Monday 7 April 2025
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
I hope you had a great weekend! Please see below for the question, the answer to the previous question and associated resources. This is the web version of this newsletter.
Question: Melissa is a director of EcoGlow Ltd, a company that develops sustainable lighting products. Without informing the board, Melissa sets up a separate company, GreenLux Ltd, offering similar products to the same client base as EcoGlow. She uses her knowledge of EcoGlow’s business strategy and supplier contacts to negotiate contracts for GreenLux, diverting several lucrative clients away from EcoGlow. When the board of EcoGlow discovers this, they accuse Melissa of breaching her duties as a director and seek legal advice on possible action. Which of the following director’s duties under the Companies Act 2006 has Melissa most clearly breached?
1. The duty to exercise reasonable care, skill and diligence under section 174.
2. The duty to avoid conflicts of interest under section 175.
3. The duty to promote the success of the company under section 172.
4. The duty to declare an interest in a proposed transaction or arrangement under section 177.
5. The duty to act within powers under section 171.
Resource: Learn more about Director’s Duties by watching this video. Pick up a copy of our free study planner here.
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Answer and feedback to last week’s question: Amira is a solicitor acting for a buyer who is purchasing a freehold residential property in England for £450,000. The property is registered at the Land Registry. As part of the conveyancing process, Amira must investigate the seller’s title. The seller’s solicitor has sent a contract package, including the official copy of the title register and plan. Amira is now considering what steps to take to investigate title effectively before her client commits to the purchase. Which of the following best describes the main purpose and process of investigating title in a residential property conveyancing transaction?
1. To verify the buyer’s identity and mortgage offer so the seller can withdraw if the buyer lacks funding for completion.
2. To confirm that the seller has a valid and marketable title, check for any defects, restrictions, or third-party rights, and raise pre-contract enquiries to clarify any issues.
3. To assess the buyer’s financial position and confirm that they can afford the mortgage repayments over the next 25 years.
4. To ensure the local council has no objections to the sale and that the seller has received planning permission for the property.
5. To prepare the buyer’s Stamp Duty Land Tax return and submit the application to the Land Registry following exchange of contracts.
Correct Answer: 2. To confirm that the seller has a valid and marketable title, check for any defects, restrictions, or third-party rights, and raise pre-contract enquiries to clarify any issues. Explanation: The investigation of title is a core part of the pre-contract stage in residential conveyancing. Its purpose is to ensure that the buyer obtains good title to the property, meaning:
- The seller is the legal owner and entitled to sell.
- The title is free from unacceptable defects or third-party rights (e.g. restrictive covenants, easements, rights of way).
- There are no overriding interests (such as actual occupation) that could affect the buyer.
- Any charges or restrictions (such as mortgages) are identified and will be removed on or before completion.
Amira must also raise pre-contract enquiries (e.g., via the Law Society’s standard CPSE or TA6/TA7 forms) and consider searches (e.g., local authority, drainage, environmental) to uncover any hidden issues.
Why the Other Options Are Incorrect:
- Option 1 is incorrect: While buyer’s identity checks and mortgage offers are important, they are not the primary purpose of title investigation.
- Option 3 is incorrect: The buyer’s affordability is assessed by the lender, not by the solicitor as part of investigating title.
- Option 4 is incorrect: Although planning matters are considered during due diligence (e.g., through local authority searches), they are just one part of the broader investigation and not the sole purpose.
- Option 5 is incorrect: SDLT and Land Registry submissions occur after completion, not during the investigation of title.
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Dr Ioannis Glinavos
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