C18: Conveyancing 5

Question 1

What are the key documents to check before completion?

Answer 1

The seller’s conveyancer must check they have the executed TR1 transfer.
The buyer’s conveyancer must ensure they hold a signed Land Transaction Return form and their client’s executed mortgage deed.

Question 2

What would be included in a completion checklist?

Answer 2

(1) Date the transfer to the buyer with the date of completion. Check it. Receive it from the seller’s conveyancer.
(2) Check mortgage discharge undertaking (if there is a mortgage to be paid off). Receive it [note that the undertaking might have been given in form TA13 so that there is no separate undertaking handed over on completion].
(3) Check any miscellaneous documents (e.g. old title certificates, planning consents and guarantees). Receive the originals.
(4) Hand over the balance of the purchase price to the seller’s conveyancer.
(5) Collect the keys (or ask the seller’s conveyancer to authorise their release).

Question 3

What are the three methods of completion?

Answer 3

In person
By agent
By post (most common)

Question 4

How is completion achieved in person?

Answer 4

Completion is carried out between the conveyancers in person. The buyer’s conveyancer attends the offices of the seller’s conveyancer, hands over the money and collects the requisite documentation. This method is uncommon, since it is time-consuming and requires both firms to be situated near to each other.

Question 5

How is completion achieved by an agent?

Answer 5

This method is the same as a completion in person, but the buyer’s conveyancer does not attend personally. Instead, they instruct a representative from another firm to attend on their behalf. This method is uncommon, but may be used for example where the firms are located in different towns, but the buyer’s conveyancer has a reason for requiring personal attendance (e.g. they do not feel that the seller’s conveyancer will comply with the rules for postal completion). In relation to completion by post, explain the importance of the Law Society Code for Completion by Post.

Question 6

How is completion achieved by post?

Answer 6

Seller’s conveyancer will provide replies to TA13 within 5 working days before completion date.

Technically, the seller’s conveyancer will act as agent for the buyer’s conveyancer on completion. Seller will complete for both lawyers officially.

Seller’s conveyancer confirms they are authorised by the seller to receive the money.

Buyer’s conveyancer should send full instructions (deeds, docs, mortgage discharge undertakings and keys)

Seller’s conveyancer will confirm that the completion money have been received will complete as soon as these funds have arrived.

Seller’s conveyancer undertakes that they will send written confirmation that completion has taken place and will send the deeds and docs to buyer’s conveyancer.

This is in accordance with the Law Society’s Code for Completion by Post (the Code), which is a procedural code containing provisions about completion, together with professional obligations backed up by undertakings. This is intended to provide innocent buyers with greater protection from fraudsters.

Question 7

What professional undertakings are given in the Code?

Answer 7

The seller’s conveyancer takes an undertaking that they have authority from the true owner of the title to the property to receive the purchase money and that, at the point of completion, that person is entitled to convey the title as per the contract of sale. Further, it is confirmed that the seller’s conveyancer holds the purchase money received on trust for the buyer and is under a duty not to use that money other than in accordance with the Code.

Question 8

In a chain transaction, does it matter whether the sale or the purchase comes first?

Answer 8

YES. The sale must be completed before the purchase, so that the funds are available for use on the purchase.

Question 9

What are the methods of transferring funds on completion?

Answer 9

Banker’s draft (cheque drawn by bank, safer than normal cheque) - uncommon
Transfer electronic funds via telegraphic transfer (TT) or CHAPS transfer. (includes TT fee)

Question 10

Why is it a good idea to amend the contract to allow for earlier completion of a sale where it is linked to a purchase?

Answer 10

There must be enough time between the sale and purchase in linked transactions, so that the funds are available for use on the purchase. The first transaction at the bottom of the chain must be completed early enough for all other transactions in the chain to complete that day. It may be outlined in the special conditions that completion must take place by 11am. According to the SCS, if completion takes place after 2pm, it is deemed to have taken place on the next working day.

