Completion

Question 1

List the main steps of the pre-completion stage (after exchange).

Answer 1

• preparing transfer deed;
• pre-completion searches;
• Making practical arrangements for completion (ie booking removal services);
• ensuring finances are in order for completion (eg drawdown of mortgage funds if being lent).

Question 2

Explain the formalities for the formal transfer of the legal estate in the land.

Answer 2

This must be transferred by way of deed.

As per s52 LPA 1925, to be valid a deed must:
- make it clear (on its face) that it is a deed;
- be signed by both parties (in the presence of a witness if the party is an individual); and
- be delivered.

Question 3

How can a company execute a deed?

Answer 3

Using one of three methods:
1) using the company seal in accordance with the articles (and being signed by someone authorised labelled as b being ‘ in the presence of’);
2) signed by a director and secretary, or by two directors of the company (and it must be expressed to be executed by the company);
3) Signed by a single director in the presence of a witness who then attests that signature.

Question 4

Explain the delivery requirement for the formality of a deed.

Answer 4

A deed is presumed to be delivered on execution of the deed, but this presumption can be rebutted by contrary intention. Eg if client signed the transfer but does not intend it to come into force at tat moment, this must be made clear in a covering letter when sending the deed (for example).

Question 5

What is the deed (form) used to transfer the whole of the registered freehold title called?

Answer 5

Land Registry Form TR1

Question 6

Who is usually responsible for completing the transfer deed?

Answer 6

buyer’s solicitor is usually responsible for completing the transfer deed and then sending it to seller solicitor for agreement immediately after exchange. However in simple residential transaction, the seller solicitor may prepare the TR1 and send to buyer solicitor in the pre-exchange pack.

Question 7

What must the TR1 reflect?

Answer 7

The terms of the contract and the title deeds.

Question 8

What must panels 1 and 2 of the TR1 contain?

Answer 8

Title number and property address and it should be checked these match the official copies exactly.

Question 9

What must panel 3 of the TR1 contain?

Answer 9

The date of the transfer. This is only completed on completion and not before.

Question 10

What must panels 4 and 5 of the TR1 contain?

Answer 10

Names of the parties (le the transferor and the transferee). It should be checked these match exactly the official copies and that the party details are correct.

Question 11

What must panel 6 of the TR1 contain?

Answer 11

The slot for the buyer to insert the address they want communications relating to the property to go to. If they are going to live in it this will likely be the new address, where as if it is being let out they may want to include a different address here.

Question 12

What goes in panel 8 of the TR1?

Answer 12

The purchase price in both figures and words (and potentially reference to any VAT being added to the price if applicable).

Question 13

What goes in panel 9 of the TR1?

Answer 13

Whether the property is being transferred with full or limited title guarantee.

Question 14

What goes in panel 10 of the TR1?

Answer 14

This is used where co-owners are specifying how they intend to hols the equitable interest in the property (ie as tenants in common or joint tenants).

Question 15

What goes in panel 11 of the TR1?

Answer 15

Additional provisions - ie Any relevant indemnity covenants to ensure covenants in the charges register are observed.

Question 16

What goes in panel 12 of the TR1?

Answer 16

This is the execution block. The seller signs this (and their signature is witnessed) in order to transfer the land. Buyer should also execute the transfer here should they be entering into an indemnity covenant (or have any other obligations specified in the transfer deed).

Question 17

List the four reasons why pre-completion searches are carried out?

Answer 17

Carried out by Buyer’s solicitor as close to completion date as possible.

Four reasons for this are:

1) To make sure seller has not further encumbrances title since investigation of title took place;
2) To check financial circumstances of the borrower when acting for the lender;
3) To gain priority for the buyer and the lender over anyone else making an application before the buyer applies to register the change of ownership at LR;
4) If seller is a company, to check the company has not gone into liquidation prior to the balance of the purchase price being paid on completion.

Question 18

Explain the necessity to check the title (through a search) immediately/ shortly prior to completion.

