Pre-contract searches and enquiries undertaken when acquiring a freehold/ leasehold property

Question 1

What is a report on title

Answer 1

The report which a solicitor reports to its client on its investigation of title, search results and replies to enquiries

Question 2

What will a report on title do

Answer 2

Identify: material facts in respect of the property; issues and their implications; solutions available - it will summarise the solicitor’s findings and put into plain English for the client

Question 3

Typical contents page of a report on title - 1st thing

Answer 3

Interpretation

Question 4

Typical contents page of a report on title - 2nd thing

Answer 4

Scope of review and limitation of liability

Question 5

Typical contents page of a report on title - 3rd thing

Answer 5

Executive summary

Question 6

What are standard limitations of liability in a report on title

Answer 6

We express no opinion on the commerciality of the transaction. We are unable to advise on the value of the Property; We have not inspected the Property and are unable to advise on the physical condition of the Property. We would advise you to arrange for a survey of the Property to be carried out if this has not already been arranged

Question 7

What should a client not to do before they’ve read the report on title

Answer 7

Should not proceed to exchange contract until read the report and fully understand what they are buying

Question 8

When are searches submitted and why

Answer 8

As early as possible - some searches can take several weeks - usually only once contract papers are received - some firms require money on account

Question 9

What is the difference between standard and optional searches

Answer 9

Standard searches will always be necessary; optional searches will depend on the particular circumstances

Question 10

What are the standard searches

Answer 10

Local search; drainage and water enquiries; desktop environmental search; chancel repair liability

Question 11

What are the two ‘local searches’

Question 12

Home buyer’s valuation and survey report

Answer 12

This is more detailed than the basic valuation but not as comprehensive as the full structural survey.

It is popular amongst house buyers who, reluctant to incur the costs of a full structural survey, seek a compromise that gives more information than a basic valuation. The small print should be read carefully though; the conditions will often reveal just how superficial the report can be.

Invariably, the surveyor will not inspect unexposed or inaccessible areas, for instance the roof space or below floorboards.

A buyer who opts for this type of survey should be advised to contact the buyer’s mortgagee to request that the mortgagee’s surveyor carries it out instead of—not in addition to—the basic valuation.

This will generally be acceptable to the mortgagee and means that the client will avoid incurring two survey fees.

Question 13

The local search

Answer 13

The local search comprises two parts:

· a search of the local land charges register LLC1; and

· the local authority’s replies to enquiries CON29.

Question 14

LLC1 search

Answer 14

LLC1 shows matters that have been entered on the local land charges register affecting the property. These include:

· debts against the property for work that the local authority has carried out – for example, to repair or demolish dangerous buildings or clean properties that are a risk to public health;

· planning permissions that have been granted (but not planning applications that have been refused);

· planning enforcement notices;

· Article 4 directions (which you will remember disapply or modify the General Permitted Development Order);

· conservation areas and listed building designations; and

· tree preservation orders and other miscellaneous charges that you can research if and when they come up in practice.

Question 15

CON29 search

Answer 15

There is some overlap between the LLC1 and the CON29 replies to enquiries. The CON29 replies show planning granted, but also show applications which are pending or refused and building regulations approvals.

The CON29 replies include many matters but some important ones are:

· details of adopted roads and pavements and public rights of way;

· land that is required for public purposes – this means that it may be compulsorily acquired by the local authority in future;

· information about contaminated land insofar as the local authority are aware, but this is limited and does not replace an environmental search.

Question 16

Drainage and water search

Answer 16

The drainage and water search checks whether the property is connected to a public sewer and water supply.

Form CON29DW for residential property

Form CommercialDW for commercial property

Question 17

Desktop environmental search

Answer 17

Land contamination should be considered a potential issue in all property transactions. This is because an owner may have to pay the costs of cleaning up contaminated land, whether or not they were responsible for the contamination.
The CON29 replies will indicate if the local authority has served a notice requiring such remediation, but will not confirm that the property is free from contamination.

A desktop environmental search will advise if the property is likely or not to be contaminated based on historic maps and records. It would therefore not pick up contamination which would not be recorded, such as illegal dumping of waste.