Question 11

When should a seller allow a buyer into the property on completion day?

Answer 11

Only when they have been informed by their conveyancer that the completion money has been safely received and that completion has taken place.

Question 12

When does the title in the property pass over to the buyer?

Answer 12

In registered land transactions, title in the property passes on registration with HMLR, not the completion date. This is why a conveyancer might register an estate contract if there is going to be more than a couple of weeks between exchange of contracts and completion.

Question 13

What are the four steps taken by a seller following completion?

Answer 13

(1) Discharge any existing mortgage - the seller’s conveyancer must comply with the undertaking given in form TA13 or handed over on completion. They will pay off the mortgage and send evidence of repayment to the buyer’s conveyancer.

(2) Send TR1 - The seller’s conveyancer must send the signed and dated transfer and any other relevant documents (e.g. original guarantees or planning permissions) to the buyer’s conveyancer by no later than the day following completion, in accordance with the Code.

(3) Bill and financial statement - If the seller’s conveyancer has not billed the client before completion (as is usual), a bill of costs must now be sent and paid. This may be sent with a financial statement, if not already done.

(4) Remaining steps for the seller’s conveyancer - The seller’s conveyancer must account to the client for any proceeds of sale due to them and ask for an acknowledgment of receipt. If the client has so authorised, any estate agent’s fees must be paid. Once these matters have been dealt with, the seller’s conveyancer will check that all the accounts in respect of the transaction are clear. The file may then be closed.

Question 14

What is Stamp Duty Land Tax?

Answer 14

SDLT is a government tax, payable on land transactions above a certain value . It was introduced on 1 December 2003.

Question 15

Is SDLT a tax on transactions or documents?

Answer 15

SDLT is a tax on transactions rather than on documents. The document itself (e.g. transfer) is not stamped.

Question 16

What is meant by ‘notifiable’ in reference to SDLT?

Answer 16

For transfers of freeholds the transaction is called “notifiable”. It means even if they don’t pay tax, anything above £40,000 has to be done officially via LTRs.

Even where the value of the transaction does not exceed £125,000, the transaction is notifiable (e.g. house purchase for £80,000).

Freehold transactions where the price is less than £40,000 are not notifiable (but most house prices exceed £40,000).

Question 17

When would a LTR form be used?

Answer 17

In notifiable cases, the buyer’s conveyancer must deliver a Land Transaction Return (LTR) to HM Revenue & Customs (HMRC) together with any duty payable (SDLT1).

Question 18

If all is in order once the LTR form is sent through, what would the HMRC issue?

Answer 18

If all is in order, HMRC issues an LTR certificate (SDLT5) which is sent with the registration application to HMLR to confirm the tax has been paid. This evidences compliance with the SDLT requirements, and registration cannot be completed without it. It is therefore a very significant document.

Question 19

What kinds of transactions are exempt from notification?

Answer 19

If the purchase price is under £40,000 or where there is no chargeable consideration – where no money or other payment changes hands – for example, in the case of a gift.

Question 20

What is the time limit for sending the LTR and what are the penalties for being late?

Answer 20

The LTR must be sent to HMRC, and duty paid, within 14 days of completion.

There are penalties for late filing and payment. Interest is payable on the unpaid amount of tax from 14 days after completion.

£100 up to 3 months late
£200 after 3 months

Question 21

Should the buyer sign the LTR?

Answer 21

The buyer must normally sign the LTR personally if it is filed in paper format (the buyer is responsible for paying the tax).

Most conveyancers, however, submit returns electronically through the HMRC’s Stamp Taxes Online service. HMRC also recommends electronic payment, and the payment is then automatically linked to the return by reference to the unique transaction reference number (UTRN).

Question 22

At what price will a property sale be notifiable and what price will tax be payable?

Answer 22

Becomes notifiable at £40,000

Becomes taxable at £125,000

Question 23

In relation to a buyer, what are the current (from October 2021) SDLT rates?