Answer 18

• Necessary as there is usually a significant period of time between investigation of title and completion. It is possible that during such a period , the title has been further encumbered by the seller (eg granting new easements, entering into new covenants or even creating a new mortgage).
• Pre completion search of title therefore ensures that nothing has changed since the investigation of title

Question 19

How is the pre-completion search of title done with regards to registered land?

Answer 19

Land registry search should be done against the title number to check if there are any further entires since initial investigation of title. Their search will also confer a priority period on the applicant of 30 working days. this effectively protects the buyer against any subsequent entries between the time

Question 20

Pre-completion searches against title for registered land confer on the applicant a priority period. Explain what is meant by a priority period.

Answer 20

• On application for a search against the registered title for a pre-completion search, a 30 day priority period is granted to the applicant.
• This effectively protects the buyer against any subsequent entries between the time of the search and the time their name is entered on the register as the registered proprietor.
• The buyer will therefore take the property free of any encumbrances entered on to the register during that time, provided they submit their application for registration before 12 noon on the last day of the priority period.

Question 21

Where the buyer is buying a property with funds from a lender, how should the application for the pre-completion search of title be submitted?

Answer 21

It should be submitted in the name of the lender. This then confers a priority on both the b user and the lender.

Question 22

Does a search on behalf of the buyer protect the lender?

Answer 22

No

Question 23

How is the pre-completion search of title completed with regards to unregistered land?

Answer 23

Form K15 is used. result of the K15 search is provided on a K18 form and confers a priority period of 15 working days from the date of the results of the search. during this time the searcher is not bound by any entries made on the register, provided completion takes place within that 15 working day period.

Question 24

Explain the scenario where a pre-exchange lane charges search would need to be repeated pre-completion.

Answer 24

This relates to unregistered land only.

It would need to be completed again should completion not occur during the 15 working day period conferred by the priority period (following the pre-completion title search).

Question 25

List the differences between the re-compeltion search of title for registered and unregistered land.

Answer 25

Registered Land:
- either done by form OS1 or OS2;
- search is against the title number;
- there is a standard fee for each search;
- results are given in form OSR1 (or OSR2);
- Confers a priority period of 30 working days

Unregistered Land:
- form k15 is used;
- search is done against the names of the current owners;
- results are published on form K18;
- there is a fee for each name searched against;
- the priority period conferred is 15 working days.

Question 26

When acting for the lender, how is the solvency of the buyer checked (assuming the buyer is an individual)?

Answer 26

Most common method is to apply on lender’s behalf for a Land Charges search against the Buyer.

Question 27

How is a land charges search against a buyer done where the property taken as security for the loan is registered?

Answer 27

• Solicitor will apply for a land charges search against buyer’s name (in addition to the pre-completion Land Registry search against the property’s title number).
• The search done will be a Bankruptcy only search and is completed using form K16 as this limits the search to the bankruptcy register any the Land Charges Department and avoids revealing any information from other entries which will not be relevant to the lender.

Question 28

How is the land charges search against a buyer done where property taken as security for the loan is unregistered?

Answer 28

Solicitor will already be making land charges search against the seller, so the name of the buyer will be added to the names searched against on the K15 form.

Question 29

Is it possible to do a bankruptcy land charges search against a company?

Answer 29

No. A company search will need to be carried out.

Question 30

Explain how a company search against a company seller is conducted.

Answer 30

• A company search will reveal whether seller is still in existence, has gone into liquidation/ is solvent, and whether it has granted any fixed or floating charges. This info is not always obtainable from Land Registry or Land Charges search.
• This should be carried out as close to completion as possible, as a company search does NOT grant any priority period.

Question 31

In addition to the company search, what other measure should be taken where the transaction is of high value and/or if there is reason to be concerned about the solvency of a corporate seller or borrower?

Answer 31

A telephone search at the Registry of Winding Up Petitions at the Companies Court should be undertaken on the day of completion.

Question 32

Explain the provision of s86(5) :and registration Act 2002.

