What is the buyer’s solicitor’s checklist before completion?
draft the transfer deed for the seller’s solicitor’s approvalonce 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)send requisitions on title to the seller’s solicitorcarry out relevant pre-completion searchessend 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 purchaseStamp Duty Land Tax form approved by client
What is the seller’s solicitor’s checklist before completion?
· 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
Who drafts the transfer deed?
Traditionally, the seller’s solicitor drafted the contract, and the buyer’s solicitor drafted the transfer deed.
This is still the default position taken in the Standard Conditions of Sale (SCS) and Standard Commercial Property Conditions (SCPC).
However, in recent years, it has become quite common for the seller’s solicitor to draft the transfer at the same time as the contract, and for the draft transfer to be annexed to the contract in approved form.
What are the different types of transfer form?
Land Registry forms must be used:
TR1 – the most common, this transfers the whole of a freehold or leasehold title
TP1 – this is used for the transfer of part only of a registered title
TR5 – this is used for the transfer of a portfolio of registered titles (and may include unregistered titles
We will go through the blanks (‘panels’) of a TR1
Unregistered land:
Unregistered title may still be transferred in the form of a conveyance, and could even be written in copperplate on parchment!
In practice it is usual to use the Land Registry form TR1, which can be used for unregistered land as well.
Who signs the attestation clauses to execute the transfer deed?
These will depend on the parties and circumstances.
The transferor must always execute the TR1.
The transferee(s) must execute the TR1 if:
- if they are tenants in common or agree to hold the property on trust for someone else in Panel 10
- they are providing an indemnity covenant, or any other obligation in Panel 11
How does an individual execute a transfer deed?
An individual signs the transfer in the presence of an independent witness who also signs and prints their full name and address (s1(3)(a)(i), Law of Property (Miscellaneous Provisions) Act 1989)
The transfer is considered delivered (ie, comes into effect) when it is dated, usually by the transferor’s solicitor.
Example: Ravi executes a transfer. His witness is a next door neighbour, Jason. The signed attestation clause looks like this:
Signed as a deed by )
Ravi Amar Jana ) R Jana
in the presence of: )
Jason S Hamilton
Jason Stephen Hamilton
27 Maple Grove, Tuxton TX11 3RJ
How does a company execute a transfer deed?
- There are different options for a company executing a deed (s44, Companies Act 2006)
- It is best to check if the company has a policy on executing deeds, so that you know which attestation clause is appropriate
Options include:
- Company seal attached, and signed by two directors, or one director and the company secretary
- 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
Executing the transfer deed - company
Example: Sawdust DIY Limited is a chain of DIY shops. They execute deeds using their company seal. The executed attestation clause looks like this (the text on the seal is embossed not coloured):
Executed as a deed by )
affixing the common seal of )
Sawdust DIY Limited )
in the presence of: )
P. Sawdust
Director
A. Sawdust
Director/Company secretary
[Graphic of red circular common seal on right]
Who holds the transfer deed before completion?
- Buyer’s solicitor drafts transfer deed
- Seller’s solicitor either amends draft for buyer’s approval, or approves the transfer as drafted
- Once agreed, seller’s solicitor sends the engrossment (final) transfer deed to the seller for execution (buyer’s solicitor does likewise only if the buyer needs to execute)
- The seller’s solicitor and, if appropriate, the buyer’s solicitor, hold the executed but undated transfer deed ready for completion
What are the pre-completion searches for registered land?
The buyer’s solicitor carries out a search with priority (form OS1 or OS2 for part of land) 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.
As the OS1 search updates the official copies that the buyer’s solicitor has seen, the buyer’s solicitor provides the Land Registry with their date, and 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.
What are the pre-completion searches for unregistered land?
The buyer’s solicitor carries out a land charges search of the Land Charges Registry (Form K15).
This identifies any incumbrances or other adverse matters registered against the owner/seller of the unregistered land.
It confers a priority period of 15 working days.
If the buyer’s solicitor registers the transfer with the Land Registry within the priority period conferred by the search, then the buyer’s transfer will take priority over any other applications, even if they were lodged before the buyer’s transfer.
What does the pre-completion land charges search involve?
- Similarly, the land charges search gives priority (although only 15 working days)
- Any entry against the landowner during the priority period, does not affect the ability of the buyer to register the transfer
- In the elements dealing with investigation of unregistered title, we discussed how the land charges search is carried out against all owners in the chain of title
- For the purposes of priority, however, it is 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 lodge the application for first registration
What does the pre-completion solvency search involve?
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. Like a land charges search, it confers a priority period of 15 working days.
