Completion Flashcards
Buyer’s solicitor’s checklist before completion
- draft the transfer deed for the seller’s solicitor’s approval
- once approved by the seller’s solicitor, arrange for the buyer to sign if it contains indemnity covenants (or other obligation on the part of the buyer)
- if the buyer is taking a mortgage loan, arrange for the buyer to execute the legal charge
- send requisitions on title to the seller’s solicitors
- carry out relevant pre-completion searches
- send certificate of title to lender and request loan advance in time for completion (usually to arrive the day before)
- send the buyer a statement of money needed to complete the purchase
- SDLT form approved by client
Seller’s solicitor’s checklist before completion
- approve the transfer deed drafted by the buyer’s solicitor
- arrange for the transfer to be executed by the seller
- reply to requisitions on title
- request a redemption statement from the seller’s lender
- in residential sale ask the seller to take final meter readings
Transfer deed
Traditionally buyer’s solicitor drafts the transfer deed but common for the seller’s solicitor to draft it at the same time as the contract
Form of transfer deed
Must be deed!
Registered land:
TR1 - most common, transfers whole of a freehold or leasehold title
TP1 - used for a transfer of part
TR5 - used to transfer a portfolio of titles
Unregistered land:
Any kind of deed but TR1 can be used
TR1: panels 1-4
Panel 1: title number (if unregistered leave blank)
Panel 2: property (enter a brief description of the property, for most properties this will be address which can be found in the official copies or root of title)
Panel 3: date
Date is handwritten in on completion which has the effect of completing the deed so it should be left blank until completion
Panel 4: the transferor(s)
Will usually be the registered proprietor(s) of the property. If the seller’s name is different than it was when they bought the property then change of name or marriage certificate should be provided.
Buyer’s solicitor will need this for Land Registry application.
If a second trustee is appointed for a sole surviving tenant in common, their details go here as well.
If transferor is a company their company number should be provided as well.
TR1: panels 5 to 7
5: transferee(s)
Insert the buyer’s full name. A maximum of four people or companies can be named.
6: Address for service
Insert the buyer’s address here. This should be the address of the property (if residential purpose).
Land Registry will use the address for service to direct any notices relating to the property
7: Transfer wording - cannot be amended.
TR1: panels 8 to 9
8: Consideration
3 tick boxes
1. sum of money for the property
2. no monetary consideration (gift)
3. other receipts (e.g. house swap or pay off a debt) - very uncommon
9: title guarantee
full or limited
if none leave blank
TR1: 10 to 11
10: declaration of trust
- skip if sole buyer
- joint tenants or tenants in common
- option for unequal shares
11: additional provisions
e.g. indemnity covenants
appointment of a second trustee would appear here
TR1: 12
12: execution
Transferor must always execute
Transferee must also execute if:
- tenants in common or agree to hold on trust for someone else
- providing an indemnity covenant or any other obligation
TP1 and TR5
TP1:
- transfers of part fo the land
- part identified by a plan attached to the TP1 and Panel 3 refers to the plan
- additional provisions provides headings such as “rights granted for the benefit of the property” and “rights reserved for the benefit of other land”
TR5: transfer of portfolio of titles
- main difference is that a panel contains a table where a number of properties and their title numbers (if registered) can be set out
Execution: individual
Individual signs in the presence of an independent witness who also signs and prints their full name and address.
Transfer is considered delivered when it is dated.
Execution: company
Different options:
- company seal in accordance with articles (usually one or two authorised signatories)
- no company seal, but signed by two directors or one director and the company secretary
- signed by one company director and witnessed by an independent witness
- signed by senior employee who is authorised under a power of attorney
Agreeing and executing the transfer: steps
- Buyer’s solicitor drafts transfer deed
- Seller’s solicitor either amends draft for buyer’s approval or approves the transfer as drafted
- Once agreed, seller’s solicitor sends the engrossment transfer deed to the seller for execution
- The seller’s solicitor and if appropriate the buyer’s solicitor, hold the executed but undated transfer deed ready for completion
Purpose of pre-completion searches
Check and protect the buyer’s (and lender’s if appropriate) ability to obtain title to the property.