Answer 32

Where no notice or restriction relating to the bankruptcy appears on the registered title, a buyer for value acting in good faith without notice of the bankruptcy petition or adjudication will take good title from the bankrupt seller, even though legal title to the land has vested in the trustee in bankruptcy.

Question 33

Explain from TA13 - Completion information and undertakings form.

Answer 33

This asks the seller to confirm important information re completion to the buyer, including:

• arrangements for handing over the keys;
• place and method of completion;
• docs to be handed over on completion;
• exact amount payable by the buyer on completion.

Question 34

List what the lender will expect to receive before releasing mortgage advance.

Answer 34

1) solvency search against borrowers;
2) clear OS1R in the name of the lender;
3) certificate of title confirming the property s adequate security for the loan;
4) executed (but not completed) mortgage deed.

Question 35

What is the financial statement and who sends this (and to whom)?

Answer 35

A financial statement is sent by the buyers solicitor to the buyer explaining and advising the client of the funds needed to complete the purchase.
- The statement shows amount forwarded by the buyer to the solicitor and will include balance of purchase price any SDLT/LTT due, registration fees, other disbursements and usually the solicitors fees.
- It will also detail any other costs such as indemnity insurance cover.

Question 36

When is the money sent to the seller?

Answer 36

Prior to completion. the buyer solicitor will check funds have been received from the lender/ client and then send these to the sellers solicitor. Once confirmed received by seller’s solicitor, completion can take place.

Question 37

On receipt of the completion monies, and both parties agree to complete, which forms need to be dated and in what order?

Answer 37

TR1 needs to be dated by seller’s solicitor, and then the lender’s solicitor will date the mortgage deed. Note the mortgage deed can only be dated once the TR1 has been dated.

Question 38

Briefly explain completion by post.

Answer 38

• It relies on undertakings and therefore the Law Society has introduced a code for completion by post.
• Seller’s solicitor will act as an agent for the Buyer’s solicitor at no cost to the buyer.
• On receipt of the completion money, the Seller solicitor will carry out the instructions to complete the transaction and then inform the buyer’s solicitor that completion has happened.
• Instead of handing over documents like would happen with an in person completion, these documents will be sent by first class post to the buyer’s solicitor (or by DX).
• Under Law Society Code for Completion by post, seller solicitor gives an implied undertaking to carry out the buyer’s instructions (and this undertaking may be enforced through the courts).

Question 39

Explain the effect of completion in relation to both registered and unregistered land.

Answer 39

For registered land, legal title passes to the buyer once their name is registered at the Land Registry as the registered proprietor.

For unregistered land, legal title passes to the buyer on completion.

Question 40

One the seller’s lender has received funds to enable the discharge of seller’s mortgage over the property, what are the ways in which the seller’s mortgage can be formally discharged.

Answer 40

1) Completion of a land registry form DS1 - this must be sent to the seller’s solicitor who can then send this to the buyers solicitor as evidence of the discharge; or
2) Submit e-DS1 electronic discharge through the land registry portal; or
3) Use electronic discharge system, sending electronic message to the land registry which automatically removes the charge from the register.

Question 41

Explain procedure for paying SDLT/ LTT.

Answer 41

• Seller’s solicitor sends Tr1 to buyer’s solicitor who then arrangesnpayment of the relevant tax.
• SDLT is to be paid within 14 days of completion;
• LTT is to be paid within 30 days of completion.
• payment along with tax return needs to be sent to relevant authority (either online or by post).
• HMRC produces SDLT5 form, and WRA will return a WRA certificate as proof relevant tax has been paid.
• Either the SDLT5 or WRA certificate must accompany application to land registry to register new buyer as new registered proprietor. If it is not, application will be rejected.

Question 42

How long does a lender’s solicitor have to register their charge at companies house where the buyer is a company?

Answer 42

21 days of creation (ie at completion). If this is not done, it is void against creditors and liquidators and the other creditor’s will be preferred on liquidation.

Question 43

What happens if the parties do not contain a completion date on the contract?

