Workshop 5

Question 1

Buyer’s solicitor’s checklist before completion

Answer 1

• draft the transfer deed for the seller’s solicitor’s approval
• once approved by the seller’s solicitor, arrange for the buyer to sign if it contains indemnity covenants (or any other obligation on the part of the buyer)
• if the buyer is taking a mortgage loan, arrange for the buyer to execute the legal charge
• send requisitions on title to the seller’s solicitor
• carry out relevant pre-completion searches
• send certificate of title to the lender, and request the loan advance in time for completion (usually to arrive the day before)
• send the buyer a statement of money needed to complete the purchase
• Stamp Duty Land Tax form approved by client

Question 2

Seller’s solicitor’s checklist before completion

Answer 2

• approve the transfer deed drafted by the buyer’s solicitor
• arrange for the transfer to be executed by the seller
• reply to requisitions on title
• request a redemption statement from the seller’s lender (if any)
• in a residential sale, ask the seller or agent to take final meter readings

Question 3

Who drafts the transfer deed?

Answer 3

the seller’s solicitor drafted the contract, and the buyer’s solicitor drafted the transfer deed = default position taken in SCS and SCPC)

However, seller’s solicitor can draft the transfer at the same time as the contract.

Question 4

Land Registry forms must be used - Form of the transfer: registered land

Answer 4

TR1 – transfers the whole of a freehold or leasehold title
TP1 – transfer of part only of a registered title
TR5 – transfer of a portfolio of registered titles/ unregistered titles

Question 5

Unregistered land - Form of the transfer: unregistered land

Answer 5

May still be transferred in the form of a conveyance.

It is usual to use the Land Registry form TR1, which can be used for unregistered land as well.

Question 6

Completing panels in the TR1 – 1 to 4

Answer 6

Panel 1 – title number
Panel 2 – property
Panel 3 – date
Panel 4 – the transferor(s)

Question 7

Completing panels in the TR1 – 5 to 7

Answer 7

Panel 5 – the transferee(s)
Panel 6 – address for service
Panel 7 – the transfer wording (cannot be amended)

Question 8

Completing panels in the TR1 – 8 to 9

Answer 8

Panel 8 – consideration
Panel 9 – title guarantee (full or limited)

Question 9

Completing panels in the TR1 – 10 to 11

Answer 9

Panel 10 – declaration of trust
Panel 11 – additional provisions

Question 10

Completing panels in the TR1 – 12

Answer 10

Panel 12 – execution - the transferor must always execute the TR1

Question 11

Other transfers – TP1 and TR5

Answer 11

TP1 – transfer of part of the transferor’s title

TR5 – transfer of portfolio of titles

Question 12

Executing the transfer deed – an individual

Answer 12

An individual signs the transfer in the presence of an independent witness who also signs and prints their full name and address.

The transfer is considered delivered/ comes into effect when it is dated, usually by the transferor’s solicitor.

Question 13

Executing the transfer deed - company - options:

Answer 13

Company seal attached in accordance with the company’s articles of association, eg, a signature by one or two authorised signatories

No company seal, but signed by two directors or one director and the company secretary

Signed by one company director and witnessed by an independent witness

Signed by a senior employee (not a director or the company secretary) who is authorised under a power of attorney

Question 14

Agreeing and executing the transfer deed

Answer 14

Buyer’s solicitor drafts transfer deed

Seller’s solicitor either amends or approves the transfer as drafted

Once agreed, seller’s solicitor sends the engrossment (final) transfer deed to the seller for execution

Both parties hold the executed but undated transfer deed ready for completion

Question 15

Registered land - pre completion searches

Answer 15

The buyer’s solicitor carries out a search at the Land Registry against the title number.

This updates the official copies that were initially provided and identifies any changes that have been made.

It also confers a priority period of 30 working days in favour of the person searching. If the buyer’s solicitor submits the application to register the transfer within that priority period, the buyer’s transfer will take priority over any other application, even if lodged before the buyer’s application.

