03 Completion, post-completion and remedies PDF

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Completion, Post-Completion and Remedies Preparing for completion – buyer’s solicitor 1. 2. 3. 4.

Draft the Transfer Submit the Completion Information and Undertakings Form Obtain finance – from buyer and/or lender Submit pre-completion searches

#1 Draft the purchase deed •

Forms o o o o

TR1 used for whole of a registered title TP1 used for part of registered title TR5 used for portfolio of registered titles No prescribed form for unregistered land, but TR1 commonly used

TR1 1. Title number of the property sold a. Registered: Top of first page of official copies of land b. Unregistered: leave blank 2. Property: Full address of the property sold a. Registered: copy from official copy b. Unregistered: also attach plan showing full extent of property 3. Date: [fill in upon completion] 4. Transferor (seller): a. Look at contract – who is selling property? b. Remember that the proprietorship register may be wrong, as the company / person’s name may have changed c. If company, include company number! d. Consider that proprietorship register may list > 1 person, but someone may have died: i. If JT, survivor can sell on their own ii. TiC, survivor cannot sell on own and need a second trustee to be transferor 5. Transferee for entry in the register (buyer): a. Look at contract b. Remember company number

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6. Transferee’s intended address(es) for service for entry in the register: a. Residential property sold: address from panel 2 of property being bought b. Commercial property: address should be registered / head office, so correspondence gets to correct person c. Up to 3 addresses may be used: solicitors’ address may often also be included here 7. LEAVE ALONE 8. Consideration: a. Buyer purchasing property – box 1 i. Cross box 1 ii. State purchase price in words – five million pounds iii. State purchase price in figures – £5,000,000 b. Transferred as gift – box 2 c. Part-exchange – box 3 9. Full / limited title guarantee – check contract, as this will include the answer to this: a. If lived / runs business, usually give full title guarantee b. If trustee, PR, or bank that has repossessed, likely to be limited title guarantee 10. Transferee is: a. Where transferee 1 person LEAVE BLANK b. Where > 1 person, select appropriate box (+ where on trust for others, give details) 11. Additional provisions – anything agreed by buyer in contract: a. Covenants will have been set out in the contract and should be inserted in panel 11 – see if this is in contract! b. A declaration concerning exclusion of the Contracts (Rights of Third Parties) Act 1999 – always put this in! A person who is not a party to this transfer will not have any rights under or in connection with it by virtue of the Contracts (rights of Third Parties) Act 1999 c. Where second trustee must be appointed because the sale is by a sole surviving tenant in common, the following should be included in Panel 11 of TR1, acting as deed of appointment of second trustee: “For the purpose of giving a valid receipt for the purchase price, [NAME OF SOLE PROPRIETOR] (‘Current Trustee’) in exercise of the power under section 36(6) of the Trustee Act 1925 appoints [NAME OF ADDITIONAL TRUSTEE] to be a trustee of the Property with the Current Trustee.”

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12. Execution – once seller happy with form, get both parties to execute a. Seller / transferor must always execute the TR1 i. Individual(s): 1. Ensure all transferors sign 2. Where second trustee, they must be party to TR1 and must sign in Transferor box w/ sole surviving TiC “Executed as a deed and delivered by [NAME] [and NAME]: In the presence of [NAME OF WITNESS]: Name: Address: Occupation:” ii. Company: 1. 2 Directors 2. Director + secretary “Executed as a Deed by [Name of company] acting by [Name of director], a director, and [Name of director / secretary], a [director / secretary] Signature, director: Signature, director/secretary: ” 3. Director + witness “Executed as a deed by [Name of company] acting by [Name of director], a director, in the presence of [name of witness] Signature of director: Signature of witness: Name: Address: Occupation:” iii. LLP: “Executed as a deed by [name of LLP] acting by two members” b. Buyer must execute where: i. Covenants or declarations (always Third Parties excl.) in panel 11 ii. > 1 buyer, making declaration of trust in panel 10

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#2 Completion Information and Undertakings Form (requisitions on title) Send out form TA 13 • •

TA 13 – some firms may have their own version Sent by buyer’s solicitor to seller’s solicitor before completion, containing a number of standard pre-completion enquiries

Includes: • • •

Bank account details to which completion monies should be sent Where keys can be collected from on completion Completion statement – Seller’s solicitor sends buyer’s solicitor a completion statement = sets out how much money is required to complete the purchase (sale price + price of any chattels – deposit)

Buyer’s solicitor will then ensure replies are satisfactory before completion Undertakings by seller’s solicitor •

NB usually, the undertaking by seller’s solicitor to ensure charges removed from the register is usually given separately to the responses to TA13, in a letter on own headed paper

