Completion

Question 1

What is the Seller’s Solicitor’s Checklist before Completion?

Answer 1

• Draft the Transfer Deed and send it to the Buyer’s Solicitor for approval.
• Reply to the Requisitions on Title.
• Request a Redemption Statement from the Seller’s Lender, if applicable.
• Request final meter readings from the Seller or their Agent (Residential Only).
• Arrange for execution of the Transfer.

Traditionally, the Buyer’s Solicitor drafts the Transfer Deed, but in practice, the Seller’s Solicitor does.

Question 2

What is the Buyer’s Solicitor’s Checklist before Completion?

Answer 2

• Send the Requisitions on Title.
• Conduct relevant Pre-Completion Searches (OS1 & OS2).
• Send the Buyer an Account of Funds needed to Complete the purchase.
• If Mortgaging, arrange for the Buyer to execute the Facility Agreement and Legal Charge.
• Send the Certificate of Title to the Lender and request Drawdown in time for Completion.
• Have the Buyer approve the SDLT Form.
• Approve the Transfer Deed.
• Certify authority to sign any Covenants or Obligations.
• Arrange for execution of the Transfer.

Question 3

Which Standard Forms are used to Draft a Transfer Deed?

Answer 3

• TR1: Used when transferring the whole of a Freehold or Leasehold Estate, Registered or otherwise.
• TP1: Used when transferring only part of a Registered Title.
• TR5: Used when transferring a portfolio of Registered Titles, which may include Unregistered Titles.

Question 4

How do you complete a TR1?

Answer 4

• Panel 1, Title number: Enter the title number(s) for Registered Property. Leave blank for Unregistered Property.
• Panel 2, Property: Provide a brief description of the Property.
• Panel 3, Date: The date is handwritten upon completion; leave blank until then.
• Panel 4, Transferor(s):

  * Typically, the Registered Rroprietor(s). If the Seller's name has changed, provide proof. 
    
  * Include a second trustee’s details if necessary or a company’s registration number.

• Panel 5, Transferee(s): Enter the Buyer’s full name.
• Panel 6, Address for Service: Enter the Buyer’s address, typically the Property’s address post-completion.
• Panel 7, Transfer Wording: Standard transfer wording which cannot be amended.
• Panel 8, Consideration: Three tick-box options:
  • Payment for the Property, insert amount.
  • No monetary consideration, e.g. gift.
  • Other receipts, e.g. debt repayment.
• Panel 9, Title Guarantee: Choose Full or Limited Title Guarantee. Leave blank if neither applies.
• Panel 10, Declaration of Trust:
  • Skip if sole Transferee.
  • Tick for Joint Tenants, Tenants in Common, or other arrangements.
• Panel 11, Additional Provisions: Include anything not covered in Panels 1-10, e.g. Indemnity Covenants, new Covenants or Easements, SDLT exemptions, or Trustee appointments.
• Panel 12, Execution:
  • Provides Attestation Clauses for execution of the Deed.
  • Transferor must always execute, and Transferees must execute if holding as Tenants in Common, holding Property on trust, or providing an Indemnity Covenant or obligation.

The TP1 and TR5 are largely identical.

Question 5

How can a Company execute a Deed?

Answer 5

• Company Seal and signature by one or two authorised persons.
• Signature by two Directors, or a Director and the Secretary.
• Signature by one Director and witnessed by an Independent Witness.
• Signature by a senior employee who is authorised under a Power of Attorney.

Question 6

What is a Redemption Statement?

Answer 6

A document from the Seller’s Lender detailing the exact amount necessary to Redeem the Seller’s Mortgage.

Question 7

What is the Purpose of Pre-Completion Searches?

Answer 7

To verify the Buyer’s (or Lender’s) ability to obtain Title to the Property from the Seller.

Accordingly, they are chiefly concerned with the Property and the Parties.

Question 8

What are the Pre-Completion Searches for Registered and Unregistered Land?

Answer 8

Registered Land:

• Conduct an OS1 Search to detect any changes to the Official Copies since Pre-Exchange.
• This provides a Priority Period of 30 working days from the result, allowing the Buyer’s Application to Register to rank above any other application.

Unregistered Land:

• Conduct a K15 Search to detect any changes to the Property’s Encumrbances since Pre-Exchange.
• The K15 provides a Priority Period of 15 working days, allowing the Buyer’s Purchase to take precedence over any other interests.

Conduct an OS2 is only part of the Land is concerning.

OS1 Searches in the name of the Lender protect the Buyer, but not the other way around. As such, if a Purchase is Mortgaged, you must make the Search in the Lender’s name.

Question 9

What are the Pre-Completion Searches for Solvency?