Question 16

Unregistered land - pre completion searches

Answer 16

The buyer’s solicitor carries out a land charges search of the Land Charges Registry (Form K15).

It confers a priority period of 15 working days.

Unlike with the OS1 search, it is only necessary to complete the purchase (not submit the registration application) within the priority period.

Question 17

Search from date and priority period

Answer 17

The OS1 search updates the official copies that the buyer’s solicitor has seen.

Buyer’s solicitor then provides the Land Registry with their date, this is the date from which the search is run.

If nothing has changed since that date, then the search will come back clear; otherwise updated official copies will be sent to the searcher.

Question 18

Land charges search

Answer 18

There is a priority period of 15 working days, priority is obtained by the buyer completing the transaction within that time.

For purposes of priority, it’s unnecessary to update land charges searches against previous owners, as any entries that may affect them after their period of ownership are not relevant to the property.

The land charges search against the seller, however, should be carried out just before completion to give a sufficient priority period to complete the purchase

Question 19

Solvency searches

Answer 19

When acting for buyer and lender, the buyer’s solicitor must carry out a bankruptcy search (Form K16) against the buyer to protect the lender.

If the buyer is a company, then lender will want a company search carried out against the buyer - no priority period, so should be carried out as late as possible and updated if necessary.

If the seller is a company, then the buyer’s solicitor should carry out a company search immediately before completion. there is no priority period.

Question 20

Requisitions on title

Answer 20

Requisitions on title are similar to pre-exchange enquiries, but just cover the information necessary for completion.

Question 21

Form and purpose of requisitions on title

Answer 21

‘requisitions on title’ are used to refer to the questions that the buyer’s solicitor needs answering before completion.

Requisitions on title for residential transactions are usually TA13

Requisitions on title for commercial transactions may be in the firm’s own precedent form, or CPSE form SCR

Question 22

Content of TA13 (completion information and undertakings)

Answer 22

1. Vacant possession: asks about arrangements for collecting keys etc
2. Deeds and documents: for unregistered property, a list of deeds and documents to be sent on completion
3. Completion: asks for confirmation that completion will take place according to the Law Society’s Code for Completion by Post. Similar to Law Society Formula B for exchange, the Code for Completion by Post sets out expectations and undertakings of the solicitors on completion.
4. Money: Asks for the seller’s solicitor’s client account details (to send the money), and for the exact amount payable on completion.
5. Mortgages and charges: Asks the seller’s solicitor to list any mortgages secured on the property and confirm their undertaking to redeem them on completion.

Question 23

Seller’s solicitor’s undertaking to redeem mortgage

Answer 23

The buyer’s solicitor wants to ensure that the mortgage is cleared from the property promptly after completion so that the buyer’s transfer can be registered.

The seller’s solicitor undertakes in the Law Society Code for Completion by Post to redeem the mortgages against the property which it will have already notified to the buyer’s solicitor - solicitor can’t discharge the charge.

Lender should either discharge the charge at the Land Registry electronically or provide a form DS1 which can be produced to the Land Registry to discharge the charge.

Question 24

The Law Society Code for Completion by Post

Answer 24

The Law Society Code for Completion by Post avoids the need for the solicitors to physically attend each other’s office.

Immediately following completion, the seller’s solicitor holds the transfer deed and other deeds and documents to the buyer’s solicitor’s order.

No later than the end of the working day after completion, the seller’s solicitor undertakes to send the transfer deed and other deeds and documents to the buyer’s solicitor.

Question 25

Completion

Answer 25

The process of completion involves the balance of the purchase price being paid to the seller, and the legal title in the property being passed to the buyer.

Completion now almost always happens by post, which is facilitated by the Law Society Code for Completion by Post.

Although completion can take place on any working day, most residential transactions still take place on Friday.

Question 26

Failure to complete and Standard Conditions of Sale (SCS) (used in most residential transactions)

Answer 26

If either party fails to complete by the time and date specified in the contract, then they are obliged to pay interest for each day’s delay under SCS.

This is calculated at the interest rate specified in the contract. If none is specified.

