5. Completion & Post-Completion Flashcards
How do buyer/sellers solicitor agree on practical arrangements for completion
Buyer’s solicitor initiates this by requesting completion information from seller’s solicitor = requisitions on title
Standard form contracts contain provisions /timetable for raising and replying to requisitions after exchange— sc 4.3.1 & scpc 7.3.1
What if buyer solicitor discovers undisclosed incumbrance or defect
they can still require it to be remedied or assert remedies for non disclosure
Form required for pre completion information
TA13 completion info and undertaking form may be required
Buyer’s solicitor should ensure replies given in response to their request for completion info are satisfactory- unsatisfactory info should be taken up with seller’s solicitor and further written enquiries raised.
Who preps transfer deed
Usually buyer
Seller may reserve contractual condition to prep transfer themselves
Form of transfer
- Transfer must be via deed to transfer legal estate in land to the buyer s 52 LPA 1925
- Transfer effects contract terms & must reflect this
- Form of transfer dependent on whether land is registered, unregistered or leasehold
Transfer form for registered land
TR1
Unregistered land transfer
- No prescribed wording exists for unregistered land
- Buyer free to choose wording subject to seller’s approval, and that it accurately reflects contract terms
- Typically prepare a Land Registry transfer
Buyer’s solicitor needs to have access to:
- Contract
- Official copy/entries unreg title deeds as the contract may refer to matters on the title that need to be repeated or reflected in the transfer
- Precedent on which to base the transfer
What happens after draft is prepared
- Once draft is prepared, 2 copies sent to seller’s solicitor for approval
- Should check that it reflects contract terms
- Under SC, seller’s solicitor is to approve or return revised documents four working days after draft transfer
- After finalised amendments, buyer’s solicitor to prepare engrossment (clean copy) of transfer - must be checked carefully and sent to seller’s solicitor for execution (signature)
- Where buyer must also execute, they should do so before it is sent to the seller- sc 4.3.2 states that buyer must deliver engrossment of transfer to seller at least 5 working days before completion
TO be valid in law, deed must:
- Clearly indicate it is a deed
- Be signed and witnessed
- Be delivered (S1 LPMPA 1989)
Signature by seller must be executed to transfer the estate s 52 LPA 1925
The buyer is required to execute the transfer if it contains
- Covenant by buyer (indemnity covenant)
- Declaration by buyer
- An application (for a restriction to be entered)
When does deed take effect
On delivery
When is a plan desirable
On a sale of part
Purpose for pre-completion searches
- To confirm information obtained about the property is still correct
- Buyer’s solicitor must ensure such searches are relevant and bear satisfactory results
When to make searches
- In sufficient time to guarantee results are received by buyer’s solicitor in time for completion
- Generally ~7 days before contractual completion date (may be left until closer to completion)
Searches may have to be repeated where:
- Period of 2 months or more between contract exchange and completion and search has not been covered by insurance
- Info received by buyer’s solicitor suggests a further search may be advisable
- Contract was conditional on satisfactory result of later searches
Does discovery on a later search entitle buyer to refuse to complete contract
no- not a matter of title
How old should searches have been at date of completion
All searches should not be more than 6 months old at date of completion
If an unexpected entry is revealed
- Contact sellers solicitor (for those adversely affecting property) and find out what the entry relates to, seek confirmation that the entry will be removed on or before completion (if possible)
- Apply for official copy of entry using Form K19
- Keep cl, lender and other solicitor involved in chain of transactions of the situation- failure to remove an entry = breach of contract
Removing entry from the reg
- MUST BE SIGNED BY THE PERSON WITH BENEFIT OF THE CHARGE OR PERSON ACTING ON THEIR BEHALF
- Application form signed by sellers solicitors to secure removal may not suffice
- Court can remove entries that are redundant at their discretion
- Entries protecting a spouses rights under FLA 96 can be removed on production of death certificate of the spouse or decree absolute of divorce
Irrelevant land charges entries
- AN entry made before or after the time the estate owner was in possession cannot prejudice the buyer
- If seller is unable or unwilling to remove adverse entry, terms of contract to be consulted to see if seller is in breach
Priority periods
- Registered
- Official certificate gives a priority period of 30 working days from cert date
- Searcher will take priority over any entry made during this period, provided completion take place
- Unregistered
- Official certificate gives a priority period of 15 working days from cert date
How is a clients mortgage discharged
- Sellers solicitor must have obtained redemption statement from lender
- Exact amount required to discharge mortgage
- Form DS1 to be prepared for signature by lender (reg land)
- For unreg, discharge shown by receipt endorsed on mortgage
Apportinment
- Where completion does not take place when outgoings are due (Rent/water rates) outgoings can be split between parties
- Calculation of apportioned sums on completion statement
- Council tax/water rate apportioned
- Inform relevant authority of change of ownership and request to send apportioned accounts to seller and buyer
- SC 6/3 deals with apportionments
- Provisional apportionment where exact figures unabilable
- SCPC 9.3 where property is subject to a lease
Completion statment
Shows amount of money required to complete transaction & how the figure was caclulated
When does purchase price have to be paid
The day on which cl moves into the new home or possesses property
Effect of completion
- Unregistered land
- Legal title passes to buyer- Registered
- Title does not pass until buyer becomes registered at LR as proprietor
- Registered
How is payment made