If the buyer is a company, then a lender will want a company search carried out against the buyer to check that there is no pending insolvency or crystallisation of a floating charge.
A company search gives 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.
This checks that there is no pending insolvency or crystallisation of a floating charge.
Again, there is no priority period.
What are requisitions on title?
- Historically, ‘requisitions on title’ were the specific questions that the buyer’s solicitor raised about the title after reviewing the title deeds.
- However, they are now used more generally to refer to the questions that the buyer’s solicitor needs answering before completion.
- Requisitions on title for residential transactions are usually in the form of Law Society TA13. The form is also headed ‘Completion information and undertakings’ which is a more accurate description than ‘requisitions on title’.
- Requisitions on title for commercial transactions may be in the firm’s own precedent form, or the Commercial Property Standard Enquiries (CPSE) form SCR (Solicitor’s completion requirements)
What is the content of a TA13?
Vacant possession: Asks about arrangements for collecting the keys; for example, whether they are left with the agents.If there is a rent-paying tenant, then asks for an authority for the tenant to pay the rent to the buyer following completion.
Deeds and documents: For unregistered property, asks for a list of deeds and documents to be sent on completion
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.
Money: Asks for the seller’s solicitor’s client account details (to send the money), and for the exact amount payable on completion.
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.
What must the seller’s solicitor do pre-completion regarding a mortgage?
- 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.
- Ideally, this would be done before completion, but this is usually not possible, as the seller will rely on the sale proceeds to pay off the mortgage.
- 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.
- Note that the undertaking is not to discharge the charge, as this is not within the solicitor’s power.
- On the loan being redeemed, the lender should either discharge the charge at the Land Registry electronically (most common) or provide a form DS1 which can be produced to the Land Registry to discharge the charge.
- With large value transactions, the buyer’s solicitor may insist that the seller’s solicitor obtains an executed but undated DS1 in advance of completion.
How is completion carried out?
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. This gives a buyer the weekend to settle in, and the seller the weekend to spend some of the sale proceeds.
The Law Society Code for Completion by Post
The Law Society Code for Completion by Post (‘the Code’) 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 various undertakings under the Code 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.
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.
As soon as possible, and 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.
What are the steps required for completion?
- Buyer’s solicitor has received (hopefully) mortgage advance and balance of money required from client, and sends required amount to seller’s solicitor by bank transfer
- 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
- 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.
- 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
When is there a failure to complete?
- the seller has not returned the executed transfer
- the seller has returned the executed transfer but instructs the solicitor not to date it
A buyer’s failure to complete means that the seller’s solicitor has:
- not received the money needed to complete from the buyer’s solicitor or
- has received the money, but the buyer instructs the buyer’s solicitor not to release it to the seller’s solicitor (for example, if the buyer changes their mind at the last moment)
A party who fails to complete is the defaulting party, and the party who is ready to complete is the non-defaulting party.
What are the consequences of failing to complete?
- 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, then SCS 1.1.1(e) provides that the Law Society interest rate (the current rate is published on their website) applies.
- If the seller is late in completing, then the seller pays interest on the full purchase price.
- If the buyer is late in completing, then the buyer pays interest on the purchase price less any deposit paid.
The non–defaulting party may also claim common law damages, recission or serving notice to complete?
When can recission occur for failing to complete?
- 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 (SCS 6.1.1 or SCPC 9.1.1)
- After either party has failed to complete on time, however, the non-defaulting party can serve notice to complete on the other (SCS 6.8.1 or SCPC 9.8.1)
- 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)
What is the effect of serving notice to complete?
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.
- The parties must complete within ten working days, the first day being the day after the notice to complete has been served.
- 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.
- If either party fails to complete within the ten working day period, the remedies available depend on whether the non-defaulting party is the seller or the buyer.
What are the seller’s remedies on serving notice to complete?
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
What are the buyer’s remedies on serving notice to complete?
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 (an equitable remedy forcing the seller to complete the sale)
Note that contractual compensation (interest) only applies to delayed completion, so where completion does not take place at all, the remedy is damages.
What are the key post-completion steps?
- Stamp Duty Land Transaction Tax (SDLT) in England or Land Transaction Tax (LTT) in Wales must be notified and paid within 14 days or 30 days respectively
- Charges created by companies must be registered at Companies House within 21 days of the creation of the charge
- The Land Registry application must be made within 30 days of the OS1 search to protect priority
- An unregistered application must be made within 2 months or the transaction is void
- SDLT, LTT, Companies House and Land Registry applications can be made online, except for unregistered applications to the Land Registry
