Property 9

Question 1

How long does the pre-completion stage last?

Answer 1

Usually one or two weeks but this is a matter for negotiation between the parties in the chain.

Question 2

What is ‘simultaneous exchange and completion’ and why is it risky?

Answer 2

When exchange and completion happen on the same day. It is risky because the parties will be aiming for the agreed date in good faith, but there will be no binding contract in place until the day of completion. The solicitor will have to do all pre-completion work before exchange

Question 3

What are the 3 main tasks of the seller’s solicitor in the pre-completion stage?

Answer 3

• Prepare the Completion Statement if applicable* Complete the Completion Information and Undertakings form* Arrange for the Purchase Deed/Lease to be executed by the seller (with formalities of a deed on or before completion date)

Question 4

What is a completion statement?

Answer 4

A statement that shows the seller how much money will be left from the completion money, that is, the ‘net sale proceeds’ (i.e. after mortgage redemption figures and estate agent’s fees, if any have been accounted for).

Question 5

What happens to the net sale proceeds?

Answer 5

Net sale proceeds will be:* sent to the seller on completion if no related purchase (bank details needed), otherwise * it will be transferred to the purchase file ledger.

Question 6

What is the Completion Information and Undertakings form and what are the 4 parts to it?

Answer 6

A standard Protocol form completed by the seller’s solicitor prior to completion. * It gives details of the client account to which the purchase money must be sent on the day of completion* Confirms the amount due on completion* Where the keys to the property will be available for collection on the day of completion (usually the keys are left with the estate agent). * Crucially, if the property is mortgaged, the seller’s solictor gives an undertaking to pay off the mortgage(s) out of the sale proceeds and to provide evidence of discharge when received.

Question 7

In a lease situation, what is the final version of a lease called, and what are its two parts?

Answer 7

An engrossment made up of the original (signed by landlord) and counterpart (signed by tenant)

Question 8

What are the 5 key pre-completion tasks of the buyer’s solicitor?

Answer 8

• Check Completion Information and Undertakings form sent by seller’s solicitor* Carry out Pre-Completion Searches* Prepare a Completion Statement* Submit Certificate of Title to requrest drawdown of mortgage on time* Draft Purchase Deed/Transfer Deed (TR1) for a Lease (and get a licence to assign if necessary)

Question 9

What does the buyer’s solicitor check the Completion Information and Undertakings form for?

Answer 9

To ensure the seller’s solicitor is undertaking to pay off all known charges from the purchase money on completion.

Question 10

What is the purpose of the pre-completion searches done by the buyer’s solicitor?

Answer 10

Ensure that all information received about the property remains correct and protects the buyer (and lender) from any undisclosed third-party rights. * The searches are usually done just after exchange, as the results will come back almost immediately. * The search results must be received and considered before completion.

Question 11

What should the buyer’s pre-completion searches not be confused with?

Answer 11

Pre-contract searches, e.g. local search or drainage search

Question 12

What pre-completion searches are carried out by the buyer’s solicitor?

Answer 12

Registered Land* Official Search with PriorityUnregistered Land* Full land charges searchBoth - repeat searches:* Bankruptcy if obtaining a mortgage* Company if seller is a company* Physical inspection of property

Question 13

What is the ‘registration gap’?

Answer 13

Every disposition involves two stages: * the disposition itself and * the registration, which completes the process.Typically, there are a few weeks between completion and the application to register. During that period, 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 14

In the registered system, in the period between completion and registration, only what type of interest does the buyer have, why, and what must be done to protect this interest?

Answer 14

Only an equitable interest, because legal title in the registered system passes upon registration. The equitable title must be registered as a notice on the charges register of the property

Question 15

What is the Official Search with Priority?

Answer 15

Search done to deal with the registration gap on behalf of the buyer or a lender (if there is one). After exchange, the buyer’s solicitor should carry out an official search of the register using the property’s title number usually via the HMLR’s online portal.

Question 16

What are the two most common official searches with priority?