Payment must be paid by direct transfer of cleared funds and unconditional release of deposit held by stakeholder SC6.7/9.7
COmpletion monies should only be made from cleared funds in cl account
What happens after competion for the seller
- Reporting to client
- Cl to be informed that completion has taken place
1. Estate agent informed of completion, asked to release keys to buyer
2. Documents sent to buyer’s solicitor
3. Proceeds of sale
4. Discharge seller’s mortgage - Registered land -DS1
- If ED or e-DS1 is used
- Direct notification to LR
- If ED or e-DS1 is used
- Unregistered land
- Lender completes receipt clause on reverse of mortgage deed and forwards receipted deed to seller’s solicitor
- Letter to client to notify LA and water undertaker of ownership change and cancel insurance cover over property
- Custody of deeds
- Check file for outstanding matters
- Lender completes receipt clause on reverse of mortgage deed and forwards receipted deed to seller’s solicitor
Acting for the buyer post completion
- Complete mortgage deed
- Insert date and other info
- Complete file copies of mortgage, transfer deed and other relevant documents
- Pay SDLT
- ACcount for bridging finance (Release from undertaking)
- Send bill to client
- On receipt of completed DS1, acknowledge receipt and release seller from undertaking
- Make copies of all docs sent to LR in case requisitons are raised by LR or docs are lost/damaged pre registration
- Certify that copies are true copies
- Register title
- Form AP1 within relevant priority period (already registered) or FR1 within 2 months (first registration)
- REgister co charges
- At CH within 21 days of creation
- MR01
- Diary entry for registration recording approx date when registration will be effected and remind registry if confirmation is not received
- Discharge entries protecting contract
- Check register entries and ask for corrections if there are any errors
- Custody of deeds
- If mortgage exists→ lender for instructions
- Obtain instructions from buyer (may wish to retain custody/send to bank/safe-keeping by solicitor)
- Check file for outstanding matters
Form for registering title
Form AP1 within relevant priority period (already registered) or FR1 within 2 months (first registration)
Form to register company charge
- At CH within 21 days of creation
- MR01
Consequences of not paying SDLT
- Non payment or evasion gives rise to fines
- Must be paid to HMRC within 14 days of completion
- SDLT return must be submitted for each transaction (details of transaction and parties to it)
- Buyer personally responsible for completing tax return
Common causes of delay
- Buyer not in receipt of funds from lender
- Sellers solicitor did not get signed transfer deed
- Links in chain causing delay
What = Breach of contract
Any delay beyond contractual completion date is in breach of contract
Can innocent party terminate for delay of contractual date
- Will not entitle them to terminate unless time was of the essence (Raineri v Miles)
- Time is not of the essence unless notice to complete has been served SC 6.1/9.1
- If it is, express contractual condition must provide for this
Common law rules for interest payments
- Replaced by SC 7.2/10.3
- Payment of compensation irrespective of loss
SC 7.2
- Compensation payable at contract rate
- Law societies interest rate from time to time in force
- May be altered by special condition
- Compensation assessed using concept of relative fault - whoever is most at fault pays compensation
Calculating compensation
- refer to timetable of events establishing whether delay was caused by earlier procedural step
- Delay before completion assessed referring to working day definition in SC 1.1.1
- Once completion date has passed, every day’s delay counts towards liability for compensation
SCPC 10.3
- COntractual entitlement to compensation given to seller where buyer has defaulted and led to completion being delayed
- If seller defaults, there is no contractual right to buyer woho has to bring a claim for breach of contract
Service of a notice to complete
- Makes time of the essence to the contract
- If completion does not take place on newly specified completion date, aggrieved party can terminate immediately, forfeit and recover deposit + interest + damages claim to recover loss
SC 6.8/9.8
- On service of a notice to complete, completion must take place within 10 working days
- Buyer who has paid less than 10% deposit to pay balandce of full 10% on receipt of notice (6.8.3/9.8.3)
What are remedies dependent on
- Dependent on the breach
- Is it a condition of the contract entitling aggrieved party to terminate and/or claim damages or a
- warranty entitling to damages only
How to distinguish between warranty and condition
- Condition if it is a major or fundamental term
- Minor terms classified as warranties
Limitation period
- Claim of contract not made by deed has a limitation period of 6 years from breach date
- Made by deed - 12 years
- On completion, terms merge with transfer deed and claim on contract no longer sustainable unless it is based on a contract term which exists despite completion
- SC 7.3/10/4 contain non merger clause allowing particular clauses to remain alive post completion
Exclusion clauses
- 7.1/10.1
- Restrict remedies available for breach of contract
- Entitled to damages only where there is a material difference in value of property
- Buyer is only entitled to terminate if error results from fraud/recklesness or where they are obliged to accept property differing substantially in quality, quantity or tenure from what they had been led to expect
- Undisoclosed incumbrances only entitle buyer to damages if it causes a material difference to land
Is delayed compensation a condition
Ye
Damages for breach of contract
- assessed under contractual principles in Hadley v Baxendale
- Damages for losses naturally flowing from breach may be claimed and damages for consequential loss within reasonable contemplation
quantum
- Limited to loss within contemplation of parties in light of facts known at contract date (not at breach)
- Starting point for damages = difference between contract and market property price at date of breach
- Financial losses suffered, interest payable on mortgage/bridging loan, costs of removal/storage of furniture, costs of alternative accommodation pending purchase of another property Beard v Porter
