Solicitors Qualifying Examination (SQE) Property Practice (FLK2) Syllabus

What formalities must a contract for the sale of land satisfy under s.2 LP(MP)A 1989?

It must be in writing, contain all the expressly agreed terms in one document (or by reference/exchange), and be signed by or on behalf of each party. Failure to comply renders the contract void.

What happens at exchange of contracts, and what is the usual deposit?

The parties become legally bound to complete; the risk in the property typically passes to the buyer (so insurance should be in place); and the buyer pays a deposit, conventionally 10% of the purchase price, held by the seller's solicitor (usually as stakeholder under the SCS).

What is the difference between a deposit held as 'stakeholder' versus as 'agent'?

A stakeholder holds the deposit on behalf of both parties and cannot release it to the seller until completion. An agent holds it for the seller, who may use it before completion (e.g. towards a related purchase). The SCS default is stakeholder.

What pre-completion searches does the buyer's solicitor make in registered land, and what protection do they give?

An OS1 search at HM Land Registry, which gives a priority period of 30 working days during which the buyer can register the transfer free of any new entries. A bankruptcy search (K16) is made against an individual buyer relying on mortgage finance.

What is the equivalent pre-completion search in unregistered land and what priority does it confer?

A Land Charges (Form K15) search against the names of estate owners, giving a 15 working-day priority period in which to complete the purchase free of newly registered charges.

What are the main methods of completion of a property transaction and the most common code used?

Completion is usually effected by post under the Law Society's Code for Completion by Post, with the buyer's funds transferred to the seller's solicitor, who then dates the transfer deed (TR1) and releases the title documents.

What must the buyer's solicitor do at the post-completion stage in registered land, and within what time limits?

Pay any Stamp Duty Land Tax / Land Transaction Tax and submit the return (within 14 days for SDLT), then apply to register the transfer (and any new charge) at HM Land Registry within the OS1 priority period (30 working days).

What is the 14-day rule for SDLT, and what is the consequence of missing it?

An SDLT return and payment must be filed within 14 days of the effective date of the transaction (usually completion). Late filing/payment results in penalties and interest charged by HMRC.

Under the Standard Conditions of Sale, when does the contractual completion date fall and what is the effect of failing to complete on that date?

Completion is 20 working days after exchange (SCS 6.1.1) unless otherwise agreed; time is NOT of the essence initially, so failing to complete on the day is a breach giving rise to compensation but not immediate termination.

What is a notice to complete, how long does it run, and what is its effect under the SCS?

A notice served by the ready, able and willing party making time of the essence. Under SCS 6.8 it gives 10 working days (excluding the day of service) to complete; failure to comply allows the innocent party to rescind, forfeit/return the deposit and pursue damages.

How is compensation for delayed completion calculated under the Standard Conditions of Sale?

The defaulting party pays compensation at the 'contract rate' (default: Law Society interest rate = 4% above Barclays Bank base rate) on the purchase price (less any deposit if the buyer is in default) for the period of delay (SCS 7).

What remedies are available to a seller where the buyer fails to complete after a notice to complete expires?

Rescind the contract, forfeit the deposit, resell the property, and claim damages for any loss (e.g. shortfall on resale and costs) — though the seller must give credit for the forfeited deposit and cannot recover more than its actual loss.

What is the difference between a lease and a licence, and what is the key case?

A lease grants exclusive possession for a term at a rent and creates a proprietary interest binding third parties; a licence is merely a personal permission to occupy. Street v Mountford established that exclusive possession for a term generally creates a tenancy regardless of the label used.

What three characteristics must be present to create a valid lease (Street v Mountford)?

Exclusive possession, for a fixed or periodic term (certainty of duration), at a rent (though rent is not strictly essential). The arrangement must also satisfy the relevant formalities.

What is the formality requirement for creating a legal lease, and what is the 'short lease exception'?

A lease must generally be made by deed and, if over 7 years, registered with its own title. A legal lease for 3 years or less taking effect in possession at a market rent (best rent without a premium) can be created orally or in writing (s.54(2) LPA 1925).

Distinguish privity of contract from privity of estate in leasehold covenants.

Privity of contract binds the original parties to the lease for its whole term; privity of estate is the relationship between the current landlord and current tenant by virtue of holding the estate. Both can determine who is liable to enforce or perform leasehold covenants.

How does the Landlord and Tenant (Covenants) Act 1995 change the liability of an outgoing tenant on assignment of a 'new' lease?

