Property Practice Unit 4 Flashcards
Main tasks for solicitors in the pre-completion stage
Preparation of the transfer deed.
Pre-completion searches.
Making practical arrangements for completion.
Ensuring the finances are in order for completion.
Formalities for transfer deed
S52 LPA 1925 states that transfer of legal title of land must be by deed.
To be valid in law, a deed must make it clear it is a deed, be signed by both parties and be delivered.
No longer necessary that it be sealed.
Executing the transfer deed
A private individual must have his signature witnessed by an independent witness to counter any allegations of undue influence.
A company must either:
- use the company seal in accordance with the articles of association
- have it signed by a director and the secretary, or by 2 directors, provided the deed is expressed to be executed by the company
- have it signed by a single director in the presence of a witness who can attest the signature.
Who executes the transfer deed?
The seller.
Also the buyer if there is an indemnity covenant or declaring a beneficial interest in the trust - this is because they are making an obligation too.
When is the TR1 deemed to be delivered?
Upon execution as long as it is clear on the face of it that it is intended as a deed.
Can be rebutted by contrary intention.
What are the four reasons why pre-completion searches are carried out?
- To make sure the seller has not further encumbered the title since investigation of title took place.
- To check the financial circumstances of the borrower when acting for the lender.
- To gain priority for the buyer, and the lender, over anyone else making an application before the buyer applies to register the change in ownership at the Land Registry.
- 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.
Pre-completion search on the title of the property
For registered land, do a Land Registry search against the title number to see new entries since the ‘search from’ date. Form OS1 is used (OS2 for if sale of only part the land). OS1R will show results of any new entries made since the search from date and confer a priority period of 30 days onto the applicant. Priority period ends at 12 noon on the last day. If being financed by a mortgage, search in the lender’s name so they are protected.
For unregistered land, do a land charges search using form K15. Results are on form K18 and confer a priority period of 15 working days from the day of the results.
Do the search against the owners’ names, not title number as in registered land. Price is per name here, not standard fee as in the registered land.
Checking the financial circumstances of the buyer for the sake of the lender
For registered land, use form K16 known as a ‘bankruptcy only’ search. This is a land charges search limited only to entries relevant to the lender.
If the title is unregistered, add the buyer’s name to form K15 since already doing a land registry search against the names of the sellers.
If the buyer is a company, this will not be possible and will need to conduct a company search.
Conduct a company search against the seller
No priority period so should be done as close to the completion date as possible.
Will show not only if solvent but also any fixed or floating charges.
Practical arrangements for completion
Done via the ‘completion information form’. Buyer’s solicitor sends it to the seller’s solicitor for them to complete. Most commonly used form is the TA13 Completion Information and Undertakings.
Contains undertakings.
What does a lender expect to receive before releasing the mortgage advance?
- A certificate of title that the property is adequate security for the loan being advanced.
- A solvency search against the borrower.
- A clear OS1R in the name of the lender.
- An executed but not completed mortgage deed.
What does the buyer’s solicitor send to the buyer detailing all the funds the buyer will need to pay?
Financial Statement.
Effect of completion
In unregistered land, legal title passes on completion.
In registered land, legal title does not pass on completion. Instead it passes when the buyer is registered at the Land Registry as proprietor of the land.
Discharge of the seller’s mortgage
Arrangements will have been agreed on the Completion Information Form.
Once lender receives the amount to redeem the S’s mortgage, they will either:
- complete Land Registry DS1 and send it to the S’s solicitor to be sent onto the B’s solicitor; or
- submit an e-DS1 electronic discharge through the Land Registry portal; or
- use the Electronic Discharge (ED) system, sending an electronic message to the Land Registry automatically removing the charge from the register.
If either electronic option has been performed, then the S’s solicitor will not send a DS1 form to the B’s solicitor, instead they will inform them that either an e-DS1 has been sent to the Land Registry or it has been electronically discharged.
SDLT / LTT
S’s solicitor will send TR1 to the B’s solicitor who must then arrange for any SDLT/LTT to be paid.
HMRC must be paid any SDLT within 14 days of completion.
WRA must be paid any LTT within 30 days of completion.
To pay SDLT, the SDLT1 form is sent to HMRC. Done online or by paper application.
HMRC will produce a SDLT5 form (WRA return a WRA certificate) as proof that the tax has been duly paid.
Failure to pay can result in fines and penalties and application to the Land Registry will be rejected unless the SDLT5 / WRA certificate accompanies the application.
Registration of a new charge (mortgage) to Companies House
Needs to be done if the buyer is a company that is buying with the help of a mortgage. Needs to be registered with Companies House 21 days of completion to ensure constructive notice is given to other creditors of the company.
Failure to register the charge renders the charge void against a liquidator or administrator of the borrower.
Making a Land Registry application
Once SDLT/LTT has been paid (and any charges registered at Companies House if relevant), the B’s solicitor will need to apply to have the B registered on the Land Registry which is done using form AP1, and have the charge of a mortgage registered (lender’s solicitor).
If seller had a mortgage and provided a DS1 form then the B’s solicitor must apply for this to be discharged (can also be done with AP1).
Certified copy of the transfer should be submitted, with the fee, SDLT5/LTT certificate and DS1 if used, form DI to cease overriding interests as will be added to the system.
To register a new mortgage, certified copy of the mortgage deed, and a certified copy of the certificate of registration if B is a company and solicitor’s or lender’s written confirmation that mortgage deed is the same as the one registered to Companies House.
Application should be made prior to the OS1 search.
Application for unregistered land
Application for first registration must be made within 2 months of completion on form FR1.
Application form, fee and accompanying documents.
Documents must be listed on form DL. Registrar needs to investigate title to decide which class of title to allocate.
Conveyancers can use entirely copy deeds and documents but non-conveyancers require the original deeds and documents for first registration applications.
Remedies for delayed completion
If no completion date stated, SC and SCPC state that the completion date is 2pm 20 working days after the contract.
No immediate right to rescind or terminate.
Contractual compensation can be paid, calculated at the contract rate specified in the contract. Under the SCPC, a S does not pay this.
Common law damages can be claimed from principle in Hadley v Baxendale however any additional contractual compensation claimed must be deducted.
Notice to complete can be made to make time of the essence and allow for rescission of the contract after 10 working days of notice. Deposit will be forfeited or claimed back and non-defaulting party can claim any losses suffered.
Can rescind for fraud or reckless error or omission from the S.
