Chapter 9: Pre-Completion (Stage 4)

Question 1

How long will there be between exchange and completion?

Answer 1

Usually 1 or 2 weeks, but this is a matter for negotiation between the parties in the chain

Question 2

What is it called when exchange + completion happen on the same day?

Answer 2

Simultaneous exchange and completion

Question 3

Why is simultaneous exchange + completion risky?

Answer 3

Because the parties will be aiming for the agreed date in good faith, but there will be no binding contract in place until the day of completion.

Question 4

What will the seller’s solicitor do if the seller has an existing mortgage?

Answer 4

The seller’s solicitor will ask the seller’s lender for an up-to-date redemption figure.

Question 5

What will the seller’s solicitor do once they know the mortgage redemption figures + estate agent’s fees?

Answer 5

They will prepare the completion statement.

Question 6

What is a completion statement?

Answer 6

This shows the seller how much money will be left from the completion money.
- the net sale proceeds.

Question 7

What must be done with the net sale proceeds on completion?

Answer 7

If the seller doesn’t have a related purchase - the net sale proceeds must be sent to the seller on completion.
- therefore the solicitor must ensure they have the bank details for the account to which the money will be sent.

If the seller has a related purchase, the net sale proceeds will probably be transferred to the purchase file ledger to use towards the purchase price.

Question 8

What is the Completion Information and Undertakings form?

Answer 8

It is a standard Protocol form + is completed by the seller’s solicitor prior to completion.

It:
i. Gives details of the client account to which the purchase money must be sent on the day of completion,

ii. confirms the amount due on completion, and

iii. where the keys to the property will be available for collection on the day of completion,

iv. if the property is mortgaged, the seller’s solicitor gives an undertaking to pay off the mortgage(s) out of the sale proceeds + to provide evidence of discharge when received.

Question 9

What must the seller’s solicitor do re the purchase deed ?

Answer 9

Typically, the buyer’s solicitor will have drafted a purchase deed (a transfer) and sent it to the seller’s solicitor.

Because this is a deed, the seller’s solicitor must arrange for this to be executed with the formalities of a deed on or before the completion date so that it can be handed over to the buyer’s solicitor on completion once the purchase money is received.

Question 10

What pre-completion tasks will a seller’s solicitor do in a new leasehold transaction?

Answer 10

After exchange of contracts, the transaction proceeds in the usual way, with:
- pre-completion searches,
- requisitions on title,
- application for funds, and
- the sending out of completion statements.

However, instead of the parties executing a transfer deed, the execute the lease.

Question 11

What will the landlord’s solicitor do in a new lease scenario pre-completion?

Answer 11

Before completion, the landlord’s solicitor will prepare final copies of the lease for signature, including all plans referred to.

Question 12

New lease transaction - what is the final version of the lease called?

Answer 12

An engrossment

Question 13

How will the engrossment be prepared?

Answer 13

In 2 parts.
i. the original, which is signed by the landlord, and
ii. the counterpart, which is signed by the tenant.

Question 14

What must the buyer’s solicitor do re the Completion Information and Undertakings form?

Answer 14

The buyer’s solicitor must check that the seller’s solicitor is undertaking to pay off all known charges from the purchase money on completion

Question 15

Why must the buyer’s solicitor carry out pre-completion searches?

Answer 15

To ensure that all information received about the property remains correct + protects the buyer (and lender) from any undisclosed third-party rights.

Question 16

When are pre-completion searches usually done?

Answer 16

Just after exchange, as the results will come back almost immediately.

Question 17

What problem does the land registration system have?

Answer 17

Every disposition involves 2 stages:
1. the disposition itself, and
2. the registration, which completes the process.

Typically, there are a few weeks between completion of the transaction and the application to register the disposition at HMLR.

During the period from disposition to registration, the buyer, lessee, or mortgagee is not vested with a legal interest in the property but rather only has an equitable interest which requires registration of a notice in the Charges Register to provide protection.

This is called the Registration Gap

Question 18

What is intended to deal with the registration gap issue?

Answer 18

The official search with priority.

Done on behalf of the buyer or a lender (if thee is one).

Question 19

When should the buyer’s solicitor undertake an official search?

Answer 19

After exchange, the buyer’s solicitor should carry out an official search of the register using the property’s title number.

