Completion, Post-completion, Remedies for delayed completion

Question 1

what is completion?

Answer 1

buyer pays balance of purchase price and seller transfers legal ownership to buyer

Question 2

what is the Law Society Code for Completion by Post?

Answer 2

• Standard set of steps and undertakings used in completion
• It avoids the need for the solicitors to physically attend each other’s office by treating the seller’s solicitor as an agent for the buyer’s solicitor
• The seller’s solicitor provides undertakings which the buyer’s solicitor can rely on to know that if the necessary money is sent, completion will take place, or the seller’s solicitor will return the money to the buyer’s solicitor
• if transaction is being conducted under Law Society Conveyancing Protocol, the Law Society Code for Completion by Post will apply unless both parties’ solicitors agree otherwise.

Question 3

what seller undertakings and obligations are required by the Law Society code for completion by post? (5)

Answer 3

• Immediately following completion, the seller’s solicitor holds the transfer deed and other deeds and documents to the buyer’s solicitor’s order - This means that the buyer’s solicitor can direct what happens to them
• Seller solicitor undertakes that as soon as possible, and no later than the END OF THE WORKING DAY AFTER COMPLETION, to send to buyer solicitor:
  1. the transfer deed and other deeds AND
  2. written confirmation of completion
• Seller solicitor undertakes to have seller’s authority to receive purchase money
• Seller solicitor undertakes to have charge holder’s authority to receive the sum intended to pay it
• upon becoming aware of the receipt of the completion monies, they will report this to the buyer and complete

Question 4

what buyer solicitor obligations are required by the Law Society code for completion by post? (2)

Answer 4

• the buyer’s solicitor will use reasonable endeavours to ensure that sufficient funds are collected from the buyer
• the buyer’s solicitor will provide the seller’s solicitor with the funds required to complete

Question 5

when must the seller’s solicitor send the executed transfer deed to the buyer after completion?

Answer 5

As soon as possible and no later than the end of the working day after completion

this is an undertaking by seller solicitor in the law society code for completion by post

Question 6

OVERVIEW of completion process (4)

Answer 6

1. Buyer’s solicitor would have received balance of purchase price after deposit (either mortgage advance or cash from client) and sends it to seller’s solicitor by bank transfer
2. Seller’s solicitor telephones buyer’s solicitor when the money arrives to confirm completion, and dates the transfer deed, calls seller to let them know, and estate agent to release keys to the buyer if appropriate
3. Buyer’s solicitor calls buyer, who can now collect the keys and physically move into the property. If acting for the lender, the buyer’s solicitor dates the legal charge.
4. Seller’s solicitor sends the transfer deed and any other agreed deeds and documents to the buyer’s solicitor, redeems the mortgage, and sends the balance of the money (less costs, Land Registry fees, etc) to the seller

Question 7

what are the 4 main post-completion steps the buyer’s solicitor must consider?

Answer 7

1. paying SDLT/LTT
2. registering the transfer in the land registry
3. applying for first registration if the property is unregistered
4. registering charges created by companies at companies house

Question 8

when is SDLT/LTT payable

Answer 8

• SDLT = payable within 14 calendar days of completion
• LTT - payable within 30 calendar days of completion

Question 9

when must thet transfer be registered at the land registry after completion?

Answer 9

• within 30 days of the OS1 search to protect priority
• but there is no deadline
• on registration, land registry sends a TITLE INFORMATION DOCUMENT to buyer solicitor
• use form AP1

Question 10

when must first registration happen? consequence of not?

Answer 10

• within 2 months of completion
• otherwise, the transaction is VOID and legal title reverts to seller but buyer has beneficial title under trust
• use form FR1

Question 11

registering charges created by companies - when must charges be registered and where?

Answer 11

• registered at Companies House within 21 days of the creation of the charge
• (deadline cannot be extended)

Otherwise:

• the charge is void against liquidators and creditors, lender is not protected, and it will be necessary to apply for a court order
• debt is immediately repayable

Question 12

what post-completion steps must the seller consider?

Answer 12

only if seller is an individual, they may have to pay CGT on any gains made by selling the property

this is unless the principal private dwelling house exemption applies

Question 13

when would the buyer vs seller have failed to complete?

Answer 13

• buyer = did not send seller solicitor completion monies (e.g., not received it from lender, or received it but instructed solicitor not to release it to seller solicitor)
• seller = seller solicitor is unable to date transfer deed (e.g., seller did not return executed deed, or seller instructs solicitor not to date it)

Question 14

what remedies are available to the non-defaulting party after a delay or failure to complete?

