Root of title

It is necessary to establish the “root of title” in order to establish the sellers right to sell the property. This means identifying a deed (such as a mortgage, transfer or conveyance) to use to commence the chain of ownership which will end with the current owner. The criteria for selecting a “good root” is

• the deed must be at least 15 years old
• the deed must deal with ownership of both legal and equitable title.
• the deed must legally and physically describe the property.
• the deed must contain nothing that casts doubt on the title. 

In addition it is a good idea to avoid using a gift or an assent. There are two reasons for this. First, it is likely that the title will not have been fully investigated by the donee/beneficiary (because he is not parting with any money in exchange for the land) and second, as the transfer/assent is for no consideration (no money) certain interests which would have been overreached on a sale will not be overreached where the transfer is not for value.

A good practice is to select the most recent deed of conveyance. Preferably involving a sale of the land for consideration. Any lack of a physical description or any covenants can be provided from previous conyances of the land as a pre-root documnt.

Unbroken Chain of Ownership

Once the root is established, it is then necessary to show an unbroken chain of ownership from the root to the seller. This means looking at who the transferee was in the root conveyance and if it was not the seller, finding the deed by which the transferee parted with possession. This process is repeated until the deed under which the sellers acquired the property is reached.

Draft Contract

In order for a contract to be valid there must be the usual offer and acceptance, consideration, certainty of terms, capacity and an intention to create legal relations. The formalities of which are laid down in S2 Law of Property (Miscellaneous Provisions) Act 1989:

1. the contract must be in writing
2. It must incorporate all terms agreed between parties and signed by each party.

A solicitor may only sign a contract on behalf of a client if he has obtained express authority from the client to sign in writing (unless a power of attorney has already been obtained).

The conveyancer must identify who has a right to sell and whether any additional trustees need to be appointed. In the case of co-owners they will always be treated as joint tenants. Which means that on death of a co-owner the legal estate shall pass to the surviving owner under the doctrine of survivorship. It is important with co-owners to identify the nature of their tenancy. Are they Joint Tenants or Tenants in Common.

One of the main differences between the two types of shared ownership is what happens to the property when one of the owners dies. When a property is owned by joint tenants, the interest of a deceased owner automatically gets transferred to the remaining surviving owners. Tenants in common have no rights of survivorship. Unless the deceased individual's will or other instrument specifies that his or her interest in the property is to be divided among the surviving owners, a deceased tenant in common's interest belongs to the estate.

The most common form of a written contract is incorporated with the Standard Conditions of Sale. Traditionally a formal contract is compromised of two parts:

• the particulars of sale - these provide a legal and physical description of the property and may include incumbrances.
• the conditions of sale - the terms on which the property is being sold and can be the subject of negotiation between the parties. These usually include the standard conditions and any Special Conditions agreed between the parties.

The date on the contract is only filled in at exchange stage and unless a provision is made on the front of the contract for completion the SC6.1.1 provides for completion to be the 20th working day after exchange of contracts. Although in practice the parties will agree a date upon exchange of contracts.

Registration and Property Title

First registration became compulsory in all of the UK on December 1990 following a trigger event. Typically a trigger event are

• The transfer of title of a freehold whether for consideration or as a gift, 
• The grant of a lease for more than seven years, 
• The assignment of a lease which at the time of assignment has more than seven years unexpired, 
• Creation of a first legal mortgage, 
• the Partitioning of unregistered land amongst beneficiaries of a trust.
• Appointment of a new trustee of unregistered land.

Registration is governed by the Land Registration Act 2002 (which came into force on Oct 2003). An application for first registration can be made using Form FR1 with documents in support listed on Form DL.

The classes of title that can be awarded under the LRA 1925 & 2002 are:

1. Absolute Title: this is the best possible title. The buyer is awarded the freehold/leasehold title with all rights, privileges and benefits of easements for that property. Absolute title guarantees the proprietor (owner) was the holder of the lease and that the lease was validly granted. The registrar must approve title of lease and the freehold too.
2. Good Leasehold Title: this is granted in situations where the Registrar has not checked the freehold title (usually because one cant not be found) and therefore the Registrar can't guarantee the landlord is entitled to grant a lease which in turn leaves the buyer/tenant at risk of losing the property. Therefore a Defective Title Indemnity policy maybe required.
3. Possessory title: a title granted based solely on possession of the property (usually to a Squatter).
4. Qualified Title: a title that is subject to a specific defect. In this situation a Defective Title Indemnity Insurance Policy will be required.

