Unit 4: Completion

Question 1

Pre-completion steps?

Answer 1

• After exchange (immediately), the parties’ solicitors must:
  1. inform their clients that exchange has taken place, and
  2. comply with any undertakings given in the course of any telephone exchange (e.g., sending their client’s signed and dated part of the contract with the completion date inserted, to the other side)
• usually two weeks after exchange of contracts.
  o Sometimes EoC and completion take place on the same day (’simultaneous exchange and completion’)
• Main tasks of solicitor in pre-completion stage are:
  o preparation of the transfer deed
  o pre-completion searches
  o making practical arrangements for completion
  o ensuring the finances are in order for completion

Question 2

Form of a transfer deed for a private individual?

Answer 2

• Transfer of a legal estate in land must be by deed (s52 LPA 1925)
• To be valid, a deed must:
  
  • make it clear on its face that it is a deed
  • be signed by the parties
  • be delivered
• Private individual - Where executed by a private individual, the signature must be witnessed by an independent witness, to counter any potential allegation of undue influence.

Question 3

Form of transfer deed for a company?

Answer 3

• company seal of AoA
• director + secretary or two directors, expressed to be executed by company
• single director with witness attesting

Question 4

Who executes the transfer deed?

Answer 4

• Seller will always execute the transfer deed to transfer the land
• Buyer will also do so if they are entering into an obligation or making a declaration in the TR1 (e.g., giving an indemnity covenant or declaring a beneficial interest under a trust)

Question 5

Delivery of the deed?

Answer 5

• A document which makes it clear on its face that it is intended to be a deed is presumed to have been delivered on execution (but presumption can be rebutted by contrary intention - e.g., if the client has signed the transfer but does not intend it to come into force yet, their solicitor needs to expressly say so in the covering letter when sending the deed)

Question 6

Relevant transfer deeds?

Answer 6

• Transfer of whole of REGISTERED freehold title - Land Registry Form TR1 (TP1 for transfers of part)
• If the land is unregistered, it will be subject to compulsory first registration so the solicitors will often choose to use a Land Registry transfer form, although it is possible to use a conveyance.

Question 7

Preparation of transfer deeds?

Answer 7

• transfer deed is completed by buyer’s solicitor and sent to seller’s solicitor for agreement immediately after EoC
• Straightforward residential transactions - transfer deed may be prepared by seller’s solicitor and sent to buyer’s solicitor in pre-exchange package.
• The transfer deed must reflect the terms of the contract and the title deeds.

Question 8

Are pre-completion searches necessary?

Answer 8

• Generally carried out by buyer’s solicitor
• Should be made as close to the completion date as possible
• Rationale for carrying them out:
  
  1. To make sure that the seller has not further encumbered the title since investigation of title took place
  2. To check the financial circumstances of the BORROWER when acting for the lender
  3. To GAIN PRIORITY for the buyer, and the lender, over anyone else making an application before the buyer applies to register the change of ownership at the Land Registry
  4. If the seller is a company, to check that the company has not gone into liquidation before the balance of the purchase price is paid over on completion.

Question 9

Search from date?

Answer 9

Date on which official copies were produced

Question 10

Registered land: pre-completion search

Answer 10

Land Registry search should be made against the title number to see if any new entries have been made since the ‘search from’ date (i.e., date on which the official copies were produced)
o Form OS1 (for sale of whole property);
o Form OS2 (for sale of part of property)
 A plan will ordinarily need to accompany a request for an OS2 (unless a layout plan has been approved by the Land Registry, which is often the case in new housing developments).
 The application will give details of the title number, the address of the property, the names of the registered proprietors, the name of the applicant and the reason for the search, ie an intention to purchase, lease or charge the property.
o Result of search - will reveal any new entry made since the ‘search from’ date and confer on the applicant a ‘priority period’ of 30 working days from the date of the SEARCH RESULT.
 ‘priority period’ - provides protection to the applicant against any subsequent entries which may be placed on the register after the date of the search, but before the buyer is registered as proprietor.
 Buyer will take free from any such entries so long as they submit their application for registration by 12.00pm on the last day of the priority period

Question 11

Result of pre-completion search - registered land?

