## Question 1 A solicitor is advising a couple who wish to buy their first home together and are considering various mortgage options. The solicitor explains that a standard repayment mortgage involves repaying both the capital and the interest over a set period of time. For the couple to fully comply with regulatory requirements in the context of a standard repayment mortgage, which of the following actions must they ensure is completed? - A. Submission of annual income statements to the mortgage lender. - B. Having a direct debit in place for monthly repayments. - C. Securing a home insurance policy approved by the mortgage lender. - D. Registering the mortgage deed with the Land Registry. - E. Announcing the mortgage in a community newsletter.

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The correct answer is D. Registering the mortgage deed with the Land Registry is a crucial legal requirement for ensuring that the mortgage is legally binding and enforceable against the property. This records the mortgagee's interest in the property. Option A is incorrect because there is no continuous requirement for submission of annual income statements to the mortgage lender under regulatory standards for a standard repayment mortgage. Option B is incorrect as having a direct debit in place for monthly repayments, while advisable, is not a legal mandate for regulatory compliance. Option C is incorrect because securing a home insurance policy approved by the mortgage lender, while common practice and often a lender's requirement, is not explicitly a legal regulatory requirement in the context of mortgage compliance. Option E is incorrect as there is no requirement or standard practice entailing the announcement of a mortgage in a community newsletter for regulatory compliance or otherwise.

## Question 2 A developer is purchasing several plots of land in Wales with the intention of constructing a residential housing estate. The total cost for the land amounts to £1,500,000. The developer already owns multiple properties and the land purchase will not be their main residence. What advice should you provide regarding their liability for Land Transaction Tax (LTT)? - A. They are exempt from LTT because the land is intended specifically for residential development purposes. - B. LTT is payable at standard commercial rates without surcharges since the project is for commercial development. - C. They must pay LTT at standard rates plus an additional 3% surcharge as they already own multiple properties. - D. They are required to pay a fixed administrative fee regardless of land value for housing development projects. - E. No LTT is payable because the development promotes residential housing and community growth in Wales.

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The correct answer is C. The developer would be liable to pay the standard LTT rates plus an additional 3% on the entire cost of the land, given that the purchase is not for their main residence and they own multiple properties. Option A is incorrect because acquiring land for development does not exempt the buyer from LTT; LTT is due on all land transactions over a certain threshold. Option B is incorrect as it ignores the fact that additional rates apply for purchasers owning more than one property, irrespective of the project's nature. Option D is incorrect since LTT charges are not replaced with a fixed fee, regardless of the intended use of the land. Option E is incorrect because the promotion of residential housing does not exempt the transaction from LTT.

## Question 3 A law firm has been managing a commercial lease agreement for a luxury boutique in a prime shopping district. The lease contains a strict covenant against subletting without the landlord's express written consent. Noticing the potential for higher returns due to an upcoming holiday season, the tenant decides to sublet a portion of the boutique to a high-end jewelry retailer. Believing this action would significantly increase foot traffic and not wanting to miss the opportunity, the tenant proceeds without obtaining the landlord's written consent, as required by their lease agreement. Has the tenant breached the leasehold covenants? - A. Yes, because subletting without consent automatically constitutes a breach of leasehold covenants. - B. No, because the subletting would potentially increase the property's value and is therefore in the landlord's best interest. - C. No, because temporary arrangements like these do not require the landlord's consent under property law. - D. Yes, but only if the landlord suffers financial losses from the subletting arrangement. - E. No, provided the tenant informs the landlord of the subletting within a reasonable timeframe after it occurs.

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The correct answer is A. The tenant breached the leasehold covenants by subletting a portion of the property without obtaining the landlord's written consent, as explicitly required by the lease agreement. Regardless of the sublet's potential to increase foot traffic or the property's value, the tenant's failure to adhere to the terms of the lease agreement constitutes a breach. Option B is incorrect because the perceived benefit to the landlord does not override the explicit terms of the lease agreement requiring written consent for subletting. Option C is incorrect because the temporary nature of the arrangement does not exempt the tenant from the requirement to obtain the landlord's written consent before subletting, as stipulated in the lease. Option D is incorrect because the breach of the leasehold covenants occurs at the moment the tenant sublets without consent, irrespective of whether the landlord suffers financial losses. Option E is incorrect because informing the landlord after the fact does not satisfy the requirement for prior written consent and still constitutes a breach of the leasehold covenants.

