COVID-19 sector-specific guidance: conveyancers

At the beginning of every sale and purchase instruction:

• be vigilant: check for fraud warning signs. There’s an increased risk of fraud in this changed environment, especially where conveyancers are working from home
• carry out a full fraud risk assessment and an anti-money laundering (AML) risk assessment for the transaction – remember a transaction may be low risk for one but high risk for the other. These checks should be repeated as appropriate throughout the course of the transaction
• check the client understands how the process will work up until completion
• establish with the other side what’s acceptable in terms of electronic or digital procedures and what will be required in terms of documentation
• point out the risks, assess the clients’ appetite for risk, set out the options and likely consequences of each option, establish whether they want to proceed and, if they do, how they want to do this
• explain the risk of completion not taking place because of the presence of COVID-19 and how the provisions of the contract will apply and affect them if completion cannot take place when scheduled
• establish the details of any chain so that attempts can be made to settle any variations to the contract across the whole chain

Make sure that clients understand that:

• they’ll need to remain flexible and patient as the matter progresses. They may need to put matters on hold at short notice. Although attempts will be made to make some provision for this in the contract, it’s not possible to provide for every situation
• once contracts have been exchanged, they will have entered into a binding legal contract and if they fail to complete the purchase or sale, they may incur serious financial penalties
• as the government increases testing, more people who are asymptomatic may have to self-isolate, meaning that they may not be able to complete their move
• new restrictions may be imposed by UK and/or Welsh government which might prevent completion taking place
• regulations may be introduced by the UK or Welsh government at any time to pause all home moves locally or nationally
• if they were hospitalised as a result of COVID-19, the contract would not be frustrated, and they would still be obliged to complete
• they may be moving into a property where one of the occupants has had COVID-19 or may be suffering from COVID-19 symptoms

You should make sure that:

• you have discussed with your client the options they have in terms of the usual contract provisions, whether or not working towards simultaneous exchange and completion or adapting the COVID rider to the agreement. Discuss the advantages and disadvantages of each of these options as set out below
• if your client wants to include a COVID clause in the contract, you need to ensure an identical clause, or a clause with a similar effect, is included in every other contract in all transactions in the chain

Discuss with clients the risks associated with each of these issues and how they can be addressed.

This rider is prepared for the situation where contracts have already been exchanged and a new lockdown is brought into effect.

If your client wishes to use the COVID rider in the contract, you should discuss with them the provisions for establishing a completion date at the initial instruction stage.

If your client chooses to use the rider, the appropriate number of working days needs to be inserted.

You would also need to ensure that everyone in the chain is using a similar rider and has inserted the same number of working days.

Similar matters apply to the time limits in relation to the service of notice to complete.

ID to comply with anti-money laundering (AML) obligations

• Continue to carry out due diligence under the Money Laundering Regulations
• If there’s no face-to-face contact, continue to comply with the enhanced due diligence (EDD) requirements as set out in the Legal Sector Affinity Group anti-money laundering guidance for the legal sector
• Continue to comply with the Legal Sector Affinity Group’s more detailed guidance on dealing with anti-money laundering compliance during the coronavirus pandemic
• Use electronic ID – the Financial Action Task Force guidance on electronic ID provides some information about verification services
• Even if there’s face-to-face interaction and paper ID documents are provided, consider using electronic ID in addition as the best forms of this are more reliable

ID for lenders

Continue to comply with obligations as set out in the UK Finance Mortgage Lenders Handbook and in the Building Societies Association (BSA) Mortgage instructions.

ID for HM Land Registry (HMLR)

HMLR has introduced temporary changes to its requirements to make it easier to verify identity for land transactions.

Full details on these changes, including the conditions that must be satisfied, are available in Practice Guide 67A.

HMLR will now not reject applications where identity evidence is not provided. It will raise a requisition so that applications do not lose their priority.

This does not reduce the responsibility to ensure that adequate steps have been taken to verify identify.

