C10/11/15: Conveyancing 1 Flashcards
1
Q
What are the six key documents you should be familiar with when handling a conveyancing matter?
A
Property Information Form – TA6
Fittings and Contents Form – TA10
Contract incorporating the Standard Conditions of Sale (5th edition – 2018 revision)
Completion Information and Undertakings – TA13
TR1 - transfer form (transfer the title)
AP1 - application to change the register
2
Q
What are the two key “pivotal points” in a conveyancing transaction?
A
exchange of contracts – when the parties become legally bound; and
completion – when the purchase money is handed over in return for the title documents. In residential transactions, this is usually the day when the seller moves out of the house and the buyer moves in.
3
Q
What are the five stages of a conveyancing transaction?
A
Pre-contract
Exchange
Pre-completion
Completion
Post-completion
4
Q
What is done in the ‘Pre-contract’ stage? 1st stage
A
This stage takes the longest time.
- Take instructions/file opening
- Anti-money laundering, Client identification, Due diligence
- Seller’s conveyancer checks title, drafts contract and preps TA6 and TA10 for package, obtains early redemption figures for mortgages
- Buyer’s conveyancer submits searches, considers surveys and resolves client’s financing.
5
Q
What is done in the ‘Exchange’ stage? 2nd stage
A
- Conveyancers exchange contracts.
- Seller and buyer are now legally bound, neither can withdraw without financial consequences.
- Usually, buyer pays a deposit on exchange of 10% of purchase price
6
Q
What is done in the ‘Pre-completion’ stage? 3rd stage
A
- Seller and buyer will be booking removals and packing.
- Seller’s conveyancer will:
+ TA13 completed sends to buyer
+ ensure seller signs the transfer document (prepped by buyer’s conveyancer)
+ obtain up-to-date redemption figures on any mortgages that the seller has on the property being sold - Buyer’s conveyancer will:
+ Draft TR1 form
+ Carry out pre-completion searches
+ Obtain the buyer’s funding to purchase the property (usually requesting drawdown of the mortgage advance from a lender) and do mortgage deed.
7
Q
What is done in the ‘Completion’ stage? 4th stage
A
- This will be on the moving date.
- Seller will move out and buyer will move in.
- Buyer’s conveyancer must pay the completion money to the seller’s conveyancer.
- On receipt of the funds, the seller’s conveyancer will contact the estate agent to release the keys to the buyer.
8
Q
What is done in the ‘Post-completion’ stage? 5th stage
A
- Buyer and seller have moved, nothing more to do on their end.
- The seller’s conveyancer must:
+ Pay off the seller’s mortgage with the 90% of purchase money from buyer, if any
+ Date and send the TR1 transfer document to the buyer’s conveyancer
The buyer’s conveyancer must:
+ Submit the stamp duty tax (SDLT) return and pay any stampy duty land tax that is due to HMRC.
+ Make the AP1 application to change ownership of the property with HMLR.
N.B. There are strict time limits for both of these tasks.
9
Q
Why are “checklists” important?
A
A checklist will set out the key stages in the transaction which the conveyancer must carry out before moving on to the next step. Hopefully this ensures that no important aspects are forgotten about.
10
Q
What does it mean to “synchronise” a related sale and purchase?
A
When a seller is moving on to another house, most do not want to incur the cost/inconvenience of putting their furniture etc into storage - they want to move on the same day. This is known as “synchronising” the sale and purchase. Where clients have a sale and purchase which are dependent on each other, these are known as “related” transactions (they might also be referred to as “linked” or “dependent” transactions).
11
Q
What sort of information are you going to need from a new conveyancing client?
A
Full names and addresses of sellers
Contact details
Identification details
Names and addresses of buyers and their conveyancers
Full address and agreed sale price
Details of estate agent
Confirmation of EPC
Green Deal scheme?
Existing mortgage on property?
Any other adult occupiers of property other than seller
Where title docs are held
Additional/Excluded items from the sale
Items to be sold for additional cost
Time constraints or suggested completion date
Related/linked purchase
Specific instructions
12
Q
What is an EPC? What do they contain and how long are they valid?
A
An EPC is an Energy Performance Certificate. It is a certificate, prepared by an accredited energy assessor, which gives the home an energy efficiency rating between A and G (least efficient). It also includes an environmental impact rating between A and G, which measures the home’s impact on the environment in terms of carbon dioxide emissions. EPCs are valid for 10 years, or until a newer EPC is provided. The EPC can be reused as many times as needed within the 10-year period.