Answer 23

Up to £125,000 - 0%
Over £125,000 to £250,000 - 2%
Over £250,000 to £925,000 - 5%
Over £925,000 to £1.5 m - 10%
Over £1.5 m - 12%

Question 24

What is the only difference between current (from Oct 2021) SDLT rates and those from 1 July 2021 to 30 September 2021?

Answer 24

Introduction of 2% SFLT for over 125,000 to 250,000 on the new tariff. Used to be up to 250,000 is 0%.

Question 25

What is the position with first time buyers and SDLT?

Answer 25

First-time buyer relief applies where buyers are purchasing their first home and the purchase price is £500,000 or less.

No SDLT is payable on the purchase price up to £300,000 and 5% is payable on any portion from £300,001 to £500,000.

If the purchase price is over £500,000, the relief does not apply and the main SDLT rates will apply.

Question 26

What criteria must first-time buyers meet in order to qualify for relief?

Answer 26

1. the purchase must be completed on or after 22 November 2017;
2. the purchase price must be £500,000 or less;
3. the purchaser, and anyone else they are buying with, must be first-time buyers; and
4. the first-time buyer(s) must be purchasing a single dwelling and must intend to occupy that dwelling as their only or main residence.

Question 27

How is SDLT first time buyers relief claimed?

Answer 27

By filling in a specific code in the LTR.

Question 28

What is the percentage rise in SDLT for additional residential properties?

Answer 28

The government has charged higher rates of SDLT for additional residential properties, such as second homes and buy-to-let property, with effect from 1 April 2016. The higher rates for additional properties are 3% above the normal rates for each value band.

The higher rates for additional properties do not apply to properties costing less than £40,000. The additional SDLT will not be payable where the property being purchased is replacing the buyer’s main residence which has already been sold.

Question 29

What happens if there is a delay in selling (replacing) the main residence?

Answer 29

If there is a delay in selling the main residence, so that it has not been sold on the day the new purchase is completed, the higher rates will be payable on the new purchase (as the buyer will own two properties) but the buyer can get a refund of the higher rate tax paid (i.e. the amount over and above the normal rates) if the previous main residence is sold within 36 months.

Question 30

What is the SDLT surcharge for non-UK residents?

Answer 30

From 1 April 2021, the Chancellor confirmed that there would be an additional 2% SDLT payable by all non-UK residents buying residential property in England and Northern Ireland. The government believes that this will help control house price inflation and help UK residents to get onto and move up the housing ladder. This surcharge will be in addition to any SDLT already payable. This surcharge, where applicable, will be in addition to the 3% surcharge for second homes.

Question 31

What is LTT?

Answer 31

LTT replaced SDLT in relation to property purchased in Wales with effect from 1 April 2018. LTT is broadly consistent with the SDLT regime but there are some notable differences in relation to the rates and some of the available reliefs, as well as the administration and forms.

Question 32

How is LTT in Wales different to SDLT in England?

Answer 32

The Welsh government has set the following rates and bands which apply in relation to LTT for freehold residential property. The rates apply to the portion of the price paid in each band.

£0 to £180,000 - 0%
£180,000 to £250,000 - 3.5%
£250,000 to £400,000 - 5%
£400,000 to £750,000 - 7.5%
£750,000 to £1.5 m - 10%
£1.5 m + - 12%

Question 33

What are the rules on SDLT on second properties in Wales?

Answer 33

Buyers of additional residential property in Wales are subject to higher rates of LTT of 3 per cent on each band, as is the current position for SDLT. There are special rules where a buyer is replacing a main residence.

Question 34

When does LTT apply?

Answer 34

LTT applies to the purchase of land situated in Wales; the location of the buyer is not relevant (e.g. the buyer could be living in England but buying a house in Wales).

Question 35

What happens if a property is situated partly in Wales and partly in England?