Concerned with (1) the property and (2) the parties
Priority period: registered land
Buyer’s solicitor carries out a search with priority (form OS1 or OS2 (for part of land) at the land registry against the title number.
This updates the official copies that were initially provided and identifies any changes that have been made.
Confers a priority period of 30 working days in favour of the person searching.
If the buyer’s solicitor submits the application to register the transfer within that priority period, the buyer’s transfer will take priority over any other application even if lodged before the buyer’s application.
Priority period: unregistered land
The buyer’s solicitor carries out a land charges search of the Land Charges Registry (Form K15).
This identifies any incumbrances or other adverse matters registered against the owner/seller of the unregistered land. Run search against the seller (no need to run against previous owners)
Confers a priority period of 15 working days.
Unlike OS1 search, it is only necessary to complete the purchase (not submit LR) within the priority period to take priority
Search from date and priority period
As the OS1 search updates the official copies that the buyer’s solicitor has seen, the buyer’s solicitor provides the Land Registry with their date, and this is the date from which the search is run.
If nothing has changed since that date, then the search will come back clear; otherwise updated official copies will be sent to the searcher.
Importance of priority
Under SCS and SCPC, the seller should disclose any adverse issues that may have resulted in changes to that official copies
If the seller does not, buyer may have a claim for damages for breach of contract and/or misrep. or even to rescind the contract
However, a buyer’s solicitor should never rely on this
If search was not carried out then it is likely to cost time and money to put right any entry and would be a clear case of professional negligence
Solvency searches
Acting for buyer and lender: Buyer’s solicitor should run a bankruptcy search against the buyer (form k16) to protect the lender.
If buyer is a company then lender will want a company search carried out against the buyer to check that there is no pending insolvency or crystallisation of a floating charge.
A company search gives no priority period so should be left as a late as possible.
If seller is a company - complete a company search immediately before completion.
Requisitions on title
Used more generally to refer to the questions that the buyer’s solicitor needs answering before completion.
Residential: Law Society TA13 (completion information and undertakings)
Commercial: CPSE form SCR (commercial property standard enquiries (CPSE) form Solicitor’s completion requirements (SCR)
- the forms are similar in content if not in form.
Content of the TA13
- Vacant possession:
- asks about arrangements for collecting the keys (e.g. left with the agents)
- If there is a rent-paying tenant, then asks for an authority for the tenant to pay the rent to the buyer following completion
- Deeds and completion
- For unregistered property, asks for a list of deeds and documents to be sent on completion - Completion
- Asks for confirmation that completion will take place according to the Law Society’s Code for Completion by Post. - Money
- asks for the seller’s solicitor’s client account details and for the exact amount payable on completion. - Mortgages and charges
- asks the seller’s solicitor to list any mortgages secured on the property and confirm their undertaking to redeem them on completion.
Seller’s solicitor’s undertaking to redeem mortgage
Law Society Code for Completion by Post - seller’s solicitor undertakes to redeem the mortgage against the property which it will have already notified to the buyer’s solicitor.
Note: undertaking is not to discharge the mortgage - not within solicitor’s power.
On the loan being redeemed, lender should discharge the charge at Land Registry (electronically) or provide a DS1 form which can be produced to the Land Registry to discharge the charge.
With large value transactions, the buyer’s solicitor may insist that the seller’s solicitor obtains an executed but undated DS1 in advance of completion.
What is the process of completion?
Involves the balance of the purchase price being paid to the seller and the legal title in the property being passed to the buyer.
Completion now almost always happens by post under the Law Society Code for Completion by Post.
Although completion can take place on any working day, most residential transactions still take place on Friday. This gives a buyer the weekend to settle in, and the seller the weekend to spend some of the sale proceeds.
Law Society Code for completion by post
This avoids the needs for the solicitors to physically attend each other’s office by treating the seller’s solicitor as an agent for the buyer’s solicitor.
Seller’s solicitor provides various undertakings under the Code which the buyer’s solicitor can rely on to know that if the necessary money is sent, completion will take place or the seller’s solicitor will return the money to the buyer’s solicitor.
