It’s not often that the Land Registry makes the news, but the Land Registry’s Early Completion Policy has hit the headlines, at least as far as we conveyancers are concerned.
Let me say at the outset, I’m not here to attack the Registry, which is to a conveyancer half-way between an essential supplier and a very precious best friend.
Evidence of ownership of land is, in most cases , a set of “ official copies of register entries” that is copies of the entries in the register maintained by the Land Registry. The entries list the owner, the price paid and the name of any mortgagee and other relevant details . They are available from the Land Registry for a few pounds and they are a matter of public record, as many MPs have recently found to their cost.
On completion of the purchase of a property we send the transfer and, if the property has been bought with mortgage funds, the mortgage to the Land Registry with any other necessary documents and receive back, assuming everything is in order, a new set of official copies showing the new owner, the new mortgage and so on. That used to take weeks. Now the new entries come back usually within a few days and sometimes almost overnight.
There are delays; the usual cause is that the seller’s lender has not supplied evidence that their mortgage has been discharged. The delays in processing deeds of release (called DS1s or ENDS in the trade) vary but for most transactions the release is processed by a different office to that which receives repayment of the mortgage and, with the best will in the world, delays of a month are not uncommon.
Most conveyancers have accepted, as a matter of course, undertakings from the solicitor acting for the seller, that they will pay over the required money to the lender and then will forward the release when they receive it. Very few practitioners have demanded set time scales. The releases do turn up even if it takes 3 months (except in the most exceptional cases).
The Law Society has encouraged that practice and the Land Registry has accepted it. It has made conveyancing transactions quicker and more straightforward. Where a release was not produced quickly the Land Registry would usually accept an explanation that the relevant form was awaited and grant an extension of time for it to be sent.
That will change in August when the “Early Completion Policy” comes into force. What we are currently being told is that the Registry will grant one extension of 20 working days for the release to be provided but if it is not then produced the Registry will complete the registration but leaving in place the registration of the previous charge.
Let’s take an example:
Suppose Mr Spock owned some land and mortgaged it to ABC Bank. Spock then sells the land to Mr Kirk who uses a mortgage from XYZ Bank to finance the purchase. If the DS 1 is not produced in time by ABC Bank (something over which the buyer’s solicitor and in fairness the seller has no control) the Registry would issue a document which shows Mr Kirk as the owner but ABC Bank and XYZ Bank both having mortgages over it (in that order) . That is not what Mr Kirk and XYZ Bank wants, to put it very mildly.
Let’s be clear, this is a real issue for everyone involved in property transactions. One or two bold souls are predicting the revival of the property market. Banks and purchasers need to see the old charge cleared off, not left in place, if they are to invest with confidence.
Here are two suggestions (not my own by any means)
1. Lenders guarantee production of releases within, say, ten working days of completion so conveyancers can give undertakings to provide the release to the buyer’s solicitor in the same time scales.
2. The seller’s lender deposits the release with seller’s solicitors against an instruction it can only be released if the mortgage money is paid over to the lender the same day.
Neither of these is normal practice for lenders at present.
Solicitors acting for buyers are likely to start asking (ever so politely) for one or other of these two options.
They will need to do that to protect their clients and their client’s lenders even though the result may be to slow matters down because of what sounds like conveyancing technicality.
It isn’t, of course, a technicality because buyers don’t want to buy property which is still subject to their seller’s mortgage (and nor do their bankers)
How will this work out? It’s too early to say but rest assured there will be more to be said about this issue which up to now has been part of the “backstage” part of property deals.
Someone is going to have to ask the seller’s bank to agree to one of the options, unfortunately the person who can authorise this is probably not your friendly local bank manager.
Watch this space.