13
Q
When would a new-build get an EPC?
A
As soon as it is physically completed (provided by the builder). If it is being sold before it is finished, the seller will need to produce a predicted energy assessment (PEA), replaced by an EPC once the building is completed.
14
Q
Which piece of legislation requires an EPC?
A
The Energy Performance of Buildings (England and Wales) Regulations 2012.
15
Q
Who must provide an EPC when selling and when?
A
It is the seller’s/estate agent’s legal duty to make an EPC available to a prospective buyer at the earliest possible opportunity. The deadline to provide on is 28 days (max 7 days of property on the market to find it, 21 days to prepare one if not found).
16
Q
What happens if a seller does not provide the buyer with an EPC on purchase of the property?
A
A fixed £200 civil penalty charge for non-compliance, enforceable by trading standards officers.
17
Q
What kind of properties do not need an EPC?
A
Buildings that will be demolished, holiday accommodation and certain temporary buildings.
18
Q
What is the “Green Deal”? Why is it important to check if this is relevant?
A
The Green Deal scheme enables property owners to make energy efficiency improvements, such as installing replacement boilers, cavity wall insulation, double glazing and new heating systems without the necessity of making any up-front payment. Although property owners may choose to pay for the work themselves, they may use finance under a Green Deal plan, a type of loan which is paid back through the property’s electricity bill. The loan remains attached to the property rather than to the individual taking out the loan, hence the relevance to conveyancers where a property has existing Green Deal finance in place. The new owner (i.e. the buyer) will be responsible for the payments and will take them over with the property unless the loan is paid off on sale.
19
Q
When did the original Green Deal scheme run?
A
2013 - July 2015. Around 10,000 properties used it.
20
Q
What happens if the buyer was not notified about the Green Deal payments?
A
If a buyer buys a property that is subject to a Green Deal plan and does not know about it because it has not been disclosed, the debt may be left with the existing seller.
21
Q
What is a NHBC warranty or equivalent?
A
It is a National House Building Council warranty. This is an insurance policy that protects the home, for the first 10 years of its life, against certain defects in the property.
22
Q
What preliminary steps should you take for a seller?
A
- Take instructions and Open a file
- Write to seller clients with client care letter and CILEX CoC or SRA Codes (and sometimes property information form (PIF) and fittings and contents form)
- Write to estate agent to get a copy of the memorandum of sale and EPC
- Write to buyer’s conveyancer, informing them that they are instructed and they will be sending them a draft contract in due course.
- Check seller’s title by obtaining deeds from lender (if unregistered) or obtain office copies of title from HMLR (if registered)
- Obtain an early redemption statement. from lender.
23
Q
How do you establish whether the seller’s land is registered or unregistered?
A
The seller’s conveyancer must use HMLR Portal to check the Map Search service, HMLR’s computerised map based on the ordnance survey map. This map provides an index of the land in every registered title. The certificate of result will show whether or not the land searched is registered, the title numbers that affect and the type of registration has been disclosed.
24
Q
What is the difference between the Map Search and the SIM search?
A
The SIM search is an index map search (SIM). The index map contains information on all land and property that is registered or being registered with HMLR. This facility is available via the Portal or, if making a postal application, using a SIM form.
The important difference between the Map Search and the SIM search (other than the Map Search being free) is that the SIM is an official search meaning that HMLR checks the boundaries of the property being searched against and the search result will have the benefit of the indemnity provisions (Sch 8 LRA 2002).
25
What is a “caution against first registration”?
It is one of the reasons why the index map search is an essential part of the investigation of title and any transaction involving unregistered land.
A caution against first registration - it cautions that some claim adverse to the title of the application may have been registered. The other reason is that the land, or part of it, may have been registered already,
26
How do you obtain “office copies” of registered title?
You obtain them from HMLR. Electronically, these can be obtained via a search provider or from HMLR via the Portal. Alternatively, you can use the form OC1 to give the details of the title number (if known) and the property.
The official copies will be accompanied by the title plan for the property and any available documents referred to on the registers.
27
How do you obtain the title deeds in unregistered land?