Continue to comply with the previous HMLR ID obligations as far as possible.

HMLR requisitions for ID evidence under rule 17 of the Land Registration Rules 2003

Rule 17 of the Land Registration Rules 2003 allows HMLR to:

• request the production of documents or evidence before proceeding or completing an application
• refuse to complete or proceed with an application until such documents or evidence are/is provided

This includes documents and evidence additional to those already provided.

HMLR may occasionally, where the registrar reasonably considers this necessary, ask you, in relation to particular applications, for additional documents and evidence even though those specifically required in their practice guides and forms have been provided.

You should provide for this possibility before finalising a transaction or application for registration.

Optional RXC form for consents and certificates required for restrictions

HMLR has created a form that applicants can use when providing consents or certificates to comply with restrictions in the register.

HMLR estimates that around 17% of requisitions (requests for information) relate to compliance with a restriction in the register.

In many cases, applicants provide defective consents or certificates and then have difficulties getting these amended by third parties to meet HMLR’s requirements.

Form RXC aims to make sure that consents and certificates are right first time.

The form is optional and can be used with all standard and non-standard form restrictions that require a consent or certificate to be provided.

Form RXC has three main sections that will help you to identify:

• which restriction the consent or certificate relates to
• that the person providing the consent or certificate is either:
  • the person specified in the restriction or
  • entitled to act on their behalf
• which disposition(s) the consent or certificate relates to

The form includes guidance to help users to make sure that certificates or consents are clearly and correctly worded.

A section with additional detailed guidance on the form has been added to HM Land Registry Practice Guide 19.

Form RXC can be lodged with HMLR using the Digital Registration Service.

What this means for conveyancers

HMLR says that the form will help conveyancers to:

• explain to third parties what consent or certificate they need to provide (the form can, for example, be pre-populated and sent to a third party for checking and signing)
• avoid requisitions by getting the right consent or certificate first time

Only give undertakings that you can perform.

Take account of the fact that performance may be more difficult if circumstances change, for instance as a result of any further lockdowns.

Continue to amend the usual undertakings given in conveyancing transactions to suit the circumstances of the transaction as necessary.

For example, the circumstances may prevent the conveyancer from complying with standard undertakings given under the Law Society formulae for exchanging contracts and Code for Completion paragraphs 12 and 13.

Subject to the circumstances, it’s unlikely to be necessary to amend the standard undertakings relating to monies or discharge of charges.

Make sure that you carefully record any variations agreed to the standard undertakings.

Encourage clients to check the status of mortgage offers.

Factor in the time that lenders require for them to check the certificate of title and issue the mortgage monies.

The lender may want to review the client’s financial position insofar as this may be impacted by the virus.

• Consider the impact of the changed circumstances on the transaction
• Establish exactly how exchange will take place
• Establish exactly how and when completion will take place taking account of social distancing
• Be careful not to effect an exchange of contracts if you do not intend to do this. Exchange of emails may constitute a valid exchange of contracts (see Neocleous v Rees [2019] EWHC 2462 (Ch)) under section 2 of the Law of Property (Miscellaneous Provisions) Act 1989
• Establish whether standard conditions in the Standard Conditions of Sale need to be amended in the contract; for example, condition 1.3 on ‘Notices and documents’

Simultaneous exchange and completion

Some firms recommend to clients that they should exchange contracts simultaneously with completion.

This solves some problems – for example, the risk of completion not happening is reduced – but creates others.

For example, if there’s a chain, all transactions would need to agree simultaneous exchange and completion which may be difficult and may not always be suitable.

Exchanging and completing on the same day can be very difficult for consumers to manage. It may be difficult to organise removers at the last moment.

Some firms suggest that encouraging clients to agree a date for exchange and completion a week or so in advance, enables them to start packing up and booking removers for a fixed future date.

There are obviously still risks with this approach and some removers may not make a booking unless contracts have been exchanged.

