Unit 4- chapter 5- Completion

Pre-Completion Steps and Transfer Deed Execution in Conveyancing (Sale and Purchase of Registered Freehold Property)

1. Introduction and Context

After exchange of contracts in the conveyancing process (sale and purchase of a registered freehold property), the main bulk of legal work (such as title investigation, searches, and contract negotiation) is completed. However, key tasks still remain, particularly in preparing for completion, the stage at which the property legally changes ownership.

The important phases after exchange include:

• Pre-completion steps

• Execution of the Transfer Deed (TR1)

• Completion itself and post-completion formalities

• Resolving any delays or issues in completion

2. Pre-Completion Steps

Immediately after exchange, solicitors must promptly:

• Inform their clients (seller and buyer) that exchange has occurred.

• Comply with undertakings given during the telephone exchange (commonly involves sending the signed, dated contract with the completion date included to the other side).

Standard Timetable for Completion

• Traditionally, completion occurred 4 weeks after exchange.

• Modern practice often shortens this period to about 2 weeks.

• In some cases, simultaneous exchange and completion occurs on the same day (riskier but increasingly common).

Main tasks before completion:

Solicitors must carry out the following tasks:

• Preparation of the Transfer Deed (commonly Land Registry Form TR1 for registered titles).

• Pre-completion searches (final checks before completion).

• Practical arrangements (liaising on keys, vacant possession, etc.).

• Ensuring financial readiness (e.g., mortgage funds, balance of purchase price, client funds).

3. The Transfer Deed (TR1) – Form and Execution Formalities

Relevant Statutory Provision:

• Section 52 Law of Property Act 1925: requires transfer of a legal estate in land to be executed by deed.

Essential Legal Requirements for a Deed:

For a transfer deed to be legally valid, it must:

• Clearly state on its face that it is a deed.

• Be signed by the parties involved.

• Be delivered (meaning the parties intend it to take immediate effect upon signing, unless expressly stated otherwise).

Execution by Individuals:

• Individual seller(s) must sign the TR1.

• Signatures must be witnessed by an independent witness to avoid allegations of fraud, duress, or undue influence.

• Witness must provide their name, signature, and address clearly on the deed.

Execution by Companies:

Companies can validly execute a TR1 (or any deed) in one of three ways:

1. Affixing the common seal (in line with the company's Articles of Association):

   
   

2. Signature by two company officers (usually two directors, or one director plus company secretary):

3. Signature by a single director in presence of a witness (common modern practice):

4. Obligations on Seller and Buyer in Execution of TR1:

• Seller’s Obligation:
  Always signs the deed, as it transfers the legal estate.

• Buyer’s Obligation (Conditional):
  Only signs if the buyer:

  • is undertaking specific obligations (e.g., indemnity covenants);

  • is making declarations (e.g., beneficial interests under a trust within the deed).

5. Delivery of the Deed:

• Legally, there is a presumption of immediate delivery upon execution.

• This presumption can be rebutted by explicitly stating otherwise.

• If the transfer is not intended to come into force immediately, the solicitor must explicitly say so in writing, usually in the covering letter sent with the signed deed.

Practical Example:

• A solicitor might write:

6. Form TR1 and TP1 for Registered Titles:

• Land Registry Form TR1: used for transfer of the whole of a registered freehold property.

• Land Registry Form TP1: used for transfer of part of a registered title.

• Even if the property is currently unregistered (but compulsory first registration applies upon sale), solicitors often choose TR1/TP1 to facilitate first registration.

• Historically, conveyances were common; now standardized Land Registry forms are preferred for efficiency and clarity.

7. Drafting and Agreeing the Transfer Deed:

• Conventional practice:

  • Buyer’s solicitor prepares the transfer deed after exchange of contracts and sends to the seller’s solicitor for approval.

• Residential conveyancing practice (simplified approach):

  • Often, the seller’s solicitor prepares a draft transfer deed prior to exchange, included within the pre-contract package sent to buyer’s solicitor.