A title typically contains a title number and is split into 3 parts:

• The Property Register: contains a brief description of the land with reference to the official plan based on a survey. It will also tell you if the property is freehold or leasehold. If its LH then it will also contain details of the lease i.e. date, term, parties, rent and lessors title number. Plus it may also contain any easements/covenants which benefit the land.
• The Proprietorship Register; includes class of title, name and address of registered proprietor. Any limitation to the registered proprietors powers to deal with the land i.e. registered proprietor cant transfer property without consent of the mortgage lender. And as of April 2000 the price paid for the property. In addition indemnity covenants are also noted in the proprietorship register. 
• The Charges register; details any encumbrances affecting the title e.g. restrictive covenants, easements, mortgages. With mortgages it usually contains 2 entries. The first states the charge to the lender and the 2nd the name of the lender. In addition to any restrictive or positive covenants. If not registered they will not bind a buyer.

Exchanging Contracts

A binding contract comes into existence on exchange of contracts, after which neither party can withdraw incurring the liability for breach. Therefore necessary to check all o/s queries have been dealt with before exchanging (‘the point of no return’) .
The actual time when a contract comes into being depends on the method used to effect exchange.

Authority to exchange: Once a solicitor has his clients authority to exchange he may then do so choosing which ever method he deems appropriate. Exchanging without clients authority can lead to the solicitor being liable to the client in negligence.

Exchange usually initiated by the buyer indicating the buyer is ready to commit himself. Where the purchase of one property is dependant on the sale of another the solicitor must ensure that exchange of contracts and completion are synced in order to avoid leaving the client with two houses or none at all.

Telephone exchange

• Most common method of exchange.
• The quickest way of securing an exchange of contract.
• Contract in effect as soon as solicitors agree that exchange has taken place.
• After the telephone call, a physical exchange of documents occurs through the post.
• HOWEVER if one party decides to withdraw, it’s all too easy for them to deny the contents of the phone call. Without which no contract can exist.
• To avoid any problems must agree prior to exchange to adopt The Law Society formulae. And an accurate attending note recording the telephone conversation must be made as soon as possible:
• Formula A: Used where one solicitor already holds both parts of the contract before exchange.
• Formula B: this is used where at time of exchange each party’s solicitor is still in possession of his own clients signed contract.
• Formula C: designed to be used in a chain transaction.

Personal exchange

• Rarely used.
• The solicitor for each party meets usually at the sellers office to exchange.
• Contract exists from the moment of exchange.
• Although not practical as solicitor office may be physically at great distance from each other.
• Has benefit of seeing the others contract before exchange and can therefore be checked to make sure they’re identical.

Postal exchange

• Exchange takes place once seller solicitor receives signed contract and deposit. After which he sense the clients signed contract.
• Exchange deemed to have taken affect once seller posts his clients signed contract (Adams v Lindsell (1818)).
• However a postal exchange is not recommended where a chain of transactions take place. Due to the possibility of contract may get lost in the mail.

Document exchange (DX)

• Most solicitors belong to a document exchange (private postal system).
• Postal rules do NOT apply to DX. And unless contract states otherwise, the contract comes into existence when the seller’s part of the contract is received by the buyer.
• The contract is made when the last copy of the contract is deposited at the document exchange.

Fax exchange

• Standard Conditions does not permit fax to be used as a valid method of service of a document.
• An exchange by fax is not a valid exchange of contracts under s2 LPA (Misc Provisions) Act 1989.

Email

• At the moment contracts for sale of land must be in writing so cannot be entered into electronically via email or via the internet.
• However government proposals for electronic conveyancing would allow contracts to be made electronically. Under which there would be only one copy of the contract which would be stored and ‘signed’ electronically.

Investigation of Title

Investigation of title will allow the solicitor to discover and anticipate and deal with any likely problems that might be revealed and thus allowing the transaction to go smoothly.

Buyers Investigation

Once the seller has supplied the buyer with evidence of his title, the buyer must do 2 things:

1. Ensure seller has right to sell property.
2. Identify any defects in, or problems raised, by the title.

Anything that’s unclear or unsatisfactory on the face of the documents supplied maybe raised as queries (requisitions) with the seller. Modern practice requires any investigation to be done before exchange of contract and all issues to be resolved before that point. Therefore entering into contract with full knowledge of what title contains.

As after exchange the contract may contain provisions preventing the buyer raising requisition after exchange (SC 4.2.1 & SCPC 6.2.1).

What to look out for on official copies and title plan?

When examining official copies and title plan, look out for the following:

The Property Register

1. Description of land agree with the contract description?
2. Title number matches the one given in the contract?
3. Is it freehold/leasehold? And does this accord with the contract?
4. Any easements enjoyed by the property? Do they match the needs of the client?

The Proprietorship Register

1. Is the class of title correct?
2. Is the seller the registered proprietor? If not, who is?
3. Are there any other entries, and what is their effect?