The desktop environmental search result also identifies the risk of flooding. Note that the drainage and water search does not contain information about flooding.

Question 18

Chancel repair search

Answer 18

Chancel repair is the historic right of a parish church to claim contributions to the cost to the repair of the church chancel, which is the area near the altar.

Although cases like this are rare, the low cost of a chancel repair search and the potential loss if there is chancel repair liability mean that they are now treated as a standard search to be carried out in all cases.

If the search reveals a risk of chancel repair liability, it is usually possible to insure against it.

Chancel repair liability was an overriding interest, so it did not historically have to be registered against the registered title.

However, after 13 October 2013, it is no longer an overriding interest. This means that the parish church should register its interest, and if a sale for value takes place without it being registered, then they can no longer claim. However, there are some twists to this rule, and so the search remains a standard search and is likely to do so for some time to come.

Question 19

Title searches

Answer 19

Index map search

Land charges search

Question 20

Index map search

Answer 20

This is not needed if only a single registered title is being acquired, as the register can be taken as conclusive.

However, an index map search will be needed for unregistered title, or a number of titles, or where there is an exception of mineral rights. In these cases, the index map search is used to check all of the registered titles within the boundaries searched.

Question 21

land charges search

Answer 21

(don’t confuse this with the local land charges LLC1 search), which again forms part of the investigation of title, and should be carried out against the seller and previous owners in the chain of title.

However, often the seller will provide previous land charges searches, and these can be relied upon as to previous owners, meaning that only the current owner needs to be included in the buyer’s solicitor’s search.

Question 22

Optional enquiries (CON29O)

Answer 22

These are usually not necessary for residential properties, but are often relevant in a commercial context.

For example, if there is open land, it is important to raise enquiry 22, which asks about commons and village greens. These are land over which the public has rights, and may not be developed.

This search can be carried out as an optional enquiry to the local search, but search providers also offer standalone commons registration searches. Either is fine.

Question 23

Highways search (CON29R)

Answer 23

The local search (CON29) will identify that the roads listed are adopted. This is usually fine for residential purposes, where it will usually be clear that the house abuts the public highway.

However, for land for development and other commercial property, it is important to get a highways search. This provides a plan that can be used to check that the public highway abuts the boundary of the property. If there is a gap, then further investigation will be needed to ascertain what private rights are in place.

Question 24

Mining searches

Answer 24

A coal mining search should be carried out if the property falls within a coal mining area. There is a gazetteer of areas that are affected, and with online search providers, they will indicate at the time of ordering whether the coal mining search is required.

This search is important to ascertain the risk of subsidence from coal mining.

Other areas of the country are affected by specific types of mining:

· a brine subsidence search is needed in certain areas of Cheshire;

· a tin mining search may be needed in Cornwall or Devon.

Question 25

Waterways search

Answer 25

If the property has a river or other waterway running through it or next to it, then a waterways search with the Canal and River Trust should be carried out to enquire about any obligation to maintain the banks of the river or waterway.

Note that a waterways search does not provide information about flooding.

Question 26

Flood search

Answer 26

The desktop environmental search provides flooding information, but if this is an issue, then a specific flood search can be carried out, which gives more detailed information on the risk of flooding.

Question 27

Further environmental investigation

Answer 27

There are two categories:

· a Phase 1 survey involves a site inspection, and if this indicates possible contamination, then:

· a Phase 2 survey is carried out, which involves taking soil and water samples to test for actual contamination.

Question 28

Railways searches

Answer 28

There is no standard railway search with NetWork Rail.

Searches can be made with Transport for London (TfL) about Crossrail and other TfL transport schemes.

Question 29

Other utilities searches

Answer 29

For development sites, or newly built property, further utilities searches, such as electricity, gas and telecommunications may be needed.

Question 30

Planning and building regulations

Answer 30

The buyer’s solicitor should consider if there have been any:

· building works or alterations at the property; or

· a change of use.

This may be apparent from the seller’s replies to enquiries or the buyer’s survey.

The buyer’s solicitor should check the searches for any necessary consents, and if they haven’t been obtained, then consider whether enforcement action is still a risk.