  • Buyer’s solicitor then reviews and returns the agreed deed for execution shortly after exchange.

8. Summary of Key Practical Steps Post-Exchange (Pre-Completion):

• Notify clients of exchange.

• Comply with exchange undertakings (send signed contract).

• Prepare the Transfer Deed (TR1/TP1).

• Obtain signatures (ensuring witnesses/company execution formalities).

• Carry out pre-completion searches.

• Arrange completion practicalities (keys, finances, mortgage funds).

• Ensure proper delivery and execution of deed at completion.

9. Resolving Problems at Completion (overview):

• If completion does not occur as planned, solicitors must:

  • Consider serving completion notices (standard contract conditions).

  • Manage client expectations (financial implications/delays).

  • Potentially address breach of contract scenarios and remedies.

Pre-Completion Searches – Conveyancing (Registered Freehold Property)

1. Purpose of Pre-Completion Searches

Pre-completion searches are vital checks conducted by the buyer’s solicitor just before completion, typically within a few days of the completion date. They serve four main purposes:

1.1. Update the Title

• Why? There may be a delay between investigation of title and actual completion.

• Risk: The seller could further encumber the title, e.g. by:

  • Granting new easements

  • Imposing new restrictive covenants

  • Taking out a new mortgage

• Goal: Confirm that the title is unchanged and clean before money is paid.

1.2. Check Buyer’s Financial Standing (if acting for lender)

• If the solicitor is acting for both the buyer and the lender, it is crucial to check for any insolvency or bankruptcy issues that might affect the lender’s security over the property.

1.3. Secure Priority Over Later Interests

• Section 72 of the Land Registration Act 2002 governs the priority period.

• A valid search gives the applicant a 30-working-day “priority period” during which:

  • No other interest registered at the Land Registry can take precedence.

  • Provided the application for registration is submitted within the priority period, the applicant’s interest takes priority over anything lodged later.

1.4. Check Seller Company’s Solvency

• If the seller is a company, conduct a Company Search at Companies House to check for:

  • Any winding-up petitions

  • Liquidation

  • Receivership before the buyer pays the completion money.

2. Types of Pre-Completion Title Searches

2.1. Registered Land

For registered titles, the search is made using the following official Land Registry forms:

OS1/OS2 Search Mechanics

• Search From Date: Must match the date the official copies of the register were obtained (i.e. last time title was checked).

• Applicant: Usually the lender, not the buyer (see below).

• Details Required:

  • Title number

  • Address

  • Names of registered proprietors

  • Purpose (e.g., purchase, lease, mortgage)

  • Applicant’s name

Search Result: OS1R / OS2R

• Reveals any new entries or changes to the title since the “search from” date.

• Confers a 30 working day priority period on the applicant from the search date (Land Registration Rules 2003).

• During this time, any applications to register competing interests will be deferred behind the priority applicant, if they apply before the end of the period.

2.2. Who Should Be the Applicant? (Very Important)

If mortgage finance is involved, the application for OS1/OS2 should be made in the name of the lender, not the buyer.

• Why? Because the buyer’s mortgage is registered after their purchase.

• A search in the lender’s name ensures both the purchase and the mortgage gain priority under the same priority period.

• If the search is done only in the buyer’s name, the lender is not protected.

2.3. Unregistered Land

For unregistered titles, a Land Charges Search (K15) is carried out:

• To check if the seller is bankrupt.

• A search against the full name of the seller must be done.

Additionally, a search of the Index Map (SIM search) may be made to confirm whether the land is actually unregistered.

3. Pre-Completion Solvency Search (Seller is a Company)

Companies House Search

• Confirms that the seller company is still solvent and not:

  • In administration

  • Subject to a winding-up petition

  • In liquidation

• Important because if the company goes into liquidation after exchange and before completion:

  • The contract could become unenforceable or require dealing with liquidators, delaying or frustrating completion.

