Pre-completion searches PDF

Preview

Summary

Information on the responsibility to ensure such pre-completion searches carried out and result satisfactory to client....

Description

Pre-completion searches WHO MAKES THE SEARCHES?  Buyer’s solicitor’s responsibility to ensure such pre-completion searches carried out, and results satisfactory to client.  searches will need making on the lender’s behalf also. REASON FOR MAKING SEARCHES  Buyers solicitor confirm information obtained about property before exchange remains correct. WHEN TO MAKE SEARCHES  Made in sufficient time to guarantee results received in time for completion to take place on the contractual completion date.  Precompletion searches should be made about 7 days before the contractual completion date. WHICH SEARCHES TO MAKE  (a) for registered land, search against title number at the Land Registry;  (b) for unregistered land, including an unregistered reversion to a lease, search at the Land Charges Department against names of estate owners of the land;  (c) if acting for a lender, a bankruptcy search against the name of the borrower; TITLE SEARCHES: LAND REGISTRY SEARCH FOR REGISTERED LAND  Aim is ascertain if further entries made on register of title to the property since the date of the official copies supplied prior to exchange.  Fees paid by cheque or credit account (applicant’s solicitor’s key number is quoted on application form).  Land Registry portal and NLIS searches via Internet, but may be made by post or telephone.  Search of whole title  Form OS1.  details of title number, brief description of its situation, and names of registered proprietors.  The applicant’s name must also be given, together with his reason for making the search.  If acting for buyer and lender, search application should be completed in name of lender.  If this is done, separate search in the buyer’s name is unnecessary as buyer is protected  search made on behalf of the buyer will not protect a lender.  An official certificate of search made on this form confers on the searcher a priority period of 30 working days from the date of the certificate. TITLE SEARCHES: LAND CHARGES DEPARTMENT SEARCH FOR UNREGISTERED LAND    

K15 to the Land Charges Department at Plymouth with the appropriate fee. Fees can be paid by credit account, applicant’s solicitor’s key number stated on application form. An official certificate of result - priority period of 15 working days on the applicant. The search application can be made by post, telephone, telex or fax by a credit account holder.

 Where title was deduced prior to exchange, and this search was carried out at the pre-contract stage of the transaction, the search need only now be made against the current seller’s name.  No further entries can validly be made against the names of previous estate owners once they have disposed of the land, so these need not be searched against again.  Form of the register  The register comprises a list of the names of estate owners of land, with details of charges registered against those names.  A fee is payable for each name searched.  Search made against all names of estate owners who appear on abstract/epitome of title.  Period to be searched against  If the estate owner’s period of ownership is not known, made from 1926.  Where there is a voluntary disposition which is less than 5 years old, necessary to search against donor’s name for a period up to and including current year to ensure that no bankruptcy of donor occurred.  The bankruptcy of the donor during this period could lead to the disposition being set aside by the trustee in bankruptcy.  Description of the land  Particular care needed when abstract shows that land was part of larger piece of land, land may previously be known by a description other than its current postal address.  There is a possibility that because of local government reorganisation the land was formerly situated in a different administrative county from that in which it is now.  Where the postal address of the property differs from its actual address the search must be made against the actual address of the property, not its postal address.  Pre-root estate owners  not need search against estate owners who held land prior to date of root of title, except in so far as names of such persons are revealed to him in documents supplied by the seller.  Official certificate of search  Official certificate of search conclusive provided that the search has been correctly made, ie it extends over the whole period of the title supplied by the seller and has been made:  (a) against the correct names of the estate owners for this period;  (b) against the correct county or former county; and  (c) for the correct periods of ownership of each estate owner.  Search certificates supplied by the seller  If seller provides previous search certificates as part of evidence of title, not necessary to repeat a search against a former estate owner provided that the search certificate supplied by the seller reveals no adverse entries and:  made against the correct name of the estate owner as shown in the deeds;  made for the correct period of ownership as shown in the title deeds;  made against correct county or former county of property as shown in the deeds; and  next disposition in chain of title took place within priority period afforded by the search certificate. BANKRUPTCY SEARCH FOR INDIVIDUALS  lender require clear bankruptcy search against name of buyer before releasing mortgage funds.

 Unless full search of register has been made on Form K15 (which includes a bankruptcy search), lender’s solicitor should submit Form K16 to the Land Charges Department.  A search certificate will be returned by the Department.  Paragraph 5.15.2 of the CML Lenders’ Handbook makes it clear that the lender will not proceed to advance the loan unless the solicitor certifies that any entry does not relate to the borrower.  Need repeating prior to completion to cover possibility that buyer has become bankrupt since date of previous search and will ensure that many potential problems can be resolved at a time where they will not cause a delay in completion. COMPANY SEARCH FOR CORPORATE ENTITIES  A company search may be done as one of the pre-contract searches and the information updated at this stage of the transaction.  Unregistered land  Look out for matters as fixed or floating charges, or appointment of a receiver or liquidator.  A floating charge is a charge that companies can create and is analogous to a mortgage. The charge ‘floats’ over all the assets of the company.  The company is free to deal with its assets without the lender’s consent, so it can sell some to a third party and buy others.  The charge ceases to float and instead fixes and attaches to particular assets of the company only when it crystallises.  Crystallisation occurs when a specified event happens which makes the sum due under the mortgage payable.  certificate of non-crystallisation should be obtained where company search reveals that a floating charge subsists.  Registered land  Unlike unregistered land, no need to search against previous corporate owners.  floating charges will not bind buyer in registered land unless entry made on the register.  If company search reveals existence of floating charge, and not on register not of concern to a buyer.  practitioners still ask for a letter of non-crystallisation as additional comfort.  If chattels included in sale, letter of noncrystallisation should be obtained.  Companies Court search  Where transaction for high value, or reason to be concerned about solvency of a corporate seller or borrower.  telephone search at Companies Court at the Royal Courts of Justice in London on day of completion.  This will reveal recent winding up and administration orders and applications and petitions for winding up/administration which may not yet be appearing on the Company Search. ENDURING AND LASTING POWERS OF ATTORNEY  Where transfer deed executed by person who is acting under authority of enduring or lasting power of attorney, a search should be made with the Office of the Public Guardian to check whether or not registration of the power has been effected or is pending.

