This Practice Note looks at the importance of obtaining a survey in residential property transactions and other considerations relating to the physical condition of the property such as the information contained in replies to pre-contract enquiries, reporting on search results and inspecting the property. It also considers the relevant provisions of the Standard Conditions of Sale (Fifth Edition—2018 Revision) and lenders’ requirements. It does not consider issues arising specifically in connection with newly-built or converted properties. For further information, see Practice Notes: New Homes Quality Code and the Consumer Code for Home Builders, New home warranties and Residential conveyancing—professional consultant’s certificates. It also does not consider issues relating to the condition of a building which falls within the scope of the Building Safety Act 2022 and the liability for remedying safety defects. For further information, see Practice Note: Building Safety Act 2022—key issues in residential conveyancing. Establishing the physical condition of the property A seller of property has a limited obligation to disclose any physical defects in the property

This Practice Note is about the VAT issues that arise in residential developments. It covers: • different types of development • the implications of granting short leases • planning obligations and local infrastructure • incentives offered to buyers • disposals of surplus land and uncompleted developments, and • issues with subsequent grants of overriding leases and sales of reversions For VAT issues in commercial developments, see Practice Note: Commercial development—VAT issues. This Practice Note includes references to case law from the EU Court of Justice. For guidance on whether judgments of the Court of Justice are binding on the UK courts, see Practice Note: Assimilated law—Assimilated case law. For guidance on assimilated law (formerly retained EU law) and tax more generally, including on the bespoke approach that has been introduced in relation to VAT law, see Practice Note: Assimilated law and tax. The Court of Justice decisions referred to in this Practice Note were decided before the end of the implementation period (which the UK entered on 31 January 2020, and which ended at 11 pm on 31 December 2020). Outright

CASE HUB ARCHIVED–this archived case hub reflects the position at the date of the decision of 17 December 2019; it is no longer maintained. See further, timeline, commentary and related cases. Case facts Outline CMA Chapter I investigation into alleged price-fixing of commission fees by estate agents in Berkshire. Latest development On 15 June 2020, the CMA announced that it had secured legally binding disqualification undertakings from: (i) Mr Stephen Jones, a director of Richard Worth Holdings Limited and Richard Worth Limited (in administration); and (ii) Mr Neal Mackenzie, a director of Michael Hardy & Company (Wokingham) Limited, Michael Hardy & Company (Lettings) Limited and Geocharbert UK Limited.Mr Jones has given an undertaking not to act as a director of any UK company for a period of six and half years.Mr Mackenzie has given an undertaking not to act as a director of any UK company for six and half years. Parties • Michael Hardy & Company (Wokingham) Limited and Geocharbert UK Ltd (together, Michael Hardy)• Prospect Estate Agency Limited and Prospect Holdings

CASE HUB ARCHIVED–this archived case hub reflects the position at the date of the disqualification order of 3 July 2020; it is no longer maintained. See further, timeline, commentary and related cases. Case facts Outline CMA Chapter I investigation into alleged price-fixing of commission rates by estate agents in Somerset (Case 50235). Latest development On 3 July 2020, the High Court upheld a director disqualification order that was sought by the CMA against Mr Michael Martin for his role in the cartel. The High Court has disqualified Mr Martin from acting as a director or being concerned in the management of a company for seven years. The High Court found that Mr Martin had contributed to a breach of competition law by his former company, which owned and ran Gary Berryman Estate Agents in Burnham-On-Sea. Parties • Annagram Estate Agents Limited (trading as ‘C J Hole’) (CJ Hole)• Abbott and Frost Limited (AF) • Gary Berryman Estate Agents Ltd (GBEA) (and its parent company Warne Investments Limited; Warne Investments Limited that it held (indirectly) 100%

Planning analysis: In Manby v Hackney LBC, the High Court quashed a decision to grant planning permission after finding that the local planning authority (LPA) had unlawfully failed to assess the significance of the 45-degree rule contained in a supplementary planning document (SPD). Although the rule was guidance rather than binding policy, it was a material consideration to which the LPA was required to have regard, particularly where a neighbouring objector had expressly relied upon it.

