PRE-COMPLETION (STAGE 4)

Question 1

2

Completion Statement

Answer 1

1. If the seller has an existing mortgage, the seller’s solicitor will ask the seller’s lender for an up-to-date redemption figure (that is, how much is left to pay off on the mortgage).
2. Once the seller’s solicitor knows the mortgage redemption figures and estate agent’s fees, if any, they will prepare the completion statement.
3. This shows the seller how much money will be left from the completion money, that is, the** ‘net sale proceeds.’**
4. If the seller does not have a related purchase, the net sale proceeds must be sent to the seller on completion;
   so, the solicitor must ensure that they have the bank details for the account to which the money will be sent.
5. If the seller has a related purchase, the net sale proceeds will probably
   be transferred to the purchase file ledger to use towards the purchase price

Question 2

3

Completion Information and Undertakings

Answer 2

1. The Completion Information and Undertakings is a standard Protocol form and is completed by the seller’s solicitor prior to completion.
2. It gives details of the client account to which thepurchase money must be sent on the day of completion, con-firms the amount due on completion, and where the keys tothe property will be available for collection on the day of com-pletion (usually the keys are left with the estate agent).
3. Crucial-ly, if the property is mortgaged, the seller’s solicitor gives an undertaking to **pay of the mortgage(s) out of the sale proceeds **and to provide evidence of discharge when received.

Question 3

Seller’s Signing of Purchase Deed

Answer 3

Typically, the buyer’s solicitor will have drafted a purchase deed (a transfer – typically a TR1) and sent it to the seller’s solicitor (see below). Because this is a deed, the seller’s solic-itor must arrange for this to be executed with the formalities of a deed on or before the completion date so that it can be handed over to the buyer’s solicitor on completion once the purchase money is received.

Question 4

Compare Leasehold: New Lease

Answer 4

a.Pre-Completion Tasks
In a leasehold transaction, after exchange of contracts, the transaction proceeds in the usual way, with pre-completion searches, requisitions on title, application for funds, and the sending out of completion statements. However, instead of
the parties executing a transfer deed, they execute the lease.
b.The Engrossment
Before completion, the landlord’s solicitor will prepare final copies of the lease for signature, including all plans referred to. The final version of the lease is called an engrossment, and it will be prepared in two parts: the original, which is signed by the landlord, and the counterpart, which is signed by the tenant.

Question 5

Completion Information and Undertakings
buyer’s solicitor

Answer 5

When the Completion Information and Undertakings form or
its equivalent is received from the seller’s solicitor, the buy-er’s solicitor must check that** the seller’s solicitor is undertak-ing to pay of all known charges from the purchase money **on completion.

Question 6

Pre-Completion Searches
buyer’s solicitor

Answer 6

The buyer’s solicitor must carry out pre-completion searches which ensure that all information received about the property remains correct and protects the buyer (and lender) from any undisclosed third-party rights.
Exam Tip
Be careful on the exam: do not confuse the above
pre-completion searches with pre-exchange searches, such as the local search or drainage search.

Question 7

Registered Title
The Registration Gap

Answer 7

1. The land registration system has a problem in that every disposition involves two stages: the disposition itself and the registration, which completes the process.
2. Typically, there are a few weeks between completion of the trans-action and the application to register the disposition at HMLR. During the period from disposition (for example, completion on the purchase of a property) to registration, the buyer, lessee, or mortgagee** is not vested with a legal interest** in the property but rather has only an equitable interest which requires registration of a notice in the Charges Register to provide protection.

Question 8

3

Registerd Title
The Offcial Search and Priority

Answer 8

1. The offcial search with priority is intended to deal with the registration gap issue and is done on behalf of the buyer or a lender (if there is one).
2. After exchange, the buyer’s solicitor should carry out an official search of the register using the property’s title number.
3. The two most common searches are the Official Search with Priority Against the Whole of a Registered Title (using form OS1) and the Offcial Search with Priority Against Part of a Reg-istered Title (using form OS2).

Question 9

2

purpose of search

Answer 9

1. Discover Recent Entries
   The search is carried out from the** ‘search from’ date ap-pearing on the header section of the ofcial copies of the title register issued by HMLR and acts as a means of up-dating the register. If any entries have been added to the register since the ‘search from’ date**, these will appear on the result of the search. The buyer’s solicitor then has the chance before completion to require the seller’s solicitor to deal with removal of any adverse entries on or before completion.
2. Priority Period
   The search result provides the buyer with a priority period of** 30 working days** from the time the ofcial search was lodged. Any application for an entry made in the register during the priority period is held until the buyer’s priority period has expired, and it will fall away if
   the buyer completes and registers the transaction within the priority period. If the buyer’s conveyancer cannot complete the transaction and carry out registration of the title within the priority period, the search will need to be
   renewed to preserve priority.