The Charges register

1. Are there any incumbrances?
2. How do these effect the buyer?
3. Which need to be removed upon completion?
4. Have you agreed In the contract to buys subject to these incumbrances?

The Title plan

1. Is the land being bought included in title?
2. Any colouring indicating rights of way? Possible covenants or land which has been removed from title?

Anything adverse found in the official copies will need to be reported to the buyer and resolved before exchange.

Overriding interests can be discovered through:

• Disclosure by the seller in the contract.
• Pre-contract enquiries where the seller will be asked to reveal details of adverse interest and occupiers rights.
• A local land charges search.
• Inspection of the property before exchange which may reveal evidence of such matters as non-owning occupiers, easements and adverse possession.

The Case of investigating UNREGISTERED land

Firstly a valid root of title must be provided. Once the solicitors have established a good root of title they are prevented from requesting the production of any other document dated prior to the root. The seller must then trace a link in the chain of title from the root document to the document or event by which the the ownership became vested in the seller.

It is then the sellers solicitors duty to provide the buyer with an epitome/abstract of title. Which is essentially a list of deeds and documents with photocopies attached. The abstract must contain all documents and events affecting the ownership of the land from root to present. This includes all mortgages ongoing and discharged e.g. conveyances, mortgages, leases, grants of representation, death certificates, assents, search certificates.

An examination of the documents supplied in the abstract or epitome for:

• The root document is as provided for by the contract. If the wrong one sent, the buyer can insist on the correct document being supplied in its place.
• There’s must be an unbroken chain of ownership, starting with the seller in the root doc and ending with the present seller.
• No defects in title which may adversely affect the buyer’s interest.

You will also have to verify the original deeds as well as checking for evidence of occupiers (done by inspection) as well as completing any pre-completion searches.

While investigating you should also bear in mind whether any transaction in the titles history should have triggered first registration. Compulsory registration occurs when:

• Theres a transfer of freehold
• A grant of a lease for more than 7 years or the right to possession is discontinuous, provided that the periods added together total more than seven years.
• An assignment of a lease which at the time of assignment has more than 7 years unexpired.
• A first legal mortgage of the freehold or of a lease which at the time of the mortgage has more than seven years unexpired.

Stamp Duty: Documents dated prior to 1 December 2003 require a stamp. Unstamped or incorrectly stamped documents are neither good roots of title. Consequently they cant be brought as evidence in civil proceedings nor will the Land Registry accept them on an application for registration.

Conveyance by Trustees to themselves: on the face of it, such a conveyance is in breach of trust and therefore voidable by the beneficiaries. But can be justified if:

• There is proof of a pre-existing contract in favour of the trustee or personal representative.
• The personal rep was a beneficiary under the will or intestacy of the deceased.
• The consent of all the legally competent beneficiaries was obtained to the transaction.
• The conveyance was made under an order by the court.

The transaction was sanctioned by the trust instrument.

Disclosure Obligation

What to send to the buyers solicitor:

1. Title Documents to check that the seller owns and is entitled to sell what he has instructed the solicitor to sell and to draft the contract of sale (the location of the title documents will need to be ascertained in the initial interview).
2. Other documents accompanying the title documents: Land and Charge certificates for all titles registered prior to 13 October 2003. Possibly any planning consent etc. When requesting title documents from lenders it is customary to include in the letter that the solicitor will either repay the loan to the lender (thus ending the mortgage and entitling the seller to the return of his deeds) or return the deeds to the lender.
3. An application to the Land Registry for official copies of the register entries: Made by using form OC1 and if there’s other documents that are known to be filed at the Land Registry i.e. a conveyance imposing restrictive covenants, you’ll need to apply using form OC2. Applications can be made by post but usually made by telephone or fax.
4. Home Information Packs: Properties for sale from 14 December 2007 need a Home Information Pack (HIP); containing an Energy Performance Certificate (EPC), also including documents such as sale statements, searches and evidence of title. Along with a Property Information Form and/or a Fixtures and Fittings and Contents Form. If the land is unregistered, a up to date search of the Index Map should be included.
5. The Pre-contract package; this should include a minimum of 2 copies of a draft contract, details of the sellers title, and the following if following protocol:
1. Sellers Property Information Form: originally given to the seller at the initial interview.
2. Fixture Fittings and Contents Form: also given at the initial interview.
3. In unregistered land, an Index Map Search @ Land Registry: to ensure there are no interests registered at the Land Registry adverse to the seller’s title.
4. A Land Charges Search against the seller and all other estate owners revealed by title deeds: this will reveal any incumbrance affecting the property and if any insolvency proceedings are pending.
5. Any property related Planning permission.

