Completion Flashcards
What is in the buyer’s solicitor’s pre-completion checklist?
Draft the transfer deed for the seller’s solicitor’s approval
Arrange for buyer to sign it if it contains indemnity covenants
Arrange for buyer to execute a legal charge
Send requisitions on title to the seller’s solicitor
Carry out relevant pre-completion searches
Send certificate of title to the lender and request the loan advance in time for completion
Send buyer a statement of money needed to complete the purchase
SDLT
What is the seller’s solicitor’s checklist before completion?
Approve transfer deed drafted by buyer’s solicitor
Arrange for the transfer to be executed by the seller
Reply to requisitions on title
Request a redemption statement from seller’s lender
In a residential sale - ask seller or agent to take final meter readings
Who drafts what?
Seller’s solicitor drafts a contract
Buyer’s solicitor drafts transfer deed
- Increasingly common for seller’s solicitor to also draft transfer and annex to contract in an approved form
What form is the transfer deed in?
Transfer of land: Deed S52 LPA
Registered land:
Land Registry forms must be used
TR1: transfers whole of a freehold or leasehold title
TP1: transfer of part of a registered title
TR5: Transfer of a portfolio of registered (and also even unregistered) titles
Unregistered land:
Can be done in a conveyance
Reality: standard to use the TR1
When should the date of a TR1 be filled in?
Only on completion
When should the transferor execute the TR1?
Always
When should the transferee execute the TR1?
Tenants in common purchasing, or agreeing to hold the property on trust
Providing an indemnity covenant
How does an individual execute a deed?
Individual: signs transfer in presence of an independent witness who also signs and prints their full name and address
Transfer is delivered (comes into effect) when it is dated – by transferor’s solicitor
How does a company sign a deed?
Seal in accordance with the company’s articles of association
No company seal, but signed by two directors / one director and company secretary
Signed by one company director and witnessed by an independent witness
Signed by a senior employee authorised under a power of attorney
Why do pre-completion searches need to be carried out by the buyer’s solicitor?
In order to check and protect the buyer and lender’s ability to obtain title as per the contract
How does a buyers’ solicitor carry out a pre-completion search?
Registered land: search with priority at the Land Registry, form OS1 / OS2
Unregistered land: Land Charges Search - form k15
What is the effect of carrying out a search via form OS1?
Priority period of 30 working days in favour of person searching
Buyer’s solicitor submits application to register the transfer of land within period buyer’s transfer will take priority over any other application, even if lodged before buyer’s application
What is the effect of carrying out a land charges search via form K15?
Confers a purchase priority period of 15 working days
What happens while priority period is in operation?
Seller should disclose any adverse issues that may result in changes to the official copies
If seller does not – buyer may have a claim for damages for breach of contract and / or misrepresentation - or even to rescind
Registration must always be protected by priority at the Land Registry
If search not carried out – will cost time and money to put right any entry - Clear case of professional negligence on conveyancing solicitor
What is a sensible approach to Land Charges search as completion approaches?
Carry out search again to regain priority
If you are acting for both buyer and lender - what should you do?
Carry out bankruptcy search against buyer to protect lender - form k16
If the buyer is a company, search should be carried out against CH to check no pending insolvency / crystallisation of a Floating charge
What is a requisition on title?
Questions that the buyer’s solicitor needs answering before completion
What form is residential requisition on title in?
TA 13 - Completion Information and Undertakings
What form is commercial requisition on title in?
Firm’s own precedent, CPSE / SCR
What is on a TA13?
Vacant possession
Deeds and documents
Completion
Money
Mortgages and charges
What should seller’s solicitor do when the mortgage on a property is redeemed?
Lender should discharge at Land Registry online or provide a form DS1 which can discharge
What is the process of completion itself?
Process of completion involves the balance of the purchase price (i.e. after the deposit) being paid to the seller and the legal title in property being passed to the buyer
Completion now almost always happens via post: facilitated by the Law Society Code for Completion by Post
Most residential transactions still take place on Friday
When must seller’s solicitor undertake to send transfer deed and other deeds and documents to buyer’s solicitor
No later than end of the working day after completion
What must the buyer send to the solicitor the day before completion?
Balance left on property less deposit and mortgage, and any money needed to pay costs, SDLT and registration fees
What must seller’s solicitor do after exchange
Order a redemption statement showing amount needed to repay the mortgage. Confirms that the lender will accept money from seller’s solicitor’s firm to redeem mortgage.
Under the SCS, what penalty is there for late completion
Interest payable for each calendar day’s delay under SCS (e.g. including weekends, etc)
Calculated at contract rate - if none, Law Society interest rate applies
On what sum does buyer pay interest if they are late?
If buyer late - interest on purchase price, less deposit paid (SCS and SCPC)
On what sum does seller pay interest if they complete late?
Interest on full purchase price (SCS only)
If seller has breached contract, what can the buyer claim?
Common law damages for buyer’s losses. If successful, interest received would be deducted from such a sum
Automatically available
What happens once a notice to complete has been served?