If the land is unregistered, the deeds may be with a lender, a bank or being held personally by the client at home. If the deeds are with a lender, some allow conveyancers’ firms to request the deeds by email with a title deeds request form. Details would include:
Conveyancer’s name and reference
Name and address of borrowers
Account number
Reason for request (e.g. sale of property)
Confirmation that the deeds will be held to the order of the lender and returned on demand)
If the deeds are held by someone other than the lender, they may not need a redemption figure. If it is being held by the client at home, the letter will be much simpler and less formal.
28
Why is it important for a seller’s conveyancer to check the seller’s title? Give three reasons.
(1) They need to confirm that the seller will be able to convey (transfer) what they are going to contract to convey to the buyer. For instance, they must check that the seller is indeed the owner of the whole property they are selling. They also have to check which title guarantee is appropriate.
(2) They need to check whether there are any problems (defects) in the title, so that they can cater for them when drafting the contract. For instance, if it is apparent that there is a problematic entry on the register, this can be investigated. If the Protocol is being used, conveyancers should update any information contained in the register (e.g. if there has been a change of name or the death of an owner) before sending out the contract package, rather than waiting for the buyer to raise the issue.
(3) They need to see what incumbrances (matters that burden the title, such as restrictive covenants) exist, so that they can ensure that they are dealt with in the contract.
29
What is a “redemption” figure in relation to mortgaged land? Why is this important?
A ‘redemption figure’ is the amount required to redeem or pay off the mortgage loan. It is important for the seller’s conveyancer to know, as they need to check that there will be sufficient money available to repay the loan out of the proceeds of the sale. If there will be negative equity, this must be discussed with the seller client ASAP to find a way forward, i.e. increasing sale price.
30
What preliminary steps should you take for a buyer?
- Take instructions/Open a file
- Check how the client is funding the purchase
- Give survey advice
- Consider co-ownership advice
31
What funding issues does a buyer need to consider when instructing a conveyancer? Identify the key ways in which fees arise.
The client must be fully advised as to the financial aspects of the purchase, and a calculation made to ensure that the client has enough money to purchase the property and to pay all related costs.
The costs of a purchase transaction will include the following.
(1) Conveyancer’s fees – usually based on a fixed fee (e.g. £800 + VAT).
(2) Disbursements – payments to third parties, which the conveyancer has to make during the course of the transaction (i.e. expenses). These do not form part of the firm’s profits. Examples of disbursements on a purchase transaction are:
(a) search fees (see Chapter 14);
(b) stamp duty land tax (or Land Transaction Tax in Wales) (see Chapter 18); and
(c) HMLR fees (see Chapter 18).
There may be a telegraphic transfer (TT) fees where the completion money is to be sent through the banking system on the completion date.
32
What is the importance for a buyer in obtaining a survey on the property they are buying? What does “caveat emptor” mean?
“Caveat emptor” means “let the buyer beware”. Apart from the obligation not to provide incorrect or misleading information and the replies to enquiries, it is largely up to the buyer and their advisers to discover all relevant issues about the property which might affect the buyer’s decision to purchase (or, indeed, a lenders decision to lend). The seller does not have to disclose physical defects about the property which is why their conveyancer will advise them to have a survey of the property carried out.
33
What is a Valuation Survey?
Where the client is taking out a mortgage to fund the purchase, the lender will carry out a valuation, but this is limited in scope and nature. It is primarily carried out by the lender for its own purposes to ensure that the property provides satisfactory security for the loan. Although the mortgage valuation report is usually paid for by the buyer as part of the mortgage application process, the report is prepared for the lender. Thus, the buyer is not entitled to rely on the mortgage valuation report which is why the buyer’s conveyancer is likely to advise their buyer to commission their own survey.
34
What is a Condition Report?
The next step up from a valuation would be a Condition Report, which is designed to complement a lender’s valuation. It does not itself contain any valuation of the property, although a surveyor may be able to provide a valuation as a separate service (e.g. where the buyer wants a valuation as they are not having a mortgage). A Condition Report can provide a useful and affordable alternative for those buyers who might otherwise simply (erroneously) rely on the lender’s valuation, for example, in providing some reassurance where the home is modern, built from conventional building materials and is in good condition. This would be the cheapest type of survey.