If works or alterations have been carried out by the seller, the two types of consents the buyer’s solicitor needs to think about are planning permission and buildings regulations approval.

Question 31

Planning permission

Answer 31

Planning permission is needed for development. This includes building works and demolition, but excludes works which only affect the interior of the building.

Question 32

Permitted development

Answer 32

Some development will be permitted under a General Permitted Development Order. When considering historic development, refer to the GPDO that was in force at that time, not now. If the work falls within that GPDO then planning permission would not have been needed, provided that the GPDO was not disapplied.

Question 33

Building regulations

Answer 33

Building regulations ensure that building work complies with standards of structural soundness, safety, environmental protection, etc.

External or internal building works require building regulations approval, whether or not planning permission is needed.

Building regulations approval is a two step process:

Full plans and specifications must be submitted to the building control department of the local authority for approval.

After completing the works, building control inspect the work and issue a certificate of compliance.

Question 34

Change of use - building regulations

Answer 34

If replies to enquiries or the survey indicate that the property has been subject to a change of use, then the buyer’s solicitor needs to think about planning permission.

Property uses are classified under the Town and Country Planning (Use Classes) Order 1987, as amended in September 2020. However, again, looking at historic changes of use, you would need to refer to the Order as it stood at the relevant time.

Question 35

Use classes

Answer 35

Use classes are grouped by capital letter, such as E, and then subdivided. This used to be by number, eg A1, A2, B1, etc, but confusingly the modern use classes adopt lettering, so E(a), E(b), etc.

With the modern use classes, changes with the same capital letter, eg, E(a) to E(b) do not require planning permission. However, with the old use classes, some of which have not been replaced, you need to consider both the letter and the number that follows it. So for example, a change from C3 (dwelling houses) to C1 (hotels) does require planning permission.

Note also, that there are sui generis uses, which do not fall into any use class. Any change to or from these sui generis uses will be considered development.

The GPDO allows for certain changes of use between different use classes.

Building regulations are not needed for a pure change of use. Usually, however, a change of use will also necessitate building works or alterations, in which case building regulations approval will be needed.

Question 36

Article 4 directions

Answer 36

If looking at ‘permitted development’, then remember that local planning authorities can disapply parts of the GPDO by making an Article 4 Direction.

The LLC1 part of the local search will show if there is an Article 4 Direction in place, and when it took effect, which could be important for historic development.

If an Article 4 Direction had disapplied the GPDO as to the particular permitted development under consideration, then planning permission would have been needed.

You are more likely to find an Article 4 direction has been made in a conservation area.

Question 37

Conservation area

Answer 37

If the local planning authority consider an area of special architectural or historical interest, they can designate it a conservation area. This helps preserve the character and appearance of the area.

The local search will identify if the property falls within a conservation area. (In most cases, this will be the LLC1 result, but before a certain date, it would appear on the CON29 result. All you need to know is that it will be somewhere in the local search.)

It is likely that there will be extra planning controls in place in a conservation area, particularly an Article 4 Direction.

It may also be that planning permissions that are granted will be subject to stricter conditions, such as the colour and type of bricks that are used to extend a property.

Question 38

Checking for planning permissions and building regulations approval

Answer 38

Having considered whether any development has taken place, and whether it would have necessitated planning permission or building regulations approval, the buyer’s solicitor next needs to check whether such consents have been obtained.

For planning permissions, the LLC1 is the best place to check, as this shows planning permissions that have been obtained. The CON29 also shows planning permissions that have been refused.

Building regulations approvals are not shown in the LLC1, so you will need to look in the CON29.

Question 39

Planning permission deadlines

Answer 39

4 years for:

· Building works carried out without planning permission; or
· Change of use to a single dwelling house.

10 years for:

· Any other change of use; or
· A breach of a condition to a planning permission.

NB The local authority can take enforcement action after these deadlines if the breach has been deliberately concealed.

Question 40

Options if time limits for enforcement have not expired

Answer 40

If there is still a risk of enforcement action for planning issues then the options are:

· An indemnity policy to cover the financial losses caused by enforcement – this should be provided at the cost of the seller

· Retrospective planning permission

· Compliance with a condition (if this is the breach)

These may be made conditions of the contract.