1) List charges which will be discharged on completion – see charges register for mortgages 2) Undertake to remit sufficient monies to each lender so each charge can be discharged by the lender – NB solicitors do NOT undertake to discharge the mortgage; this is beyond the solicitor’s control 3) Undertake to forward evidence of discharge (DS1) upon receipt from the lender to buyer’s solicitor #3 Obtain finance •

• •

Financial statement – Buyer’s solicitor sends FS to the buyer, telling buyer how much money they need to send to their solicitor in order to complete = includes costs of legal fees, disbursements and VAT, and minus deposit AND mortgage monies (as buyer is not providing mortgage monies) Mortgage deed – execution of mortgage deed by buyer Certificate of Title – If buyer buying with aid of a mortgage… o CLLS Certificate of Title will be drafted by the exchange o Between exchange and completion, buyer’s solicitor should contact lender to ensure the money will arrive in good time for completion o Signed and dated CLLS Certificate of Title is sent on the completion date to the lender’s solicitor by the buyer’s solicitor = pre-completion step needed on day of completion for mortgage funds to be released

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#4 Pre-completion searches •

DO NOT CONFUSE THESE WITH PRE-EXCHANGE SEARCHES FROM SGS 2

OS 1 1. Establish whether anything has changed between date of initial official copies and current official copies at time of completion – OS1 search (Priority Search) = whole of a registered title § If no changes = all good § If changes revealed, must discuss with seller’s solicitor 2. OS1 search additionally freezes the registers for 30 working days from the date of the OS1 search – it gives the applicant a priority period, and provided application to register TR1 with the Land Registry is made within priority period, the buyer is protected from any changes being made to the Official Copies § Any applications during 30 working days will be suspended until the end of the 30 days and the buyer will take free of any interests that are unregistered provided the TR1 is received by the LR within the 30 days § Make search in the name of the lender where the buyer is using a loan, as this confers protection on both the lender and the borrower; if no lender, in name of buyer Solvency Searches 1. K16 Bankruptcy Search – individual mortgaging property a. Against buyer: Done as anyone lending money to a borrower / buyer does not want them to be bankrupt / insolvent = applies ONLY where acting for the lender b. Against seller: No need to do against seller as Trustee in Bankruptcy will enter a caution with the LR on all bankrupt’s properties 2. Company Search – ON DAY of completion a. Against buyer – ONLY where acting for lender b. Against seller – always, to verify that still exist and are solvent

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Preparing for completion – seller’s solicitor 1. Provide replies to the Completion Information and Undertakings Form § NB on this form, there is a question: do you undertake to discharge the mortgage? o The answer “yes” should be avoided, as the solicitor cannot discharge the mortgage o Can only undertake to: 1. Send redemption monies to the lender for the lender to discharge the mortgage 2. When the lender sends the DS1, this will be forwarded to the buyer’s solicitor 2. Send completion statement to buyer’s solicitor 3. Get redemption figures from lenders for seller’s charges – find out how much is needed to discharge mortgage on completion date 4. Agree form of purchase deed and get seller to execute in escrow

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Completion •

Completion may take place by way of in-person meeting, as historically the case

•

Now, usually completion takes place by post (initially by telephone), pursuant to the Law Society’s Code for Completion by Post o Buyer’s Solicitors hold money o Seller’s Solicitors have signed TR1

•

As buyer’s solicitor, must PRIOR to sending the purchase monies to the seller’s solicitor: o Check have an undertaking from seller’s solicitor in relation to redemption of charges + that this undertaking is in a form we are happy with o Ask the seller’s solicitor to confirm that they will hold the money to your order – such that it still belongs to the buyer until you release it

•

Seller’s solicitor calls buyer’s solicitor to: o Confirm have received the money o Have signed TR1 o Undertake to send TR1 + other documents (title deeds etc.) to you in tonight’s post or the documents exchange On phone, you agree to date the TR1 with today’s date and confirm that the money is released to the seller’s solicitor

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Seller’s solicitor must… •

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Comply with undertaking and send sufficient funds to the lender to be able to discharge the mortgage o Send any surplus to the seller Take the DS1 (or ED / EDS1) (within a few days of completion) received from the lenders and forward this on to the buyer’s solicitor

Buyer’s solicitor must… 1. If acting for a company that has entered into a charge / debenture where property has been mortgaged or charged, this must be registered with Companies House by sending within 21 days starting the day after the day of completion: o MR01 o Certified copy of mortgage o Relevant fee (£23 or £15 online) • CH will send a CH Certificate confirming registration • If not registered with CH within the deadline: o Charge will not be valid against administrators and liquidators and priority will be lost as against other creditors of the borrower o If charge void for non-registration, amount secured is payable on demand o Construed as negligence by solicitor who failed to register o Cannot register at land registry