Answer 14

delay in completion =

• contractual compensation (interest) payable on each calendar day delayed
• claim for damages for breach of contract for loss of reasonable expense
• serve a notice to complete = gives 10 working days to complete and if buyer defaulted it makes the full 10% deposit immediately payable

failure to complete = rescission but not interest

• buyer = demand deposit and interest accrued, and claim damages for rescission or specific performance
• seller = keep deposit and interest accrued, resell property, claim damages for rescission

Question 15

what contractual compensation is available for delayed completion?

Answer 15

• defaulting party is obliged to pay interest for each CALENDAR DAY DELAY under SCS/SCPC
• interest accrues AUTOMATICALLY (no need to serve notice to complete)
• interest is only available if completion still occurs, not if the contract is rescinded

Question 16

interest is calculated on what type of days delay?

Answer 16

• calendar days delay
• includes weekends and holidays
• starts the day after completion was supposed to take place and includes the day that completion actually takes place
• If completion takes place on completion date but after completion time, it is treated as having taken place the next working day but interest is calculated for each calendar day
• Example: if completion should have taken place on Friday 2pm but took place on Friday 3pm, then completion is deemed to have taken place on Monday. Interest will be payable for 3 days delay (Saturday, Sunday, Monday)

Question 17

how is contractual compensation calculated?

Answer 17

• Interest is calculated at the interest rate stated in the contract
• If the seller defaults, interest is calculated on the full purchase price
• If the buyer defaults, interest is calculated on the balance of the purchase price less deposit paid
• Find the daily interest rate by: interest% x (1/365 or 366)
• Then multiply the daily rate with the amount of calendar days delay
• Then multiply that figure with the purchase price / balance purchase price
• Round the number at the end to 2 decimal places

Question 18

what damages are available for delayed completion? when is this appropriate?

Answer 18

• Non-defaulting party can claim damages for breach of contract for loss of reasonable expenses resulting from delay
• The party’s ability to claim damages will depend on whether they sustained loss from the delay (e.g., buyer has to book hotel or storage, or seller had related sale)
• This remedy may not be suitable or practical if the delay is short and the non-defaulting party has not incurred much expense as it may involve lengthy and expensive litigation, especially if the defaulting party resists the claim

Question 19

can a non-defaulting party claim both interest and common law damages?

Answer 19

• yes - when there is a delay in completion (not no completion/ rescission)
• however, interest payable under the contract is deducted from the damages claim if it is less
• practically, they will only receive the amount of the greater of the interest and the damages, not added together.

Question 20

can the non-defaulting party rescind the contract when the defaulting party fails to complete

Answer 20

• the non-defaulting party does not have an automatic right to rescind the contract following the defaulting party’s failure to complete.
• The standard conditions contracts do not make time of the essence, which means that a failure to complete does not give the non-defaulting party the automatic right to rescind the contract.
• However, serving the notice to complete will make time of the essence, allowing the non-defaulting party to rescind if the defaulting party does not complete within 10 working days (2 weeks)

Question 21

what is the notice to complete and what is its effect?

Answer 21

• The non-defaulting party can serve a notice to complete immediately after delay if they are themselves ready to complete
• effect:

1. Requires parties to complete within 10 working days (2 weeks) starting with the day after the notice is served
2. If the buyer did not pay the full 10% deposit, they must pay the balance of the 10% deposit immediately

Question 22

when can a party rescind the contract for sale?

Answer 22

if EITHER party does not complete within 10 days of serving notice to complete, rescission is available to non-defaulting seller/buyer

Question 23

what are the seller’s remedies if it rescinds the contract?

Answer 23

1. can resell the property
2. can keep the deposit with any accrued interest
3. can claim damages for rescission of contract

Question 24

what are the buyer’s remedies if it rescinds the contract?

Answer 24

1. can demand the deposit back with any accrued interest
2. can sue for breach of contract and claim damages for rescission OR claim specific performance forcing seller to complete

Question 25

what is the difference between common law damages for breach of the sale contract after delayed completion and damages for rescission of the contract after failing to complete following the notice to complete?

Answer 25

damages for rescission = loss resulting from the contract being cancelled

• buyer was forced to buy another property but the housing market has risen so it was more expensive = loss is difference in the price
• seller was forced to sell to another buyer but the housing market fell = loss is difference in price

damages for breach of contract = loss resulting from failure to complete at the agreed date and time

• buyer was forced to find alternative accommodation and storage = loss is expenses
• seller had a related sale which fell through and so had to find alternative accommodation