4. Priority Period – Key Legal Effect

• Once the OS1/OS2 search is made, the applicant (usually lender) has 30 working days to:

  • Submit their application for registration (TR1 and legal charge).

  • Ensure their interest ranks in priority over:

    • Any later application made by others during that window.

    • Even if someone else applies before them, their application will take priority if lodged within the 30-day period.

• If application is not submitted in time, the priority expires, and the buyer/lender may lose their protected position.

5. Summary Table – Pre-Completion Search Process

6. Practical Consequences of Failing to Search / Missing Priority

• If buyer’s solicitor fails to carry out a valid pre-completion search:

  • Buyer may unknowingly purchase a title now subject to new encumbrances.

  • Lender may be unprotected, leading to enforcement difficulties if borrower defaults.

• If search is made but application is late:

  • Priority protection is lost.

  • Any intervening application may defeat buyer’s/lender’s claim to ownership or charge.

7. Real-World Example

Pre-Completion Searches – Unregistered Land

🔍 1. Purpose of Pre-Completion Searches for Unregistered Land

Similar to registered land, pre-completion searches in unregistered land serve several key purposes:

1. To check for adverse entries (e.g., mortgages, restrictive covenants, bankruptcy notices) that may have been entered since pre-exchange searches.

2. To secure a priority period during which the buyer’s interest in the land is protected against competing interests, provided completion occurs within that period.

3. To check the solvency of the seller, especially important if seller is a company.

📄 2. Forms Used for Unregistered Land Searches

🧾 3. How the K15 Search Works

✅ When to Perform

• Typically done both before exchange and before completion.

• If the transaction completes within 15 working days of a pre-exchange K15 search, no need to repeat.

• If more than 15 working days have passed since the last K15 search, a fresh search must be carried out before completion.

🧑‍💼 Whose Name to Search Against

• Only the current seller (legal estate owner).

• No need to search names of prior estate owners, as no entries could have been made against them after they transferred the estate.

🛡 Priority Period – Legal Effect

• The K18 result confers a 15 working day priority period (from the date of the search result).

• If the purchase is completed during this period, the buyer takes free of any entries registered between the search and the date of completion.

📝 4. What Happens If Adverse Entries Are Found

• If the K18 result shows adverse entries (e.g. mortgages, restrictive covenants, writs), the buyer’s solicitor must raise the issue immediately with the seller’s solicitor.

• Resolution may include:

  • The seller removing the charge before completion (e.g., repaying a mortgage).

  • Agreement to deduct a retention or adjust the purchase price.

  • Termination of the transaction, depending on the severity of the entry.

🆚 5. Comparison: Land Registry Search (Registered Land) vs. Land Charges Search (Unregistered Land)

🏡 6. Why This Matters Practically

If the buyer’s solicitor fails to carry out or repeat the K15 search when required:

• Buyer risks acquiring the land subject to undisclosed burdens, such as:

  • Pre-existing legal mortgages

  • Restrictive covenants

  • Injunctions or orders

• No priority is conferred, meaning any entries registered after the last search but before completion would bind the buyer.

• The lender’s security may be compromised if not protected.

🔒 7. Protection for the Buyer and Lender

• Solicitors must ensure that completion occurs within the priority period conferred by the K18.

• If mortgage finance is involved:

  • The lender may also request a copy of the K18 result to ensure their interest is protected.

🧾 8. Summary of Steps – Unregistered Land (Pre-Completion)

Solvency and Bankruptcy Searches in Conveyancing

1. Why Solvency Checks Matter

• When a lender provides finance secured by a mortgage or legal charge, they must ensure the buyer is solvent and not subject to bankruptcy or liquidation proceedings.

• Likewise, when the seller is a company, it’s vital to confirm that it is still in existence, not being wound up, and entitled to sell the property.

• These checks are essential to protect the lender’s security and the buyer’s title to the property.