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2. Deal with Stamp Duty Land Tax – transactions on or after 1st March 2019, deadline = within 14 days of the effective date (usually completion) or occupation o Must lodge land transaction return by SDLT1 form with HMRC ~ can be done electronically o + Pay SDLT i. ≤ £150,000 => 0% ii. £150,001-£250,000 => 2% iii. > £250,000 => 5% • HMRC issue SDLT5 confirming SDLT1 has been received • If fail to file: o Penalties and fines o Do not obtain SDLT5, and so the Land Registry will not accept the application to register the transfer of property to the new owner 3. Application to Land Registry o Form AP1 (+ fee) – application for change to the register => discharge previous charge, register transfer + register new charge o Send certified copies, not originals, of the following before the end of the priority period given by OS1 search: i. DS1 ii. Transfer TR1 iii. Change of name certificate for the seller (where seller has changed name since on proprietorship register) iv. SDLT5 v. Mortgage deed vi. Companies House Certificate • Land registry registers changes and produces and sends updated official copies showing the buyer as the registered owner and the new mortgage in the charges register • If not done in time: o Legal title will not pass o May fall outside the OS1 – 30 working day period, and thus other encumbrances may be registered prior to the new interest

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Remedies for delay / failure in completion •

Potential problems between exchange and completion o Delay (often because buyer unable to get funding in time) o Failure to complete (one party changes their mind / is unable to complete) o Buyer discovers that the seller misrepresented something, such that something serious that should have been disclosed was not

Delayed completion •

SCPC 10.3.1 (contractual remedy, irrespective of loss, provided contract not rescinded; if rescinded = damages) – seller entitled to compensation for late completion at the contract rate on the balance of the purchase price for each day of default o At the contract rate § E.g. 4% over Barclays base rate (1%) = 5% o On the balance of the purchase price § E.g. price of £950,000, deposit at 10%, therefore balance = £855,000 o For each day of default § SC 9.1.2 – default time of completion = 2pm (but check contract for disapplication of SC 9.1.2), and if not deemed to take place the following working day (BE CAREFUL IF THIS IS A FRIDAY, as if it is the days of the weekend will be included as days of default) § When counting days, INCLUDE day completion due, but NOT day you finally complete, if completion BEFORE 2pm • E.g. 2pm on 3 Jan completion due; 3pm on 10 Jan completion happens – 3,4,5,6,7,8,9,10 = 8 days § IN EXAM: do both if before 2pm + if after 2pm and give both figures Daily rate = ((£950,000 - £95,000) x 0.05) / 365 = £117.12 Total (8 days) = £936.96

Damages •

SCPC 10.3.3 – damages may be available where losses by the seller exceed the compensation available under the contract

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Notice to complete • •

In general, time will unlikely to be of the essence, such that neither party will be able to rescind the contract due to a delay Therefore, under SCPC 9.8.1 – seller may serve a notice to complete on the buyer at any time after the latest time for completion, unless changed by special condition. o This notice may give the defaulting party not less than 10 working days to complete excluding the day on which notice is given, making time of the essence (SCPC 9.8.2) § SCPC 1.3.5 = notice deemed received after 4pm is treated as received the next working day § SCPC 1.3.7 = deemed times of receipt: • First class post – before 4pm on 2nd working day after posting • Second class post – before 4pm on 3rd working day after posting • DX – before 4pm on 1st working day normally available for collection • Fax / email – 1 hour after dispatch o Where initial deposit < 10%, on receipt of notice to complete, buyer without delay to pay further deposit equal to the balance of that 10 per cent (SCPC 9.8.3)

… where fails to comply with notice to complete… Failure to complete •

SCPC 10.5 – seller has right to: o Rescind, although seller will therefore lose the right to contractual compensation o Forfeit the buyer’s deposit (and any accrued interest) o Claim damages for breach of contract at common law o Resell the property

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Misrepresentation •

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Where material difference between the property as represented and the actual property, the buyer may bring a claim for damages against the seller o William Sindall – seller replying ‘not so far as the seller is aware’ in response to buyer’s enquiry amounts to an assertion that the seller has made reasonable investigations into the matter o Gordon v Selico – cannot deliberately mislead buyer by concealing physical defects or answering enquiries dishonestly Claim may only be brought under 10.1 to rescind where: o Misrepresentation fraudulent or reckless; or o Representation so substantial that there is such a difference between the property as described and the actual property that the only fair remedy for the buyer would be for them to rescind the contract Here, there is no requirement of first notice prior to rescission; the buyer may merely serve notice is rescind

Common law remedies • • • •

While available, these are much more difficult to obtain and thus the remedies under the standard conditions should always be considered first Damages Specific performance, although very unlikely Misdescription claim – error in particulars of sale; if sufficiently significant, innocent party can seek rescission and damages

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