Question 20

What are the 2 most common official searches?

Answer 20

1. Official Search with Priority Against the Whole of a Registered Title (using form OS1), and
2. Official Search with Priority Against Part of a Registered Title (using form OS2).

Question 21

When may an OS2 search be used?

Answer 21

If, for example, the buyer is purchasing a new build property from a developer.

Question 22

What is the purpose of the priority search?

Answer 22

Twofold:
1. to discover recent entries, and
2. provides a priority period

Question 23

When is the official search carried out from?

Answer 23

The search is carried out from the ‘search from’ date appearing on the header section of the official copies of the title register issued by HMLR + acts as a means of updating the register

Question 24

How is the official search used to discover recent entries?

Answer 24

If any entries have been added to the title register since the ‘search from’ date, these will appear on the result of the search.

Question 25

What happens if new entries do appear upon doing the official search?

Answer 25

The buyer’s solicitor then has the chance before completion to require the seller’s solicitor to deal with removal of any adverse entries on or before completion

Question 26

What priority period does an official search confer?

Answer 26

The search result provides the buyer with a priority period of 30 working days from the time the official search was lodged

Question 27

What is the effect of the priority period?

Answer 27

Any application for an entry made in the register during the priority period is held until the buyer’s priority period has expired, and it will fall away if the buyer completes + registers the transaction within the priority period.

Question 28

What happens if the buyer’s conveyancer cannot complete the transaction + carry out registration of the title within the priority period?

Answer 28

The search will need to be renewed to preserve priority.

Question 29

What happens if an error is made in the official search certificate?

Answer 29

If an error is made in the official search certificate, the buyer will be bound by what is on the register even if they were not aware of it.

However, the buyer may be able to claim an indemnity from HMLR for any loss sustained.

Question 30

What is the equivalent of the official search with priority for unregistered land?

Answer 30

If title is unregistered, a full land charges search must be carried out against the full names of the current estate owner/seller for the full period of their ownership.

Question 31

What should be done if anything unexpected is revealed following the land charges search?

Answer 31

The buyer’s solicitor must require the seller’s solicitor to deal with the issue + undertake to remove the entry.

Question 32

What is unlikely to be a surprise when doing the land charges search?

Answer 32

A D(ii) restrictive covenant is unlikely to be a surprise as this is a land charge which must be registered to constitute notice of a covenant that will then bind the buyer.

Question 33

What priority period is conferred by the full land charges search ?

Answer 33

15 working days within which the transaction must complete

Question 34

What searches will the buyer’s solicitor repeat during the pre-completion stage?

Answer 34

Bankruptcy search if buyer is obtaining a mortgage.

Company search if the seller is a company.

The buyer’s solicitor will also advice the buyer to carry out another physical inspection of the property prior to completion.

Question 35

What should be done if a pre-completion search reveals a new entry?

Answer 35

The buyer’s solicitor will require the seller’s solicitor to resolve it before completion.

This will usually require removal of the entry.

Question 36

What will the buyer’s solicitor do re a completion statement?

Answer 36

The buyer’s solicitor will prepare a completion statement showing the sum required from the buyer to complete (or the sum due to the buyer on completion).

Question 37

What should the buyer’s completion statement include?

Answer 37

The statement should include all sums due, including:
i. any stamp duty land tax,
ii. HMLR fees,
iii. legal fees, and
iv. indemnity insurance premiums.

Question 38

What must be done to ensure compliance with the SRA Accounts Rules?

Answer 38

Any funds due to the firm must be cleared funds prior to their use on the completion date.

• The bank transfer to the solicitor must have been finalised by the bank by the time of completion.

Question 39

What will the buyer’s solicitor do if the buyer has a mortgage?

Answer 39

The buyer’s solicitor will submit the Certificate of Title to the lender in time to request drawdown of the mortgage advance prior to the completion date.

Question 40

What does the purchase deed do?

Answer 40

The purchase deed transfers the legal estate in the property to the buyer pursuant to the contract entered into on exchange.

Question 41

What does the buyer’s solicitor do re the purchase deed?

Answer 41

The buyer’s solicitor normally drafts the purchase deed, and then sends 2 copies of the draft document to the seller’s solicitor.

Question 42

What will the seller’s solicitor do upon receipt of the purchase deed drafts?

