Real Estate Mock Anjum Chowdhury SJ21:22V1:Y PDF

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LPC

MOCK ASSESSMENT

Real Estate

Although the mock examinations should alert you to the overall transactional style of the questions in the LPC exams and the level of detail required to answer them successfully, the form of each mock and the subject content is indicative only. The material included in this mock examination, its style of questions and enclosures are for general information only and should not be regarded either as a steer towards any particular area of the syllabus or an absolute indication of the format, accompanying documentation or style of the final examination. You should not assume that particular subject areas covered or the weighting given to them in this mock examination will or will not be replicated or followed in the final examination.

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Anjum Chowdhury class number [SJ21:22V1:Y ]

Mock Examination (Open Book) Real Estate TIME ALLOWED:

1 HOUR 38 MINUTES

There are 50 marks available for this examination. It has two parts: Part 1

Multiple Choice Questions (MCQs) (10 marks). For each MCQ there are FOUR possible answers of which only ONE is the appropriate answer.

Part 2

Questions Requiring Written Answer (40 marks).

INSTRUCTIONS TO CANDIDATES    

Complete your MCQ answers on ELITE Write your answers to Part 2 in a word document. Insert your name and the name of your class in the header of your document. Do not write your candidate number. Record all your answers on ELITE for Part 1 and in your answer document for Part 2, NOT on this question paper.

YOU MUST ATTEMPT ALL QUESTIONS This is an open book assessment. Staff cannot comment on the content of this mock exam. If you are uncertain about something then you should answer as you see fit.



 The mock is half the time of the real exam. Students who are eligible to sit a proctored exam will get a small amount of extra time to allow for scrolling through the paper online. As students can download and print this paper, all should adopt the 1 hour 38 minute time limit. e128bb594eeace5d0e723f7738d3c842.docx

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PART I

MULTIPLE CHOICE QUESTIONS

(10 MARKS)

Each of the FIVE multiple choice questions in Part 1 is worth two marks. Record your answers to the Multiple Choice Questions by typing your answer on your answer document. QUESTION 1 You are investigating the title of 26 Marlborough Way, Hereford on behalf of your buyer client. Entry 3 of a Proprietorship Register states the following: “(20 September 2007) RESTRICTION: No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.” Which ONE of the following statements is CORRECT? A.

The restriction reveals that the beneficial title to the property is held as joint tenants.

B.

The restriction reveals that the legal title to the property is held as tenants in common.

C.

The restriction reveals that the beneficial title to the property is held as tenants in common.

D.

The restriction reveals that both the legal and beneficial title to the property are held as tenants in common.

Answer: Statement A

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Anjum Chowdhury class number [SJ21:22V1:Y ] QUESTION 2 You act for Tenby plc on the purchase of an office building, Gower House, Pembroke (“the Property”). You have received official copies of the title and have discovered the following entry on the Proprietorship Register: “The transfer to the proprietor contains a covenant to observe and perform the covenants referred to in the Charges Register and of indemnity in respect thereof.” Which ONE of the following statements is CORRECT? A

The buyer should be required to give a similar covenant to the seller in the transfer and will only be liable for future breaches of any restrictive covenants on the Charges Register.

B

The buyer should be required to give a similar covenant to the seller in the transfer and will only be liable for future breaches of any positive covenants on the Charges Register.

C

The buyer should be required to give a similar covenant to the seller in the transfer and will be liable for future breaches of any restrictive and positive covenants on the Charges Register.

D

The buyer should be required to give a similar covenant to the seller in the transfer and will need to obtain restrictive covenant indemnity insurance in respect of the covenants on the Charges Register.

Answer: Statement D

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QUESTION 3 You are acting on behalf of a buyer of a freehold retail property. You are investigating the title of the property. Entry 2 of the Charges Register states that a conveyance dated 5 October 1999, made between Edward Charles Rigley (1) and Euan Andrew Palenbella (2), contains restrictive covenants. The Land Registry does not have a copy of this conveyance. Which ONE of the following statements is CORRECT? A

A buyer would be bound by the covenants contained in the missing conveyance, because the Charges Register refers to them

B

A buyer would not be bound by the covenants contained in the missing conveyance, because the terms of the covenants cannot be ascertained.

C

A buyer would be bound by any covenants relating to the Property.

D

A buyer would only be bound by the covenants contained in the missing conveyance if the covenants had been stated in full in the Charges Register

Answer: Statement A

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Anjum Chowdhury class number [SJ21:22V1:Y ] QUESTION 4 You have been instructed by Prouse Productions Limited (“Prouse”) to act on its behalf in the purchase of 122-126 Deptford Road, Deptford, London (“the Property”). You have submitted the relevant searches and have now received the results to the CON29. The search result reveals that a road which is next to the Property is not maintained at public expense. Which ONE of the following statements is CORRECT? A

Prouse may have to contribute to the cost of maintenance of the road.

B

There would be no concerns from Prouse’s point of view.

C

Prouse definitely has a right to use the road for access.

