Pre-Contract Matters II
Contract and Title Issues
A buyer is deemed on notice under the standard conditions of the terms of title on which the property is held. This may include, for example, the terms of the lease under which the property is held, and covenants, rights, conditions, liabilities and restrictions in the title listed in the draft contract. He is deemed bound by them whether or not he inspects, and is deemed to purchase the property with full knowledge
Conditions may preclude the buyer from raising enquires regarding title and matters affecting the property dating from prior to the so-called root of title or during the period from the date of a very long and old lease under which the property is held and assignments of it at some date in the past. These concepts are explained in another next chapter. However, if there is any such rights or interests which appear to affect the property in a material way, they should be investigated prior to contract.
Insurance
Formerly the obligation to insure and the risk in the property passed to the buyer on signing the contract. The more recent editions of the Law Society contract leaves this risk with the seller until completion.
Insurance will be an important matter as the buyer will want to obtain comfort that he can obtain insurance on reasonable terms. If for example, the property is subject to flooding or other risks, such insurance may not be available or may not be available on economic terms.
Identity
Issues regarding the identity of the property are effectively pre-contract enquiries. The standard contract provides for the sale of that which is described in the legal title. It is, therefore, necessary for the buyer to establish that the property as appears with its physical ordnance survey boundaries, conforms with the title.
The issues of identity and services should be dealt with pre-contract. The standard contract tends to sell a parcel of land as it is, without regard to whether and how it is used. It is debatable as to what extent title challenges may be made post-contract if, for example, there are no easements and rights for the supply of water and other services.
Easements, Access and Services
The standard contract obliges the seller to disclose easements rights, privileges, charges and liabilities known to the seller to affect the property or likely to affect it following completion. Subject to this, it is declared that the buyer is deemed to buy the property with full notice of the actual state and condition of the property subject to all leases, easements rights, covenants and obligations affecting it and mentioned in the particulars conditions.
Where easements and rights affect the property their terms and conditions must be known and be acceptable to the buyer. Once the contract is signed it is too late to make enquiries and terminate the contract on such grounds, as the property is deemed to be taken subject to such rights.
Pre-contract enquiries should establish that there is physical access to the property to and from a public roadway. If there are private roadways, the responsibility for which does not rest with the public authority, then there should be satisfactory coherent arrangements available for the management and maintenance of those ways.
Supply lines for services should connect to a public supply at some point. Under the water services or other legislation, they generally become their responsibility of the relevant authority or statutory undertaking. It is necessary however to establish that the connection to services is lawfully in place. This may be by way of easements or simply by way of pipe laid under statutory authority to the point of contact with the public supply.
In the case of private lands between, it may be necessary to show an easement to connect supply lines from the property to and from the public supply. In the case of pipe drains and wires, connecting directly or indirectly to the public apparatus in the adjoining highway their installation and maintenance in place is generally permitted by planning permission or other consent of the authority concerned.
Easements may be deemed to be established by necessity or long use. Under the e 2009 land reforms, such easements have to be registered in order to be fully effective. Most connections to public supplies, do not rely on an easement, but on statutory rights arising from the relevant legislation.
Leases
It is critical that a buyer is familiar with the terms of the lease under which the property is held or is to be held. This will constrain the property’s use in many ways. There may be provisions for payment of rent and other sums to ground landlord.
Where the property in sale is a lease, whether at market rent or sold at a premium and held under an existing or new long lease at a nominal rent effectually equivalent to ownership, the Law Society conditions t the buyer’s rights to investigate pre-lease matters, including the landlord’s title and certain defects and lack of conformity affecting the lessor title. This may be a risk if the lease is of recent vintage or there is earlier of adverse matters predating the lease such as higher leases with unknown conditions.
If the landlord’s consent is required under the terms of the lease under which the property is held, this should be obtained pre-contract or as a pre-condition of the obligation to buy. Under the standard conditions, the seller with the cooperation of the buyer must endeavour to obtain consent, It is not obliged to issue proceedings for a declaration that the landlords’ consent is being unreasonably withheld In this situation, the buyer can exit the contract.
Local Authority Issues
There are no mechanisms in the Republic of Ireland for making formal enquiries of local authorities in relation to the exercise of formal legal powers or other local enquiries seeking local authority information in relation to designations and other relevant matters which falls short of the exercise of formal power.
Under the standard conditions, the seller must give particulars f formal notices received from public authorities prior to the sale. This covers the full range of public authority powers which might be exercised in relation to the property. See the sections on compulsory acquisition, planning law, environmental law and local government law in relation to some of the many powers which local authorities may exercise in respect of the property.