The risks need to be assessed against the risks of having a short time between exchange and completion.

Short period between exchange and completion

Keeping the period between exchange and completion short might provide a compromise.

A practical approach might be to limit the period between exchange and completion to five working days, having submitted the certificate on title and obtained clear final searches ahead of exchange; but these matters are all for negotiation once the client has provided instructions.

Even having a short period of time between exchange and completion does not eliminate the possibility that someone may become ill or receive a test result in this time and not be able to move.

The transaction may need to be paused at short notice.

Remember where a client is buying and selling simultaneously any bespoke provisions should usually apply throughout the chain. Risk should be apportioned fairly.

The aim is to provide the same solution and let the risk fall in the same place across the chain. It’s acknowledged that this may be difficult to negotiate.

Wet ink signatures

Where clients are able to execute documents:

• with a wet ink signature
• with witnesses who are physically present and who use wet ink signatures
• where steps can be taken to avoid transmission during appointments, for example, encouraging hand washing and not sharing pens and other objects, especially with vulnerable people
• where this can be carried out safely and in England in accordance with the current Coronavirus legislation
• where physical delivery of the document can be effected (for example, by post)

this can continue.

Where clients report that they’re unable to have a document signed or witnessed complying with these requirements, there are alternate methods of execution:

• ‘Mercury’ style execution
• electronic signatures

‘Mercury’ style execution

HMLR will accept the ‘Mercury’ signing approach for deeds and has updated Practice Guide 8: Execution of Deeds.

For land registration purposes, a signature page will need to be signed in pen and witnessed in person (not by a video call). The signature will then need to be captured, with a scanner or a camera, to produce a PDF, JPEG or other suitable copy of the signed signature page.

Each party sends a single email to their conveyancer to which is attached the final agreed copy of the document and the copy of the signed signature page.

HMLR require the conveyancer to certify the resulting transfer or other deed as a true copy of the original in the usual way as the final step in the process.

The ‘Mercury’ style execution should only be used if the steps set out in Practice Guide 8, Section 12 are to be followed in their entirety.

Electronic signatures

Electronic signatures generally

• Use electronic signatures as necessary in the present circumstances rather than wet ink signatures. Make sure they are electronically dated correctly, for example, with the date of the contract
• Electronic signatures can be used for contracts to sell/buy/agreements for lease and other documents under hand
• Electronic signatures can be used for deeds but only if any witnesses are physically present when the signatory applies the electronic signature

HMLR and electronic signatures

• HMLR does not categorise ‘Mercury’ style signatures as electronic signatures, as these involve scanned manuscript signatures as set out above, HMLR is currently registering transfers and other dispositions effected by deeds that have been executed using ‘Mercury’ style signatures
• HMLR can enter a notice in respect of a contract that has been electronically signed – a notice does not guarantee the validity of the purchaser’s interest
• HMLR will register a transfer or other disposition where the deed has been electronically signed in accordance with the requirements set out in Practice Guide 8, Section 13. Note that the conveyancer lodging the resulting application must certify, or include a certificate from another conveyancer, to the effect that, to the best of the conveyancer’s knowledge and belief, these requirements for the execution of deeds using electronic signatures have been satisfied
• HMLR will register an electronic disposition in the form of a digital mortgage complying with Notice 1 made under rule 54C of the Land Registration Rules 2003: this is not a deed but will be treated as such under section 91 of the Land Registration Act 2002
• HMLR has produced a table showing what forms of signature (wet ink, Mercury style or electronic) can be used for the different deeds and other documents lodged with them
• HMLR has recently announced that it will be running a pilot in which certain electronic dispositions under section 91 of the Land Registration Act 2002 are signed with “qualified electronic signature” (QES). QES is a form of digital signature that verifies the signatory's identity before they sign. It involves biometric checks and encryption to provide security and remove the need for a witness

HMLR’s standard for digital identity checking

HMLR published its digital ID standard.

