Completion, legally, is the big shebang. It is the date when legal title to the property passes to the buyer, the breach date for exchanged contracts if it is not adhered to, the end of the sale process. However, in practice, it is a bit of an anti-climax in comparison to all the work you have done before!
Completion requires two things: exchange of money and exchange of transfer documents. That is it. A lawyer will need to make sure all the pre-completion matters are done in advance to make sure this is possible, but in reality, it is a simple process.
Order of completion
1. Buyer’s and Seller’s solicitor receive executed documents from their client (usually just transfer document – this may have been done already if the transfer was agreed before exchange).
2. Mortgage advance arrives in Buyer’s solicitors account.
3. Seller’s solicitor receives up to date redemption statement from mortgage company.
4. When completion funds are cleared, the Buyer’s solicitor confirms he is ready to complete and arranges for the funds to be sent to the Seller’s solicitor.
5. Seller’s solicitor waits for confirmation that the funds have been received.
6. When funds are received, the solicitors confirm completion by phone and date the transfer documents. Part of this conversation is undertakings to send the documents to each other.
7. The solicitors send the completed documents to each other overnight.
8. The solicitors confirm completion to their clients and the Seller’s solicitor instructs the agent to release the keys to the property.
9. The Seller’s solicitor arranges for the mortgage to be redeemed, the agent’s fee to be paid, his own bill to be paid and any remaining money returned to the client.
10. The buyer’s solicitor submits the SDLT return and the Land Registry application (AP1).
So, what will have been a few months of work and negotiation boils down to just a few conversations on the phone.
In reality, it is often a big push to get to those few conversations. Banks are only open for a short period of time, so transfer of funds has to happen in a very small window – usually between 10am and 2pm. There might be a chain of transactions reliant on funds moving through the system; the seller using his sale monies to purchase another property and so on. Where this is the case, the window is even smaller, as every transfer of money up the chain has to take place in the banking window. The issue is that a seller’s solicitor cannot say he is ready to complete until he has an up-to-date mortgage redemption statement (banks have no sense of urgency) and the buyer’s solicitor will not transfer completion funds until the seller’s solicitor is ready.
Neither can completion take place unless the solicitors have the signed documents in hand (this has been the issue with quite a few of my completions). It is crucial that you have informed the client of this and given them enough time to return the documents. Bringing them into the office in person is the best option but if they have to be returned by post, make sure it’s special or recorded delivery. Not knowing where the documents are because they were put in a letterbox with a second-class stamp on them is very frustrating! It really boils down to relying on a lot of other people to give you what you need, and managing the situation if they are late or delayed.
All this wouldn’t be so much of a problem, if there were not consequences to late completion. Unfortunately, the completion date is a contractual deadline and not meeting it constitutes a breach of the contract. In fact, if completion doesn’t take place by 2pm under the standard conditions, it is deemed to have taken place the next day and completion will have been late. What happens if completion is delayed depends on a number of factors, but the bottom line is usually that if the delay is your client’s (or your) fault then your client will have to pay more.
Any breach of contract results in damages. Under the standard conditions, damages are payable at the ‘contract rate’ which will have been defined in the contract. Usually this is calculated at a daily rate for every day that completion is delayed. If a breach is fundamental, the innocent party may terminate the contract; for this to occur, the late completion time must be ‘of the essence’ i.e. fundamental to the contract. This might have been stipulated in the contract, but it is more usual for time to be of the essence only following service of a notice to complete.
A notice to complete specifies a new date for completion, say within one week, and if completion has not taken place by that date the innocent party is entitled to terminate. Whether to serve a notice to complete is a tactical issue. It is a big statement, and although the client will be compensated if the contract is terminated, losing a property and months of work is not an attractive solution if it can be worked out. Often completion may only be delayed by a day or so because of a banking issue or similar, and if this is the case the client will probably be happy to wait. However, if the delay seems to be endless, with no resolution in sight, the option should be discussed with the client. It also depends on how the completion affects the client – if they have sold their house and are waiting to move in, they will not want to wait, but equally they won’t want to give up and have to start again from scratch. It is a difficult situation.
For exam purposes, you might be faced with a situation where completion is delayed and you will need to explain the consequences and the actions you might take. It is always a good idea to include some client considerations here; it is easy to explain you could serve a notice from the minute completion is late, but understanding that this might not be in the best interests of the client will earn you brownie points.
One final thing to know about completions is that, in practice, they will always happen at the wrong moment. Around this time (Christmas Eve!) in 2010, I had just completed a commercial property sale, having to courier documents round the country to get it executed as the snow had stopped the post. I suspect there are plenty of lawyers having to go in to the office to complete before the Christmas break. Something to look forward to!
Next week I will be looking at Company Finance and Business Accounts.