Time is now of the essence
Parties must complete within 10 working days - does not include the day on which the notice itself is given
What remedies are available for the seller if buyer defaults after a notice to complete has been served?
- Seller may rescind contract and forfeit deposit + any interest accrued
- May resell property and any contents included
- Seller can claim contractual damages
What remedies are available for the buyer if seller defaults after a notice to complete has been served?
Buyer can rescind contract and in doing so can also:
o Demand return of the deposit with any interest accrued
o Claim contractual damages / even specific performance
o Can claim for reasonable costs incurred in delay less contractual compensation
If completion does not happen at all, can you claim contractual compensation?
No - only remedy here now would be damages
How long after completion does buyer’s solicitor have to prepare and submit SDLT return? Why SDLT
14 days of completion - SDLT 5 certificate to prove it
SDLT in england
How long after completion does buyer’s solicitor have to prepare and submit LTT return? Why LTT?
30 days to pay
WRA certificate
Wales only
How long does the buyer’s solicitor have to register a charge on a company
- Must be done within 21 days of creation
- If not done, void against any liquidator or administrator and lender won’t be protected
- CH cannot extend this deadline – important to get application correct
- Deadline missed – must apply to court for order to allow filing out of time.
- This does not apply to charges given by an individual – only when dealing with company buyer / borrower
What documents must you include for a the Land Registry application for a transfer of registered land?
Form AP1 with following documents attached
- Transfer deed – TR1
- SDLT5 or WRA certificate to prove payment of SDLT / LTT
- Form DS1 to discharge seller’s mortgage
- Mortgage deed in favour of buyer’s lender
- If appropriate, certificate of registration of charge at Companies House
- Other documents e.g. death certificates, etc
What documents must you include for a the Land Registry application for a transfer of unregistered land?
Form FR1
o Transfer deed – TR1
o SDLT5 or WRA certificate to prove payment of SDLT / LTT
o Form DS1 to discharge seller’s mortgage
o Mortgage deed in favour of buyer’s lender
o If appropriate, certificate of registration of charge at Companies House
o Other documents e.g. death certificates, etc
* Epitome of title
* Deeds and documents referred to in the epitome of title
* Land charges searches for the seller and previous owners in the chain of title
How should you confirm that there are no overriding interests?
Buyer’s solicitor confirm or complete form DI
How is the Land Registry application submitted?
- Many solicitors can submit online
- Application for a first registration cannot be done online – must be made by post or DX
- Best to send certified copies of the transfer and mortgage deed – Land Registry do not return paper documents
- Original mortgage deed should be sent to lender – original transfer deed should be kept if it has covenants
What are the Land Registry deadlines for both types of land?
- Registered land: no deadline other than limit created by 30 days from OS1 search
- Unregistered land: deadline of two months from completion – is not complied with, transaction is void
o An application must then be made to the Land Register to extend the period
How does SDLT change if VAT is payable?
SDLT then is based on the purchase price including VAT?
How does SDLT relief work for first time buyers?
- Discount applicable for a person buying their first home provided that purchase price is no more than £625,000
- If more than one person buying – ALL must be first time buyers
- If relief applies:
- No SDLT for first £425,000 of purchase price
- 5% on any part of the price over £425,000
How does SDLT work on second properties?
- Additional SDLT is charged on the whole of the purchase price
- Calculate standard SDLT – and add 3% of purchase price
- Qualifications:
o Replacing buyer’s main home
o First property sold within 36 months
What key differences are there between SDLT and LTT?
No relief for first time buyers under LTT
Higher rates of LTT apply for buyers who will have a second property after purchase
When does CGT arise?
Chargeable disposal of a chargeable asset by a chargeable person which gives rise to a chargeable gain
All elements must be satisfied
What is a chargeable disposal?
- Sale of an asset
- Lifetime gift of an asset
NOT a gift on death
What is a chargeable asset?
- All property assets are chargeable assets, except main home where and insofar as it qualifies for Private Residence Relief
Who is a chargeable person?
- An individual who is a UK taxpayer for the relevant tax year
- Companies do not pay CGT
- Charities are usually exempt from paying CGT
What is a chargeable gain?
Looks at the increase in value of an asset – allowing for allowable expenditure
For property this would include:
* Costs incurred in acquiring the asset – e.g. conveyancing fees
* Costs incurred that contribute to the value of an asset – cost of building an extension, but not the costs of maintenance or repair
* Costs incurred in disposing of the asset – conveyancers’ fees for sale, estate agents’ commission
How much is the annual exemption to CGT?
£3,000
What is Private Residence Relief?
Applies so that a person does not pay Capital Gains Tax if they sell / dispose of their home
What conditions are there for private residence relief?
o It has been the person’s main home for all the time that they have lived in it
o They have not let it out (other than taking a lodger)
o Not been used for business purposes – using a room as a temporary office is ok
o All grounds must be less than 5,000 sq m
o It was not bought just to make a gain