2. Bankruptcy Search Against an Individual Buyer

✅ Purpose:

To determine whether the buyer is bankrupt – crucial for lenders granting mortgages, as they may refuse to lend if the buyer is insolvent.

🔍 Form Used:

Form K16 – “Bankruptcy only” land charges search.

• Scope: This limits the search to the bankruptcy register (no unnecessary information on other land charges).

• Who applies: Usually the buyer’s solicitor on behalf of the lender.

📌 For Registered Titles:

• Carry out both:

  • Land Registry OS1/OS2 search (against the property)

  • K16 bankruptcy search (against the buyer)

📌 For Unregistered Titles:

• Use Form K15 and include the buyer’s name (as well as the seller’s).

• This will reveal any entries against the buyer, including bankruptcy notices.

3. Company Search Against a Corporate Seller (or Buyer)

✅ Purpose:

To check whether the company:

• Still exists

• Is solvent

• Has registered fixed/floating charges (secured debts)

🔍 When and How:

• Performed close to the date of completion to ensure up-to-date results.

• Carried out via Companies House, usually through an online company search provider.

🚫 No Priority Period:

• The company search has no protective priority window like OS1 or K15.

• For high-value deals, do a telephone search at the Registry of Winding Up Petitions (Companies Court) on the day of completion to ensure no liquidation proceedings are pending.

4. Example – Failure to Register Within Priority Period

❗ Scenario:

• Buyer: Rabinet plc

• Seller: Beckwith Ltd

• Priority period (from OS1 search): Ends 28 December

• Solicitor delays registration until 4 January

❗ Outcome:

• A right of way granted to Southwood Ltd (on 10 December) is registered before the buyer’s application.

• Because the application was not submitted within the 30 working day priority period, Rabinet is bound by the easement.

⚠ Key Legal Point:

• Priority period only protects the buyer if they apply for registration before 12 pm on the last day.

• If they miss this deadline, any interests registered in the meantime (e.g. easements, charges) take priority.

5. Bankruptcy Search Against Individual Seller

✅ Registered Land:

• Generally not required, because of:

  • Section 86(5) Land Registration Act 2002:

    • A buyer for value acting in good faith and without notice of a bankruptcy petition takes good title, even if the legal title has vested in the trustee in bankruptcy.

    • This protects buyers even if the seller is technically bankrupt, provided there is no entry on the title and the buyer is bona fide.

❗ However:

• In high-value transactions, or where there is concern about the seller’s solvency, a K16 search can still be carried out for reassurance.

✅ Unregistered Land:

• Bankruptcy entries will be shown via the K15 search against the seller’s name (see notes on Land Charges searches).

• This must be carried out to avoid purchasing subject to registered bankruptcy interests.

6. Summary Table: Solvency Checks

7. 🧠 Key Takeaways

• Always conduct searches as close as possible to completion to ensure accuracy.

• Apply for registration within the OS1/OS2 or K15 priority period to ensure protection against later competing interests.

• Lenders rely heavily on K16 searches before issuing mortgage funds.

• A failure to protect priority or check solvency could lead to subordinate title or loss of lender security.

• For corporate sellers, do both a company search and winding-up check

Practical Arrangements for Completion

1. Completion Information and Form TA13

📄 What is Form TA13?

• A standardised form used to confirm the practical arrangements for completion.

• Sent by the buyer’s solicitor to the seller’s solicitor for completion.

• Most commonly used in residential transactions.

📌 Key Information Provided in TA13:

• How and where keys will be handed over

• Method of completion (in person / post)

• Exact amount due on completion

• List of documents to be handed over (e.g., TR1, guarantees, planning permissions)

• List of existing mortgages and charges, with undertakings to redeem them

2. Mortgage Redemption Undertakings

🏦 Problem:

• The seller’s mortgage is unlikely to be redeemed before completion as funds come from the buyer.