Answer 9

For the Lender:

• Conduct a K16 Search to verify a Natural Buyer’s solvency.
• If the Buyer is a Company, conduct relevant searches on Companies House.

The Lender’s Solicitor conducts this Search, but so will the Buyer’s Solicitor if it is also acting for the Lender.

Question 10

What is the Purpose of the Requisition on Title?

Answer 10

To avail the Buyer of any lingering concerns regarding the Property’s Title.

Residential Transactions use the Law Society TA13, whereas Commercial Transactions use the CPSE Form SCR.

Question 11

What are the Contents of the Requisition on Title?

Answer 11

• Vacant Possession: Inquires about key collection arrangements and authority for Tenants (if applicable) to pay rent to the Buyer Post-Completion.
• Deeds and Documents: Requests a list of Deeds and documents for Unregistered Property to be sent on Completion.
• Procedure for Completion: Confirms that Completion will follow the Law Society’s Code for Completion by Post (similar to Formula B for Exchange).
• Money: Requests the Seller’s Solicitor’s Client Account details for the transfer of funds and the exact amount due on Completion.
• Mortgages and Charges: Asks for a list of Mortgages secured on the Property and the Seller’s Solicitor’s Undertaking to redeem them on Completion.

Question 12

In the Reply to the Requisition on Title, what Solicitors’ Undertakings does the Seller’s Solicitor give?

Answer 12

• To redeem the Mortgages against the Property.
• They may prove this by sending a copy of the DS1 Form the Lender submits to the Land Registry when discharging.

Question 13

What Undertakings does the Seller’s Solicitor give during the Procedure of Completion?

Answer 13

• To act as the Buyer’s Agent.
• To Complete once the Completion Funds are received.
• To hold the Transfer Documents on the Buyer’s Solicitor’s order.
• To send the Transfer Documents by no later than the end of the next working day.

These Undertakings are given automatically under the Law Society Code for Completion by Post (the “Code”).

Question 14

Procedurally, what happens the Day Before Completion?

Answer 14

The Buyer’s Solicitor:

• Ensures the Funds are ready to transfer.

The Seller’s Solicitor:

• Obtains a Redemption Statement from the Seller’s Lender.
• Holds an executed, undated Transfer Deed from the Seller.
• Confirms authority to complete and readiness to receive.

Question 15

Procedurally, what happens the Day of Completion?

Answer 15

Morning of Completion Day:

• The Buyer’s Solicitor:
  • Sends the Funds via Telegraphic Transfer to the Seller’s Solicitor’s Client Account.
  • Notifies the Seller’s Solicitor of the Transfer.
• The Seller’s Solicitor:
  • Confirms receipt of the Funds.
  • Completes the Transaction by dating the Transfer Deed.

Afternoon of Completion Day:

• The Seller’s Solicitor:
  • Notifies the Seller that Completion has occured.
  • Notifies the Buyer’s Solicitor that Completion has occured.
  • Releases keys to the Buyer by contacting the Estate Agent.
  • Initiates Redemption of the Seller’s Mortgage by sending the outstanding sum to the Lender.
• The Buyer’s Solicitor:
  • Notifies the Buyer that Completion has occured.
  • Dates the Mortgage Deed.

Question 16

Procedurally, what happens the Day After Completion?

Answer 16

The Seller’s Solicitor:

• Sends the Transfer Documents to the Buyer’s Solicitor.
• Sends the balance of sale proceeds to the Seller, after deducting the Mortgage Redemption, costs, and fees.

The Buyer’s Solicitor:

• Regsiters the Transfer of Ownership and Mortgage at the Land Registry.
• Pays SDLT or LTT.
• Informs the Buyer and gives them the Completion Documents or copies thereof.
• Updates the Buyer’s Lender.

There is a two-month deadline, from Completion, to register Unregistered Land. Otherwise, the transaction is void.

Form AP1 or FR1 are used to register a Transfer of Ownership of a Registered or Unregistered Title, respectively.

If there are any Overriding Interests, Form DI must also be completed.

Question 17

When is there a Failure to Complete?

Answer 17

On the Seller’s Side:

• A Transfer Deed is not sent.
• An undated or unexecuted Transfer Deed is sent.

On the Buyer’s Side:

• The Completion Funds are not transferred on time.
• The Seller’s Solicitor receives instructions from the Buyer’s Solicitor not to release the Funds to the Seller.

Question 18

What are the Consequences of a Failure to Complete?

Answer 18

Before and During Notice to Complete:

• Interest:
  • The Defaulting Party is obliged to pay a contractually-specific rate of interest for each day’s delay.
  • If the Buyer is in Default, they pay interest on the Post-Deposit Purchase Price .
  • If the Seller is in Default, they pay interest on the full Purchase Price (only in Residential Transactions).

