5. Pre-completion steps relevant to a freehold and/or leasehold property transaction

Question 1

What happens at Completion?

Answer 1

The legal interest is transferred through completion fo the trasnfer deed and subject to registration at HM LR.

The balance of the purchase price is paid and the keys are handed over.

Question 2

What is the Transfer Deed?

Answer 2

Needed to transer the legal title of estate to the buyer.

The transfer deed is ALWAYS required to transfer legal ownership.

A conveyance of land, or interest in it, will usually be void for the purposes or creating a legal estate unless it is made by deed (s52 LPA 1925)

Question 3

Who produces the draft transfer deed?

Answer 3

The buyer’s solicitor, using information from the contract and title deeds.

If not sending electronically, they will provide two hard copies to the seller’s solicitor.

Question 4

What does the seller’s solicitor do with the draft transfer deed?

Answer 4

Will approve/amend the draft transfer.

Will use one copy (the top copy/engrossment) as the final copy and arrange for it to be executed.

Question 5

When is a TR1 used?

Answer 5

For the transfer of the WHOLE of the land comprised within a registered title.

Or the WHOLE of the land comprised within an unregistered title.

Question 6

When is a TP1 used?

Answer 6

For the transfer of the PART of the land comprised within a registered title.

Or the PART of the land comprised within an unregistered title.

Question 7

What does Rule 58 of The Land Registration Rules 2003 state?

Answer 7

In the case of registered land, a TR1 MUST be used.

For unregistered TR1 MAY be used, but an old fashioned conveyance can also be used, although not standard practice.

Question 8

What are the exceptions for the draft transfer being drafted by the Buyer’s solicitor?

Instead drafted by the Seller’s Solicitor

Answer 8

• In a straightforward sale of whole.
• On a sale of part, will provide that the transfer is part of an annexed draft. Make the process more efficient and avoids duplicate easements, covenants and declarations in contract.
• A sale of a newbuild property by a developer. Typically a sale of part of the land comprised with registered title.

Question 9

What does the TR1 include?

Answer 9

• Title Number(s)
• Property
• Date
• Trasnferor
• Transferee for entry in register
• Transferee intended address for service
• Transfer declaration
• Consideration
• Title guarantee
• Declaration of trust
• Additional Provisions (eg. indemnity covenants)
• Execution

Question 10

What does the TP1 include?

Answer 10

Same as TR1 but also includes:

• title numbers of any affected titles by the transfer
• Additional provisions, such a definitions, rights that burden/benefit, restrictive covenants etc…
• MUST include a HM LR compliant plan on the sale of part.

Question 11

What are the execution requirements for newly granted deeds?

Answer 11

• Must be clear on the face of it that it is a deed.
• Signed by the seller, and delivered.
• Signature must be attested by witness who is independent.

Question 12

What are the special provisions for a company executing a deed?

Answer 12

Can affix the company seal if this is provided for in the AoA.

If not, the company acting by 2 directors and a secretary, or single director in the presence of an independent witness.

Best practice for any plans to be annexed to the transfer deed and signed by the signatories (no need for attestation).

Question 13

Which parties must execute the deed?

Answer 13

Seller must ALWAYS sign.

Buyer only needs to if they are entering into new covenants (indemnity covenant) or agreeing to any new declarations within the deed.

Question 14

What are pre-completion searches and enquiries?

Answer 14

Undertaken by the buyer/their solicitor.

Some are undertaken in all circumstances and the others will depend on the status of the seller and/or buyer and whether title is un/registered.

Serve to update informtion provided before exhange and confirm solvency of both buyer and seller.

Question 15

What is the pre-completion HM Land Registry Search?

Answer 15

For Registered Land MUST be undertaken.
- Updates the official copies provided and investigated pre-exchange to confirm whether any adverse inferences have been made to the title since the issue date.

• Provides the buyer’s solicitor a 30 WD priority period to submit the HM LR application to register the transfer.

Question 16

What is an OS1 Search?

Answer 16

Search with priority of the WHOLE of the land.

Against the registered title; and

Against lender if mortgage; if no mortgage against the buyer.

Question 17

What is an OS2 search?