Answer 42

They will approve the document or make any amendments.

Question 43

What will the buyer’s solicitor do with the purchase deed following approval or amendments by the seller’s solicitor?

Answer 43

The buyer’s solicitor will prepare + send the final engrossment (the final version of the document) back to the seller’s solicitor.

Question 44

What is essential re the purchase deed?

Answer 44

It is essential that all sellers sign the purchase deed on or before the contractually agreed completion date.

Question 45

When might the buyer also need to sign the purchase deed?

Answer 45

If the transfer includes covenants by the buyer or if there is more than 1 buyer

Question 46

What are the types of purchase deed?

Answer 46

1. Conveyance
2. Transfer
3. Assignment
4. Assent

Question 47

When is a conveyance used?

Answer 47

When unregistered land is sold.

It is an old style document that is not used in practice anymore

Question 48

What is the most commonly used purchase deed?

Answer 48

A transfer

Question 49

When is a transfer used?

Answer 49

It can be used to convey all registered + unregistered land, as all unregistered land is now compulsorily registrable.

Question 50

What are the 2 types of transfers?

Answer 50

1. TR1 Form - used where the whole of the land in a title is being transferred, or
2. TP1 Form - used where part of land in a title is being transferred

Question 51

What information is required on a transfer?

Answer 51

Both a TP1 and TR1 require information such as:
i. the property’s title number + address,
ii. the date of the transfer,
iii. the full names of the transferor and transferee,
iv. the consideration paid,
v. the title guarantee given, and
vi. if more than 1 person will hold title, a declaration of trust.

Question 52

Who typically prepares a TR1?

Answer 52

While typically the buyer’s solicitor will prepare TR1, sometimes the seller’s solicitor does so.

Question 53

When is an assignment used?

Answer 53

For unregistered leasehold land.

It is very rare in practice these days, as a TR1 would be used instead

Question 54

When is an assent used?

Answer 54

When personal representatives transfer land to a beneficiary, they will use an assent.

It applies to freehold + leasehold, registered + unregistered land.

Question 55

What is required of an assent?

Answer 55

It must be in writing but need not be by deed unless it contains a covenant by the assentee, such as an indemnity covenant.

All ‘proving’ personal representatives (representatives named on the grant) must be parties to the assent.

Question 56

In the conveyance of a leasehold, who will prepare the purchase deed?

Answer 56

The buyer’s solicitor will prepare the purchase deed, which will be a Transfer Deed (TR1) to legally transfer the lease to the buyer.

Question 57

What pre-completion searches will the buyer’s solicitor conduct in the assignment of an existing lease?

Answer 57

The buyer’s solicitor will also conduct the same pre-completion searches as are conduct for a freehold conveyance.

Question 58

What might the seller’s solicitor be required to do in the assignment of an existing lease?

Answer 58

If required, the seller’s solicitor must also provide evidence of the landlord’s consent to the assignment.

This will be contained in a formal document called a ‘licence to assign’.

Question 59

What will the seller/tenant want to provide for in the transaction in the case of an assignment of an existing lease?

Answer 59

The seller/tenant is likely to have paid certain estimated amounts of rent + service charges applicable to the leasehold in advance.

Therefore, they will want to provide in the transaction for recovery of amounts they paid that are applicable to the incoming buyer’s tenancy.

Question 60

When will the accounts confirming the actual service charge the seller/tenant has paid be finalised?

Answer 60

The accounts confirming the actual service charge the seller/tenant paid will usually not be finalised until after completion.

The final amounts will be indicated on the completion statement.

Question 61

What is the effect on not having the amount of service charge paid confirmed until completion?

Answer 61

Means the seller might have overpaid or underpaid the service charge figures.

Question 62

What does the Standard Conditions of Sale provide for apportionment of charges re the seller potentially having over/under paid?

Answer 62

The Standard Conditions of Sale provide for apportionment of charges that are not easily ascertainable at completion based on ‘best estimates’.

Any shortfall attributable to the seller’s period of ownership will be payable to the buyer.

Question 63

What should the solicitors do if they anticipate service charge problems?

Answer 63

The solicitors should negotiate a retention whereby the buyer’s solicitor keeps some of the purchase money back pending production of the final service charge account.