lOMoARcPSD|29395069
RE WS6 7 - Real Estate Practice Notes to help with
exam structure and seminars.
Real Estate
The Contract
Drafting the contract
Before the actual transfer of title to property, parties will ENTER INTO A BINDING CONTRACT.
This defines the extent of the land to be sold and sets out the terms on which the seller will sell, including
date of completion.
Title is transferred in the transfer deed upon completion but the terms of the transfer deed are fixed by the
terms of contract.
Seller drafts the contract and two identical copies will be prepared by seller’s solicitor and sent to the buyer’s
solicitor for approval with the rest of the pre-contract package.
Further copy of contract to be retained by seller’s solicitor so as to deal with any amendments proposed by
the buyer.
Contract terms are open to negotiation with the buyer and the seller must be prepared to concede points in
the buyer’s favour.
Drafting contract is the MOST IMPORTANT STAGE OF TRANSACTION and is an exercise in the art of compromise.
Seller’s solicitor will turn the instructions from client into the contract agreement that has been reached by the
parties.
This includes dealing with aspects particular to the transaction and investigating title.
Remember that SCPC stands for Standard Commercial Property Conditions
Elements of the contract
ELEMENTS OF A CONTRACT – Contract is made up of:
the particulars of sale
the standard conditions of sale (SCPC)
the special conditions
The This describes the estate in land being sold and the physical extent of that land.
particulars May also contain reference to any easements or covenants which benefit the land.
of sale The aim of the particulars is to give a clear and concise description of the property. If the land has a
regular postal address and clearly marked boundaries then descriptions of these will suffice. If not, a
fuller description and plan may be needed.
Plan must be used on a sale of part of land and may be desirable in other cases, such as where the
boundaries of property are not self-evident. Whatever plan is used, it must be of sufficient size and
scale to be useful for purpose (Land Registry has a lot of specific requirements for plans submitted
to it)
If a plan is used then the contract and transfer will need to make reference to it and any markings on
it. There should be no discrepancy between the verbal description of the property and the plan, if
there is then it is a matter of construction which of the two descriptions will prevail. However…
1
, lOMoARcPSD|29395069
‘For identification purposes only’ = where there is discrepancy and the plan has been
described as being for identification purposes only, the verbal description of the land will
prevail.
‘More particularly delineated’ = the plan will prevail over verbal description where the
phrase ‘more particularly delineated’ has been used. This phrase should not be used unless
the plan is to scale.
A mistake in the particulars of sale may give the buyer a remedy in misdescription or
misrepresentation.
The The Standard Commercial Property Conditions provide standard, binding terms of the contract for
standard commercial property transactions, however not all terms are appropriate in every transaction.
conditions This sets out the terms of the sale, the standard conditions are a set of conditions that have been
expertly drafted and are common to all transactions - solicitor will be familiar with these.
The special These are drafted by a solicitor to deal with the particular circumstances of the transaction or to vary a
conditions standard condition position.
If a contract incorporates one of the sets of standard conditions and then adds a special condition
to the contrary, the special condition will prevail.
The standard conditions
1.1.1(e) SCPC 1.1.1(e) –
Contract rate Defines the “contract rate” which is relevant to the compensation provisions in SCPC 9.3.
The contract rate is the “Law Society’s interest rate from time to time in-force”.
This rate is currently 4% above base.
1.1.4 SCPC 1.1.4:
Application of The conditions in Part 1 apply EXCEPT as varied or excluded by the contract.
Parts 1 and 2 of The conditions in Part 2 ONLY apply if expressly incorporated into the contract.
the SCPC I.e. where there is a conflict between a Standard Condition and a Special
Condition, the Special Condition takes precedence.
2.1/2.2 SCPC 2.1 - The seller warrants that the sale of the property will constitute a supply CHARGEABLE
VAT TO VAT AT THE STANDARD RATE.
These provisions are therefore inappropriate if the seller does not wish to charge VAT on sale
A seller who wishes to NOT charge VAT will need to exclude these provisions by a Special
Condition.
Often, a seller who wishes to charge VAT will incorporate (by ticking) SCPC A1 in Part 2 :
SCPC A1.1 – “Conditions 2 does not apply”.
SCPC A1.2 – “The seller:
(a) warrants that the sale of the property does not constitute a supply that is taxable for
VAT purposes
(b) agrees not to exercise the option to tax in relation to the property, and
(c) cannot require the buyer to pay any amount in respect of any liability to VAT arising in
respect of the sale of the property, unless condition A1.3 applies.”
Part 2 A1.3 – provides that IF there is a change in the law between signing the contract and
completion which means the sale must be subject to VAT, then the buyer shall pay the seller an
additional amount equal to the VAT.
If this is inputted into contract: A buyer’s solicitor will often want to exclude this to ensure, in
the unlikely event that the law does change, that their client does not have to pay an
additional unexpected sum.
3.2 SCPC 3.2.1:
Deposit The buyer must pay a 10% deposit by the completion date.
SCPC 3.2.2:
Except where the sale is by auction, the deposit must be:
Paid by electronic means from a solicitors account with a clearing bank to the seller’s
solicitor’s bank account.
Be held as a stakeholder.
