5. Completion Flashcards
What form must a valid transfer of a legal estate take? Formalities?
Must be a DEED
1.make it clear that it is a deed
2. be signed by the parties
3. be delivered
4. IF DEED IS EXECUTED BY A PRIVATE INDIVIDUAL, signature must be witnessed by an independent witness to counter potential allegation of undue influence
How can a company execute a deed?
- Using company seal in accordance with the articles of association
- Having it signed by a director and secretary, or by two directors of the company, provided that the deed is expressed to be executed by the company
- having it signed by a single director in the presence of a witness who them attests that signature
Who executes the deed?
- The seller (always)
- the buyer if they are entering into an obligation or making a declaration in the TR1 like an indemnity covenant or declaring a beneficial interest under a trust
Transfer Deed: Registered Freehold Land
Form TR1
- or TP1( transfer deed for transfers of part)
When should form TR1 be dated?
Only on completion
Form TR1: What does the buyer put for their ‘address’
Should put new address (and can include an email) so that correspondence will go to the new house
In Panel 8 of TR1: how should purchase price be communicated?
In figures as well as words (?VAT)
Land Registry Search: After Completion for Registered Land
Form OS1 for whole property or OS2 for sale of part (with title plan attached)
- will confer priority period on applicant form date of results sent
- buyer must submit application for registration by NOON on last day of priority period to take advantage
How long is the priority period with Form OS1R and OS2R
30 working days from the date of the search result
Pre-Completion Searches: Unregistered Land
Land charges search on Form K15 (results on form K18)
- Priority period
How long is the priority period conferred by form K18
15 working days
Steps for the buyer’s solicitor (pre-completion)
- Arrange for TR1 to be executed
- Pay balance of purchase price to seller’s solicitor
- Agree date of TR1
- Date mortgage deed
- Pay stamp duty land tax
- Register transfer of title at Land Registry
- Check Title Information Document when received back from Land Registry
- Deal with safe custody of Title Information Document and other papers
- Close file
Methods of a company executing a deed
- Using company seal in accordance with the articles of association
- Having it signed by a director and secretary, or by two directors of the company, provided that the deed is expressed to be executed by the company
- having it signed by a single director in the presence of a witness who them attests that signature
Who executes the deed transferring the legal estate in land?
- ‘The seller’: always
- ‘The buyer’: if they are entering into an obligatoin or making a declaration in the TR1 like an indemnity covenant or declaring a beneficial interest under a trust
What does it mean to say that a deed must be ‘delivered’
- Normally, execution = evidence of delivery but this presumption can be rebutted by a contrary intention
- If client does not want transfer to have immediate effect, should say so expressly on the covering letter to the deed
Transfer deed form for unregistered land
This will make unregistered land subject to first registration - can transfer using Land Registry transfer form or a conveyance
Who is the transfer deed normally completed by?
The buyer’s solicitor (and sent to seller’s solicitor after the exchange of contracts)
- But if very straightforward the seller’s solicitor may prepare it and include it in the pre-exchange package
Purpose of pre-completion searches
- To make sure that the seller has not further encumbered the title since investigation of title took place
- To check the financial circumstances of the borrower when acting for the lender
- To gain priority for the buyer, and the lender, over anyone else making an application
before the buyer applies to register the change of ownership at the Land Registry - If the seller is a company, to check that the company has not gone into liquidation before
the balance of the purchase price is paid over on completion.
Who normally carries out pre-completion searches
The buyer’s solicitor
Pre-Completion search of the Title: registered land
- If the title is registered, then a Land Registry search should be made against the title number to see if any new entries have been made since the ‘search from’ date, that is, the date on which the official copies were produced
- Form OS1 (Official Search 1) for whole property sale or OS2 for part sale (OS2 usually needs a plan to be sent in with the request)
If acting for a buyer who is buying with the aid of the mortgage, who should form OS1R or OS2R be completed on behalf of
Both the buyer and the lender
Priority period for OS1R or OS2R
30 working days from the search result
What is a priority period and how does it apply?