If the buyer is late in completing, the buyer pays interest on the purchase price less any deposit paid.

If the seller is late in completing, the seller pays interest on the full purchase price. (This only applies under SCS, not SCPC.)

Question 27

Common law damages

Answer 27

unless it is either a large value transaction, or a long delay, the interest is relatively low.

Question 28

Rescission

Answer 28

Rescission: a remedy where the contract is set aside, and parties are put back in the position in which they were before the contract was made.

Unlike the interest under the standard conditions and common law damages, rescission is not automatically available to the non-defaulting party. This is because under a standard contract, time is not of the essence.

After either party has failed to complete on time, however, the non-defaulting party can serve notice to complete on the other. This has the effect of making time of the essence

The parties must then complete within ten working days (excluding the day on which notice is given)

Question 29

Serving notice to complete

Answer 29

If completion has not taken place by the date and time stated in the contract (2pm under the standard conditions if not amended), then either party if they are ready, able and willing to complete, may give the other notice to complete
If it is the buyer who is the defaulting party, and they have not given a full 10% deposit, they must make it up to 10% without delay.

Question 30

Effect of notice to complete

Answer 30

The party serving the notice to complete is bound by the notice as well, so they must make sure that they will continue to be ready to complete within the ten working day period.

Once served, the notice to complete cannot be withdrawn unless both parties agree.

Question 31

effect of notice to complete - Seller’s remedies

Answer 31

The seller may rescind the contract, and on doing so, may also:

forfeit the deposit and any interest accrued on it

resell the property and any contents included in it

claim contractual damages

Question 32

effect of notice to complete - Buyer’s remedies

Answer 32

The buyer may rescind the contract, and on doing so, may also:

demand return of the deposit with any interest accrued on it

claim contractual damages or even specific performance

Note that contractual compensation (interest) only applies to delayed completion, so where completion does not take place at all, the remedy is damages.

Question 33

Post-completion

Answer 33

• Once the seller has received their money, and the buyer their property, the transaction is ended for them. Post-completion work happens behind the scenes.
• The buyer’s solicitor still has work to do, particularly settling Stamp Duty Land Tax and registering the buyer’s title at Land Registry.
• It can be tempting for a busy solicitor to put off post-completion work in favour of transactions where clients are still chasing and there are fees to bill.
• However, it is important to keep on post-completion tasks, as some tasks have set timescales, and there can be serious repercussions if they are neglected or forgotten.

Question 34

SDLT V LTT - Properties in England

Answer 34

• Stamp Duty Land Tax (SDLT)
• Dependent on purchase price
• Buyer’s solicitor prepares and submits SDLT return on buyer’s behalf
• SDLT return must be submitted and tax paid within 14 days of completion to avoid penalties
• Solicitors can prepare and submit SDLT return online using HM Revenue & Customs portal
• On submitting the return, buyer’s solicitor receives SDLT5 certificate

Question 35

SDLT V LTT - Properties in Wales

Answer 35

• Land Transaction Tax (LTT)
• Dependent on purchase price (but different thresholds and rates apply)
• Buyer’s solicitor prepares and submits LTT return on buyer’s behalf
• LTT return must be submitted, and tax paid within 30 days of completion to avoid penalties
• Solicitors can prepare and submit SDLT return online using Welsh Revenue Authority (WRA) portal
• On submitting the return, buyer’s solicitor receives WRA certificate

Question 36

Registration of charge at Companies House

Answer 36

• It is very important to register a charge given by a company at Companies House within 21 days of the creation of the charge. If this is not done, then the charge is void against any liquidator or administrator, and the lender is not protected.
• This deadline is strict, and Companies House have no discretion to extend the deadline.
• However, it is important to get the application right – if there is a problem, and Companies House return it, the 21-day period is still running.
• If the deadline is missed, then it will be necessary to apply for a court order to allow the filing out of time. This will involve time and expense that the client will likely expect the solicitor’s firm to cover.
• This does not apply to charges given by an individual, so conveyancers who deal with mainly residential transactions will usually not need to worry. However, this can make them more prone to missing this step on the odd occasion when they are dealing with a company buyer/borrower.