For building regulations breaches, the options are:

· An indemnity policy to cover the financial losses by enforcement.

· A regularisation certificate and remedying any non-compliant work.

For minor or trivial breaches, an indemnity policy may be considered sufficient. However, it should always be borne in mind that work that does not comply with building regulations may not be safe. Indemnity policies do not cover the risk of a structure collapsing or personal injury or death.

Question 41

Building regulations deadlines

Answer 41

There are time limits on the local authority’s statutory powers to take enforcement action:

· 6 months after discovering a breach to prosecute a person responsible for the works for up to two years from the date of completion of the works

· 12 months to serve an enforcement notice.

There is no time limit on their seeking an injunction through the courts.

It is likely that the local authority will only be inclined to pursue the most serious breaches of building regulations through the courts, but the risk should not be ignored.

Case law has confirmed that a solicitor who does not take all reasonable steps to obtain copies of building regulations approvals and certificates may be found negligent.

Question 42

The local authority’s enforcement options

Answer 42

A planning enforcement notice requires that the land be restored to the condition it was in before the unauthorised development took place.

· A stop notice can only be served with an enforcement notice and prohibits the carrying out of further activities in breach of planning control.

· A breach of condition notice is similar to a planning enforcement notice but requires compliance with conditions imposed by a planning permission.

· The local authority can also seek an injunction from the court if they consider it necessary.

Question 43

A house-building company is purchasing land for development from an engineering company which has owned the land for many years. The land has a registered title. A local authority search in Form CON29 has already been carried out.

Which additional pre-contract searches would be required in consequence of these specific circumstances?

Answer 43

Environmental search

This is because this search would cover environmental matters, which will be particularly important as the seller has clearly been using the land for industrial purposes and so there is a high risk of contamination.

Question 44

The owner of a freehold house, which she bought around seven years ago, now wishes to sell the property. It is a Grade II listed property. The owner is unsure as to the rules regarding an Energy Performance Certificate (EPC) for the property.

What is an EPC

Answer 44

An EPC does not just contain information about a property’s current energy performance and costs—it also includes recommendations about how to reduce energy use in the future.

Question 45

A solicitor has been instructed by the buyer of a parcel of land. At their initial meeting, the solicitor mentions to the buyer that they will be utilising the services of the National Land Information Service (NLIS). The buyer has not heard of the NLIS before and asks for further details.

How would you describe NLIS?

Answer 45

It provides a single point of enquiry for making pre-contract searches.

The NLIS brings together most of the different agencies involved in the conveyancing process, thereby enabling pre-contract searches to be undertaken via a single NLIS licensed channel rather than contacting each agency independently.

Question 46

A solicitor is acting for the buyer of a commercial unit and is just about to undertake a local search in respect of the property. The buyer asks their solicitor to explain what a local search involves.

What describes the two main parts of a local search?

Answer 46

Local land charges search and standard enquiries of the local authority.

The local land charges search will reveal whether any such charges (eg tree preservation orders and smoke control orders) are registered against the property.

The standard enquiries of the local authority (using Form CON29) will reveal or confirm a variety of matters affecting the property (eg whether the road serving the property is adopted by the local authority).

Question 47

A local property firm regularly receives referrals from a firm of surveyors in the same area. One of the partners at the firm of surveyors wishes to put a formal fee-sharing arrangement in place with the firm regarding any clients they refer to the law firm to carry out their residential conveyancing.

What must the law firm do in these circumstances to ensure they are not in breach of the SRA Code of Conduct for Solicitors (CCS)?

Answer 47

Ensure that the clients are informed of the fee-sharing arrangement in writing.

This will ensure that the solicitor is acting in the best interest of the client and is also acting in accordance with paras 5 and 8 of the CCS. The client must be informed of any fee-sharing arrangement in place and this must be in writing (para 5.1(a)—(c)), and a client must be provided with information that they can understand and that they are in a position to make informed decisions (para 8.7).

Question 48

A businessman is buying a freehold commercial unit in London, which has an unregistered title. The land on which the unit is built was previously owned by a company until 1980. The land has previously been used for a variety of different purposes, including engineering. The unit is currently owned by a local authority, which bought it in 1980.