Answer 16

• Official Search with Priority Against the Whole of a Registered Title (using form OS1) and * Official Search with Priority Against Part of a Registered Title (using form OS2) e.g. if the buyer is purchasing a new build property from a developer.

Question 17

What are the two purposes of the official search carried out after exchange in the registered system?

Answer 17

1. Discover any new entries, e.g. new mortgages, requiring address before competition2. Start the 30 working day priority period to complete and register

Question 18

What is the ‘search from’ date in an Official Search with Priority?

Answer 18

The search is carried out from the ‘search from’ date appearing on the header section of the official copies of the title register issued by HMLR and acts as a means of updating 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.

Question 19

If another mortgage has been added to the seller’s charges register and it appears on the search result when the buyer’s solicitor is conducting the Official Search with priority, what should they do?

Answer 19

Require the seller’s solicitor to undertake to pay off the mortgage out of the sale proceeds on completion.The same action should be taken if an unexpected result is revealed on the full land charges search in unregistered land

Question 20

What happens to any application for an entry made in the register during the priority period?

Answer 20

It 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.

Question 21

If the buyer’s solicitor cannot complete the transaction and carry out registration of the title within the priority period, what must they do?

Answer 21

The search will need to be renewed to preserve priority.

Question 22

What are the usual consequences for the buyer’s solicitor of a failure to register within the priority period?

Answer 22

• Negligence claim * Buyer’s firm paying off the registered charge

Question 23

What occurs if there is an error in the official search certificate and what remedy is available?

Answer 23

Buyer is still bound by what should have been on the report, even if unaware of it, however they can claim an indemnity from HMLR

Question 24

In the unregistered system, what pre-completion searches are carried out?

Answer 24

Repeat the pre-exchange full land charges search against the full names of the landowner/seller for the full period of their ownership

Question 25

From the full land charges search, what is the priority period in the unregistered system in which to complete?

Answer 25

15 working days

Question 26

What are the priority periods for registered and unregistered land?

Answer 26

Registered: 30 working days to complete and registerUnregistered: 15 working days to complete (registration then happens within 2 months of completion)

Question 27

What must the buyer’s solicitor include in the Completion Statement?

Answer 27

Sum required from the buyer to complete. It should include all sums due, including any stamp duty land tax, HMLR fees, legal fees, and indemnity insurance premiums.

Question 28

To ensure compliance with the SRA Accounts Rules, how must funds due to the firm be held prior to their use on completion date?

Answer 28

As cleared funds i.e. the bank transfer to the solicitor must have been finalised by the bank by the time of completion)

Question 29

In which situations might a buyer have to sign the purchase deed?

Answer 29

If the transfer includes covenants by the buyer or if there is more than one buyer.

Question 30

What are the four types of purchase deed?

Answer 30

1. Conveyance (unregistered)2. Transfer (registered and unregistered)3. Assignment (unregistered leasehold)4. Assent (PRs transfer to beneficiaries, freehold, leasehold, registered and unregistered)

Question 31

What are the two types of form used when (1) whole of the land and (2) part of the land in a title is being transferred?

Answer 31

1. Whole: TR1 Form2. Part: TP1 Form

Question 32

What 7 pieces of information are required on a TR1 and TP1?

Answer 32

• The property’s title number * The property’s address * The date of the transfer* The full names of the transferor and transferee* The consideration paid* The title guarantee given* If more than one person will hold title, a declaration of trust.

Question 33

What are the requirements for an assent?

Answer 33

It must be in writing but need not be by deed unless it contains a covenant by the assentee, such as an indemnity covenant. All ‘proving’ PRs (i.e. representatives named on the grant) must be parties to the assent.

Question 34

What is a licence to assign?

Answer 34

Document evidencing landlord’s consent to assignment under a lease

Question 35

What is the position in the Standard Conditions of Sale regarding apportionment of over/underpaid rent or service charges by the seller?

Answer 35

Charges that are not easily ascertainable at completion should be apportioned based on ‘best estimates’. * Any shortfall attributable 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.