## Question 4 A solicitor is advising a client who has recently acquired a freehold residential property. During the conveyancing process, it was discovered that the property benefits from a right of way over the neighbour's land. This right was exercised by the previous owner but is not mentioned in the current client's title deeds. The client wants to know if they can legally use this right of way or if they need to negotiate a new agreement with the neighbour. Can the client legally exercise the right of way over the neighbour's land? - A. Yes, because rights of way are inherent to the land and do not need to be registered to be effective. - B. No, since the right of way is not mentioned in the title deeds, the client must negotiate a new agreement. - C. Yes, if the right of way has been continuously used for a period exceeding 20 years. - D. Yes, but only if the neighbour agrees to formalize the right of way in writing. - E. No, rights of way cannot be transferred to new owners unless explicitly mentioned in the deed or registered at the Land Registry.

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The correct answer is C. In England and Wales, a right of way can become legally binding through the doctrine of prescription if it has been exercised openly, without force, and without permission for a period of at least 20 years. This grants the right holder a legal easement over the land for continued use of the path. Option A is incorrect because while rights of way are considered to pertain to the land, their enforceability against subsequent owners typically requires registration or an established legal basis such as prescription. Option B is incorrect because the necessity to negotiate a new agreement overlooks the potential applicability of prescriptive rights, which can legitimize the use of the path without needing to renegotiate. Option D is incorrect because the law does not require the neighbour's agreement to formalize a prescriptive right of way; it is based on the historical use of the path. Option E is incorrect because it fails to consider that rights of way can indeed be transferred or continue to exist under certain conditions such as prescription, even if not explicitly mentioned in the deed or registered.

## Question 5 Two investors are in the process of acquiring an office building with the intention of converting it into a boutique hotel. They have come across a covenant in the title deeds that restricts the use of the property to office purposes only. They are concerned about the impact this might have on their project and seek advice on how to proceed. Which of the following is the LEAST effective way for the investors to deal with the restrictive covenant impacting their plans? - A. Negotiating with the benefitting party for a formal release of the covenant. - B. Applying to the Upper Tribunal (Lands Chamber) for the modification or discharge of the covenant. - C. Taking out indemnity insurance against potential enforcement of the covenant. - D. Ignoring the covenant and proceeding with the development, hoping it remains unnoticed. - E. Researching if the covenant has been historically breached without consequence.

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The correct answer is D. Ignoring the covenant and proceeding with the development in the hope that it remains unnoticed is the least effective method to deal with a restrictive covenant. This approach risks significant legal challenges and financial implications if the covenant is enforced. Option A is incorrect because negotiating with the benefitting party for a formal release of the covenant is a viable and direct approach to resolving restrictions that impact development plans. Option B is incorrect as applying to the Upper Tribunal (Lands Chamber) for the modification or discharge of the covenant is a legitimate legal avenue to challenge or change the terms of a restrictive covenant that affects the property’s use. Option C is incorrect because taking out indemnity insurance provides a form of financial protection against the risks associated with the potential enforcement of the covenant, making it an effective risk management strategy. Option E is incorrect because researching if the covenant has been historically breached without consequence could provide leverage or a basis for formally contesting the covenant's relevance or enforceability.

## Question 6 A vendor is finalizing the sale of a freehold retail property worth £3.5 million to a newly established property investment company. To proceed, the vendor needs assurance regarding the appropriate steps the company must take to ensure the sale agreement is executed correctly and is legally binding. What is the correct method of execution for the company to ensure the sale agreement is legally enforceable? - A. By having the agreement signed by the company's CEO in front of a public notary. - B. By using the company's seal in the company boardroom, witnessed by all board members. - C. By obtaining signatures from two directors or one director and the company secretary. - D. By the sole signature of the company secretary in the presence of two witnesses who are not employees. - E. By an electronic signature of one director, provided that it is countersigned by the company's legal counsel.