The Condition Report is always carried out by a qualified Royal Institution of Chartered Surveyors (RICS) surveyor and provides information about:
the property itself (e.g. EPC rating, mains services and type of heating);
the general condition of the property;
the construction of the property;
serious defects and matters requiring urgent attention;
matters requiring further investigation (e.g. the electrical system);
any defects which could be a danger to safety; and
other issues of interest to the conveyancer (e.g. to check whether there is a warranty for replacement windows).
The Condition Report will be presented in a standardised format, using a “traffic light” rating system to highlight the various issues (a green rating indicates that no repair is currently needed and a red rating indicates a serious problem).
35
What is a HomeBuyer Report?
The next alternative is a HomeBuyer Report, a compromise between a valuation and a full structural survey. There are two types of Home-Buyer Report available: one contains a survey and valuation, and the other contains a survey only. HomeBuyer Reports are commonly relied on by buyers due to their cost. It is the most popular type of survey and is suitable for conventional properties (houses or bungalows) built of common building materials and in reasonable condition. In many cases, a buyer’s lender will agree to instruct the lender’s valuer to undertake this report at the same time as the mortgage valuation is carried out.
A HomeBuyer Report is carried out by a qualified RICS surveyor. It provides a more extensive inspection than the Condition Report and more detailed information such as advice on repairs, a list of problems which may affect the property’s value, legal issues that should be addressed by the conveyancer (e.g. whether there are adequate rights of way or whether there are guarantees for certain work or that the electrical system should be checked by a qualified person) and information about the location and local environment. Again, the report is presented in a standardised format and uses the traffic light system.
36
What is a Structural Survey?
The most detailed type of survey is an independent full structural survey, often called a building survey. Whatever the client eventually decides to do, the conveyancer should point out the advisability of obtaining an independent survey, and its advantages compared with other types of surveys.
A full structural survey may be particularly important if the mortgage loan represents a low percentage of the purchase price, since the valuation will basically be checking that the property value covers the loan. Additionally, certain types of property may require a full survey – for example, very high value property, very old or converted property, or property which has an unusual architectural design or is constructed of unusual materials. This is the most expensive type of survey.
37
What advice do you need to give to any co-owners on a purchase? How is this created and protected in registered land?
You must advise the clients on the difference between joint tenants and tenants in common.
You must:
clearly explain the types of co-ownership (joint tenancy and tenancy in common), and advise on the implications of each, related to the clients’ own situation;
ensure that the clients understand the advice, that they are both in agreement with any decisions, and that there is no conflict of interest between them; and
record the instructions and advice in writing (e.g. as part of the initial client letter).
If tenants in common, this will be indicated by the presence of a Form A restriction on the title register.
38
What is a Form JO?
Form JO might be useful, for instance, where the joint buyers have not executed the transfer deed (i.e. where it has only been executed by the seller). Joint buyers need to execute the transfer in order to enter into the declaration of trust. Where the conveyancer does not want to let the transfer executed by the seller leave the office (perhaps because of a lack of time between exchange and completion or they do not want to part with the original transfer by posting it out), they could ask the buyers to sign a form JO. This would then be sent to HMLR on registration along with the transfer and all the other relevant documents such as form AP1.
39
What is a mortgage?
A mortgage is a loan secured on property which acts as security for the money lent. For registered land, it will be registered as a charge. If a mortgage defaults, the mortgagee (the lender) can sell the property to retrieve the funds.
40
What is the test of a standard mortgage?
The test for a “standard mortgage” is that:
it must be within the lender’s normal course of activities;
lending must be a significant part of the activities; and
the mortgage must be on standard terms.
It must meet all the requirements to be a standard mortgage.
41
How else could one get a mortgage?
You can also arrange for a private mortgage, e.g. from a wealthy relative.
42
What particular issues are raised with “cash” buyers?
Need to make sure the source of funds and wealth checks are carried out. E.g “source of funds” means that the client needs to provide evidence of where their money is currently being held and typically, they do this by producing a copy of their recent bank statements to their conveyancer. “Source of wealth” requires the conveyancer to establish where that money came from, for example, whether from an inheritance, work bonus or other source.
43
Why is it important to generally check the source of funds/wealth when acting for a buyer?
The requirement to carry out these checks is part of the due diligence which a conveyancer must carry out to comply with the firm’s obligations under the money-laundering legislation.
44
What is 'separate representation'?
When acting for the lender as well as the buyer.
