Property (Freehold) - Completion (10)

Question 1

What is completion?

Overview

Answer 1

Completion: Completion is the process of finalising the transaction and completing the transfer deed.

(1) Date: By default, at 2pm 20 working days after exchange (subject to bespoke condition).

(2) Effect on Contract: Completion terminates the exchanged contract, which can no longer be relied on. Its provisions are merged into the deed.

Question 2

What methods can be used to complete?

Answer 2

Method of Completion: Completion occurs by one of two methods. In both, payment is transferred to an account in the name of the seller’s solicitor, and the deed is then dated, confirming completion. By SC/SCPC, payment is electronic.

In Person
In Person: Completion in person constitutes the buyer’s solicitor attending the seller’s solicitor with the executed deed. Purchase money is exchanged for the title or title deeds, other relevant documents, and key release is organised.

Postal
Postal: Postal completion is more common, as it is more practical. It is governed by the Law Society Code for Completion by Post.

(1) Process: Seller’s solicitor completes upon receiving purchase money. They hold it on trust until formalities are finalised, and undertakes to comply with buyer’s instructions and redeem any existing mortgage.
>Written confirmation and relevant documents are transferred by first-class post or document exchange as soon as possible and by the end of the next working day at most.
>The instructions are simply whatever the buyer’s solicitor would have requested in person.

(2) Cost: Seller’s solicitor bears cost of process (but benefits whenever they act for a buyer).

Effect
Effect: The effect of completion differs by land.

(1) Unregistered: Legal title passes to buyer immediately but an application for first registration needs to be filed within 2 months otherwise the legal title will revert.

(2) Register: Legal title does not pass until buyer is registered at Land Registry as new proprietor (this is why the priority period is important).

Question 3

What happens if completion is delayed?

Answer 3

Delayed Completion: Delayed completion may incur various remedies (these vary between SC and SCPC).

Contract Rate Compensation
Contract Rate Compensation: Innocent parties may be entitled to compensation at the contract rate, usually the law society rate from time to time (see draft contract). This is applied to (purchase price-deposit) for each day of innocent delay.

(1) SCs: Either party can seek contractual compensation.
>Buyers can redirect rent of any tenants in situ.

(2) SCPCs: Only a seller can seek contractual compensation.

Damages
Damages: Innocent parties can seek common law contractual damages for breach of completion term.

(1) Calculation: Calculated as loss of expectation: a) losses arising naturally; or b) reasonably foreseeable at time of contract, i.e. legal costs, short-term premises etc. (Hadley v Baxendale).

(2) Contractual Compensation: Any compensation awarded under contract rate is deducted from recoverable damages.

Rescission
Rescission: Innocent parties may be able to rescind, terminating the entire transaction. The deposit is forfeited by the defaulting party, and damages can be sought in addition. Reduced deposits would need to be topped-up.

(1) Misrepresentation: Fraudulent or non-innocent misrepresentation may permit rescission.

(2) Notice to Complete: By default, time is not ‘of the essence’. As such, a party must serve a notice to complete at any time after 2pm on the intended completion date. The other party must complete within 10 working days, otherwise the transaction can be terminated.

(3) Time of Essence Clause: Contract may have made time ‘of the essence’ by special condition, permitting rescission without notice.