Answer 11

o Result of search - will reveal any new entry made since the ‘search from’ date and confer on the applicant a ‘priority period’ of 30 working days from the date of the search result.
 ‘priority period’ - provides protection to the applicant against any subsequent entries which may be placed on the register after the date of the search, but before the buyer is registered as proprietor.
 Buyer will take free from any such entries so long as they submit their application for registration by 12.00pm on the last day of the priority period.

Question 12

Pre-completion search in registered land when mortgage is funding purchase?

Answer 12

 The application for a Land Registry search should be in the name of the LENDER and not the buyer.
 That way the results will confer priority upon both the buyer and the lender since the mortgage is deemed to take place slightly after the purchase by the buyer.
 A search made on behalf of the buyer will not protect the lender.

Question 13

Pre-completion search: unregistered land?

Answer 13

• Land charges search is made on form K15.
• Result - will be on form K18, and confers a priority period of 15 working days from the date of result, during which time the searcher will take free of any entries made on the register between the date of the search and the date of completion, provided that completion takes place during the 15 working day period.
  
  • A land charges search will normally have been done as a pre-exchange search, but will need to be repeated against the current seller’s name unless the transaction can be completed within the 15 working day priority period conferred by the pre-exchange search.
    
    • It is not necessary to search again against the names of the previous estate owners as no entries can have been registered against them after they parted with the property.
• Usually, the results of the pre-completion searches do not show adverse entries, but if they do, the matter must be taken up with the seller immediately.

Question 14

Checking for BUYER’S solvency on behalf of lender - buyer is individual

Answer 14

o Registered title - solicitor will apply for a land charges search against the name of the buyer (alongside pre-completion Land Registry search against property’s title number).
 Will be a special ‘bankruptcy-only’ search using Form K16.
o Unregistered title - solicitor will already be making a land charges search against the seller, so the name of the buyer will be added to the name(s) to be search against on Form K15.

Question 15

Checking for buyer’s solvency - where buyer is company

Answer 15

o Not possible to do a bankruptcy land charges search against it.
o Company search is required.

Question 16

Company search for seller?

Answer 16

• Company search should be done by the solicitor acting for a buyer purchasing from a company.
• Will reveal:
  o whether the seller is still in existence,
  o whether the seller is solvent
  o whether the seller has created any fixed or floating charges
• Company search has no priority period - should therefore be carried out as close as possible to day of completion.
  o Where the transaction is of a particularly high value or where there is reason to be concerned about the solvency of a corporate seller or borrower, it is possible to do a telephone search at the Registry of Winding Up Petitions at the Companies Court on the day of completion.

Question 17

Bankruptcy search against an individual seller?

Answer 17

• If seller is an individual and the transaction relates to unregistered land, a form K15 search against the seller as estate owner will reveal any entries relating to bankruptcy.
• Registered land - most conveyancing solicitors do not consider it necessary to do a bankruptcy check on an individual seller as s 86(5) of the Land Registration Act 2002 provides that where no notice or restriction relating to the bankruptcy appears on the registered title, a buyer for value acting in good faith without notice of the bankruptcy petition or adjudication will take good title from the bankrupt seller, even though legal title to the land has vested in the trustee in bankruptcy.
• NB the bankruptcy searches above can be done where the transaction is for particularly high value, or there is reason to be concerned about the solvency of the individual seller.

Question 18

Practical arrangements for completion

Answer 18

• Buyer and seller need to agree practicalities for completion - done through a ‘completion information form’
  o Sent by buyer’s solicitor to seller’s solicitor for them to complete.
• Most common version (residential transactions) - Form TA13 Completion information and undertakings
  o Asks seller to confirm important information relevant to completion, incl:
   arrangements for handing over the keys
   place and method of completion
   documents to be handed over at completion
   exact amount payable by buyer on completion
  o Contains the undertaking given by seller’s solicitor to redeem the mortgage out of the completion money on completion.
• Form of undertaking should be agreed between the solicitors before the day of completion.
  o Form TA13 does this by asking the seller’s solicitor to list the mortgages and charges secured on the property and whether they ‘undertake to redeem or discharge the [listed mortgages and charges] on completion and to send to us Form DS1, DS3, the receipted charge(s) or confirmation that notice of release or discharge in electronic form has been given to the Land Registry as soon as you receive them?’. The reply ‘Yes’ is treated as an undertaking.