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The correct answer is C. According to the Companies Act 2006, a company can validly execute a document as a deed if it is signed on behalf of the company by two authorised signatories. These signatories can be two directors or one director and the company secretary. This method ensures the agreement is legally binding. Option A is incorrect because the presence of a public notary is not a requirement under the Companies Act 2006 for the execution of deeds or agreements by companies in England and Wales. Option B is incorrect because the use of a company's seal is not necessary for the execution of deeds, nor is it required that all board members witness the sealing. Option D is incorrect as the sole signature of the company secretary, even in the presence of two witnesses, does not meet the statutory requirements set out in the Companies Act 2006 for the execution of documents as deeds. Option E is incorrect because, although electronic signatures are generally acceptable, the requirement under the Companies Act 2006 specifies that two authorized signatories must execute the document for it to be considered a validly executed deed. The countersignature by the company’s legal counsel does not satisfy this requirement.

## Question 7 A firm is advising a small business that is planning to sublet a portion of its warehouse to another company. The lease agreement with the property owner includes a clause requiring the lessee to obtain the landlord's consent before any subletting occurs. The small business is keen to move forward quickly and is considering how best to comply with this clause while ensuring the subletting process is smooth and legally compliant. Which of the following actions is most appropriate for the firm to recommend to their client in order to comply with the lease agreement and legal standards? - A. Advise the client to proceed with the subletting and assume the landlord will not object if not informed. - B. Recommend that the client seek a quick informal agreement with the landlord over the phone. - C. Suggest sending a certified letter to the landlord, formally requesting consent for the subletting arrangement. - D. Inform the client to sublet the property and deal with any objections from the landlord later. - E. Encourage ignoring the consent requirement on the basis that the landlord might be difficult to contact.

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The correct answer is C. Advising the client to send a certified letter to the landlord, formally requesting consent for the subletting arrangement, is the best practice. This method is legally sound as it adheres to the lease agreement's terms, respects the landlord's rights, and ensures clear documentation of the request and any response received, minimizing the risk of future disputes. Option A is incorrect because proceeding with the subletting without informing the landlord can lead to breaches of the lease conditions and potentially serious legal consequences for the client. Option B is incorrect because informal agreements, especially those not documented, may fail to meet the contractual requirements for consent under the lease and can lead to misunderstandings or disputes. Option D is incorrect because subletting the property without prior consent can constitute a breach of the lease terms and can lead to legal action against the client. Option E is incorrect because opting to ignore the consent requirement disregards the contract's legal stipulations and the landlord's rights, posing significant risks of breach and subsequent legal complications.

## Question 8 An entrepreneur is planning to buy a commercial property in Wales for £160,000 to start a new business. The entrepreneur has never owned a property before and is interested in understanding the tax implications of this purchase. As the solicitor, you need to explain the differences in tax regulations for buying property in Wales compared to England, specifically focusing on the Land Transaction Tax (LTT) instead of Stamp Duty Land Tax (SDLT). Considering that the entrepreneur is a first-time buyer and the property is a commercial property in Wales with a purchase price of £160,000, what would be the LTT amount they would need to pay? - A. £0, because there is an LTT relief for first-time buyers of commercial properties up to £180,000. - B. £700, calculated as 1% of the property price over the £150,000 threshold for commercial properties. - C. £1,500, as the standard rate for LTT on a commercial property of £160,000. - D. £0, because LTT does not apply to properties under £250,000. - E. £800, calculated as 0.5% of the property price for being a first-time property owner.

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The correct answer is B. For a commercial property in Wales with a purchase price of £160,000, the LTT due would be £700. This is because the LTT on commercial properties starts at a threshold of £150,000, and the property price over this threshold up to £250,000 is charged at 1%. Option A is incorrect because the LTT relief mentioned does not specifically apply to first-time buyers of commercial properties. The threshold for not paying the LTT is applicable to all transactions under £150,000 for commercial properties. Option C is incorrect because it misrepresents the LTT rate that is applicable to the transaction amount over £150,000 and up to £250,000 for commercial properties in Wales. Option D is incorrect as it confuses the exemption threshold with higher thresholds relevant to residential properties, not commercial ones. LTT applies to commercial properties over £150,000. Option E is incorrect because LTT rates are not determined by whether the buyer is a first-time property owner but by the property price and its classification as residential or commercial.