Which best describes a group of pre-contract searches which will need to be undertaken for this property?

Answer 48

Environmental search, local authority search, index map search.

This is because in addition to the usual local authority search, an environmental search will be necessary given the previous use for engineering purposes. An index map search will be relevant, given that the property has an unregistered title.

Question 49

A solicitor is acting for the buyer of a house which has a registered title. The house was first registered in 2004 following a sale. The house was the subject of a further sale which was registered in 2012. The house is built on land which is near the church within a Church of England parish. There is no entry in the register as to chancel repair liability.

What best describes whether the buyer’s solicitor would need to carry out a chancel repair liability search?

Answer 49

A chancel repair liability search should be carried out because there has been no registered transfer on sale after 12 October 2013

This is because although there is no entry in the register and chancel repair liability no longer takes effect as an overriding interest after that date, the property remains subject to any existing liability until the next transfer on sale is registered.

There is therefore a risk, at this stage of the transaction, that an application could still be made for registration of the burden of any such liability in the register and the buyer would then be bound by it if they proceed with their purchase.

Question 50

A solicitor is acting for a client in the purchase of a house for £250,000 and has just received the local land charges official search certificate from the local authority. The client asks the solicitor about the extent to which the accuracy of the official search certificate can be relied upon.

What best describes the position in relation to such a search certificate?

Answer 50

The official search certificate is guaranteed by the local authority as at the date of the local search result.

This is because the Local Land Charges Act 1975 provides that where an official search certificate is inaccurate, the local authority may be liable to pay compensation to the buyer.

Question 51

A solicitor is acting for the buyer of a house from a married couple. The buyer is obtaining a mortgage from a building society. The completion date has been agreed and the parties are in a position to exchange contracts. The buyer’s solicitor advises the buyer that a physical inspection of the house prior to exchange would be advisable.

Why is this advisable?

Answer 51

It enables a check to be made as to who is in actual occupation of the property.

This is because the rights of occupiers could potentially take effect as an overriding interest as against the buyer. It is therefore important to check who is in actual occupation and whether any such rights exist, so that the matter can be dealt with on or before exchange of contracts.

Question 52

A solicitor is acting for a company which is buying a development site. The site was previously used for industrial purposes prior to its purchase as vacant land by the seller. The solicitor has carried out an environmental search which reveals the site is affected by contamination. The company is concerned by this and asks its solicitor whether further investigation as to its potential liability for remediation costs is necessary before it commits to buying the site.

What best describes whether such further investigation is necessary?

Answer 52

Further investigation as to potential liability for remediation costs is necessary because the buyer will potentially be liable if it becomes the new owner.

This is because the buyer will have a potential liability once it becomes the new owner. The liability is imposed by the Environmental Protection Act 1990 and the regulations issued under it. The liability is not automatic, as the original polluter (as a ‘Class A’ person) has primary liability.

However, the liability may potentially fall on others—for example, where the original polluter cannot be found. As the new owner, the company may therefore find itself designated a ‘Class B’ person and therefore liable.

Question 53

A mortgage lender is intending to take repossession proceedings in respect of a property over which it has a registered charge, so that it can then sell the property. The house has a registered title and there is a sole registered proprietor. As an initial step, the lender carries out an application to HM Land Registry using Form HR3.

What best describes the purpose of such an application?

Answer 53

To search the register as to whether any home rights notice has been registered or applied for

This is because s56 of the Family Law Act 1996 requires a lender to serve notice of the repossession proceedings upon any person who has registered a home rights notice in the title

A search using Form HR3 enables the lender to check whether any such notice has been registered or is the subject of a pending application. The search result confers a priority period of 15 days.

Question 54

A building company is buying a parcel of land for residential development. Its solicitor has carried out pre-contract searches, which reveal that part of the land is registered under the Commons Registration Act 1965.

What best describes why further enquiries will need to be made regarding this registration?

Answer 54

To ascertain whether the commons registration relates to the land being registered as a town or village green.

This is because if the land is so registered, that would make development of the land difficult or impossible.