Answer 17

Search with priority of the PART of the land.
A plan must usually be submitted with an OS2.
A new build may also be an estate plan pre-approved by HM LR.

Against the registered title; and

Against lender if mortgage; if no mortgage against the buyer.

Question 18

Where are OS1/OS2 results found?

Answer 18

OS1R/OS2R

Will clearly set out if there have been adverse entries since search from date.

If adverse entries are revealsed, requisitions should be made of the seller.

Question 19

What is the pre-completion Land Charges Search?

Answer 19

For Unegistered Land MUST be undertaken.

• Made against seller(s) only on form K15 and gives the buyer a 15 WD priority period to complete the transaction.

Meaning they will not take subject to ant land charges registered after the date of the search, provided that completion takes place within the priority period.

Question 20

What are the differences in the Priority Periods granted by OS1/OS2 and a Land Charges Search?

Answer 20

• OS1/OS2 = 30 WD, with priority given to HM LR registration.
• LCS = 15 WD, with priority given to the completion date, in which the application for first registrated should be submitted.

Question 21

What insolvency searches are carried out for individuals?

Answer 21

Registered Land: Bankruptcy only search.
- A more limited form of Land Charges search. – Made on form K16.

Unregistered Land: Bankruptcy only OR the buyer can be added to the pre-completion Land Charges (k15) when searching against the seller.

Question 22

What insolvency searches are carried out for companies?

Answer 22

Company search must be made against them for the benefit of the lender.

Company AoA must be checked to ensure that the company has the power to borrow money.

Question 23

What is a company search?

Answer 23

Checks whether the company is in existence, subject to any insolvency proceedings or procedures, and whether any fixed or floating charges have been granted over assets.

Question 24

What must the seller’s solicitor do in regards to fixed and floating charges?

Answer 24

Seller’s solicitor undertakes to dishcharge fixed charges and provide written confimration that floating have not crystralised.

Question 25

What is the priority period for a Company Search?

Answer 25

There isn’t one.

Wise to undertake them as close as possible to completion.

Question 26

What should be checked on personal inspection?

Answer 26

• General state and condition
• Occupiers who may have an overriding interest
• That all relevant fittings to be transferred are present
• That no fixtures, other than those agreed have been removed.
• Whether there are issues that remain to be resolved under the terms of the contract.

Especially important for new build properties.

Question 27

What is the Completion Information and Undertakings form?

Answer 27

Form raised by buyer’s solicitor, for completion by the seller’s solicitor. Deals with:
- Vacant possession and key arrangments
- What deeds and documents are handed over on completion
- Place, method and undertaking to adopt the code for completion
- Amount payable and seller’s solicitor’s bank details
- Undertaking to redeem/discharge mortgage and to send form DS1/3 and receipted charge to HM LR

Question 28

What is a DS1 and a DS3?

Answer 28

DS1: executed by lender confirming a charge over the whole of a registered title has been discharged. Can be discharged electronically.

DS3: executed by lender confirming a charge over part of a registered title has been discharged. Should always have a plan annexed to show part that has been released.

Question 29

What is a receipited charge?

Answer 29

Provided in the chase of a charge over unregistered land (or original mortgage with a facating receipt endorsed on it).

Question 30

Can you discharge mortgages over part of land electronically?

Answer 30

NO!!

Only those over whole via eDS1 or ED.

Question 31

What should the buyer’s solicitor do once they have confirmation of the balance due?

Answer 31

• Issue certificate of title to lender (if not already done) with any additional info required, such as pre-executed mortgage and pre-completion search results.
• Request the balance due from the client, in the form of a financial statement.

Both should be undertaken in good time to allow the funds to be transferred

Question 32

What happens at Completion?

Answer 32

• The balance purchase price is transferred to seller’s solicitor.
• Deposit is released (if held as stakeholder).
• Transfer deed and buyer’s mortgage deed are dated.
• The seller’s solicitor immediately sends the amount required to redeem any exisiting mortgage to the mortgagee via telegrpahic transfer (fulfilling their undertaking).

Question 33

What is good practice on the day of Completion?