D

Prouse cannot be asked to contribute to the cost of bringing the road up to the local authority’s standard if it decides to adopt the road.

Answer: Statement A QUESTION 5 Gidleigh Limited (“Gidleigh”), a property investment company, has instructed you to act for it in the purchase of a converted warehouse that it wants to let out as offices. Gidleigh is conerned that the property may not have the correct planning permissions for its intended use. Which searches will inform Gidleigh about planning permissions granted in respect of the property? Which ONE of the following statements is CORRECT? A

The existence of planning permissions granted would be revealed in the OS1 search and the Local Land Charges Search (LLC1).

B

The existence of planning permissions granted would be revealed in the Local Land Charges Search (LLC1) and the Enquiries of the Local Authority (CON29).

C

The existence of planning permissions granted would be revealed in the Environmental Search and the Enquires of the Local Authority (CON29).

D

The existence of planning permissions granted would be revealed in the Local Land Charges Search (LLC1) and the Optional Enquiries of the Local Authority (CON29O).

Answer: Statement B

TOTAL PART 1:

10 MARKS

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PART 2

QUESTIONS REQUIRING WRITTEN ANSWER (40 MARKS)

Facts relevant to Questions 1 and 2 You are a trainee solicitor in the Real Estate Department of Gibson & Weldon LLP (“G&W”). Your supervising solicitor, Teresa McKillop, acts for Carnegie Estates Limited (“Carnegie”) which is a developer that has purchased a retail shop to convert into offices. Carnegie has agreed to buy 12 Dolton Hill, Solihull, B26 4PF (“ 12 Dolton Hill”) from the current owner, Vine Holdings Limited (“ the Seller”). 12 Dolton Hill has been vacant for a number of years and is in a poor state. The Seller has had it on the market for a while and has had no interest from anyone other than Carnegie, which is why your client has been able to agree a good price for it. The purchase price is £380,000 and the Seller has agreed that it will not be charging VAT in addition to the agreed purchase price under any circumstances. QUESTION 1 (26 marks) a)

You have now investigated title to 12 Dolton Hill using the official copies and title plan which are the Documents at the back of this Examination Paper.

Explain any title issues that arise and any action to be taken as a result of your investigation of title. Answer Q1a: Hi Teresa, these are the issues I have discovered from the Title, I have provided you with some possible solutions. Issue 1 In the Property Register there is an issue with entry 2. The entry states that the buyer is not entitled to any easements or able to claim any easements. Nor is the client entitled to: a right to light, air, or any easements which interfere with the vendors retained use of the property. This is an issue for the client as it will be for them to incorporate into future designs for the development, whether their designs are suited for situations in where there is limited light, air. The client wants to develop the space into offices which may create a demand for an office with a view. This can potentially be an issue if there is no access to light. It is advisable to carry out a personal site inspection to see if there are current restrictions of light and or air to the premise. It would also be advisable to raise enquiries with the vendor if they have plans to develop anything in the future which may interfere with the buyers right to light and air. Issue 2 In the Charges Register there is an issue with entry 1 and 1(i) . The entry indicates that there is an indemnity chain. This means that it is highly likely the seller will ask the buyer to sign the chain of indemnity and thereby passing the © The University of Law Limited

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Anjum Chowdhury class number [SJ21:22V1:Y ] liability of breaching restrictive covenants to the buyer. The restrictive covenants in the indemnity chain is that the property is only to be used as a retail shop. This is an issue for the client as they are interested in developing the space into offices. By doing this the client would be in direct breach of the covenant. This would interrupt the plans for the client. I advise that contact is made with the seller and request information as to whether the original covenantors have contacted the current sellers since their ownership regarding any breach in respect of the use of the building. Otherwise, the development into offices may not be possible for our clients without any permission from the local planning authority. Issue 3 In the Charges Register there is an issue with entry 1 (ii). The entry indicates that there is an indemnity chain. This means that it is highly likely the seller will ask the buyer to sign the chain of indemnity and thereby passing the liability of breaching restrictive covenants to the buyer. The restrictive covenant in the indemnity chain is that the buyer must maintain the fence at the eastern boundary of the property. This is an issue for the client as the client may prefer to maintain all fences on their boundary, to achieve a perfect finish. If the client is going for the higher quality finish, it may be important to ask for permission to replace all surrounding fencing boundary depending on the current state. Or if this is something which the client is not interested in and has opted for a lower cost finish, we can ask the seller how much they have spent on maintaining the boundary fence to date as it has been identified that the premise has been neglected. Issue 4 In the Charges Register there is an issue with entry 2&3. These entries indicate that there is a mortgage on the property. This is an issue for the seller as it will be in the buyers best interest to ensure that the mortgage is cleared upon completion of transfer. It will be important for the client to have a special condition in the contract to obtain an undertaking from the seller solicitor that the mortgage will be paid upon completion. Issue 5 In the Charges Register there is an issue with entry 4. The indicates a unilateral notice in force between the seller and the local council. This is an issue for the client as it is their best interest to know about a notice which may impact them. It would be advisable to either ask the seller what the unilateral notice is about, or a phone call to the council office can assists, however this would be visible in the LLC1 search.