Question 10

Registration Gap

Answer 10

Question 11

4

Unregistered Title

Answer 11

1. If the title is unregistered, a full land charges search must be carried out against the full names of the current estate owner/seller for the full period of their ownership.
2. This should have been done before exchange and will be repeat-ed before completion.
3. If the search results reveal anything unexpected, such as a C(i) puisne mortgage, the buyer’s solicitor must require the seller’s solicitor to deal with the ossue and undertake to remove the entry. Remember that a D(ii) restrictive covenant is unlikely to be a surprise as this is a land charge which must be registered to constitute notice of a covenant that will then bind the buyer.
4. The search result confers a priority period of 15 working days within which the transaction must complete.

Question 12

Buyer’s SolicitorWill Repeat Certain Searches

Answer 12

During the pre-completion stage, the buyer’s solicitor will repeat certain searches. For instance, they will carry out a bankruptcy search if the buyer is obtaining a mortgage, and the company search if the seller is a company. The buyer’s solicitor will also advise the buyer to carry out another physi-cal inspection of the property prior to completion.

Question 13

If a New Entry Is Found

Answer 13

If a pre-completion search does reveal a new entry, the buyer’s solicitor will require the seller’s solicitor to resolve it before completion. This will usually require removal of the
entry.

Question 14

3

Completion Statement and Buyer’s Finance

Answer 14

1. The buyer’s solicitor will prepare a completion statement showing the sum required from the buyer to complete (or the sum due to the buyer on completion). The statement should
   include all sums due, including any stamp duty land tax, HMLR fees, legal fees, and indemnity insurance premiums.
2. To ensure compliance with the SRA Accounts Rules, any funds due to the firm must be cleared funds prior to their use on the completion date (that is, the bank transfer to the solicitor must have been finalised by the bank by the time of comple-tion).
3. If the buyer has a mortgage, the buyer’s solicitor will submit the Certifcate of Title to the lender in time to request drawdown of the mortgage advance prior to the completion
   date.

Question 15

3

The Purchase Deed

Answer 15

1. The purchase deed transfers the legal estate in the property to the buyer pursuant to the contract entered into on ex-change.
2. As already mentioned, the purchase deed is nor-mally drafted by the buyer’s solicitor, who will then send two copies of the draft document to the seller’s solicitor. The seller’s solicitor will approve the document or make any amend-ments. The buyer’s solicitor will then prepare and send **the final engrossment (the final version of the document) **back to the seller’s solicitor.
3. It is essential that all sellers sign the purchase deed** on or before** the contractually agreed com-pletion date.

Question 16

4

Types of Purchase Deed
The type of purchase deed used depends on the type of property being conveyed.

Answer 16

1. Conveyance
   The conveyance is used when unregistered land is sold. It is an old style of document that is not used in practice anymore.
2. Transfer
   The transfer is the most commonly used purchase deed. It can be used to** convey all registered and unregistered land, as all unregistered land is now compulsorily regis-trable. There are two types of transfers:
   *TR1 Form – Used where the whole** of the land in a title is being transferred; or
   *TP1 Form – Used where part of land in a title is being transferred.
3. Assignment
   The assignment is used for unregistered leasehold land. It is very rare in practice these days, as a TR1 would be used instead.
4. Assent
   When personal representativestransfer land to a ben-fciary, they will use an assent. It applies to freehold and leasehold, registered or unregistered land. It must be in writing but need not be by deed unless it contains a cov-enant by the assentee, such as an indemnity covenant. All ‘proving’ personal representatives (that is, representa-tives named on the grant) must be parties to the assent.

Question 17

5

Assignment of Lease

Answer 17

1.Purchase Deed and Licence to Assign
In the conveyance of a leasehold, the buyer’s solicitor will prepare the purchase deed, which will be a** Transfer Deed (TR1) **to legally transfer the lease to the buyer.

2. The buyer’s solicitor will also conduct the same** pre-completion searches** as are conducted for a freehold conveyance.
3. If required, the seller’s solicitor must also provide evidence of the landlord’s consent to the assignment; this will be contained in a formal document called** a ‘licence to assign**’.

4.Service Charge Apportionment
The seller/tenant is likely to have paid certain estimated amounts of rent and service charges applicable to the leasehold in advance. Therefore, they will want to provide in the transaction for recovery of amounts they paid that are applicable to the incoming buyer’s tenancy.

5. However, the ac-counts confirming the actual service charge the seller/tenant paid will usually not be finalised until after completion (the final amounts will be indicated on the completion statement). This means that the seller might have overpaid or underpaid the service charge figures.

Question 18

Retention for Potential Shortfall
Service Charge Apportionment

Answer 18

The Standard Conditions of Sale provide for apportion-ment of charges that are not easily ascertainable at completion based on ‘best estimates.’ Any shortfall attrib-utable to the seller’s period of ownership will be payable by the buyer. Accordingly, the solicitors should negotiate a retention whereby the buyer’s solicitor keeps some of the purchase money back pending production of the final service charge account if they anticipate service charge problems.