Question 19

Finances for completion

Answer 19

• If buyer is financing purchase with the aid of the mortgage, before releasing the mortgage advance the lender will expect to receive:
  1. a certificate of title to confirm that the property is adequate security for the loan being advanced
  2. a solvency search against the borrowers
  3. a clear OSR1 in the name of the lender
  4. an executed but not completed mortgage deed
• Buyer’s solicitor will need to send a Financial Statement to the client advising them of funds needed to complete. This will show:
  1. The amount to be forwarded by the buyer to its solicitor, which includes:
  1. Balance of the purchase price
  2. Any SDLT/LTT due
  3. Registration fee
  4. Amount outstanding for any other disbursements
  5. Solicitor’s fees
  6. Any other amount owing (e.g., a restrictive covenant insurance policy premium)
• Buyer’s solicitor should ensure that they have received (1) mortgage advance from lender, and (2) balance of purchase price from buyer client.
  o Balance of purchase price should then be sent to the seller’s solicitor to the bank account specified in the replies to the Completion information form
  o Solicitor should then notify the seller’s solicitor that the money is on its way.
  o Once money has been received, the seller’s solicitor will contact the buyer’s solicitor and completion will take place.

Question 20

Methods and effect of completion?

Answer 20

• At completion - buyer’s solicitor will send the balance of the purchase price and release the deposit paid on exchange to the seller.
• The buyer’s solicitor will usually arrange for the completion money to be sent electronically:
  o 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
• After receiving completion money, seller’s solicitor will complete the transaction by dating the TR1.
• Once TR1 is dated, the lender’s solicitor will need to date the mortgage deed (cannot be done before TR1 is dated, as the buyer technically does not own the property until then)

Question 21

Completion in person?

Answer 21

• Requires one solicitor (usually buyer’s) to attend the office of the other solicitor (usually seller’s)
• At this stage, all parts of the transfer should have already been executed by the parties in anticipation of formal completion and will usually be with the seller’s solicitor since the seller normally executes the transfer last.
• At the completion meeting, buyer’s solicitor will check any title documents against the evidence of title previously sent to them (usually significant in unregistered land)
• In return for receiving the completion money, seller’s solicitor will hand over title documents and other documents relating to the property (e.g., planning permissions, and guarantees or insurance policies)
• Seller’s solicitor will then lastly arrange for the release of keys to the property by whoever is holding them.
• Disadvantage:
  o takes time
  o impractical to spend so much time away from the desk

Question 22

Effect of completion - unregistered vs registered land?

Answer 22

• Unregistered land - legal title passes to buyer on completion.
• Registered land - legal title does not pass to the buyer until the buyer is registered at the Land Registry as proprietor of the land.
  o This is why it is important to protect the buyer from the creation of adverse third party rights in the intervening ‘registration gap’ using a Land Registry search which confers priority.

Question 23

Post-completion: discharging mortgage

Answer 23

Arrangements for the discharge of the seller’s mortgage will have been agreed using the completion information form.
1. Buyer will have agreed to allow the seller’s solicitor to discharge the mortgage after completion using the money received at completion, the buyer relying on the undertaking from the seller’s solicitor.
2. Alternatively, the seller’s solicitor may ask the buyer’s solicitor to send the amount required to redeem the mortgage direct to the lender on the day of completion, with only the balance being sent to the seller’s solicitor
3. Once lender has received the amount required to redeem the mortgage from the seller’s solicitor, they will either:
1. complete Land Registry form DS1 and send it to the seller’s solicitor for onward transmission to the buyer’s solicitor; or
2. submit an e-DS1 electronic discharge through the Land Registry portal; or
3. use the Electronic Discharge (ED) system, sending an electronic message to the Land Registry which automatically removes the charge from the register.
4. If ED or e-DS1 is used, the seller’s solicitor will not be sending a DS1 form to the buyer’s solicitor. They will instead send confirmation to the buyer’s solicitor that notice of release or discharge in electronic form has been given to the Land Registry.