45
When acting for a buyer’s lender as well, why and how does the lender give instructions?
This is known as “separate representation” (the name can be misleading). A buyer and the building society or bank have the same interests in ensuring good title to the property, so there is no real reason why the same conveyancer should not act for both parties and this is what normally happens.
46
How are the CILEX/SRA Codes of Conduct relevant here in the context of acting for a lender?
According to CILEX and SRA, a conveyancer cannot generally act for both sides of a conveyancing transaction. However, nothing in those codes contain anything against acting for the lender and borrower.
SRA Principle 7 acting in the best interests of the client and Para 6.2 no conflict and substantial common interest.
47
What would happen if the conveyancer is made aware that the borrower has lost their job, the conveyancer has a duty to keep this confidential, but it may be material information for the lender?
In this situation, the duty of confidentiality would prevail, and the conveyancer would have to stop acting for the lender.
48
What does Part 1 and Part 2 of the UK Finance Mortgage Lenders’ Handbook state?
Part 1 sets out general requirements which apply to all lenders.
Part 2 contains matters which are specific to the lender in question (e.g. who to contact in case of queries, what documents the lender wishes to hold, how the mortgage money will be paid (e.g. electronically or by cheque), whether the lender wants to be informed about any Green Deal plan on the property and the discharge method utilised (form DS1 or electronic discharge).
49
What is the difference between the UK Finance Mortgage Lenders' Handbook and the Building Societies Association Mortgage Instructions?
UK Finance Mortgage Lenders' Handbook is general and BSA Instructions are mainly for Building Societies - only 28 of them use it.
50
What is a repayment mortgage?
A repayment mortgage relies on the buyer paying the loan back over monthly repayments, which consists partly of the capital (the loan) and partly of the interest on this loan. The advance is based on a percentage of the purchase price (e.g. 80%) depending on the mortgage lender and the property. A borrower might be able to obtain a loan in excess of the percentage which would normally be approved in their case, by paying a higher lending charge (HLC) to the lender when taking out the mortgage.
51
What is a repayment mortgage?
A repayment mortgage relies on the buyer paying the loan back over monthly repayments, which consists partly of the capital (the loan) and partly of the interest on this loan. The advance is based on a percentage of the purchase price (e.g. 80%) depending on the mortgage lender and the property. A borrower might be able to obtain a loan in excess of the percentage which would normally be approved in their case, by paying a higher lending charge (HLC) to the lender when taking out the mortgage.
52
What is a mortgage protection policy?
For a regular monthly premium, a sum is repayable on the death of the policy holder which should pay off the mortgage if the borrower dies during the term of the mortgage. Should the borrower survive the full term, nothing will be available under the insurance.
53
What is an interest-only mortgage?
This is usually the cheapest form of mortgage as the borrower makes only interest repayments each month. No capital repayment is made. Lenders are now only allowed to provide interest-only mortgages where the borrower can demonstrate there is a credible strategy for repaying the capital (e.g. from property they may own, other assets or financial resources).
54
What is an endowment mortgage?
An interest-only loan. Under this scheme, the borrower will take out a life policy for the full amount of the loan as well as taking out a mortgage as in the ordinary repayment mortgage. This life policy matures on the expiry of the term of the mortgage, or on death. The benefit of the policy is transferred (“assigned”) to the lender and the borrower repays only interest to the lender and pays the premiums on the policy to the insurance company. As some of these have not yielded sufficient proceeds for paying the loan, these mortgages are now recognised to be very risky and are rarely taken out.
55
What is a pension mortgage?
This type of mortgage is mainly for the self-employed. Under this scheme, the borrower pays interest only to the lender, as with the endowment policy mortgage, but at the same time they make contributions to a personal pension plan. On retirement, the borrower receives a pension from their pension plan and part of this is made into a lump sum to pay off the debt owing under the mortgage. These have declined in popularity.
56
Can a conveyancer give specific advice as to whether or not the mortgage product itself is a ‘good deal’?
No, the conveyancer cannot give specific advice as to whether or not the mortgage product itself is a “good deal” or suitable for the buyer’s circumstances.
57
What is a mortgage deed?
The mortgage deed is usually a standard form provided by the lender and the conveyancer will add their client’s details and those of the property. The buyers must execute it as a deed. This means that all borrowers must sign the mortgage deed and their signatures must be witnessed.