Question 37

The Land Registry application

Answer 37

• The last step of the post-completion work is often the Land Registry application.
• The process and timing of this differ for transfers of registered land and transfers of unregistered land that trigger first registration.
• The Land Registry are very user friendly and will usually raise requisitions on any issue that arises from an application, such as a missing deed or document, or use of an incorrect form.
• However, some errors will lead to the application being returned completely, so it is best to get the application right first time.

Question 38

Application for registration – registered title

Answer 38

• If the title is already registered, then Land Registry form AP1 is used to set out the details of the application and the documents provided.
• For a purchase, these will include:
• The transfer deed (e.g. TR1)SDLT5 or WRA certificate to prove payment of SDLT or LTT Form DS1 to discharge the seller’s mortgage if appropriate (this can be sent on later if not yet available)Mortgage deed in favour of the buyer’s lender If appropriate, certificate of registration of charge at Companies House Other documents as appropriate (e.g., death certificate for deceased joint proprietor if the seller is a sole surviving beneficial joint tenant)

Question 39

Application for registration – unregistered title

Answer 39

• An application for first registration is usually a little more involved than for a transfer of registered title.
• Instead of the form AP1, a form FR1 is used, which contains additional boxes relevant to unregistered title.
• Unlike the AP1, the FR1 does not have a box where the enclosures are listed. Instead, they are listed on a separate form DL.
• The following documents are included:
• Numbers 1 to 6 on the previous page. The epitome of title and the deeds and documents referred to in it Land charges searches for the seller and previous owners in the chain of title

Question 40

Overriding interests

Answer 40

For both registered and unregistered land, the buyer’s conveyancer should either tick the AP1 or FR1 to state that there are no overriding interests, or if there are, complete a Form DI.

Question 41

Submitting the Land Registry application

Answer 41

• Most solicitors have an account on the Land Registry online portal, enabling registration applications to be submitted online. However, this is not possible for a first registration.
• The application is instead made by post or document exchange (DX), and this is possible for a transfer of registered land if the solicitor does not have access to the online portal.
• If this is the case, it is best to send certified copies of the transfer and mortgage deed, as the Land Registry do not return paper documents.
• The original mortgage deed should be sent to the lender, and the original transfer deed should be kept if it has covenants.

Question 42

certified copy

Answer 42

A certified copy of a document is a copy that has been stamped and signed by a solicitor to confirm that it is a true copy of the original. Certified copies are usually (not just in property law) treated as equivalent to original documents for evidential purposes, although there are times when an original will suffice.

Question 43

Land Registry priority period

Answer 43

• The Land Registry application is less pressing than the SDLT and Companies House registration but should still be attended to as soon as possible.
• If the application is not submitted within 30 working days of the buyer’s solicitor’s OS1 search with priority, then priority will be lost.
• The original OS1 search cannot be extended.
• A new OS1 search can be submitted, but this will start a new priority period, not extend the existing one.

Question 44

Land Registry deadlines

Answer 44

For registered land, there is no deadline for application other than the time limit for priority under the OS1 search. The Land Registry will allow an application to be submitted at any time after completion.

For unregistered land, however, there is a deadline of two months from completion. If this is not complied with, the transaction is void.

If there are no requisitions, then usually the Land Registry will process a transfer of registered land within a couple of weeks.

Once the application has been completed, the Land Registry will issue new official copies showing the buyer as registered proprietor, and the lender (if any) as the proprietor of the legal charge.

They are accompanied by a title information document (TID) but really the title is in the Land Registry’s electronic registers, not in the document.

Sending the client the updated official copies is the end of the transaction.

Question 45

SDLT on residential transactions – contents

Answer 45

It is possible for the parties to allocate a separate value to contents, such as carpets, white goods and furniture, etc. This value does not form part of the purchase price for the purposes of the SDLT/LTT calculation. Care must be taken that it is a genuine value, however, as otherwise HM Revenue & Customs/the Welsh Revenue Authority could consider it as tax fraud.
This used to be more common when SDLT was calculated in thresholds rather than slices. This is because the percentage when a threshold was exceeded applied to the whole purchase price, not that slice. This meant that a small change in price could make a big difference to the SDLT bill.
As this is no longer the case, it is less common that contents will be valued separately unless they are particularly valuable.