Note to Candidates: confine yourself to matters of title in this question as you have an opportunity to discuss matters relevant to searches and enquiries in part b). 16 marks

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b) Teresa McKillop tells you that she is planning to raise the pre-contract searches in respect of 12 Dolton Hill and the client has just informed her that the property next door is a metals factory and also that the client has heard locally that there was recently some ground water flooding of properties in that street. Explain what pre-contract searches and enquiries or other investigations you would make to reveal the detail on these two issues and give reasons for your choice. Answer Q1b: Metal factory A CON29O search should be requested. The metal factory may potentially be noisy. With a CON29O searches can be made into the level of noise produced in the area. If this information is available, it can be used to see whether it is acceptable for when the building is to be used as offices. This can also be done by conducting your own personal survey. A physical inspection of the site should put the buyer at ease, as this should identify if the premise is an issue during business hours. Groundwater flooding on street The seller should enquire using Commercial Property Standard Enquiries (CPSE) the CPSE should identify whether the building has ever been affected by flooding at enquiry 8.1. If this is not successful, the buyer will be able to see if the seller had ever taken out any flood insurance for the property in the CPSE which may indicate that the property has been flooded before. A Drainage and Water enquiry could also be carried out. This enquiry will indicate to us whether there is a current risk of flooding to the building due to overloaded public sewers (point 2.8 of enquiry). Which may have led to possible groundwater flooding. An Environmental Risk Assessment should most importantly be carried out. Within this enquiry, a Flood Risk enquiry should be opted for costing £85 more. This will identify the future potential risk of flooding to the property and clarify whether the rumours heard locally are true. Additionally, this assessment will establish whether the area has been contaminated which may be possible from the metal factory. A Structural Survey should be carried out by the purchaser as this will identify whether the property is damaged structurally from any of the possible groundwater flooding. 10 marks

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Anjum Chowdhury class number [SJ21:22V1:Y ] QUESTION 2 (14 marks) a)

Assume that it is now February 2023 and that Carnegie successfully acquired 12 Dolton Hill in 2021 as planned. Carnegie has now completed its planned works to renovate 12 Dolton Hill and has decided to sell the freehold in order to raise capital for other projects. It has found a buyer, Primrose Insurance plc. Carnegie’s managing director, Adelle Green contacts Teresa and tells her that Primrose Insurance do not have a solicitor appointed. She asks whether Teresa can act for Primrose as well as Carnegie on this sale to speed things up.

Advise Carnegie if you can act for them as well as for Primrose Answer Q2a: Hi Teresa, I advise that we should not act for both parties. I have listed a few points for why we cannot act for Carnegie as well as Primrose. As lawyers we must act in the best interest of our clients. This is an issue for any solicitor in a commercial property transaction if acting for both clients we have a duty to disclose relevant information to their client. This could mean disclosing information which could lead to Primrose being able to negotiate a substantially lower price. By doing this we would be in breach of our duty of client confidentiality to Carnegie. Alternatively, we would not be acting in Primrose’s best interest by not disclosing to Primrose the relevant information which can help them to obtain better terms. At first it may seem like there is no apparent risk of conflict. Situations arise which can lead to conflict for example, the price of sale, terms of the contract. The SRA guidance provides that ‘acting for one client buying and another selling is a situation which gives rise to a conflict of interest’. Hence for the SRA guidance also stating ‘that you should not act in these situations for both clients. The Law Society guidance states as an exception para 6.2(a) that ‘you can act for both clients if there is a substantial common interest’. However, this is not the situation pending new information. 5 marks

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b)

Primrose decides to instruct their own solicitor . Carnegie wants to ensure that they recoup as much of the cost of the renovation works as possible, including any VAT paid. It is aware that this may have a knock on effect on the sale to Primrose Insurance plc.

Advise Carnegie as to the VAT status of 12 Dolton Hill, Carnegie’s option in the light of the sale to Primrose Insurance and how the option affects Carnegie’s ability to recover VAT on the renovation works and any potential repercussions for the sale transaction. Answer Q2b: Carnegie can add VAT to the sale price of 12 Dolton Hill, even though it is an old freehold commercial building they are subject to the ‘option to tax’. As Carnegie has incurred VAT on the refurbishment of 12 Dolton Hill, Carnegie may opt to charge VAT on disposal to recover the VAT incurred on sale. Notice to add VAT to the sale price must be given to HMRC for the ‘election to waive exemption’ to be an exempt supply. Then Carnegie must make the buyer aware that VAT is to be added to the sale. This affects Carnegie’s option to recover the VAT as renovation should correlate with the increase in asset value. With the ‘option to tax’ it will pay off the VAT charged by HMRC on disposal of the asset. Potential repercussions for the sale transaction include the buyer pulling out at any last moment...