Property Practice

• Topic 01

  Introduction to Property Transactions

  45 questions
• Topic 02

  Investigation of Title

  39 questions
• Topic 03

  Pre-Contract Searches and Enquiries

  34 questions
• Topic 04

  Progressing to Exchange of Contracts

  33 questions
• Topic 05

  Pre-Completion Steps

  34 questions
• Topic 06

  Completion and Post-Completion

  22 questions
• Topic 07

  Remedies for Delayed or Non-Completion

  24 questions
• Topic 08

  Leases: Structure and Content

  31 questions
• Topic 09

  Granting a Lease or Underlease

  45 questions
• Topic 10

  Assignment of a Lease

  45 questions
• Topic 11

  Leasehold Covenants

  45 questions
• Topic 12

  Planning Law

  45 questions
• Topic 13

  Taxation in Property Transactions

  54 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. A solicitor is acting for a buyer in a residential freehold purchase. The seller's solicitor sends a draft contract on Monday. The buyer's solicitor carries out searches, raises enquiries, investigates title, and reports to the client. On Thursday, the buyer instructs the solicitor to proceed, but then the seller's solicitor telephones on Friday morning to say the seller has received a higher offer and no longer wishes to proceed. Which of the following best describes the legal position?

   • A
     The seller is free to withdraw because contracts have not yet been exchanged, and neither party is bound until exchange
     Correct answer
   • B
     The seller is bound because the buyer's solicitor has incurred costs on searches and enquiries, creating an enforceable obligation
   • C
     The seller is bound because the buyer instructed the solicitor to proceed, which constitutes acceptance of the contract
   • D
     The seller is bound because the pre-contract stage was substantially complete, which prevents withdrawal
   Explanation

   Before exchange of contracts, either party may withdraw without liability. The fact that the buyer's solicitor has carried out searches, raised enquiries, and reported to the client does not create a binding agreement. A contract for the sale of land must satisfy s.2 LP(MP)A 1989 (in writing, containing all terms, signed by both parties), and exchange of contracts is the point at which these requirements are met. The costs incurred in the pre-contract stage are borne by the party that incurred them — sometimes called 'abortive costs'.

2. A solicitor acts for a tenant taking a 20-year lease of a recently constructed warehouse. The warehouse was built 2 years ago. The landlord's draft lease proposes a full repairing and insuring (FRI) lease with no schedule of condition. The tenant's solicitor inspects the premises and notes some cracking in the external walls that may indicate a structural defect. What is the most appropriate advice to the tenant?

   • A
     The tenant's solicitor should advise the tenant to accept the lease and claim damages from the landlord after completion if the defect worsens
   • B
     The tenant's solicitor should advise obtaining a building survey to investigate the cracking, and if the defect is confirmed, negotiate either a schedule of condition or an express exclusion of liability for pre-existing structural defects, and consider whether the landlord should be required to remedy the defect before the lease is granted
     Correct answer
   • C
     The tenant's solicitor should advise refusing to take the lease under any circumstances due to the potential structural defect
   • D
     The tenant's solicitor should advise proceeding with the lease as drafted because the building is only 2 years old and the NHBC guarantee will cover any structural defects
   Explanation

   The cracking may indicate a significant structural defect. Under an FRI lease, the tenant would be liable for all repairs including structural repairs. The solicitor should advise obtaining a survey, and if the defect is confirmed, negotiate protections such as a schedule of condition limiting liability to the current state of the premises, an exclusion for pre-existing defects, or a requirement that the landlord remedies the defect before the lease is granted.

3. A solicitor acting for both buyer and lender discovers that the buyer intends to fund £50,000 of the deposit from a gift by a third party. The mortgage lender's offer is based on the assumption that the deposit comes from the buyer's own savings. Which of the following best describes the solicitor's obligation?

   • A
     The solicitor must report the gifted deposit to the lender because it is a material fact that may affect the lender's assessment of the buyer's financial position and the lender's security, as required by the UK Finance Mortgage Lenders' Handbook
     Correct answer
   • B
     The solicitor need only report the gift if the donor is a family member, as gifts from friends are not reportable
   • C
     The solicitor should advise the buyer to conceal the gift from the lender to avoid complications with the mortgage application
   • D
     The solicitor has no obligation to report the gift because the source of the deposit is a private matter between the buyer and the donor
   Explanation

   Under the UK Finance Mortgage Lenders' Handbook, the solicitor must report any gifted deposit to the lender. The source of the deposit is material to the lender's decision because: (1) it affects the lender's assessment of the buyer's own financial commitment to the purchase; (2) the lender may require a deed of gift confirming the donor has no interest in the property; and (3) failure to report could constitute facilitating a misrepresentation to the lender.