With exceptional timing, the High Court case of Clark v Lucas Solicitors LLP [2009] EWHC 1952 (Ch) is reported. Judgment is dated 31st July – the Friday before the start of the Land Registry’s new policy of early completion. The policy causes conveyancers to think twice before accepting seller’s solicitors’ undertakings to discharge mortgages. This case might cause conveyancers to think thrice.
The case relates to the summary enforcement of an undertaking to discharge a charge affecting a plot sale. It seems from reading the case that the mortgagee was under no obligation to release the charge in parts, that no contact had been made with the lender ahead of completion to release in part (notwithstanding the giving of an undertaking), and that no redemption figure had therefore been obtained. Despite all of this, the seller’s solicitors confirmed that they would be adopting the Law Society’s Code for Completion – part of which involves the seller’s solicitor undertaking that he/she has the authority of each mortgagee to receive the sum intended to repay the charge(s).
The good news in this case is that the court enforced the undertaking – although in doing so, it reminded us that the jurisdiction to enforce is discretionary, and that there are cases where the court might require the solicitor to compensate instead. (See comments made in Angel Solicitors v Jenkins O’Dowd & Barth [2009] EWHC 46 (Ch), reported in the February 2009 CPI Update). However, the Clark case should encourage buyers’ conveyancers to take extra care where it is proposed that reliance is placed on an undertaking. One should consider querying whether the seller’s solicitor has obtained a satisfactory redemption figure from the mortgage lender (i.e. check he/she has done his/her job correctly), has been authorised to receive that amount on behalf of the mortgagee, and has received confirmation that payment of that amount will result in the handing over of a form of discharge. Alternatively, just require a DS1/DS3 at completion.
It is probably about time the Law Society looked again at its Code for Completion – partly because of the arrival of early completion, but mainly to remind conveyancers of what its adoption entails.