Question 46

SDLT on residential transactions – first time buyers

Answer 46

A discount (relief) is applicable for a person buying their first home provided the purchase price is no more than £625,000. If there is more than one person buying, all must be first-time buyers.
If the relief applies, there is no SDLT for the first £425,000 of the purchase price, and 5% on any part of the price over £425,000 (but not exceeding £625,000). In the example given on the previous slide, the buyer who paid £2,500 on a £300,000 purchase would pay no SDLT if a first-time buyer.

Question 47

SDLT on residential transactions – second properties

Answer 47

If the buyer is buying a second property, then additional SDLT of 3% is charged on the whole of the purchase price.
You can calculate the SDLT that would be chargeable as usual, and then add 3% of the total purchase price.
There are qualifications to this rule, such as if the property bought is replacing the buyer’s main home, or if the first property is sold within 36 months, but these are outside the scope of this course.

Question 48

Land Transaction Tax (LTT)

Answer 48

Land Transaction Tax (LTT) is the equivalent of SDLT in Wales, but there are differences in how it is charged:
* there is no relief for first-time buyers
* Higher rates of LTT applies for buyers who will have a second property after the purchase
* the rates are different (again, you do not need to know the rates – if you are asked to perform a calculation, you will be given the rates)

Question 49

What is Capital Gains Tax?

Answer 49

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value.

CGT arises when:
* there is a chargeable disposal
* of a chargeable asset
* by a chargeable person
* which gives rise to a chargeable gain

Question 50

Chargeable disposal

Answer 50

Two examples of a chargeable disposal are:
- the sale of an asset
- the lifetime gift of an asset
However, a gift on death (whether by the person’s will or the rules of intestacy) is not a chargeable disposal.

Question 51

Chargeable asset

Answer 51

Chargeable assets include certain valuable personal possessions (but not cars) and certain non-physical assets, such as shares.
However, this element will focus on real property (land), and it is simple because all property assets are chargeable assets, except the main home where and insofar as it qualifies for Private Residence Relief.

Question 52

Chargeable person

Answer 52

A chargeable person is an individual who is a UK taxpayer (under the residence rules) for the relevant tax year.
Companies do not pay CGT (as they are in the corporation tax regime).
Charities are usually exempt from paying CGT.

Question 53

Chargeable gain

Answer 53

Even if a chargeable person makes a chargeable disposal of a chargeable asset, there still needs to be a chargeable gain to give rise to a CGT liability.

Chargeable gain looks at the increase in value of the asset.

In calculating the chargeable gain, the taxpayer can take into account allowable expenditure.
In the case of property, this may include:
* costs incurred in acquiring the asset (such as conveyancers’ fees for the purchase)
* costs incurred that contribute to the value of the asset (such as the cost of building an extension but not costs of maintenance or repair)
* costs incurred in disposing of the asset (such as conveyancers’ fees for the sale and estate agents’ commission)

Question 54

Capital losses and the annual exemption

Answer 54

If a taxpayer has made losses on assets during the tax year, they may offset that against gains made.
A taxpayer is also entitled to annual exemption (£3,000 as at August 2024).

Question 55

Private Residence Relief

Answer 55

Private Residence Relief applies so that a person does not pay Capital Gains Tax if they sell or dispose of their home, provided the following conditions are met:
o it has been the person’s main home for all the time that they lived in it
o they have not let it out (other than taking a lodger)
o it has not been used for business purposes (using a room as a temporary office is ok)
o the grounds including all buildings are less than 5,000 square metres
o it was not bought just to make a gain
If any of these conditions are not met, then Private Residence Relief may be reduced or not available at all.
Married couples and civil partners can only treat one property as their main home between them (they can’t have one each).