We assume that contingency fund means a sinking or reserve fund which the tenant is contractually obliged to contribute towards by reason of a covenant in the lease. Sometimes the lease will provide that such a fund is to be built-up to pay for a one-off large expenditure to be incurred in a few years time, such as the installation of air conditioning, but in others it is more general. What the fund can and should be used for is a matter of construction of the lease itself and as such is a matter of law. See: St Mary’s Mansions v Limegate Investment Co and Morshead

This Practice Note provides a summary of some of the ways in which a residential flat development might be structured. It aims to provide an overview of different leasehold flat schemes for both developers and purchasers of residential flats. A key consideration in residential leasehold developments is ensuring that there are adequate enforceable obligations in place for the repair, maintenance and insurance of the common parts of the development (ie the structure, foundations, roof, main walls, internal and external common parts and common services). The following development schemes, and their different methods of dividing responsibility for the common parts between landlords, management companies and tenants, are considered below: • developer/landlord retains reversion and management responsibilities • developer/landlord retains reversion but contracts out management responsibilities • developer/landlord retains reversion and tenants take on management responsibilities • developer/landlord disposes of reversion and management responsibilities to the tenants • ‘criss-cross’ or ‘crossover’ scheme • ‘cat’s cradle’ scheme This Practice Note does not consider commonhold developments; for information on commonhold, see: Commonhold—overview and Practice Note: Residential flat schemes—leasehold v commonhold. Lenders’

There are a number of alternative ways in which a residential flat scheme may be established. These are discussed in Practice Note: Residential flat schemes—Alternative schemes. This Practice Note focuses on the more generic issues to consider when acting for a buyer of a flat within any residential flat scheme. For a discussion of the advantages and disadvantages of owning a freehold unit within a commonhold, as opposed to a leasehold interest within one of those residential flat schemes, see Practice Note: Residential flat schemes—leasehold v commonhold. Deficiencies in drafting Unless buying the first flat to be sold within a development, any deficiencies discovered in the drafting of the lease are unlikely to be easily resolved, because the landlord will have already granted leases to other leaseholders and cannot agree amendments to one individual lease, even if the deficiency is inconsistent with the requirements of the UK Finance Mortgage Lenders’ Handbook (the UKFML Handbook) or the Building Societies Association Mortgage Instructions (the BSA Mortgage Instructions), unless the landlord can persuade all the existing leaseholders

The Commonhold and Leasehold Reform Act 2002 (CLRA 2002) gives developers of new residential schemes a freehold option to offer to flat buyers. This Practice Note considers the advantages and disadvantages of owning a freehold unit within a commonhold as opposed to a leasehold interest. Background Before 27 September 2004, when CLRA 2002, Pt 1 came into force, leasehold tenure was the only option that a developer could sensibly offer to prospective flat purchasers. The burden of a positive obligation (eg to pay service charge, insurance rent, etc) can only run with a leasehold rather than a freehold estate. Although this defect could be circumvented on any freehold disposal of a flat by the imposition of an estate rentcharge under the Rentcharges Act 1977 (RcA 1977), the reality is that many mortgage lenders will not advance money on the security of a freehold flat (see paragraph 5.7.1 of the UK Finance Mortgage Lenders’ Handbook (UKFML Handbook) and paragraph D.24 of the Building Societies Association Mortgage Instructions (BSA Instructions)); they regard a leasehold structure

In the context of residential flat schemes, a concurrent lease is a lease of the reversion that is granted by a developer typically to a management company after it has granted the individual leases of the flats to the respective buyers of those flats. It is, therefore, an intermediate lease which ‘sits’ between the developer (as freeholder, or the owner of a superior leasehold interest) and the flat tenants. For further guidance, see Practice Note: Concurrent leases. This form of lease is sometimes also called an ‘overriding lease’. However, this runs the risk of confusion with the form of lease to which a former tenant or guarantor is entitled under section 19 of the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995). Consequently, it is preferable to use the term ‘concurrent lease’. By granting a concurrent lease to a management company, the developer can: • secure a regular income from the flats (in addition to the premiums paid by the flat tenants on the grant of the flat leases) by requiring the management

The Prudential Regulation Authority (PRA) has published discussion paper DP1/25—Residential mortgages: Loss given default (LGD) and probability of default (PD) estimation. It sets out possible options to make it easier for mid-sized firms to scale-up and compete in the residential mortgage market, and is now opening a wide discussion with industry on how best to do so. Responses are sought by 31 October 2025.

An addition to the basic nil-rate band, which further reduces the inheritance tax payable on death to the extent that the deceased has a qualifying residential interest.