After Notice to Complete:

• Rescission.
• Contractual Compensation.
• Damages (minus Contractual Compensation).

If a Buyer Completes late on the day, they are deemed to have Completed the next working day.

Notice to Complete is irrevocable.

If no rate of interest is specified, the rate payable is the the Law Society’s. Interest does not compound de facto.

Question 19

What is the Effect of Notice to Complete?

Answer 19

The Parties have ten working days from the day after Service to Complete the Transfer.

This makes time of the essence.

Question 20

What is the Effect of Rescission?

DOUBLE-CHECK

Answer 20

To return the Parties to their pre-contractual positions, meaning:

• A return of the Deposit (with interest) to the Buyer.
• Freedom to resell the Property and its contents.

Question 21

What is the Difference between paying Tax on Property in England vs Wales?

Answer 21

In England:

• SDLT must be submitted and paid within 14 days of the Effective Date.
• Upon submission, the Buyer’s Solicitor receives an SDLT5 Certificate.

In Wales:

• LTT must be submitted and paid within 30 days of Completion.
• Upon submission, the Buyer’s Solicitor receives an WRA Certificate.

The Effective Date is the earlier of the date of Occupation or Completion.

Question 22

What Documents are included in a Form AP1 or FR1?

Answer 22

Form AP1:

• The Transfer Deed.
• The Mortgage Deed.
• SDLT5 / WRA Certificate.
• Form DS1 (can be sent later if unavailable)
• Certificate of Registration of Charge at Companies House (if applicable)
• Other documents as needed (e.g. a Death or Marriage Certificate).

Form FR1:

• All of the above.
• Complete Land Charges Search.
• The Epitome of Title and any documents it references.

If sending a physical application, send Certified Copies, i.e. copies stamped and signed by a Solicitor to confimr authenticity, of supporting documentation, since the Land Registry does not return paper documents.

Question 23

How is SDLT Calculated for Residential Properties?

Answer 23

• Tax Rates:
  • No Tax: Up to £250,000.
  • 5% Tax: Over £250,00, up to £925,000.
  • 10% Tax: Over £950,000, up to £1.5m.
  • 12% Tax: Over £1.5m.
• First-Time Buyer Relief: Tax-Free Allownace of £425,000 if the Purchase Price is up to £625,000.
• Second Property Tax: An additional 3% is charged on the entire Purchase Price.

Question 24

How is SDLT Calculated for Non-Residential Properties?

Answer 24

Tax Rates:

• No Tax: Up to £150,000.
• 2% Tax: Over £150,00, up to £250,000.
• 5% Tax: Over £250,000.

Question 25

How is LTT Calculated for Residential Properties?

Answer 25

Tax Rates:

• No Tax: Up to £225,000.
• 6% Tax: Over £225,00, up to £400,000.
• 7.5% Tax: Over £400,00, up to £750,000.
• 10% Tax: Over £750,00, up to £1.5m.
• 12% Tax: Over £1.5m.

No First-Time Buyer Relief.

Question 26

How is LTT Calculated for Non-Residential Properties?

Answer 26

Tax Rates:

• No Tax: Up to £225,000.
• 1% Tax: Over £225,00, up to £250,000.
• 5% Tax: Over £250,00, up to £1m.
• 6% Tax: Over £1m.

Rates change frequently, and exact rates will be provided if needed for calculations.

Question 27

When does Capital Gains Tax arise?

Answer 27

When there is:

• A Chargeable Disposal;
• Of a Chargeable Asset;
• By a Chargeable Person;
• That results in a Chargeable Gain.

There is an Annual Exemption of £3,000.

Question 28

For the Purposes of Land Transactions, what constitutes a Chargeable Disposal of a Chargeable Asset?

Answer 28

Any Sale or Lifetime Gift of Real Property.

Question 29

What is a Chargeable Person?

Answer 29

A UK Taxpayer.

The precise rate a Taxpayer pays depends on their income bracket.

Question 30

What is a Chargeable Gain?

Answer 30

• An increase in value from acquisition to disposal.
• Costs incurred acquiring, enhancing, or disposing of the Asset may be deducted.
• Capital Losses can be offset against Capital Gains made in the same tax year.

Question 31

What is Private Residential Relief?

Answer 31

CGT is not payable on the Chargeable Disposal of a Home if:

• It has been the Person’s main home for entire time they occupied it;
• It has never been let out or used for business purposes;
• It was not bought just to make a gain; and
• The Grounds are less than 5,000 sqm.

For Spouses or Civil Partners, if each resided in their own house before moving in, only one of their houses will be eligible for Private Residence Relief.