 In the case of enduring powers, unless a registration is pending the transaction may proceed to completion, provided the buyer has no actual knowledge of any circumstances that would revoke the power.  power is no longer capable of revocation without notification to the Public Guardian.  An office copy of the power should be obtained from the Office of the Public Guardian.  Lasting powers come into effect only when registered with the Office of the Public Guardian and, again, an office copy should be obtained. LOCAL LAND CHARGES SEARCH AND ENQUIRIES  These searches should be repeated prior to completion if:  (a) there is to be a period of two months or more between exchange of contracts and completion, and the search has not been covered by insurance or replaced by insurance; or  (b) information received by the buyer’s solicitor suggests a further search may be advisable in order to guard against a recently entered adverse entry on the register; or  (c) the contract was conditional on the satisfactory results of later searches.  The discovery of a late entry on such a search is not a matter of title and will not entitle the buyer either to raise requisitions about the entry, or to refuse to complete, unless the contract was made conditional on the satisfactory result of searches.  Although clause 5.3.3 of the CML Lenders’ Handbook requires that all searches should be not more than six months old at the date of completion, many conveyancers consider that repeating the searches after two months is preferable. INSPECTION OF THE PROPERTY  Inspection or re-inspection of the property may be necessary just before completion. RESULTS OF SEARCHES  If an unexpected entry (other than a Class D(ii) entry protecting restrictive covenants, which cannot generally be removed) is revealed by the search result, the buyer’s solicitor should:  (a) find out exactly what the entry relates to;  (b) if the entry appears adversely to affect the property, contact the seller’s solicitor as soon as possible to seek his confirmation that the entry will be removed on or before completion;  (c) in the case of a Land Charges Department search, apply for an official copy of the entry using Form K19;  (d) keep the client, his lender and, subject to the duty of confidentiality, other solicitors involved in the chain of transactions informed of the situation.  if the seller is unable or unwilling to remove an entry which the contract did not make the sale subject to, this will also be a breach of contract.  Removing an entry from the register  An application form for removal of an entry from register accepted by Chief Land Registrar only if signed by the person with the benefit of the charge or a person acting on his behalf.  An application form signed by the seller’s solicitors, or an undertaking given by them on completion to secure removal of charge may not, therefore, suffice, unless the seller is the person with the benefit of the charge (see Holmes v Kennard (H) and Son (A Firm) (1985)).

 The court has a discretion to remove entries which are redundant but which cannot be removed from the register because the person with their benefit either will not consent to their removal or cannot be contacted.  Entries protecting a spouse’s rights under the Family Law Act 1996 can be removed on production of the death certificate of the spouse or a decree absolute of divorce.  In the absence of these items, the charge can be removed only with the consent of the spouse who has the benefit of the charge.  Irrelevant land charges entries  Charges registered at Land Charges Department only validly entered against name of estate owner in relation to the period during which he was the owner of the land in question.  Thus, an entry which was made before or after this time cannot prejudice the buyer.  Having checked that entry is irrelevant, it may either be disregarded or, at completion, the seller’s solicitor may be asked to certify the entry as being inapplicable to the transaction.  Official certificates of search  Registered land  Official certificate of search issued by Land Registry not conclusive in favour of searcher, who will thus take interest in land subject to entries are on the register, irrespective of whether or not they’re revealed by search certificate, Parkash v Irani Finance Ltd 1970.  where a person suffers loss as a result of an error in an official certificate of search, he may be able to claim compensation under the LRA 2002.  Unregistered land  An official certificate of search issued by the Land Charges Department is conclusive in favour of the searcher, who will thus take his interest in the land free of any entries which are on the register but which were not revealed by the search certificate.  Where a person suffers loss as a result of an error in an official certificate of search, may be able to claim compensation from the Chief Land Registrar - but no statutory right.  No liability will attach to the solicitor who made the search, provided that a correctly submitted official search was made (Land Charges Act 1972, s 12). PRIORITY PERIODS  Registered land  An official certificate of search issued by Land Registry for Form OS1 gives a priority period to the searcher of 30 working days from the date of the search.  Buyer take advantage of this protection where search made on his behalf in name of lender.  Unregistered land  Official certificate of search issued by Land Charges Department gives a priority period of 15 working days from date of the certificate, searcher will take free of any entries made on the register between the date of the search and the date of completion.  Date of expiry of priority period  The date of expiry of the priority period is shown on the search certificate.  The priority period given by these searches cannot be extended.  The new search certificate will give another priority period, but does not extend the original priority period from the first search....