Early completion
Thursday 30 July 2009
Contents
Latest news
New registration procedures from 3 August 2009
30 July 2009
From 3 August 2009 there are new Land Registry procedures to deal with any application to remove the entries relating to a registered charge, where evidence of discharge is not supplied with, or before, the application. These are known as 'early completion' procedures.
We have published a practice note on early completion. Some issues are still under discussion with the Land Registry, and we will adapt our advice as the situation develops.
- Read our practice note on early completion
- Frequently asked questions about early completion
- Early completion Q&A on the Land Registry website
Our position - supporting solicitors
The Law Society advocated rejection of the new procedures, and this stance was supported by the Council of Licensed Conveyancers. The Council of Mortgage Lenders accepted the proposals with some caveats.
The Law Society recommended that the Land Registry Board reject the proposal to introduce early completion because accepting it would:
- reduce the impetus for the creation of an electronic system of discharge, transfer and new charge, where the proposal would fit in well
- remove a major driver for conveyancers to adopt a voluntary system of full e-conveyancing.
- waste an opportunity to improve this part of the land registration system and instead perpetuate and entrench the problems arising from some lenders not adhering to their redemption statements, or delaying in producing discharges
- risk jeopardising the system of 'chains', forcing buyers to bridge, and sellers to move into rented accommodation which would not be in the public interest
- risk making home buying and selling more expensive, stressful and complicated for consumers
- hinder the development of a fully functioning and efficient e-conveyancing system by entrenching poor practice in the system
- ensure that a wholly disproportionate amount of the costs arising from the failure of the prompt issue of discharges is borne by solicitors/conveyancers
- deny the unique position that the Land Registry is in to improve the system for all participants: Land Registry, lenders, solicitors, conveyancers and consumers.
Frequently asked questions
- What are the main concerns in practice?
- Why can't lenders produce evidence of discharge promptly?
- The result is that solicitors cannot assess the risk of delay
- Do solicitors benefit from the new procedure?
- How will the Land Registry make the position clear?
- How will I know when electronic discharges have been registered?
- Will additional fees be payable?
- Solutions and other issues
- How can I make my concerns known to the Law Society?
What are the main concerns in practice?
- Complying with the terms of the Council of Mortgage Lenders (CML) Handbook. The CML Handbook states that on completion of the instructions in a retainer, the lender will require a fully enforceable first legal charge. The CML says this requirement remains unchanged by the Land Registry's early completion processes. The CML states:
'The order of events may in some cases be reversed but the stages of the process remain exactly the same.
'Lenders regard completion as having taken place once the retainer is complied with. It is not relevant that the Land Registry has imposed an intervening stage in the transaction as this does not change the overall position'.
This suggests that lenders will not regard the temporary situation, of the buyer's mortgagee having a second mortgage whilst the seller's mortgage is awaiting discharge, as being in breach of the provisions of the CML Handbook. This is because lenders will not regard completion as having taken place until the retainer has been completed by the lender being registered with a first legal charge. - Land Registry giving less time to deal with requisitions. However, the Land Registry have now agreed that an extension will be granted (provided specified conditions are met) and that requests for further extensions beyond an initial 20 business days will be considered on their merits.
- Giving and accepting undertakings (see section 5 Undertakings in our early completion practice note).
- Clients who see the register showing two mortgages may require explanation and reassurance.
- The seller's outgoing charge may remain on the register for a long time after completion of the other parts of the registration. It may then be difficult and costly to resolve, often at a time when the client wants to deal with the property. The client will not expect this additional delay and expense, and if there is any suggestion of money outstanding under the charge, it may be difficult to locate the original seller who may believe that the charge was discharged.
Why can't lenders produce evidence of discharge promptly?
Reasons include:
- inaccurate mortgage account numbers
- the time taken to comply with anti-money laundering requirements
- failure to give account numbers when sending redemption monies
- failure to provide accurate and reliable redemption statements
- administration systems that do not prioritise discharges
- the time taken to produce the discharge, depending on the method of discharge to be used.
The result is that solicitors cannot assess the risk of delay
Although there may only be a small percentage of all discharges that are not produced promptly, it is difficult to identify in advance the transactions where this might occur. The result is that solicitors cannot satisfactorily assess the risk of delay.
Do solicitors benefit from the new procedure?
The main benefit is that the buyer and any new lender may obtain protection by earlier registration. Solicitors are aiming to obtain registration of their buyer and lender clients interests.
Early completion will make these obligations easier to fulfil. There may be fewer queries from lender clients about registration of their charge but these may be replaced by queries about the discharge of the prior registered charge.
How will the Land Registry make the position clear?
We have asked that Land Registry makes it clear to solicitors that registrations are not necessarily concluded when a Registration Completion Sheet (RCS) is dispatched.
We asked Land Registry to highlight outgoing and incoming charges in different colours but this was not possible. The Land Registry suggests that the date of the registration of an entry will provide the strongest indication of whether the charge is old or new, but we are pressing for a clearer alert.
Solicitors will need to establish office procedures to monitor the status of recently submitted and completed applications.
How will I know when electronic discharges have been registered?
When an ED or EDS1 has been lodged the solicitor who lodged the original application will get an updated Registration Completion Sheet (RCS) and a newly updated official copy register from the Land Registry.
Will additional fees be payable?
No fee is presently payable in relation to an application for discharge. If a fee were to become payable in the future we understand it would be payable in relation to the initial application and credited in respect of any further application if the application for discharge was rejected or cancelled when first made.
Solutions and other issues
Some practitioners have suggested that they may adjust their office procedures in order to mitigate the effects of early completion. However practitioners should proceed with caution as these changes may bring their own risks.
It has been suggested that priority searches be deferred until immediately prior to completion to gain the maximum priority period following completion. Repeating searches at this time is different from deferring searches.
Deferral may leave insufficient time to deal with any additions to the register since the production of official copies, for example, seeking additional undertakings for the discharge of newly registered loans.
Some practitioners have suggested that applications should be deferred until written evidence of submission of the discharge has been received, to reduce the risk of cancellation. This increases the risk of the application being made outside the priority period. It also risks breaching the duty of care to lender clients and the provisions of the CML Handbook.
How can I make my concerns known to the Law Society?
The Law Society is keen to understand how this procedure will work in practice and welcomes information from solicitors.
Please contact us at earlycompletion@lawsociety.org.uk
We will not be able to respond individually but comments will be passed to the early completion working party of the Conveyancing and Land Law Committee.
Advice
Land Registry early completion : Law Society Practice note
09 July 2009
If you are a residential conveyancing solicitor dealing with applications to Land Registry for registration you should read this note. It sets out some practical information about the new procedures.
Read our practice note on Land Registry early completion
Helplines
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This dedicated support line for Law Society members and employees of law firms is staffed by solicitors who have access to a wide range of information services and specialists within the Law Society. For queries and comments on the practice notes telephone 0870 606 2522 or e-mail practiceadvice@lawsociety.org.uk.
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