The powers may range from compulsory acquisition of the property or rights over it to requiring compliance with legislation or compliance with standards under the legislation. If any such notices are known to the seller, whether personally or in some cases deemed known, the seller is to disclose them to the buyer.
The obligation has exceptions. It does not apply if
- the buyer was aware of the matter and had notice of it.
- if the matter was apparent from the development or draft development plan of the planning authority,
- it is no longer material
- it is immaterial
- does not adversely affect the property
- it can be dealt with in the apportionment account.
In most cases, the buyer’s remedy is that he can terminate the contract if such notices or matters are not disclosed or arise prior to completion. If they come to light after completion there may be a breach of contract.
Because of the limitations in this disclosure obligation, it is prudent that buyer make appropriate enquiries in relation to the prospective exercise of legal powers in relation to the property pre-contract. As a minimum, the buyer should make a search in the planning authority’s records. See the separate section on planning law.
Management Scheme Enquiries I
The nature of pre-contract enquires are very much determined by the circumstances The default position is that the seller has little or no obligation and the risks rest with the buyer in relation to such future use and developments issues.
Many properties are part of a larger block or building and / or are serviced under a privately managed arrangement. This would apply in the case of a property which is not a stand-alone unit such as an apartment or a commercial unit within a larger block or development. However, it would also apply to houses or commercial and industrial units within, privately managed estate or industrial park where the common parks are not public and vested in the local authority.
In each of these cases, it is essential to an owner/ buyer that there is a proper scheme for the management and maintenance of the common parts. The common parts may consist of the internal common parts of a building and crucially the actual physical structure, foundation and roof. They may consist of external facilities. In the case of a privately managed estate or industrial part, they will consist of roadway and may involve a range of services such as security, lighting, cleaning et cetera on the roadway.
Management Scheme Enquiries II
It is essential that a buyer makes enquiries prior to contract with the relevant management entities in order to vouch that there is a proper legal scheme in place for the management and maintenance of the property. At the minimum, the scheme would require that control of the common parts are vested in the management company in which the buyer has an appropriate level of input. There should be mechanisms by which all various owners who benefit make a contribution. There should be some democratic control to the management company of the expenditure and management.
The distinction should be made between the management company in the strict sense and the managing agents. The management company in the strict sense is usually a corporate entity in which the common parts are vested and of which all owners should ideally be members and have voting rights and collective. In this context, the company is used as a mechanism for controlling the common part.
In the other sense of the word, the management company may to the manager which usually will be the professional agent retained by the management company/residents who will actually manage the development on its behalf.
From a buyer’s perspective, it is desirable to vouch that the obligations of the developer under the act have been complied with.
The bare existence of a legal scheme is a minimum. However, it is desirable for a buyer to make pre-contract enquiries to see that the scheme operates in practice and that there are no unexpected problems or risks. The buyer should examine the accounts of the management company. Enquiries should be made in relation to prospective claims and other risks which may impact on its funds. Ultimately with a private managed area, the various owners must contribute monies necessary to meet regular and exceptional expenditure.
Management Scheme Enquiries III
With the onset of the financial crisis, any multi-unit developments are left incomplete. Developers may have obligations to pay for the uncovered services, charges for unsold units either by law in residential cases or by contract in nonresidential cases. However, if the developer is insolvent and unable to meet this obligation, the burden will fall on the remaining owner.
It is appropriate to make a range of such enquiries to the managing agents to ascertain the actual position so that the buyer is aware of all risks and matters affecting the common area.
Enquiries should establish that the common parts are, for example, vested in the management company or that tere are binding arrangements for their transfer. If there has been a delay in the process of transfer of the common parts,this may be a matter of concern.
The Multiple Unit Development Act greatly assists in the case of residential developments. It creates mandatory rights for management companies and residents. It was enacted to deal with perceived shortcomings in management arrangements in new developments. See the separate chapters on the Multi-Unit Development Act.
References and Sources
Primary Texts
Law society of Ireland: Conveyancing 9th Ed Brennan et al.
Investigating Unregistered Title- Magee 2012
Irish Conveyancing Law- Wylie & Woods 4th Ed 2019
Irish Conveyancing Precedents- Laffoy
Irish Conveyancing Statutes – Wylie 2020 6th Edition:
eConveyancing and Title Registration quantity
Complex Conveyancing Law Society PPG Hession 2nd Edition
Registration of Deeds and Title in Ireland – Deeney 2014
UK Textbooks
Conveyaning Handbook 28th Ed. Silverman et. al (annual)
A Guide to Conveyancing Residential Property by Alan Stewart
A Practical Approach to Conveyancing (22nd ED) Robert Abbey and Mark Richards
A Practical Approach to Commercial Conveyancing and Property 5th Ed Robert Abbey