## Question 9 A buyer is in the process of purchasing a freehold property from a seller. The contract includes the Standard Conditions of Sale (5th edition) but also has a special condition that requires the buyer to accept the property 'as is', including an unresolved right of way dispute with a third party over access to the property. The buyer is unsure about how this might affect them legally and financially in the future. What should the buyer's solicitor advise regarding the special condition relating to the right of way dispute? - A. The buyer should accept the special condition as it is standard practice to take property 'as is' after exchange of contracts. - B. The right of way dispute must be resolved before exchange, or the buyer should not proceed with the purchase of the property. - C. Negotiate to remove or modify the special condition before exchange, as unresolved right of way disputes affect property value. - D. The buyer should ensure an indemnity policy is in place regarding the dispute before agreeing to the special condition. - E. The buyer is advised to conduct due diligence but must ultimately adhere to special conditions as dictated by the seller.

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The correct answer is C. It is crucial for the buyer to negotiate the special condition regarding the right of way dispute before proceeding. Unresolved disputes about rights of way can have significant implications on the enjoyment, value, and legal ownership of the property. Therefore, challenging or seeking amendment to such conditions is a prudent step. Option A is incorrect because simply accepting a property 'as is' without seeking to understand or mitigate potential disputes can lead to significant legal and financial issues in the future. This approach does not protect the buyer's interests. Option B is incorrect because it is not always possible or required to resolve all disputes before the exchange of contracts. In some cases, negotiations or provisions such as indemnity insurance can be appropriate measures to deal with such disputes. Option D is incorrect because, while obtaining an indemnity policy is one way to mitigate the risks associated with the right of way dispute, this option does not address the advisability of accepting the special condition without attempts to have it removed or modified in the buyer's favour. Indemnity insurance should be considered as part of a wider strategy. Option E is incorrect because it does not acknowledge the agency and negotiation power the buyer holds. While conducting due diligence is crucial, blindly adhering to the seller's conditions without assessing or negotiating them can be disadvantageous.

## Question 10 A buyer has agreed to purchase a retail shop from a seller in a bustling market area for £350,000, and a 10% deposit has been paid. The contract for sale includes standard conditions of sale, with completion scheduled for 45 days from the exchange. Both parties are represented by solicitors. Two weeks before the scheduled completion, the buyer is informed that a major redevelopment plan has been approved for the market area, significantly increasing its future value. The buyer seeks to delay the completion to negotiate a lower price. Under the standard conditions of sale, how is the seller most likely to respond to the buyer's attempt to delay completion for a price renegotiation? - A. The seller must renegotiate the price with the buyer due to the change in the market's value. - B. The buyer is entitled to delay completion without penalty to assess the redevelopment's impact on the property's value. - C. The seller may claim the deposit as forfeit and rescind the contract, seeking compensation for any harm caused by delay. - D. The buyer can unilaterally lower the purchase price to reflect the anticipated increase in property value. - E. The contract automatically extends the completion date by 30 days in cases of significant redevelopment in the area.

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The correct answer is C. Under the standard conditions of sale, if the buyer attempts to delay the completion without a contractual basis, the seller has the right to rescind the contract and may claim the deposit as forfeit. Additionally, the seller can seek compensation for any losses suffered due to the delay, such as additional legal fees or a loss in property value. Option A is incorrect because the existence of a contract at an agreed price means that the seller is not obliged to renegotiate the price due to subsequent market changes; the contract price is binding unless mutually agreed otherwise. Option B is incorrect because the buyer does not have the right to unilaterally delay completion without incurring penalties, and there's no provision in the standard conditions of sale that permits delaying completion to reassess property value due to market changes. Option D is incorrect as the buyer cannot unilaterally decide to pay less than the agreed-upon price based on future developments; the contract binds both parties to the agreed terms unless both agree to renegotiate. Option E is incorrect because the standard conditions of sale do not include automatic extensions for completion due to external developments like area redevelopment; any change to the completion date would need to be agreed upon by both parties.

SQE1 FLK2 Property Practice Sample Questions July 2024