📝 Solution:

• The seller’s solicitor gives an undertaking to:

  • Redeem the mortgage out of completion money

  • Provide evidence of discharge (e.g., DS1 or DS3, or Land Registry confirmation of discharge)

✅ Legal Effect:

• A "Yes" reply in TA13 regarding discharge of mortgage is legally treated as a binding solicitor’s undertaking and is enforceable.

3. Ensuring Finances Are Ready for Completion

💰 Buyer’s Funds:

• The buyer’s solicitor must ensure both:

  • The mortgage advance is received from the lender

  • The balance of purchase price is received from the client (buyer)

🧾 Financial Statement:

• Sent to the client

• Shows:

  • Purchase price balance

  • SDLT/LTT due

  • HM Land Registry fees

  • Disbursements

  • Solicitor’s fees

  • Any additional costs (e.g. indemnity insurance)

🔐 Lender’s Pre-conditions to Release Advance:

Before the lender releases the mortgage advance, the following must be in place:

• A certificate of title (confirming the property is adequate security)

• A clear OS1R result in the lender’s name (for priority)

• A K16 bankruptcy search result (see earlier notes)

• An executed but undated mortgage deed

4. Methods of Completion

4.1 Completion in Person

🧾 Process:

• Usually takes place at seller’s solicitor’s office

• The buyer’s solicitor attends with electronic transfer already arranged

• In exchange for the completion money, the seller’s solicitor hands over:

  • The original TR1, duly signed and dated

  • Title deeds, guarantees, planning permissions, etc.

  • Arranges release of keys

📌 Note:

• Still common for unregistered land (where physical title deeds are more critical)

4.2 Completion by Post (Code for Completion by Post)

📦 Problem:

• Completion in person is time-consuming and outdated in many cases

• Post is less reliable

🛡 Solution:

• The Law Society Code for Completion by Post provides a secure framework

• The seller’s solicitor acts as agent for the buyer’s solicitor, carrying out the buyer’s instructions

✅ Key Features:

• Undertakings are implied under the Code and legally enforceable

• Buyer’s solicitor sets out clearly in writing what the seller’s solicitor is to do

• Seller’s solicitor notifies completion and sends all necessary documents by first-class post or document exchange

5. Effect of Completion

5.1 Registered Land

• Legal title does not pass on completion itself.

• Title passes only when the buyer is registered as proprietor at the Land Registry.

• A registration gap exists between completion and registration – priority must be protected by an OS1 search.

5.2 Unregistered Land

• Legal title passes immediately on completion

• Registration is not required to effect the transfer but is still necessary due to compulsory first registration following sale.

6. Summary Table: Practical Completion Checklist

Post-Completion Steps

5.8.1 Discharge of the Seller’s Mortgage

• Agreement on Discharge: Arranged using the Completion Information Form.

• Methods of Discharge:

  • Undertaking: Buyer relies on the seller’s solicitor’s undertaking to redeem the mortgage post-completion.

  • Direct Redemption: Buyer’s solicitor sends redemption funds directly to the lender, balance to the seller’s solicitor.

• Redemption Procedure:

  • Upon receipt of funds, the lender:

    • Completes and sends DS1 to the seller’s solicitor; or

    • Submits an e-DS1 (via Land Registry portal); or

    • Uses the Electronic Discharge (ED) system, which sends an electronic message directly to the Land Registry to remove the charge.

• If ED/e-DS1 is used: The seller’s solicitor will not send a DS1 form but will provide confirmation of the electronic notice of discharge to the buyer’s solicitor.

5.8.2 SDLT (England) / LTT (Wales)

• Responsibility: Buyer’s solicitor must pay SDLT/LTT and file the return.

• Deadlines:

  • SDLT: 14 days from completion (to HMRC).

  • LTT: 30 days from completion (to WRA).

• Submission: Return (SDLT1 or Land Transaction Return) may be submitted online or via paper.

• Proof of Payment:

  • HMRC issues SDLT5.

  • WRA issues WRA certificate.

• Importance: SDLT5/WRA certificate must accompany Land Registry applications or the application will be rejected.