Answer 33

• Buyer’s solicitor should call seller’s solicitor to confirm balance of the purchase monies have been sent.
• Funds should be sent via bank transfer.
• Seller’s solicitor should call buyer’s solicitor to acknowledge the funds and to agree the release of deposit and completion by dating the trasnfer deed.

Question 34

What happens if there is no completion date set on exchange of contracts?

Answer 34

The date will be 20 working days after the date of the contract.

Time will be 2pm unless amened by a special condition. If not received by 2pm, it is treated as the next day.

Question 35

What is the effect of Completion?

Answer 35

For unregistered land the legal title passes to the buyer, but will revert back to seller if not registered within 2 months.

For registered land the legal title will not pass until the disposition is registered.

Question 36

What must the Seller’s Solicitor do Post Completion?

Answer 36

• Send dated transfer deed to buyer’s solicitor.
• Registered Land: Subject to mortgage, complete DS1 or DS3 and send to relevcant mortgagees.
• Unregistered Land: Subject to mortgage, send the original legal mortgage back to mortgagee with request for endorsing the vacating receipt.
• Send the appropriate evidence of discharge to the buyer’s solicitor as soon as received - fulfill undertaking.
• Account to the client for the balance due. followding deduction of agents fee, costs and disbursements.
• Seek formal release from undertakings and close the file.

Question 37

What must the Buyer’s Solicitor do Post Completion?

Answer 37

• Check documents received from SS.
• Deal with SDLT/LTT.
• Register the charges at CH within 21 days if buyer is a company.
• Register disposition at HM LR or apply for first registration.
• Check title at HM LR to check info is correct and there are no omissions or errors.
• Send a copy of title to lender together with document required in accordance with its instructions.
• Send a copy of title to client together with any other title deeds and document not required by the lender.
• Make any needed transfers and close the file.

Question 38

How is SDLT/LTT submitted?

Answer 38

England: Form SDLT1 must be completed and sent to HMRC within 14 days of completion.

Wales: Form LTR must be completed at sent to WRA within 30 days of completion.

Both can be submitted paper or online.

SDLT5 or WRA certificate will be issued when duty paid.

Question 39

Should a charge be registered at Companies House?

Answer 39

Not a strict requirement, but seen a vitally important due to consequenes of failure to register.

Should be registered via MR01 within 21 days of creation, alongside certified copy of charge and fee.

Question 40

What are the consequences of failing to register a charge?

Answer 40

Will be void against a creditor, liquidator, or administrator of borrow.

Potential claim in negligence.

Question 41

How is the disposition registered at HM LR for REGISTERED LAND?

Answer 41

Registered via AP1 in the priority period of the OS1/OS2 search, alongside following documents:

• Evidence of discharge
• Transfer
• SDLT/LTT certificate
• Mortgage
• Certificate of Registration at CH
• Form DI to disclose overriding interests
• Relevant fee

Question 42

What is a form DI?

Answer 42

The disclosable overriding interets form, used to disclose any OI known to the buyer.

Question 43

How is the disposition registered at HM LR for UNREGISTERED LAND?

Answer 43

Registered via FR1 within two months of completion with following documents:
- Document from epitome of title.
- Pre contract searches and enquiries
- Contract
- Requisitions on title and replies
- Transfer
- Receipted mortgage
- SDLT/LTT certificate
- Mortgage
- Certificate of registration at CH
- Form DI
- Relevant fee

Question 44

Does a failure to complete by 2pm give an automatice right to rescind the contract?

Answer 44

NO
Time is not of the essence until a notice to complete is served.

Completion will be treated as complete the next working day and contractual compensation may be available.

Question 45

What is contractual compensation?

Answer 45

Payable on actual completion at the contract rate on the balance purchase price, less the deposit if the buyer is in default, for the period during which the party was in default.

Normal contractual principles for breach of contract may also be claimed for conequential losses.

Question 46

What is the effect of a notice to complete?

Answer 46

Can be served by either the buyer or seller, provided they are ready to complete. Effect is that it makes time of the essence in the contract, and gives the defaulting party 10 workiing days to complete following serivice.

If not completed, the party serving has the option to rescind.