PP = protection to the applicant against subsequent entries which may be placed on the register after this search but before the buyer is registered as proprietor, buyer takes free from such entries, provided that they submit their application for registration by 12 noon on the last day of the priority period
Pre-Completion searches of the title: Unregistered land
Form K15
- Results on form K18, confers PP of 15 working days from the date of the result (during which time the searcher will take the property free of any entries made on the register between the date of the search and the date of completion, provided that completion takes place during the 15 day working period
Who must form K15 search against?
The name of the current seller
What does form OS1R search against?
The title number of the registered freehold
Registered Land: How to check for the buyer’s solvency on behalf of a lender
- S applies for LC search against the name of the buyer (as well as doing the pre-completion LR search against property’s title number)
- This is a ‘special’ land charges search (Bankruptcy Only Search) using form K16
Unregistered Land:How to check for the buyer’s solvency on behalf of a lender
S will already be making land charges search against the seller, so will add the name of the buyer to form K15 to search against
Does a company search confer a priority period on the applicant?
NO
- should be done as close to completion as possible
When a transaction is of very high value with a company seller, what else should the buyer’s solicitor check for (aside from a company search)
this may flag worries about insolvency, there should be a telephone search of the Registry of Winding up Petitions at the Companies Court on the day of completion
When would a bankruptcy search be done against an individual seller of a registered freehold?
- Generally not considered necessary as this would appear on the title and if it did not - buyer would take good title from the seller without notice
- But may be done if transaction is for a high value or there is reason to be concerned
- - S applies for LC search against the name of the buyer (as well as doing the pre-completion LR search against property’s title number)
- This is a ‘special’ land charges search (Bankruptcy Only Search) using form K16
How would a bankruptcy search be done against an individual seller of a unregistered freehold?
Form K15 search against the seller as an estate owner will reveal any entries relating to bankruptcy
How can a buyer be rest assured that the seller will discharge their mortgage over the property after they receive the proceeds of sale?
- Get their solicitor to provide an undertaking that they will do this and inform the buyer immediately
- often on form TA 13
If a buyer is funding the purchase of property with a mortgage, what will the lender want to see before giving the mortgage advance over?
- A certificate of title to confirm that the property is adequate security for the loan being advanced
- a solvency search against the borrowers
- a clear OS1R in the name of the lender
- an executed but not completed mortgage deed
How does completion occur in freehold transactions?
- SC 6.7 and SCPC 9.7: Require the completion money to be paid by direct transfer / electronic means in cleared funds from an account held in the name of a coveyancer at a clearing bank
- After getting the completion money, seller’s S will complete by dating TR1
- After TR1 is dated, the lender’s will need to date the mortgage deed (cannot be done before)
- Completion in person or completion by post
When does legal title pass to the buyer in a residential transaction of registered land?
Once the buyer is registered at the LR as proprietor of the land
When does legal title pass to the buyer in a residential transaction of unregistered land?
Upon completion
Key Post-Completion Steps: Freehold Transactions
- Discharging the seller’s mortgage
- SDLT/LTT
- Registration of the New Charge at Companies House
- Land Registry Application
Discharging a seller’s mortgage: Once the lender receives the amount they require from the seller they will:
- Complete Land Registry Form DS1 and send to the seller’s solicitor for onward transmission to the buyer’s solicitor OR
- submit an e-DS1 electronic discharge through the Land Registry portal; or
- Use the Electronic Discharge (ED) system, sending a message to LR which automatically removed the charge from the register
(for second two, buyer’s solicitor will get confirmation)
When is it necessary to register a charge at company’s house after completion of a residential transaction?
If the buyer is a company and has purchased a property with a mortgage, the lender’s solicitor will have to register the charge at companies house within 21 days of its creation (ie. at completion) to ensure constructive notice is given to other creditors of the company
Form for applying to have buyer registered as new proprietor, what must be submitted with it?
Registered Land: Form AP1
- Certified copy of transfer must be submitted with the application, along with the fee, the SDLT/LTT certificate and DS1 (if used) , Form DI setting out overriding interests
If a buyer is applying to register the lender’s charge by way of legal mortgage over their property what must be submitted to the Land Registry to register it?
- Certified copy of the mortgage deed
- if the buyer is a company, certified copy of the certificate of registration issued by companies house
- if the buyer is a company, the solicitor’s / lender’s written confirmation that the enclosed certified copy mortgage deed is the same as the one filed at Companies House (and to which the certificate of reg. relates)
If the exchanged contract does not contain the completion date agreed between the parties: what will it be?