Immediately following completion the seller’s solicitor holds the transfer deed and other documents to the buyer solicitor’s order - meaning the buyer’s solicitor can direct what happens to them.
As soon as possible, and no later than the end of the working day after completion, the seller’s solicitor undertakes to send the transfer seed and other deeds and documents to the buyer’s solicitor.
What is a redemption statement?
Statement showing the amount of money needed to repay the mortgage.
Confirms the lender will accept the money from Stephanie’s firm to redeem the mortgage.
Overview of completion
- Buyer’s solicitor has received mortgage advance and balance of money required from client and sends required amount to seller’s solicitor by bank transfer
- Seller’s solicitor telephones buyer’s solicitor when the money arrives to confirm completion and dates the transfer deed, calls seller to let them know, and estate agent to release keys to the buyer if appropriate
- Buyer’s solicitor calls buyer who can now collect the keys and physically move into the property. If acting for the lender, the buyer’s solicitor dates the legal charge
- Seller’s solicitor sends the transfer deed and any other agreed deeds and documents to the buyer’s solicitor, redeems the mortgage, and send the balance of the money to the seller
Seller’s failure to complete
A seller’s failure to complete means that the seller’s solicitor is unable to date an executed transfer
E.g.
- seller has not returned the executed transfer
- the seller has returned the transfer but instructs solicitor not to date it
Buyer’s failure to complete
Means seller’s solicitor has:
- not received the money needed to complete form the buyer’s solicitor
or
- has received the money but the buyer instructs the buyer’s solicitor not to release it to the seller’s solicitor
Failure to complete and the Standard Conditions of Sale
If either party fails to complete by the time and date specified in the contract, then they are obliged to pay interest for each day’s delay under SCS.
This is calculated at the interest rate specified in the contract. If none is specified, then SCS 1.1.1(e) provides that the Law Society interest rate applies (the current rate is published on their website)
If the buyer is late in completing, the buyer pays interest on the purchase price less any deposit paid
If seller is late in completing, interest is paid under the full purchase price.
Calculating interest
Calculate the daily rate of interest and multiply that by the amount of days late.
Daily rate:
= (amount) x interest rate/100
then divide that by 365
multiply that by the amount of late days.
Common law damages
Can claim common law damages for the buyer’s losses as well (e.g. hired moving van, related sale etc)
Sometimes it is not always practical or cost effective to take proceedings if the other side resists
Note interest received under the SCS is deducted from the sum
Rescission under the standard conditions
Rescission is not automatically available to the non-defaulting party.
This is because under a standard contract, time is not of the essence (SCS 6.1.1 or SCPC 9.1.1)
After either party has failed to complete on time, the non-defaulting party can serve notice to complete on the other side.
This makes time of the essence.
The parties must then complete within ten working days (excluding the day on which notice is given)
What is rescission?
A remedy where the contract is set aside and the parties are put back in the position in which they were before the contract was made.
Serving notice to complete
If completion has not taken place by the date and time started in the contract then either party if they are ready, able and willing to complete may give the other notice to complete.
If it is the buyer who is the defaulting party and they have not given a full 10% deposit, they must make it up to 10% without delay.
Effect of notice to complete
- Parties must complete within ten working days
- first day is the day after the notice to complete has been served
- the party serving the notice is bound as well so they must make sure they will continue to be ready to complete.
- once served, the notice cannot be withdrawn unless both parties agree
- if either party fails to complete within the ten working day period, the remedies available depend on whether the non-defaulting party is the seller or the buyer.
Seller’s remedies after notice to complete is served
Seller may rescind the contract and in doing so:
- forfeit the deport and any interest accrued on it
- resell the property and any contents
- claim common law damages
Note: if contract is rescinded, the seller can no longer claim common law damages
Buyer’s remedies after notice to complete
Buyer may rescind contract and:
- demand return of the deposit with any interest accrued on it
- claim contractural damages or even specific performance (forcing seller to complete the sale)
SDLT process
- return must be submitted and tax paid within 14 days of completion
- can prepare and submit SDLT return online using HM Revenue and Customs portal
- On submitting buyer’s solicitor receives the SDLT5 certificate
LTT process
- must be submitted and paid within 30 days of completion
- Welsh Revenue Authority
- WRA certificate
Registration of charge at companies house
Very important to register a charge given by a company at Companies House within 21 days of the charge given.