Answer 35

Where properties are situated partly in Wales and partly in England (cross-border cases such as a farm which straddles the English and Welsh borders), then basically SDLT will be payable on the part of the property situated in England and LTT on the part of the property situated in Wales. An apportionment of the purchase price will be necessary in such cases, probably with the help of a surveyor, and two returns will be filed, one with HMRC for the SDLT element and one with the Welsh Revenue Authority (WRA) for the LTT element.

Question 36

What are the rules around LTT returns and how to file them?

Answer 36

LTT returns are filed with the WRA and most returns are filed via the WRA’s online system. LTT returns must be sent to the WRA, and tax paid, within 30 days of the day after completion. The WRA website provides guidance notes and user manuals for practitioners as well as a telephone helpline in English and Welsh. There are penalties for the late filing of LTT returns and for late payment of LTT. The WRA’s online service also allows users to view all returns submitted and to generate LTT certificates (i.e. the equivalent of SDLT5). No notifiable transaction can be registered at the Land Registry without the LTT certificate so, like SDLT5, it is a very significant document.

£100 up to 6 months
£300 or 5% up to 12 months
Another £300 or 5% over 12 months

Question 37

Does a buyer become the legal owner on completion?

Answer 37

No, the legal ownership of the land (legal estate) will only pass to the buyer once they are registered as owner (registered proprietor) in place of the seller. If registration is not applied for, the buyer will not yet be the legal owner of the land. Until registration, the transfer will take effect only in equity and the buyer will only have a beneficial interest in the property. Where the client is funding the purchase with a new mortgage, this new mortgage will similarly not take effect at law as a legal mortgage until it is completed by registration. So, where there is a transfer and a mortgage, the importance of registration will relate to both the change of owner and the registration of the new mortgage as a registered charge in the register of title.

Question 38

Will the conveyancer be liable if they don’t register the title?

Answer 38

Yes, they will be liable in negligence.

Question 39

What is the priority period and what is its significance?

Answer 39

It is important that the registration application is made within the priority period of HMLR pre-completion search (e.g. OS1). Failure to lodge the application before the priority period expires means that third parties might register entries on the title (e.g. covenants or mortgages) which would bind the buyer. Therefore, if the priority period given by the pre-completion search expires without the transfer and mortgage having been registered, third party interests may gain priority over the interests of the buyer and, where applicable, the lender.

As a result of this failure to make the applications in time, the conveyancer would be in breach of their duty of care to the client, and in breach of the lender’s mortgage instructions. The conveyancer may potentially be liable in negligence for any losses incurred by the client as a result.

Question 40

What is Form AP1?

Answer 40

The buyer’s conveyancer must register the change of ownership. This is done by sending form AP1 to HMLR.

The application for registration must be lodged with the Land Registry before the expiry of the priority period (30 working days) shown on the pre-completion search result.

The application may ask the Land Registry to deal with several matters, for example, discharging the seller’s old mortgage, registering the transfer and registering the buyer’s new mortgage (this is often referred to as a “DTC” – discharge, transfer, charge).

Question 41

What is DTC referring to?

Answer 41

Discharge, transfer, charge. When the AP1 asks the Land Registry to deal with matters when registering the property.

Question 42

Identify and explain the different documents which will be sent with the registration application.

Answer 42

Form AP1 must be accompanied by:

• form DS1 to discharge by electronic means if there is a mortgage to be discharged;
• form TR1 (certified copy of the transfer to the buyer);
• certified copy of the buyer’s new mortgage deed;
• the correct Land Registry fee;
• LTR certificate (SDLT5 or LTT certificate for properties in Wales);
• evidence of identity, where necessary; and
• form DI where there are disclosable overriding interests.

Question 43

In some cases, there may be extra documentation to be sent with the AP1. This will depend on the circumstances of the particular transaction but examples could include (3):

Answer 43

a certified copy of a grant of probate where the sale is by executors;
a certified copy of a marriage certificate to evidence a name change; and
form JO, where this has been used to declare trust information.