58
What is the mortgage guarantee scheme?
The mortgage guarantee scheme is a government initiative to help homebuyers with small deposits to get on – or up – the property ladder. The initiative supports banks and building societies that offer 95% loans, meaning buyers only have to raise 5% themselves, on a house worth up to £600,000. The scheme encourages lenders to offer these deals in uncertain times as they can buy a guarantee on the portion of the mortgage between 80% and 95%. If a borrower gets into financial difficulty and their property is repossessed, the government will then cover that chunk of the lender’s losses. Ninety-five per-cent loan-to-value mortgages are often seen as riskier by banks as they are more vulnerable to falling property prices, when there is a risk that people hold more debt than their home is worth.
59
What are the key terms found in a typical mortgage deed?
Redemption date - traditionally 6 months after mortgage date. This date means the client can redeem the mortgage and the lender’s power of sale arises after it passes.
The covenant to repay - refers to the stated instalments of capital, interest or both that are due each month.
Further covenants - e.g. not letting the property, or something that could adversely affect the lender's rights should it wish to exercise its power of sale.
Miscellaneous clauses - e.g. provision for making further advances, or for the property to be insured at the borrower’s expense.
Remedies - these are the ones available to the bank should the client default, e.g. rights to take possession, appoint a receiver, sell the property or foreclose.
60
What is foreclosure?
Foreclosure is a rarely used common law remedy. It means that the mortgagee would take over all the mortgagor’s rights so that the mortgagor would lose the property entirely.
61
Will lenders use the power of sale often?
The power of sale is usually the most important remedy and, as stated above, it can be exercised only where there is a specified default, such as the client’s failure to pay mortgage instalments.
While lenders do have the right to exercise their power of sale, they are slow to use it, giving the borrower every chance to remedy the default. Should the lender have to sell the property, there is a statutory obligation to obtain the best possible price and, after repayment of the mortgage and other costs, to repay any balance to the borrower.
62
What is the CH1 form used for?
HMLR has developed a standard form that can be used for registered charges if wished. It is called CH1 (legal charge of a registered estate), but it is not compulsory and most lenders use their own forms of charge (usually pre-approved by to avoid any problems).
63
What remedies are available to a lender?
Rights to take possession, appoint a receiver, sell the property (power of sale) or foreclosure.
64
Why is it important to obtain a non-owning occupier’s consent for the lender?
Where an adult non-owner/borrower is to occupy the property with the borrowers, they will be required to complete an occupier’s consent form. Lenders are generally very cautious about occupiers. This is because of the conflict between the interests of the occupier and the interests of the lender/borrower, and also the possibility of the borrower exerting undue influence on the occupier to sign the clause. To avoid a conflict of interest, and to counter any suggestion of undue influence (which might lead to problems with the validity of the mortgage), the lender must take reasonable steps to ensure that the occupier understands the nature and effect of the transaction. This normally means that the conveyancer for the lender should ensure that the occupier takes independent legal advice, and that this recommendation should be in writing.
This confirms the occupier’s agreement that any right of occupation or interest in the property that they may have, now or in the future, is postponed and subject to the rights of the lender. This is done because the lender will be concerned that the occupier could have an interest in the property which might be binding on the lender and prevent the lender from selling with vacant possession should the borrower default. The occupier’s name will be inserted in the form and the occupier must execute it. The borrower’s conveyancer should recommend that the occupier takes independent legal advice before signing.
65
Who mustn't the conveyancer advise according to the UK FML Handbook?
The UK Finance Mortgage Lenders’ Handbook states in its standard instructions that the conveyancer must not advise the following people, and must arrange for them to seek independent legal advice:
- any borrower who does not personally benefit from the loan;
- any guarantor; and
- any person intending to occupy the property who is to execute a consent to the mortgage.
66
How does a conveyancer “report” to the lender?
A conveyancer must contact the lender if there are any issues that arise, such as incorrect spelling of the borrower’s name or finding an adverse search result in the survey. Conveyancers should always seek their buyer client’s consent before contacting a lender. If the buyer refuses the consent, the conveyancer will have to cease acting.
67
What is a “certificate of title”?
A certificated of title is a standard document which must be completed and returned to the lender within the timeframe required by them to enable the conveyancer to request drawdown of the loan.