Question 24

SDLT / LLT

Answer 24

1. Seller’s solicitor will send TR1 to buyer’s solicitor who must then arrange for any SDLT or LTT to be paid.
2. SDLT - paid to HMRC within 14 days of completion
3. LTT - paid to Welsh Revenue Authority within 30 days of completion
4. Can be done online or through a paper application.
5. HMRC will produce an SDLT5 form for proof that tax has been duly paid on the transaction
6. WRA will return a WRA certificate
7. Failure to pay SDLT/LTT can lead to fines and penalties and any application to the Land Registry to register the buyer as the new registered proprietor will be rejected unless the SDLT5/WRA certificate accompanies the application.

Question 25

Registration of new charge at CH

Answer 25

1. If buyer is a company and has purchased with the aid of a mortgage, the lender’s solicitor will have to register the charge at Companies House within 21 days of its creation (i.e., at completion) to ensure that constructive notice is given to other creditors of the company.
2. Time limit is absolute and cannot be extended without court order.
3. Failure to register renders the charge void against a liquidator or administrator of the borrower and the borrower’s other creditors, so would seriously prejudice the lender’s security.

Question 26

Registered land - land registry application

Answer 26

REGISTERED LAND

• Form AP1
• if DS1 used, apply for mortgage to be discharged
• If new mortgage
  
  • certified copy of mortgage deed
  • (if company buyer) certificate of registration
  • (if company buyer) written confirmation of mortgage deed copy
• Apply within OS1 priority period

1. The applications to have the buyer registered as the registered proprietor of the land and the lender registered as the registered proprietor of the charge are made on Land Registry form AP1.
2. If the seller had a mortgage which has been electronically discharged, the entries in the charges register protecting this mortgage will be automatically removed but
3. if a DS1 has been used, the buyer’s solicitor must apply for the mortgage to be discharged.
4. Certified copy of the transfer should be submitted with the application, with the fee, SDLT/LTT certificate, and DS1 (if used)
5. As part of the policy to reduce the number of overriding interests, an applicant for registration must complete Form DI setting out any overriding interests that burden the title.
6. These will then be entered on the register and thus cease to be overriding.
7. If buyer has created a new mortgage, then they will also need:
8. certified copy of mortgage deed
9. if buyer is a company, certified copy of the certificate of registration issued by Companies House
10. if buyer is a company, the solicitor’s/lender’s written confirmation that the enclosed certified copy mortgage deed is the same as the one filed at Companies House and to which the certificate of registration relates.
11. Application(s) must be made before the expiry of the priority period of the OS1 search that should have been carried out pre-completion.
12. Failure to do so will leave the buyer and lender to take subject to matters registered during that period.

Question 27

Unregistered land - land registry application

Answer 27

Unregistered land

1. Application for first registration of title must be made within two months of completion of the transaction on Form FR1.
2. Documents accompanying the application must be listed in duplicate on form DL. One copy of form DL will be returned to the applicant’s solicitor, which will give an estimate of the likely time which the Land Registry expects to take to deal with the application.
3. Registrar needs to investigate title to decide which class of title to allocate, hence they need access to all the documents which formed the evidence of title supplies to the applicant by the seller’s solicitor.
4. Conveyancers have the option of lodging first registration applications made up entirely of certified copy deeds and documents, but
5. non-conveyancers must submit original deeds and documents with first registration applications.
6. Documents should be numbered in chronological sequence on form DL and include whichever documents are relevant to the transaction from the list below:
    all the documents which formed the evidence of title supplied by the seller’s solicitor
    all the buyer’s pre-contract searches and enquiries relating to the title with their replies
    the contract
    requisitions on title with their replies
    all pre-completion search certificates
    the transfer deed
    the seller’s mortgage, duly receipted
    SDLT/LTT certificate
    Form DI
7. If there is a new mortgage, the documents above will also be required, along with the original mortgage deed.
8. As part of the policy to reduce the number of overriding interests, an applicant for registration must complete form DI setting out any overriding interests that burden the title. These will then be entered on the register and therefore cease to be overriding.
9. Land Registry Forms AP1 and FR1 relating to properties of more than £5,000 in value require the applicant to give details of the conveyancer acting for each party and, where a party is not represented, provide evidence of that party’s identity.
10. The Land Registry will process the relevant application(s) for registration and insert the buyer as the new registered proprietor and the lender as the new registered proprietor of the charge. Once this has been done, the Land Registry will forward an official copy of the entries on the register, known as a Title Information Document (or ‘TID’) to the buyer’s solicitor.
11. Although this is not strictly a document of title, it is for the buyer to keep as evidence that it is the new owner.
12. Once TID has been checked, the buyer’s solicitor will need to deal with the safekeeping of the TID and any other papers.
13. If property has been bought with a mortgage, the lender should be asked if it wishes to retain them (usually only the updated TID)
14. Once all of this has been dealt with and the bill paid, it is possible to close the file.

