Completion and post-completion steps relevant to a freehold/leasehold property transaction including remedies for delayed compensation

Question 1

The buyer’s solicitor will usually arrange for the completion money to be sent electronically

Answer 1

SC 6.7 and SCPC 9.7 require
the completion money to be paid by direct transfer/electronic means in cleared funds from an account held in the name of a conveyancer at a clearing bank.

Question 2

Completion in person: (3)

Answer 2

1. buyer’s solicitor to check title docs against evidence previously sent to them
2. seller’s solicitor will hadn’t over title documents and any other docs
3. The Seller’s solicitor will then arrange for the release of the keys to the property by whoever is holding them.

Question 3

Completion by post: The Law Society’s Code involves…

Answer 3

the seller’s solicitor acting as the agent of the buyer’s solicitor for the purpose of carrying out the completion procedure.

Question 4

Completion by post: The Law Society’s Code for Completion by Post involves

Answer 4

the seller’s solicitor acting as the agent of the buyer’s solicitor for the purpose of carrying out the completion procedure.

The seller’s solicitor does this at no cost to the buyer, on the basis the seller will be a buyer at some point and will likewise benefit from using the Code.

Question 5

Completion by post: The Law Society’s Code for Completion by Post: what must the buyer’s solicitor set out in writing?

Answer 5

precisely what the seller’s solicitor is to do on their behalf. The buyer’s solicitor is asking the seller’s solicitor to do whatever it is that they would have done if they could have attended the completion in person.

Question 6

Completion by post: The Law Society’s Code for Completion by Post gives what type of undertaking?

Answer 6

the seller’s solicitor gives an implied undertaking to carry out the buyer’s solicitor’s instructions. This undertaking may be enforced through the courts.

Question 7

Summary of completion

Answer 7

The Law Society Code for Completion by Post is usually adopted by the parties to govern the process of completion.

The buyer’s solicitor is given guidance on what is required from them, and only the seller’s solicitor gives undertakings that are enforceable by the Solicitors Regulation Authority, and if necessary, by the courts.

The seller’s solicitor’s undertakings allow the buyer’s solicitor to know that it is safe to send the money to them.

On the morning of completion, the buyer’s solicitor sends the full completion monies to the seller’s solicitor. The seller’s solicitor calls the buyer’s solicitor to confirm that they have completed, and dates the signed transfer deed. The seller’s solicitor will then call the seller and the seller’s agent (if appropriate) to release the keys.

The seller’s solicitor will send the money needed to clear any mortgage or charge (the redemption monies).

If the seller has a related purchase, the necessary completion monies will be sent to the seller’s solicitor on that transaction.

After deducting the seller’s fees and disbursements, any balance will be sent to the seller

Question 8

Some examples of reasons why the parties may be unable to complete on time:

Answer 8

· The buyer has not been able to get the balance of purchase money to their solicitor on time

· An administrative error, so that the mortgage lender has not sent the funds in time for completion – usually the funds are requested for the day before so that such problems do not appear at the last minute

· A related transaction has not completed – in the case of a buyer, they do not have the money from their related sale, and in the case of a seller, they do not have a property to move into

Question 9

Delay of completion

Answer 9

Once the completion time has been missed by the defaulting party, interest starts to accrue under either set of standard conditions. If completion takes place on the completion date, but later than the completion time, it is treated as having taken place on the next working day.

Note, however, that interest is calculated for each calendar day. Let’s say that a buyer does not complete until 3.30 pm on a Friday, and the completion time was 2 pm. The completion is treated as not having taken place until the following Monday. There would be three days of interest payable – Saturday, Sunday and Monday.

This may seem harsh, but if the seller has not received the money until 3.30, they may not have time to redeem their mortgage and will owe their mortgage lender interest on the loan over the weekend. Removers may also charge overtime for going beyond their booked slots.

Note also, that interest accrues automatically. In the example above, the seller did not need to serve notice to complete.

Under the Standard Conditions of Sale, then the non-defaulting party may claim for expenses. So a residential buyer who finds themselves homeless over the weekend may reclaim their reasonable expenses for accommodation. (A budget hotel would be considered reasonable, a luxury hotel would not.)

Interest payable under the conditions of sale must be deducted from any such claim.

Question 10

Notice to complete

Answer 10

Whilst these remedies apply automatically under both sets of standard conditions, neither party is allowed to walk away from the contract unless time is of the essence. It is rare for a contract to make time of the essence.

The non-defaulting party will therefore want to serve notice to complete to ensure that the failure to complete does not go on indefinitely.

The notice to complete is a mechanism provided by both sets of standard conditions that makes time of the essence and gives ten working days to complete. The ten working days are counted from the first working day after the notice is given. The notice to complete is binding on both parties, so the person serving it should make sure that they will also remain ready to complete.

Again, interest is calculated including non-working days.

Question 11

Buyer’s failure to comply with a notice to complete

Answer 11

If the buyer fails to comply with a notice to complete, then the seller may rescind (walk away from) the contract and under both sets of standard conditions:

· Forfeit and keep the deposit and any accrued interest

· Resell the property and any contents included in the contract

· Claim damages

Question 12

Seller’s failure to comply with a notice to complete

Answer 12

If the seller fails to comply with a notice to complete, then the buyer may rescind the contract and:

· Require the return of the deposit with accrued interest

As the standard conditions also say that for either party they retain other rights and remedies, the buyer could also make a claim for damages based on breach of contract.

From a buyer’s point of view, they may be able to show they incurred a loss if, for example, they are only able to buy a similar property at a higher price due to a climbing market, but this might be tricky. It may be easier for a seller who has resold their property at a lower price in a falling market.