Answer 43

If the SC are adopted, SC 6.1.1 provides completion date is 20 working days after the date of the contract. SCPC 9.1.1 provides the same.

In both sets of conditions the money due on completion must be paid before 2pm on the completion day, and if it is not completion is deemed to have taken place the next working day as a result of the buyer’s default. (note this 2pm can be varied by the terms of the contract).

Question 44

How is the contractual compensation calculated for delayed completion?

Answer 44

• Calculated at contract rate unless specified in the contract, on the balance of the purchase price, less any deposit paid (if defaulting party is the buyer) for the period between contractual completion date and date of actual completion.
• Note that if the non-paying party was also at fault for some of those delayed da7s, those days should be ignored.

Question 45

Explain the key difference between the contract compensation provisions for the SC and the SCPC.

Answer 45

• SC 7.2 provides that both the seller and the buyer an be asked to pay compensation.
• SCPC 10.3 provides that only the buyer can be required to pay compensation.

Question 46

Give the formula to calculate the contractual compensation owed.

Answer 46

Compensation is payable by the buyer (if at fault for delay) will be the contract rate of the purchase price (less deposit) for the number of days completion is delayed by.

Eg, purchase price is 300k, deposit is 10% and contract rate is 8.5%.

• £270k Is purchase price less deposit.
• 8.5% of £270k is 22,950. The 8.5% relates to the annual rate so 22,950 is for 365 days.
• £22,950 divided by 365 is £62.88, which is then multiplied by the number of days completion is delayed by.
  -If delayed by three days for example £62.88 x 3 gives the compensation amount, in this case it would be £188.64

Question 47

Explain the common law damages available if completion is delayed.

Answer 47

Will be based on Hadley v baxendale aiming to put the claimant in the position they would have been had the contract been perfumed correctly . As such the court may take into account wasted legal costs, costs of putting furniture into storage, cost of renting another property etc.

Question 48

What is a notice to complete?

Answer 48

• Where completion is likely to be delayed and not quickly resolved, either parrot that is ready and being delayed by the other may serve a notice to complete.
• The notice can only be served after the contractual completion time;
• Once served, the notice to complete makes tie of the essence and gives the other 10 working days to complete.
• if defaulting party fails to complete within the 10 working days, party who served the notice can rescind the contract.
• If the contract is rescinded and defaulting party was the buyer,, the seller can keep the deposit.
• If defaulting party was the seller, they must return the despot to the buyer.
• Non-defaulting party can also claim damages for losses they suffer as a result of the other’s default.

Question 49

List the two common reasons where a buyer will need to sign the transfer deed (TR1).

Answer 49

1) Where there is a declaration of trust (ie they are co-owners);
2) Where the buyer is giving an indemnity convent.

Question 50

True or False: SDLT is due on the purchase price plus any VAT within 14 days of completion.

Answer 50

True.

IT IS NOT 14 WORKING DAYS, BUT 14 DAYS.

Question 51

Which form is used to release a mortgage over a specific part of the land secured by a registered charge?

Answer 51

DS3.

Question 52

Explain the difference between a DS3 and a DS1.

Answer 52

A DS1 cancels/ removes the charge over the land. A DS3 removes the charge over only part of the land, whist retaining the security over some of it.

Question 53

Explain when a land charges search against both the sellers and the buyers using form K15 would be necessary.

Answer 53

Where:
1) The property being bought is unregistered title; and
2) The buyers are purchasing with the aid of a mortgage;
3) The buyer solicitor is acting for both the buyers and the lender.

Question 55

Explain the situation where it would be necessary for an application in the name of the bank for a land registry search against the title of the property and a company search against a buyer (which is a company) would be needed.

Answer 55

Where:
1) A solicitor is acting on behalf of a company for purchase a property with registered title; and
2) The purchase is being partly funded by a mortgage; and
3) The bank is being separately represented in the transaction.

Question 56

What is a form K16 and when should it be used?

Answer 56

It is a bankruptcy search against an individual. This does not afford a priority period and should therefore be obtained as close to completion as practicable.