Question 28

Remedies for delayed compensation

Answer 28

• The exchanged contract will usually contain the date for completion that the parties agreed.
  o If it does not, SC 6.1.1 and SCPC 9.1.1 provide that the completion date is 20 working days after the date of the contract.
• SC and SCPC - Money due on completion must be paid before 2pm on the day of completion, and if not, completion is to be treated as taking place the next working day as a result of the buyer’s default.
  o Parties can vary the completion time of 2pm in the contract
   e.g., 12 noon is sometimes substituted when there is a chain of transactions to be completed in a single day.
• If one of the parties is not ready to complete on time, both SC and SCPC provide that time is not of the essence of the contract unless a notice to complete has been served.
  o There is no immediate right for the non-defaulting party to terminate or rescind the contract on the contractual completion date.

Question 29

Contractual compensation?

Answer 29

• Both SC and SCPC provide for compensation to be paid, however:
  o SC - both the buyer and seller can be asked to pay this compensation (SC 7.2)
  o SCPC - only the buyer can be required to pay compensation (SCPC 10.3)

Question 30

Calculation of compensation?

Answer 30

• Compensation is calculated at the Contract rate specified in the contract on the balance of the purchase price less any deposit paid (if the defaulting party was the buyer) for the period between the contractual completion date and the date of actual completion.
• Compensation is calculated as a daily rate so that it can be multiplied for the number of days of default.
  o Count the day that it was supposed to be completed.
  o Count the day of completion if they were NOT able to complete on that day by 2pm.
  o Do NOT count the day of actual completion if it was completed that day before 2pm.
  o Weekends, bank holidays, etc. ARE included - COUNT ALL DAYS.
• If the non-paying party was also at fault for some of that period, then those days are ignored.
• Compensation is payable on completion.

Question 31

Common law damages

Answer 31

• Failure to complete on the contractual completion date is a breach of contract, and seller could therefore claim for breach of contract under normal contractual principles.
• Damages:
  o assessed under Hadley v Baxendale - measure being that of putting C in the position it would have been in had the contract been correctly performed.
  o losses naturally flowing from the breach will be covered
  o reasonably foreseeable consequential loss will be covered (e.g., wasted legal costs, putting furniture into storage, cost of renting other property, cost of bridging finance, and any rebooking removal costs)
• The fact that the seller has received contractual compensation does not prevent the seller from claiming damages for extra losses for breach of contract in the normal way.
  o However, the contractual compensation the innocent party receives will be deducted from the contractual damages.

Question 32

Notice to complete?

Answer 32

• Where it appears that the delay in completion is not likely to be resolved quickly, either party, if they are ready, willing and able to complete themselves, may consider serving a notice to complete.
• Can only be served after the contractual completion time on the contractual completion date
• Once served, it makes time of the essence and gives the other party 10 working days to complete.
  o If the defaulting party fails to do so, then the party who served the notice can rescind the contract (but does not have to)
  o If the contract is rescinded and the defaulting party was the buyer, the seller is able to forfeit the deposit
  o If the defaulting party was the seller, the seller must repay the deposit to the buyer.
  o The non-defaulting party can also claim damages for any losses they suffer as a result of the other’s default.

Question 33

Rescission?

Answer 33

• Contracts incorporating the SC and the SCPC provide for rescission in specified circumstances. e.g.:
  o where a party has failed to comply with a notice to complete
  o where there has been a misrepresentation by the seller in a plan or statement in the contract, or in the negotiations leading up to the contract
• Rescission is only allowed where:
  o the seller’s error/omission results from fraud or recklessness, or
  o the buyer would be obliged to accept a property differing substantially (in quantity, quality or tenure) from what the error/omission led them to expect.
• Less serious misrepresentations will only entitle the buyer to damages.