SC 6.1.1 and SCPC 9.1.1 provide that completion is 20 days after date of the contract
- In both sets of conditions, the money due on completion must be paid before 2pm on the day of completion and if it is not, completion is to be treated as taking place on the next working day as a result of the buyer’s default (12 noon may be substituted)
- If parties cannot complete, no automatic right for non-defaulting party to terminate or rescind the contract on the contractual completion date (as both sets of standard conditions provide that time is not of the essence of the contract)
Compensation for failure to complete: when is it payable and how is it calculated
SCs: either buyer or seller pays if they fail to complete
SCPCs: only buyer would pay
Calculation
- Comp. calculated at Contract Rate on balance of purchase price, less deposit paid (if defaulting party was buyer) for period between completion date and date of actual completion (normlly 4% above barclays rate)
- If non paying party at fault for some of those days they are ignored
If compensation is payable due to a failure to complete on time, when will the paying party be required to provide such payment?
On completion
If a seller fails to complete and the buyer is claiming compensation, can they also claim damages?
Yes - but amount of damages will be reduced by whatever contractual compensation they have already received
- damages assessed on normal contract principles
When would a ‘notice to complete’ be served
- Can any other remedies be pursued?
- Notice can only be served after the contractual completion time on the contractual completion date (eg. 2pm on a contract with unamended SCPCs and SCs)
- If delay in completion likely to last a while, this notice gives 10 working days to complete (if they don’t, serving part can RESCIND)
- seller can forfeit deposit if buyer is defaulting party
- if defaulting party is seller they must repay deposit to seller
- NON DEFAULTING PARTY CAN CLAIM REMEDIES
When can a party RESCIND a contract for freehold purchase
SC + SCPCs:
1. Where a party has failed to comply with a notice to complete (see above)
2. Where there has been a misrepresentation by the seller in a plan or statement in the contract, or in the negotiations leading up to the contract
When will misrepresentation allow a party to a sale contract to rescind?
- rescission will only be allowed where the seller’s error or omission results from fraud or recklessness, or the buyer would be obliged to accept a property differing substantially from what the error / omission led them to expect
- Less serious misrep. entitles buyer to damages
Form for bankruptcy search of a buyer of registered land and corresponding priority period:
Form K16, no PP
If a bankruptcy search is necessary, when should it be conducted in the transaction?
As close as possible to the date of completion to ensure accuracy
Effect of serving a notice to complete on property transaction with SCPCs
Makes ‘time of the essence’ and the delaying party has to complete within 10 days *
Restrictions on serving a s 146 notice on tenants in dwelling houses
The Commonhold and Leasehold Reform Act 2002 s. 168 prevents a landlord from serving an effective S.146 notice in respect of any breach by a tenant under a long lease of a covenant or condition unless either the tenant has admitted the breach or it has been finally determined that the breach has occurred by the appropriate tribunal, a court or an arbitral tribunal. As we know that the client has had no dealings with the landlord apart from the payment of rent and service charges, this cannot have occurred here.
Why is a company search done against a commercial buyer?
Commonly - because the buyer is a company and they are buying with the aid of a mortgage
- So company search protects the lender
When would a K15 search be required against not just the sellers but the buyers as well:
- Unregistered Land
- Buyer is purchasing land with the aid of a mortgage
Timeline for registering a charge by way of legal mortgage at Companies House (for a commercial buyer)
Within 21 days of completion - or else it will be void against creditors
SCs: Chain of real estate transactions
the Standard Conditions provide that if the seller has agreed to buy another property in England and Wales as the seller’s residence, the seller may use all or part of the deposit as a deposit in that transaction.
Form for an assent of the whole of the registered title
Form sent alongside to change the register
AS 1
AP 1
Who should witness a transfer of land form?
An independent witness (not family member or interested party, eg.)
Freehold property transaction has not completed on the completion date: When would the non-defaulting party be UNABLE to serve a notice to complete?
If, circumstances have arisen and are such that the non-defaulting party is now unable to complete
- eg. mortgage advance delayed etc.
Form for the SDLT certificate?
SDLT 5
