.4 textbook for more info)
o Etridge guidelines: The lender should, with the spouses consent, provide the solicitor with certain
information
o Cost disadvantage of being advised by a separate solicitor outweighed the benefit
Mortgage
- Solicitor carrying out a regulated activity in relation to a regulated mortgage contract must be authorised to
do so under FSMA 2000
o [look back on regulated activities]
- Types of mortgage
o Repayment mortgages
Monthly payments made up of instalments and interest
Adv: by the end of the mortgage term, borrower will have paid off everything they owe
o Interest-only mortgage
Monthly payment made up only of interest chargeable on the loan
Adv: monthly repayments likely lower than repayment mortgage
Dis: by the end of the mortgage term, borrower will still owe the lender the whole original
amount borrowed, so must find an alternative way to pay off the loan (eg. savings,
investment product) if they want to be free of the mortgage
Property taxation
- Residential property
o SDLT/LTT on purchase of property
o CGT
- Commercial property
o SDLT/LTT:
o May have to pay VAT
o Likely to be owned by a company –Corporation Tax
,Property
SDLT
Residential freehold property
Purchase price SDLT Rate Purchase price LTT Rate
Up to £125,000 0% -£250,000 0%
-£250,000 2% -£400,000 5%
-£925,000 10% -£750,000 7.5%
The remainder 12% -£1.5m 10%
The remainder 12.5%
- Before March 21: Less than £500,000 =
no SDLT
- 1st time buyers (up to £500,000)
o Up to £300,000 = no SDLT
o Portion until £500,000 = 5%
Non-residential (or mixed-use) freehold property
Purchase price SDLT Rate Purchase price LTT Rate
Up to £150,000 0% -£150,000 0%
-£250,000 2% -£250,000 1%
The remainder 5% -£1m 5%
The remainder 6%
st
- No relief for 1 time buyers
CGT
- Principal private residence relief (PPRR)
o If it is the sale of an individual’s dwelling house used as their only main residence you can claim PPRR
o If an individual has more than one residence,
They choose which one qualifies for PPRR
o Certain periods of absence allowed eg. living abroad for work
o Not available if garden of more than 0.5 hectares
Unless can show the extra garden was necessary for the reasonable enjoyment of the house
, Property
VAT
- Different rates
o Standard – 20%
o Exempt – non-VATable (supplier of a land sometimes has ‘the option to tax’)
o Zero-rated – still taxable supplies, but charged at a zero rate
- Most real estate transactions are exempt
- Not usually paid on residential transactions
- Commercial properties
o Only compulsory on ‘new’ (3 years)
o Not always charged on ‘old’
o [option to tax the supply of ‘old’ commercial properties]
- Option to tax
o Only if he has paid VAT he wants to recover
o Buyer usually able to recover the VAT paid if option exercised
o If the buyer makes only exempt supplies (eg. insurance, financial supplies) may be unable to fully
recover VAT it has to pay
o Therefore, a buyer that makes exempt supplies will resist the seller’s option to tax, or seek a
compensatory reduction in the purchase price
Core principles of planning law
Development
- The carrying out of building, engineering, mining, other operations
- Making any material change in the use of any buildings/other land
- Not ‘development’
o Change of use within the same class:
B – general industrial & storage & distribution
C – residential uses
E – commercial, business & service
Retail sale of goods (not hot food)
Sale of food & drink for consumption on the premises
Financial & professional services
Uses which can be carried out in a residential area without detriment to its amenity
F – learning & non-residential institutions & local community
Sui generis – class of its own
Entertainment, drinking, hot food takeaways
These always require express planning permission
Matters not requiring express planning permission
- Can be automatically granted under GDPO – ‘permitted development’
o Developments within curtilage of a dwelling house
Eg. extensions below a certain size, minor operations
o Specified changes between classes
- Issuing an Art 4 direction excludes the effect of the GPDO
o Enquiries of the LPA will show this
Property – Unit 1. Due Diligence 1
Key elements
- Exchange of contracts: not compulsory (useful as it fixes completion date and gives time for final
preparations)
- Completion: stage when the bulk of the purchase money is paid to the seller and transfer deed is completed
- Stages
1. Pre-contract stage: investigation of title, additional searches
2. Exchange of contracts
3. Pre-completion stage: now bound to complete
4. Completion
5. Post-completion stage: finalise administrative matters
Professional conduct