5.8.3 Registration of Charge at Companies House

• Applies When: Buyer is a company using mortgage finance.

• Responsibility: Lender’s solicitor.

• Deadline: 21 days from the creation of the charge (date of completion).

• Legal Consequence: Failure to register renders the charge void against:

  • Liquidators or administrators.

  • Other creditors.

5.8.4 Land Registry Application(s)

(a) Registered Land

• Forms Required:

  • AP1 for:

    • Registration of buyer as proprietor.

    • Registration of lender’s charge.

    • Discharge of seller’s charge (if DS1 used).

• Supporting Documents:

  • Certified copy of TR1.

  • SDLT5/WRA certificate.

  • DS1, if applicable.

  • Form DI (disclosure of overriding interests).

  • Certified copy of mortgage deed (if applicable).

  • If buyer is a company:

    • Certified certificate of registration from Companies House.

    • Written confirmation that mortgage deed is the same as filed at Companies House.

• Priority Period:

  • Application must be made within the OS1 priority period.

  • Failure to do so risks losing priority to competing interests registered during that period.

(b) Unregistered Land

• Form Used: FR1 (for first registration).

• Deadline: 2 months from completion.

• Supporting Documents:

  • Listed on Form DL (in duplicate).

  • Include:

    • All seller’s evidence of title.

    • Buyer’s pre-contract searches and enquiries.

    • The contract.

    • Requisitions on title and replies.

    • Pre-completion search certificates.

    • Transfer deed.

    • SDLT/LTT certificate.

    • Seller’s discharged mortgage.

    • Form DI.

    • If a mortgage exists: certified mortgage deed, registration certificate, confirmation letter.

• Registration Outcome:

  • Land Registry issues a Title Information Document (TID).

  • Not a title document, but evidences ownership.

  • Solicitors must check accuracy of entries.

• Safe Custody:

  • Solicitor arranges storage or delivery of TID and related documents.

  • Lender may only require the updated TID.

• Closing the File:

  • Done once:

    • Registration complete.

    • Documents returned/stored.

    • Fees paid.

5.9 Remedies for Delayed Completion

5.9.1 Contractual Compensation

• Applicable Rules:

  • SCs: Both buyer and seller can be liable.

  • SCPCs: Only buyer can be liable.

• Calculation:

  • Based on contract rate (annual %) on:

    • Purchase price – deposit.

  • Calculated daily.

• Example:

  • £300,000 purchase, £30,000 deposit, 3 days delay, 8.5% rate.

  • Compensation = £270,000 × 8.5% ÷ 365 × 3 = £188.64.

• Payable: On completion.

5.9.2 Common Law Damages

• Failure to Complete = Breach of Contract.

• Legal Basis: Hadley v Baxendale.

• Damages Cover:

  • Direct losses (e.g. removal costs).

  • Foreseeable consequential losses (e.g. bridging finance).

• Interaction with Contractual Compensation:

  • Damages can be claimed in addition to compensation.

  • But compensation received is deducted from total damages.

5.9.3 Notice to Complete

• When Used:

  • Only after the contractual completion time on the completion date (e.g., after 2pm).

• Effect:

  • Makes time of the essence.

  • Sets a 10-working day deadline to complete.

• Consequence of Non-Compliance:

  • Non-defaulting party may rescind the contract (not mandatory).

  • Buyer default: Seller may forfeit deposit.

  • Seller default: Must return deposit.

  • Non-defaulting party can also claim damages.

5.9.4 Rescission

• SCs and SCPCs allow rescission if:

  • Failure to comply with notice to complete.

  • Misrepresentation by seller in:

    • Contract documents.

    • Pre-contractual negotiations.

• Threshold for Rescission:

  • Must result from fraud or recklessness, or

  • Buyer would receive a property substantially different in quality, quantity, or tenure.

• Lesser Misrepresentations: Entitle only to damages, not rescission.