Question 44

Do original documents need to be sent to HMLR?

Answer 44

From June 2014, HMLR has only required certified copies with form AP1.

Originals can be sent if wished but they will be scanned and destroyed. This has brought the requirements for postal applications into line with the requirements for electronic AP1 applications through e-DRS.

Question 45

What are registration fees?

Answer 45

Registration fees are payable according to the price of the property. Conveyancers have tables of Land Registry fees (and there is an online fee calculator on the Land Registry’s website).

Question 46

Does the AP1 have to be signed by hand?

Answer 46

Form AP1 can be prepared in the conveyancer’s system, signed with a typed signature and uploaded without the need for printing and scanning.

Question 47

What is an HMLR requisition?

Answer 47

Most HMLR applications are processed without problems. But sometimes, HMLR needs further information or document/s to complete the registration. In this instance, they will raise a “requisition” with the conveyancer. This is a written request from HMLR to deal with the stated issue to enable the registration to be completed. If the application has been made via the portal the requisition will be emailed to the email address of the user who submitted the application.

Question 48

What are the time limits for HMLR requisitions? What happens if this is not met?

Answer 48

HMLR give firms 20 days to reply to requisitions. If a full reply has not been received, HMLR will send another reminder and will give further 20 working days to reply. HMLR will cancel the application for registration in its entirety if they do not receive a full reply or a successful application to HMLR to extend the timeframe for cancellation.

Question 49

If an HMLR requisition is not replied to in time, would the conveyancer be liable for negligence?

Answer 49

Yes, failure to respond to an HMLR requisition could lead to the HMLR application being cancelled. This means that the buyer might not be registered as the registered proprietor and any legal charge might not appear on the charges register.
This outcome would probably mean that the conveyancer is negligent for failing to complete the registration.

Question 50

What is a TID?

Answer 50

A TID stands for title information document (TID). Following completion of a registration, HMLR issues a TID. Registration details must be checked by the buyer’s conveyancer and any queries raised with HMLR. It is important that the buyer’s conveyancer checks that the register entries are correct, for instance, that the names of the new registered owners are correctly entered in the register, that any new restrictions (if any) are entered in the register and that any new mortgage has been correctly registered.

Question 51

What will the TID state?

Answer 51

The TID will:
state that an official register copy is attached (a new copy of the title plan will only be sent where there were amendments);
provide information on how to obtain official copies in the future;
stress the importance of keeping the address of the proprietor up to date (for service of notices etc.);
give the details of the relevant HMLR office responsible for the title; and
stress that the document is for information purposes only.

Question 52

What are the remaining steps once the title is registered?

Answer 52

The buyer’s conveyancer should ascertain where the title documentation is to be kept. If there is a new mortgage, it must be sent to the lender as security for the loan, or dealt with as the lender directs. Some lenders wish to hold very little (if any) documentation, but the lender’s individual requirements must be checked from the UK Finance Mortgage Lenders’ Handbook and/or the mortgage instructions. If there is no mortgage, the client’s instructions should be sought – for example, the buyer may wish the conveyancer to hold documents for safekeeping. In either case, the client may wish to have a photocopy of the register entries (e.g. so that they can see the terms of covenants and boundary maintenance).
The Protocol states that the buyer’s conveyancer should supply the client with a copy of the title information document and remind the buyer to keep their address for service up to date. It states that the buyer’s conveyancer should also advise the client of the existence of the HM Land Registry Property Alert service.

Question 53

What is the HM Land Registry Property Alert service?

Answer 53

Property Alert is a free monitoring service aimed at preventing fraud. Once a registered property owner has signed up to the service, they will receive an email alert from the Land Registry when certain activity occurs with the property (e.g. an application), enabling them to take action if the activity seems suspicious (e.g. the registered owner has not made any application).
Provided that the accounts are clear and the bill has been settled, the buyer’s conveyancer can close the file.