The purpose of this is to help the buyer quickly make up his mind if he wishes to continue with the transaction.

What the buyer should do?

1. Start pre-contract searches.
2. Deal with his clients mortgage and survey arrangements if required to do so.
3. The pre-contract package; once received its contents must be studies carefully to ensure that what is being offered for sale matches the instructions given by the buyers.
4. Home information Pack (HIP); Obtain a copy from the estate agent and study its contents In particular its searches and if any additional searches will be required. If the Property Information Form and the Fixture Fittings and Contents Form has been included and nothing in the pre-contract package from the sellers solicitors that may require changing.
5. The buyer client should be advised of any changes as soon as possible.

Powers Of Attorney: is a deed under which the donor appoints someone to carry out certain actions on his behalf. There are four types of power of attorney:

1. A general power, under s10 of the Power of Attorney Act 1971, entitles the attorney to deal with all of the donors assets.
2. A special power, permits the attorney to deal with specific assets.
3. A trustee power, used where property is held on trust.
4. An enduring power, under the Enduring Powers of Attorney Act 1985, endures through the donors mental incapacity.

The buyer is entitled to a certified copy of any power of attorney which affects the title. If the transaction is not made within 12 months of granting the power a statutory declaration should be obtained, to the effect that he had no knowledge of the revocation of the power. Otherwise its unlimited.

A trustee may delegate to another trustee by The Trustee Delegation Act 1999.

An attorney may not act as an attorney and a beneficiary for a sale of land. Over reaching allows buyers to take free of beneficial interest. Buyer’s interest passes from the land to the money.

Matters of Disclosure: Matter which do not relate to defect in title do not need to be disclosed. As it pertains to the use and enjoyment of the property. Unless asked and they mislead. Under s 2(b) addresses if theres been a formal complaint.

All easements should be discoverable and disclosed on inspection (under 2(a)). However to avoid a dispute all incumbrances should be disclosed in the contract.

Planning permission is needed in respect of any activity which constitutes ‘development’ as defined in s55 of the Towns and Country Planning Act 1990. Enforcement in respect of any breach must be started within four years of the alleged breach.

First Interview Sale Checklist

Suggested Sale Checklist

Date of Instructions

Seller’s Full Names

Contact Address

Address of Property Being Sold

(If Different From Contact Address)

Contact Phone Number(s)

Daytime

Evening

Mobile

Estate Agents

Contact

Buyer’s Name & Address

Solicitors Acting

Mortgage Details

1^st Mortgage

2^nd Mortgage

Other Mortgages

Occupiers Over 18

Agreed Sale Price

Fixtures and Fittings Included

Fixtures and Fittings Excluded

Details of Connected Purchase

Target Completion Date

ID Inspected

CGT Relevant? Yes/No

Client Care Information Given

Special Features /

Additional Information

Buying a Property Expense

Financial calculations must be made ensuring client has sufficient funds to purchase the property and pay related costs.

Land Registry Fees are payable for registering the land or a dealing at Land Registry after completion. Fee’s are payable on a scale published by the Land Registry and the client can find out the exact amount (£40-300 ish).

Stamp Duty tax is payable at the rate of 1 % on the whole consideration paid. Where it exceeds £125,000 (Residential property) or £150,000 (Commercial property) or property is within a disadvantaged area (check hmrc website for list of disadvantaged areas) and not exceeding £250, 0000.
Prices between £250,000 and £500,000 will pay at 3%. Anything that exceeds £500,000 will need to pay 4%.
Bare in mind total tax payable does not include price of chattels. But in some cases m, if the sale includes chattels its possible to alleviate tax payable by apportioning some of the price to the chattels included in the sale i.e. furniture, carpets etc. However this amount must be a fair reflection of the value of the chattels otherwise both the solicitor and the client will be liable to criminal sanctions.

Deposit: Buyers are usually required to pay a deposit of 10% on the purchase price (although it maybe possible to negotiate a smaller sum). Solicitors need to discuss with their client how they intend to fund this.

Mortgage: Most clients will choose to fund their purchase via a mortgage. Plus an arrangement fee (£200-300).

Mortgage Premium Insurance- Pays for the mortgage on the off chance the client falls ill or looses work. Although it has its limits as well as requiring the client to have worked a certain number of years.

Survey: Commission an independent survey of the property ensuring the property is free of unknown defects. There are different types, the more detailed the survey the higher the cost i.e. a valuation will only provide basic information and usually carried out by the lender.

Searches: Anything between £200-300

Professional Fees (solicitors) usually in the range of £350-£1000 + VAT. Depends on the property. Always added onto the disbursements.