It is a short document but incorporates a long form of certificate of title by reference. Understand that the certificate of title has two functions:
(1) It acts as a request for the mortgage advance to be sent to the buyer’s conveyancer’s client account by the date specified in the certificate.
(2) It acts as confirmation by the buyer’s conveyancer to the mortgage lender that all matters of title are satisfactory and that the property represents good security for the loan.
68
What “pre-completion searches” must be done on behalf of the lender?
The buyer’s conveyancer will have to carry out pre-completion searches, which in this case are being done for both the buyer and the lender.
In registered land transactions, the official search will be made at HMLR. The search, if made in the name of the buyer, does not protect the lender. The application for the search (e.g. form OS1) should therefore be completed to show that the search is being made in the name of the lender. This search then also protects the buyer, so only one search needs to be done.
The lender will also require a bankruptcy search against the buyer’s full names from the Land Charges Department. This is to check that the buyer is not affected by any bankruptcy proceedings and is not in financial difficulties.
69
What must a conveyancer do after completion on behalf of the lender?
Following completion, the buyer’s conveyancer must make the registration application to HMLR and must ensure that the mortgage lender’s charge is registered. Following return of the Title Information Document, the buyer’s conveyancer must check that the charge has been correctly registered. They must then establish what documentation the lender wishes to hold, since this varies between lenders, and send whatever is required (usually with an accompanying schedule of enclosures).
70
What is a further advance?
A further advance is made when a borrower wants to borrow more money from their existing lender. The advance will simply be added to the existing mortgage, and there will be revised repayment arrangements.
71
What is a second mortgage?
A second mortgage is a separate and further mortgage. A buyer does not have to obtain this from the lender which gave the first mortgage.
72
What is the significance of second and subsequent mortgages on the property?
Whoever gave the first mortgage, whether it be bank or building society, will be protected by way of a register entry, the second lender will have to protect itself as well. In registered land, protection is by an entry on the register. The second and subsequent mortgages are entered below the first registered charge in the charges register of the borrower’s title and rank in the order in which they are registered.
E.g. For example, imagine that Henry has taken out three mortgages on his property. The first mortgage was to fund his initial purchase in 2000. The second mortgage was to build an extension in 2005 and the third mortgage was to build a garage in 2016. Each mortgage was protected on the register at the time it was granted.
(1) National Building Society - 15 November 2000
(2) Blue Horse Home Loans - 17 August 2005
(3) Sontondar Finance - 23 October 2016
In this case, there are three registered mortgages. They would appear in the charges register in the order set out above. They would rank in the priority order shown, so if the lender repossessed and sold the house, National Building Society would be paid off first, then Blue Horse and then Sontondar.
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What is a “remortgage”?
Some borrowers may wish to remortgage their property. This normally means changing from one lender to another (e.g. from Blue Horse Home Loans to National Building Society). This is usually done to obtain more favourable mortgage terms, such as a lower rate of interest, improved mortgage conditions or a higher loan amount.
If this is the case, the legal work involved is similar to that undertaken to redeem an existing mortgage and to take out a new mortgage (as described in this chapter). The existing charge will be redeemed using the new mortgage advance.
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What is the Help to buy ISA?
One part of the scheme consists of loans to enable buyers to purchase property with a lower deposit than usual. There is also a Help to Buy shared ownership scheme, offering buyers the chance to purchase a share of a home and to pay rent on the remaining share. There are also Help to Buy ISAs, whereby savings are boosted by a government bonus. It has not been possible to open a new Help to Buy ISA since November 2019, but account holders can pay into existing accounts until 2029. LISAs now give a government bonus.
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What is the help to Buy Equity Loan?
The government also offers a “help to buy equity loan” which enables an eligible borrower to obtain a low interest loan to help them purchase a property. The main eligibility criteria are:
the home must be a new build;
the purchase price must be up to £600,000 in England (or £300,000 in Wales); and
the home must be the only one owned by the borrower and must not be sub-let or rented out after the purchase.
The borrower must have a 5 per cent deposit available and the government will lend up to 20 per cent of the purchase price (or up to 40 per cent of the purchase price in London). A mortgage lender will make up the balance of the purchase price. There are set procedures to follow when dealing with a help to buy equity loan. It will appear as a mortgage on the charges register of the buyer’s title after the loan from the institutional mortgage lender.
