The post-exchange, pre-completion stage of a conveyance is usually where it gets really busy. Often there is a strict deadline, as the completion date will have been incorporated into the contract. Failure to meet that date will result in damages and if it is your fault, you’ll be paying! Every little step is vital to completing the transaction, meeting the deadline and getting your bill paid, so attention to detail is key.
The most important document that is drafted at this stage (although in practice is often drafted prior to exchange) is the transfer. It is usually completed on Land Registry standard form TR1 – it would be useful to have a semi-completed version of this in your exam, to refer to if necessary. The transfer is the document that transfers legal title to the property along with all the rights and restrictions involved. It is the document used by Land Registry to update the title and so it is very important that it is drafted well. It is the buyer solicitor’s responsibility to draft the transfer, according to what was agreed in the contract. In non complicated transactions, you can probably use a few precedent phrases and copy the rest from the contract on to the TR1. However, when the seller is reserving new rights or granting additional rights to the buyer, it can become more complicated. Also, make sure the attestation clauses (the execution clauses) are correct for the type of person who will be signing – individuals must be witnessed, and companies can sign by the signature of two directors, a director and a secretary and a single director witnessed. There is a very useful Land Registry guide on execution of documents, which could be useful in the exam.
Keep a list of everything you are supposed to be doing in between exchange and completion and be prepared to answer a question about any of it. Remember, any delay to completion is likely to mean damages for the party at fault.
In terms of the exam, your understanding of exchange to completion is likely to be tested, as there is simply a lot to remember! Keep a list of everything you are supposed to be doing in between exchange and completion and be prepared to answer a question about any of it. Remember, any delay to completion is likely to mean damages for the party at fault.
There are several steps that need to be undertaken by each party leading up to completion – most of these should be done in the ten days prior to completion, to prevent delay on the day. There is a lot to do in a short space of time so it is useful to keep a list. The various steps will be explained to you in the course but here are a few that I have run up against in practice and which you should be particularly aware of:
- Requisitions on Title form – this is standard set of questions, which are usually answered before completion. One question requires the seller’s solicitor to specify which mortgages he will be redeeming on completion – BEWARE, this is an undertaking! You must not complete this until you have received an up-to-date redemption statement from the client’s mortgage company and you are satisfied there will be enough funds to redeem the mortgage. The buyer will not complete without this undertaking and if you give it without ensuring you have enough funds, guess who they’ll be chasing to pay the rest of the mortgage off – it won’t be your client.
- Drawn down funds – the buyer’s solicitors won’t be able to buy anything if you haven’t requested the funds from the bank!
- Apportionments – these are the extra payments such as gas bill, maintenance fees, etc. that the seller will charge the buyer to reflect the fact that some household expenses are paid in advance. The seller’s solicitor should draw up a completion statement including these charges, indicating the total amount of money that will be required from the buyer. The buyer’s solicitor should check this to make sure it is accurate – lawyers are not known for their maths! Your client will not want to be out of pocket by paying too much or receiving too little.
- Financial statement – you will be practising preparing these in solicitors’ accounts. You should return the financial statement to the client before completion so that they can either forward you the additional funds in time or inform their bank of the sum they are expecting to receive (a sudden influx of £100,000s gets the bank manager’s alarm bells ringing!). Getting it right is important; it looks embarrassing to send your client a cheque post-completion for a nominal amount because you got your sums wrong, but if you return too much or complete without the full amount as a result of bad arithmetic, you will have broken the accounts rules.
- Tax return – buyers need to have completed an SDLT return, even if they are below the threshold, within a set time limit or face a fine. Lawyers are able to submit the return online on behalf of their clients, but clients should authorise this and therefore should be given a copy of the return to check before completion. In practice, all documents needing signature or approval are forwarded to the client at the same time; the registration application (usually AP1), the TR1, the tax return and completion/financial statements.
- Drawing up your bill – solicitors’ fees are usually taken from the sale proceeds before they are transferred to the client. As a result, the bill needs to be drawn up and sent to the client before completion. Often in residential conveyancing a fixed fee is given, so the invoice will be the fixed fee plus any disbursements such as registration fee, SDLT or search fees. However, if you are not working to a fixed fee, make sure the bill either allows you to do the work to complete or includes a proviso which allows you to charge more, should there be an unforeseen complication. Rectifying a document post-completion – e.g. a title plan that is not to scale and rejected by Land Registry – can be time consuming and if you have already issued your final invoice, you will be doing it free of charge.
- Bankruptcy/winding up searches – very important! If your client has been declared bankrupt, he does not have the power to use his assets and the bank certainly will not want to grant him a mortgage. All his assets will have been transferred to the Trustee in Bankruptcy. It is very important this search be carried out correctly – if you don’t do it or do it incorrectly, you are likely to be negligent and will be facing action from both the seller and the bank when they realise the transaction is unenforceable.
I have heard of documents being taxied back from clients’ offices in order to make the deadline, and of solicitors doing four-hour round trips to get a signature on a document that was not executed properly!
In reality, this period is not that challenging but does require time management and organisation. If one little thing is forgotten, you could complete and bind your client to something that is not valid or a bad deal. Getting this stage right is crucial to ensure the rest of the transaction goes smoothly and you actually get your bill paid at the end of the day! It is likely to be tested in the exam so make sure you know the ins and outs of the stage well and will be able to get the steps (and the reasoning behind them) right if you need to!
In the next post I will be look at choosing the largest part of BLP – Company law.