- Cannot act for a seller and buyer subject to certain exceptions (CoC para 6.2)
o ‘substantially common interest’ – does not apply to a property purchase
o ‘competing for the same objective’ – eg. 2 buyers competing against each other to buy a property
- Usually acceptable to act for joint buyers
- Acting for a borrower and lender unless there is a risk of a conflict if:
o The mortgage is not a standard one
o The mortgage is a standard one but you do not use the approved certificate
- Acting for joint borrowers of a matrimonial home (section 1.3.4 textbook for more info)
o Etridge guidelines: The lender should, with the spouses consent, provide the solicitor with certain
information
o Cost disadvantage of being advised by a separate solicitor outweighed the benefit
Mortgage
- Solicitor carrying out a regulated activity in relation to a regulated mortgage contract must be authorised to
do so under FSMA 2000
o [look back on regulated activities]
- Types of mortgage
o Repayment mortgages
Monthly payments made up of instalments and interest
Adv: by the end of the mortgage term, borrower will have paid off everything they owe
o Interest-only mortgage
Monthly payment made up only of interest chargeable on the loan
Adv: monthly repayments likely lower than repayment mortgage
Dis: by the end of the mortgage term, borrower will still owe the lender the whole original
amount borrowed, so must find an alternative way to pay off the loan (eg. savings,
investment product) if they want to be free of the mortgage
Property taxation
- Residential property
o SDLT/LTT on purchase of property
o CGT
- Commercial property
o SDLT/LTT:
o May have to pay VAT
o Likely to be owned by a company –Corporation Tax
,Property
SDLT
Residential freehold property
Purchase price SDLT Rate Purchase price LTT Rate
Up to £125,000 0% -£250,000 0%
-£250,000 2% -£400,000 5%
-£925,000 10% -£750,000 7.5%
The remainder 12% -£1.5m 10%
The remainder 12.5%
- Before March 21: Less than £500,000 =
no SDLT
- 1st time buyers (up to £500,000)
o Up to £300,000 = no SDLT
o Portion until £500,000 = 5%
Non-residential (or mixed-use) freehold property
Purchase price SDLT Rate Purchase price LTT Rate
Up to £150,000 0% -£150,000 0%
-£250,000 2% -£250,000 1%
The remainder 5% -£1m 5%
The remainder 6%
st
- No relief for 1 time buyers
CGT
- Principal private residence relief (PPRR)
o If it is the sale of an individual’s dwelling house used as their only main residence you can claim PPRR
o If an individual has more than one residence,
They choose which one qualifies for PPRR
o Certain periods of absence allowed eg. living abroad for work
o Not available if garden of more than 0.5 hectares
Unless can show the extra garden was necessary for the reasonable enjoyment of the house
, Property
VAT
- Different rates
o Standard – 20%
o Exempt – non-VATable (supplier of a land sometimes has ‘the option to tax’)
o Zero-rated – still taxable supplies, but charged at a zero rate
- Most real estate transactions are exempt
- Not usually paid on residential transactions
- Commercial properties
o Only compulsory on ‘new’ (3 years)
o Not always charged on ‘old’
o [option to tax the supply of ‘old’ commercial properties]
- Option to tax
o Only if he has paid VAT he wants to recover
o Buyer usually able to recover the VAT paid if option exercised
o If the buyer makes only exempt supplies (eg. insurance, financial supplies) may be unable to fully
recover VAT it has to pay
o Therefore, a buyer that makes exempt supplies will resist the seller’s option to tax, or seek a
compensatory reduction in the purchase price
Core principles of planning law
Development
- The carrying out of building, engineering, mining, other operations
- Making any material change in the use of any buildings/other land
- Not ‘development’
o Change of use within the same class:
B – general industrial & storage & distribution
C – residential uses
E – commercial, business & service
Retail sale of goods (not hot food)
Sale of food & drink for consumption on the premises
Financial & professional services
Uses which can be carried out in a residential area without detriment to its amenity
F – learning & non-residential institutions & local community
Sui generis – class of its own
Entertainment, drinking, hot food takeaways
These always require express planning permission
Matters not requiring express planning permission
- Can be automatically granted under GDPO – ‘permitted development’
o Developments within curtilage of a dwelling house
Eg. extensions below a certain size, minor operations
o Specified changes between classes
- Issuing an Art 4 direction excludes the effect of the GPDO
o Enquiries of the LPA will show this