Practice Guide 81: Encouraging the use of digital technology in identity verification sets out the steps required to meet HMLR’s enhanced level of digital identity verification and includes information on the effect of reaching the standard.

HMLR says:

• the enhanced level of check is defined by reference to a set of requirements, collectively known as the HMLR digital identity standard. The standard is founded on the principles within the government’s Good Practice Guide GPG45. The requirements involve biometric and cryptographic checking of identity and verification that the individual or individuals signing on behalf of corporations are the owner of the property or otherwise a genuine party to a registrable transaction
• the standard when followed constitutes what is regarded by HMLR as a discharge of the duty to verify the identity of a party to a registrable transaction
• a conveyancer who adopts this approach will have fulfilled their obligation to take reasonable steps in relation to the requirement to verify their client’s identity and will reach the “Safe Harbour”. This means that if a conveyancer carries out the steps described in the standard, HMLR will not pursue any recourse claim against the conveyancer resulting from the registration of a fraudulent transaction on the grounds that identity checks were inadequate

Witnessing

All physical presence witnessing must be conducted in accordance with social distancing requirements.

Principles of witnessing

• The usual principles continue to apply: a party to a deed can never be a witness, there must be no conflict of interest, they should be independent and not benefit directly or indirectly from the contents of the deed
• If there’s to be any deviation from usual procedures on witnessing, check with HMLR requirements or individual lender requirements
• If extreme measures are being considered – such as family members being asked to witness – make sure that clients are aware of the risks, warn the other side that this may occur in advance so that they have the opportunity to object, ensure that lenders accept the position before they are requested to advance monies and obtain full details of capacity, age and confirmation that they do not stand to benefit, in any way, however remote, from the contents of the deed

Wet-ink signatures

Witnesses must be physically present when the document is signed.

The video solutions proposed in other jurisdictions or for wills do not apply for HMLR purposes in England and Wales.

Note: For HMLR purposes, witnesses must be physically present when the document is signed

Electronic signatures

Witnesses to electronic signatures must be physically present when the signatory electronically signs.

Note: HMLR will not register a disposition purported to be effected by a deed that has been electronically signed unless the requirements in Practice Guide 8, Section 13, are followed (see Electronic signatures).

It’s suggested that witnesses are requested to sign statements confirming that they were physically present when the document was executed.

In August 2021, the Welsh government eased lockdown in Wales and placed the whole country at alert level zero.

This ended almost all previous COVID-19 restrictions; however, people should work from home where possible.

At alert level zero, all restrictions on meeting with others are removed and all businesses able to open.

Protections continue to be in place, including:

• everyone must isolate for 10 days if they have COVID-19 symptoms or if they have a positive test result
• face coverings are required in most indoor public places in Wales, including on public transport, in shops and in healthcare settings. There are exemptions for people who cannot wear them
• all those responsible for premises open to the public and workplaces must carry out a COVID risk assessment and continue to take reasonable measures to minimise the risk of exposure to coronavirus

• Client confidentiality obligations continue to apply even though some or all staff may be working remotely
• Be aware that there are increased fraud risks in this new environment
• Contact clients/consumers by use of email, video conferencing platforms, telephone and so on
• Searches should be available as usual from most local authorities and providers – check the availability and discuss with the client if there are any difficulties
• Check that you have the capacity to do the work before you accept instructions
• Check to see if the clients’ lender has changed its requirements during the transaction (such as their loan-to-value requirements)
• Time limits for making applications for registrations at HMLR and at Companies House (for company charges) have not changed. Continue to comply with the existing time limits

While every effort has been made to ensure the accuracy of the information provided it does not constitute legal advice for any particular transaction and cannot be relied on.

No legal liability is accepted by the organisations or individuals involved in preparing this information.

The government has said it will continue to amend its guidance to reflect the situation as more is known about the effects of the virus.

Reference should always be to the latest government guidance.

If there’s anything that’s incorrect in this information, email property@lawsociety.org.uk.