Question 13

Post-completion- Stamp Duty Land Tax and Land Transaction Tax

Answer 13

Stamp Duty Land Tax (SDLT) in England, and Land Transaction Tax (LTT) in Wales, are taxes charged on the purchase price of property.

On completion the buyer’s solicitor submits the form (usually electronically) and pays the tax by bank transfer using a unique reference number.

Both submission of the form and payment of the tax must be done within 14 days of completion for SDLT and 30 days of completion for LTT to avoid a penalty.

To avoid delay, the buyer’s solicitor should have prepared the form for the buyer’s approval and arranged for the buyer to pay the necessary amount as part of the amount needed to complete before the completion date.

Question 14

Post-completion- Companies House

Answer 14

If the buyer is a company, and the company is taking a loan secured by legal charge, then that legal charge must be registered with Companies House within 21 calendar days of completion of the charge. This deadline is strict, and Companies House have no discretion to waive it. If the deadline is missed, then the charge can only be registered by court order. This application will involve significant time and expense.

Note that if there is any issue with the application, Companies House may reject the application, and if they do this towards the end of the 21 day period, it may be necessary to get a courier to ensure that it is received by Companies House within the deadline.

Question 15

Post-completion - Land registration

Answer 15

For registered title, there is no deadline as such, and provided that no application has been lodged in the meantime, the buyer can lodge their application whenever they want after completion.

However, until the buyer’s application is lodged, there is the risk that a third party will enter an application against the title.

It is therefore important to lodge the application within the priority period given by the OS1 search, namely 30 working days.

For unregistered title the application should be lodged within 15 working days of the land charges search.

However, for unregistered title, there is a deadline of two months. The first application registration should be lodged within this time, or the transaction is treated as void. The Land Registrar has discretion to extend the deadline here, but it is best not to rely upon this. In any case, it is best to aim to lodge the application within the priority period of the land charges search.

Question 16

Post-completion - Closing the file

Answer 16

When the Land Registry application comes back (usually within a couple of weeks for registered titles, but it may be several months for a first registration), the official copies should be sent to the client for their records. This usually marks the end of the transaction.

Question 17

SDLT on residential transactions

Answer 17

SDLT is assessed on the purchase price paid for the property, and different percentage rates apply to the slices of the total purchase price.

• Up to £250,000, there is no SDLT payable.
• Over £250,000 up to £925,000, SDLT of 5% is payable
• Over £925,000 up to £1.5 million, SDLT of 10% is payable
• Over £1.5 million, SDLT of 12% is payable

Example: A buyer buys a house for £300,000. There is no SDLT on the first £250,000, but the remaining £50,000 is charged at 5% = £2,500

Question 18

SDLT on residential transactions – first time buyers

Answer 18

A discount (relief) is applicable for a person buying their first home provided the purchase price is no more than £625,000. If there is more than one person buying, all must be first-time buyers.

If the relief applies, there is no SDLT for the first £425,000 of the purchase price, and 5% on any part of the price over £425,000 (but not exceeding £625,000). In the example given on the previous slide, the buyer who paid £2,500 on a £300,000 purchase would pay no SDLT if a first-time buyer.

Question 19

SDLT on residential transactions – second properties

Answer 19

If the buyer is buying a second property, then additional SDLT of 3% is charged on the whole of the purchase price.

You can calculate the SDLT that would be chargeable as usual, and then add 3% of the total purchase price.

There are qualifications to this rule, such as if the property bought is replacing the buyer’s main home, or if the first property is sold within 36 months, but these are outside the scope of this course. If you are interested in learning more, refer to HMRC’s website.

Example: A buyer buys a second property for £300,000. We have already calculated the SDLT at £2,500. An additional 3% of £300,000 is charged for the second property uplift = £9,000. The total SDLT is £2,500 + £9,000 = £11,500. You can see this makes quite a difference!

Question 20

SDLT on non-residential transactions

Answer 20

SDLT is simpler on non-residential transactions:

• Up to £150,000, there is no SDLT payable.
• Over £150,000 up to £250,000, SDLT of 2% is payable.
• Over £250,000, SDLT of 5% is payable.

Example: A buyer buys an industrial unit for £750,000. There is no SDLT on the first £150,000, 2% SDLT on the next £100,000, and 5% SDLT on the remaining £500,000. Total = 0 + £2,000 + £25,000 = £27,000.

Question 21

LTT on residential transactions (wales)

Answer 21

TT is calculated in similar fashion to SDLT:

• Up to £225,000, there is no LTT payable.
• Above £225,000 up to £400,000, LTT of 6% is payable.
• Above £400,000 up to £750,000, LTT of 7.5% is payable.
• Above £750,000 up to £1.5 million, LTT of 10% is payable.
• Above £1.5 million, LTT of 12% is payable.

Example: A buyer buys a house for £300,000. There is no LTT on the first £225,000, and 6% of the remaining £75,000 = £4,500.

Question 22

LTT on non-residential transactions (wales)

Answer 22

As with SDLT, LTT calculations are simpler with non-residential transactions:

• Up to £225,000, there is no LTT payable.
• Above £225,000 up to £250,000, LTT of 1% is payable.
• Above £250,000 up to £1 million, LTT of 5% is payable.
• Over £1 million, LTT of 6% is payable.

Example: A buyer buys an industrial unit for £750,000. There is no LTT on the first £225,000, 1% LTT on the next £25,000, and 5% LTT on the remaining £500,000. Total = 0 + £250 + £25,000 = £25,250.