For leases granted on or after 1 January 1996, the outgoing tenant is automatically released from the covenants on a lawful assignment, abolishing continuing original-tenant liability — though the landlord may require an Authorised Guarantee Agreement (AGA) guaranteeing the immediate assignee.

What is an Authorised Guarantee Agreement (AGA)?

An agreement under the LT(C)A 1995 by which an outgoing tenant guarantees the performance of the lease covenants by the immediate assignee only (not subsequent assignees). It can lawfully be required on assignment where the lease permits.

In a commercial lease, what is an 'alienation' clause and what are the common types of restriction?

A clause controlling the tenant's ability to deal with the lease (assign, sublet, charge, share occupation). Restrictions range from absolute prohibition, to qualified (consent required), to fully qualified (consent not to be unreasonably withheld). Under s.19(1) Landlord and Tenant Act 1927 a qualified covenant is converted to a fully qualified one.

What is the structure of an 'upward only' rent review clause in a commercial lease, and what is its purpose?

A clause allowing the rent to be reviewed (commonly every 5 years) to open market rental value but never below the current rent. It protects the landlord's income against market falls while capturing increases.

What protection does the Landlord and Tenant Act 1954 Part II give business tenants, and how is it excluded?

It gives qualifying business tenants security of tenure — a right to a new tenancy on lease expiry unless the landlord establishes a statutory ground. It can be 'contracted out' before completion by the landlord serving a warning notice and the tenant making a simple or statutory declaration.

List the main ways a lease can be terminated.

Effluxion of time (expiry of a fixed term), notice to quit (periodic tenancy), surrender, merger, forfeiture, disclaimer, frustration, and the exercise of a break clause.

What is forfeiture, and what must a landlord do before forfeiting for breach of a covenant other than rent?

Forfeiture is the landlord's right (where the lease contains a forfeiture/re-entry clause) to terminate the lease for breach. For non-rent breaches the landlord must serve a s.146 Law of Property Act 1925 notice specifying the breach, requiring remedy if remediable, and requiring compensation, before re-entry.

What relief from forfeiture is available to a tenant?

The tenant (and sometimes sub-tenants/mortgagees) may apply to the court for relief from forfeiture; if granted, the lease is reinstated as if never forfeited, usually on condition the tenant remedies the breach and pays the landlord's costs.

What is the effect of a 'break clause' and why is strict compliance important?

A break clause allows the landlord or tenant to end the lease early by serving notice. Conditions (e.g. vacant possession, rent paid up to date) and notice formalities must be strictly complied with; minor errors can invalidate the break, as break clauses are construed strictly.

What are the lender's two key concerns when taking a mortgage over property, summarised as the two limbs of investigation?

Title (that the borrower has good and marketable title the lender can rely on and enforce against) and value (that the property provides adequate security for the loan). The lender's solicitor reports on title and the lender obtains a valuation.

What is a lender's power of sale as mortgagee, and when does it arise and become exercisable?

The power of sale arises when the mortgage is made by deed and the legal date for redemption has passed (s.101 LPA 1925). It becomes exercisable when, e.g., notice requiring repayment has been served and 3 months have elapsed, interest is 2 months in arrears, or there is a breach of another covenant (s.103 LPA 1925).

How must a mortgagee apply the proceeds of sale under s.105 LPA 1925?

In order: (1) discharge prior incumbrances; (2) pay the costs and expenses of sale; (3) discharge the mortgage debt, interest and costs; and (4) pay any surplus to the next subsequent mortgagee or, if none, to the borrower. The mortgagee holds the surplus on trust.

What is the standard rate and band structure for residential SDLT, and how is the headline figure calculated?

Residential SDLT is charged on a progressive 'slice' basis: each portion of the price within a band is taxed at that band's rate (for example $0\%$ up to the nil-rate threshold, then $5\%$, $10\%$ and $12\%$ on higher slices). The total is the sum of the tax on each slice, e.g. on a price $P$ the charge is $\sum_i r_i \times (\text{slice}_i)$. Higher rates apply to additional dwellings.

What is the equivalent of SDLT in Wales, and which body administers it?

Land Transaction Tax (LTT), administered by the Welsh Revenue Authority. It applies to land transactions in Wales instead of SDLT and has its own bands, rates and a 30-day filing deadline.

When is the grant of planning permission required, and what is 'development' under the Town and Country Planning Act 1990?

Planning permission is required to carry out 'development', defined as the carrying out of building, engineering, mining or other operations in, on, over or under land, OR the making of any material change in the use of land or buildings (s.55 TCPA 1990). Some development is permitted by the General Permitted Development Order without an express application.