Investigation of Title, Contract Formation, Terms and Standard Conditions of Sale
This domain tests the move from investigation to binding obligation: how title is deduced and objections raised, and how the contract is formed and construed on the Standard Conditions of Sale (fifth edition).
Deducing title and raising enquiries
- The seller prepares an epitome of title (unregistered) or official copies (registered) and must disclose latent defects in title; the buyer takes subject to patent defects under caveat emptor.
- Objections and requisitions are raised before exchange; after exchange the buyer's ability to object is limited by the conditions.
- Replies to enquiries and the Property Information Form should be treated as representations, giving a misrepresentation remedy if untrue.
Formation
- Section 2 LP(MP)A 1989: one document, or an exchange of documents, in writing, incorporating all express terms, signed by or on behalf of each party. A draft transfer or a subject-to-contract letter will not do.
- Exchange creates a binding contract; the deposit (normally 10%) is held by the seller's solicitor as stakeholder or agent.
- Incorporation of the Standard Conditions needs clear drafting; special conditions must be checked for conflict, so an order-of-precedence clause is standard.
Key standard conditions
- Risk passes to the buyer on exchange, so the buyer should insure from exchange.
- Time is of the essence for completion; a party may serve a notice to complete, making time of the essence and triggering default interest and the right to rescind.
- The conditions provide compensation for errors and misdescription and restrict rescission to substantial differences.
- The seller must give vacant possession on completion, subject to disclosed lettings.
Worked example
Contracts exchange incorporating the Standard Conditions. The seller's replies stated that a loft conversion had building regulations approval; the file shows only planning permission. That is both a misrepresentation and an error within the conditions. The buyer can claim compensation, but rescission depends on whether the difference is substantial; the buyer should also consider a claim under s.2(1) Misrepresentation Act 1967 and notify the lender, since the works may be unregularised.
Traps
- Omitting an agreed term from the contract, making it void under s.2.
- Exchanging before searches are back, leaving the buyer to bear the risk.
- Serving a notice to complete when the seller cannot yet deliver a clean title; a notice is ineffective if the serving party is not itself ready.