Strict deadline - no discretion to extend deadline (and if issue and have to resubmit the deadline is still running)
If deadline is missed it is necessary to apply for a court order to allow filing out of time - this is time consuming and expensive and likely the law firm will have to pay for it.
Application for registration at land registry
Form AP1 - used to set out the details of the application and the documents provided.
For a purchase includes:
- TR1
- SDLT5 or WRA to prove payment
- Form DS1 to discharge seller’s mortgage
- Mortgage deed in favour of the buyer’s lender
- If appropriate, certificate or registration of charge at Companies House
- Other documents as appropriate (e.g. death certificate for deceased joint proprietor)
Application for registration - unregistered
Application for first registration is usually a little more involved than for a transfer of registered title.
- Form FR1 is used
- SDLT5 or WRA to prove payment
- Form DS1 to discharge seller’s mortgage
- Mortgage deed in favour of the buyer’s lender
- If appropriate, certificate or registration of charge at Companies House
- Other documents as appropriate (e.g. death certificate for deceased joint proprietor)
ALSO:
- epitome of title and deeds and documents referred to in it
- Land charges searches for the seller and previous owners in the chain of title
Form D1
For both registered and unregistered land the buyer’s conveyancer should either tick the AP1 or FR1 to state there are no overriding interests or if there are complete a Form DI
- this includes disclosing if there are any occupational tenancies etc.
Submitting LR application (first registration)
Not possible to do it online, and the application is instead made by post or document exchange.
This is possible for a transfer of registered land as well/
Best to send certified copies of the transfer and mortgage deed and the LR do not return paper documents.
OS1
If LR application is not submitted within 30 days of the OS1 search then priority will be lost.
Can apply again, but this does not extend priority but starts a new one.
LR deadlines
Registered land: no deadline other than the OS1 search (30 working days from date of OS1 priority search result).
Unregistered land: deadline of two months from completion - if not complied with, transaction is void and an application must be made to the Land Registrar to extend the period.
TIming
Registered land: usually processed within a couple of weeks
Unregistered: can take several months
SDLT rates
Up to £250,000 - 0%
£250,000 - £925,000 - 5%
£925,000 - £1.5M - 10%
£1.5M+ - 12%
The rates apply to slices of the total purchase price
SDLT - contents
Possible to allocate separate value to the contents being sold with the house.
These do not form part of the purchase price for the purposes of SDLT/LL.
Discount relief for first time buyers
Max purchase price £625,000.
No SDLT for first £425,000 of the purchase, then 5% on price above it.
SDLT - second homes
If the buyer is buying a second property, then additional SDLT of 3% is charged on the whole of the purchase price.
SDLT - non residential
Up to £150,000: no SDLT
£150,000 - £250,000: 2%
Over £250,000: 5%
When does CGT arise?
Arises when:
- there is a chargeable disposal
- of a chargeable asset
- by a chargeable person
- which gives rise to a chargeable gain
Examples of a chargeable disposal
- sale of an asset
- lifetime gift of an asset
(not gift on death)
Chargeable gain
This is the profit made from the increase in value of the asset.
Losses and annual exemption
If tax payer made losses on other assets they can offset that against gains made.
Also entitled to annual exemption (£3000)
Allowable expenditure
- costs incurred in acquiring the asset (conveyancer’s fees)
- costs incurred that contribute to the value of the asset (cost of building an extension but not costs of maintenance or repair)
- costs incurred disposing of an asset (estate agent fees etc)
Note: cannot include repairs or fixing damage as this is not an improvement
Private residence relief
Private Residence Relief:
person does not pay capital gains tax if they sell or dispose of their home
- it has been the person’s main home for all the time that they lived in it
- not let it out
- not been used for business purposes
- grounds including all buildings are less than 5,000 sq meters
- was not bought just to make a gain