2
RE WS6 7 - Real Estate Practice Notes to help with
exam structure and seminars.
Real Estate
The Contract
Drafting the contract
Before the actual transfer of title to property, parties will ENTER INTO A BINDING CONTRACT.
This defines the extent of the land to be sold and sets out the terms on which the seller will sell, including
date of completion.
Title is transferred in the transfer deed upon completion but the terms of the transfer deed are fixed by the
terms of contract.
Seller drafts the contract and two identical copies will be prepared by seller’s solicitor and sent to the buyer’s
solicitor for approval with the rest of the pre-contract package.
Further copy of contract to be retained by seller’s solicitor so as to deal with any amendments proposed by
the buyer.
Contract terms are open to negotiation with the buyer and the seller must be prepared to concede points in
the buyer’s favour.
Drafting contract is the MOST IMPORTANT STAGE OF TRANSACTION and is an exercise in the art of compromise.
Seller’s solicitor will turn the instructions from client into the contract agreement that has been reached by the
parties.
This includes dealing with aspects particular to the transaction and investigating title.
Remember that SCPC stands for Standard Commercial Property Conditions
Elements of the contract
ELEMENTS OF A CONTRACT – Contract is made up of:
the particulars of sale
the standard conditions of sale (SCPC)
the special conditions
The This describes the estate in land being sold and the physical extent of that land.
particulars May also contain reference to any easements or covenants which benefit the land.
of sale The aim of the particulars is to give a clear and concise description of the property. If the land has a
regular postal address and clearly marked boundaries then descriptions of these will suffice. If not, a
fuller description and plan may be needed.
Plan must be used on a sale of part of land and may be desirable in other cases, such as where the
boundaries of property are not self-evident. Whatever plan is used, it must be of sufficient size and
scale to be useful for purpose (Land Registry has a lot of specific requirements for plans submitted
to it)
If a plan is used then the contract and transfer will need to make reference to it and any markings on
it. There should be no discrepancy between the verbal description of the property and the plan, if
there is then it is a matter of construction which of the two descriptions will prevail. However…
1
, lOMoARcPSD|29395069
‘For identification purposes only’ = where there is discrepancy and the plan has been
described as being for identification purposes only, the verbal description of the land will
prevail.
‘More particularly delineated’ = the plan will prevail over verbal description where the
phrase ‘more particularly delineated’ has been used. This phrase should not be used unless
the plan is to scale.
A mistake in the particulars of sale may give the buyer a remedy in misdescription or
misrepresentation.
The The Standard Commercial Property Conditions provide standard, binding terms of the contract for
standard commercial property transactions, however not all terms are appropriate in every transaction.
conditions This sets out the terms of the sale, the standard conditions are a set of conditions that have been
expertly drafted and are common to all transactions - solicitor will be familiar with these.
The special These are drafted by a solicitor to deal with the particular circumstances of the transaction or to vary a
conditions standard condition position.
If a contract incorporates one of the sets of standard conditions and then adds a special condition
to the contrary, the special condition will prevail.
The standard conditions
1.1.1(e) SCPC 1.1.1(e) –
Contract rate Defines the “contract rate” which is relevant to the compensation provisions in SCPC 9.3.
The contract rate is the “Law Society’s interest rate from time to time in-force”.
This rate is currently 4% above base.
1.1.4 SCPC 1.1.4:
Application of The conditions in Part 1 apply EXCEPT as varied or excluded by the contract.
Parts 1 and 2 of The conditions in Part 2 ONLY apply if expressly incorporated into the contract.
the SCPC I.e. where there is a conflict between a Standard Condition and a Special
Condition, the Special Condition takes precedence.
2.1/2.2 SCPC 2.1 - The seller warrants that the sale of the property will constitute a supply CHARGEABLE
VAT TO VAT AT THE STANDARD RATE.
These provisions are therefore inappropriate if the seller does not wish to charge VAT on sale
A seller who wishes to NOT charge VAT will need to exclude these provisions by a Special
Condition.
Often, a seller who wishes to charge VAT will incorporate (by ticking) SCPC A1 in Part 2 :
SCPC A1.1 – “Conditions 2 does not apply”.
SCPC A1.2 – “The seller:
(a) warrants that the sale of the property does not constitute a supply that is taxable for
VAT purposes
(b) agrees not to exercise the option to tax in relation to the property, and
(c) cannot require the buyer to pay any amount in respect of any liability to VAT arising in
respect of the sale of the property, unless condition A1.3 applies.”
Part 2 A1.3 – provides that IF there is a change in the law between signing the contract and
completion which means the sale must be subject to VAT, then the buyer shall pay the seller an
additional amount equal to the VAT.
If this is inputted into contract: A buyer’s solicitor will often want to exclude this to ensure, in
the unlikely event that the law does change, that their client does not have to pay an
additional unexpected sum.
3.2 SCPC 3.2.1:
Deposit The buyer must pay a 10% deposit by the completion date.
SCPC 3.2.2:
Except where the sale is by auction, the deposit must be:
Paid by electronic means from a solicitors account with a clearing bank to the seller’s
solicitor’s bank account.
Be held as a stakeholder.
2
