The Land Registry’s new “early completion” policy – see Partial registration – official announcement – causes buyers’ solicitors to think NOW about what their completion requirements will be where the seller’s property is in mortgage.
The new policy applies in relation to applications for registration received on or after 3rd August 2009. You may be exchanging contracts now that may complete after the new policy is in force. The policy will apply to any application for the registration of a discharge of whole which is accompanied by another application, such as a transfer of whole and/or a new charge. If the application to discharge the existing charge does not include a form of discharge, the Land Registry will nevertheless proceed to deal with the accompanying applications to register the transfer and/or new charge, so that the transferee will become the new registered proprietor, and the new chargee will become registered as proprietor of a new charge – albeit a second charge until the application to register the discharge of the original charge has been completed.
However, where, as has become common, the seller’s mortgage is protected on the register by a restriction against dispositions, if the buyer applies for registration but is unable to satisfy a Land Registry requisition for production of a form DS1, or a consent pursuant to the restriction, its application to register the transfer (and new charge) will be rejected, and the buyer will run the risk of losing priority. You are not safe simply repeating your search: this gives the buyer no protection if something has been lodged for registration in the meantime, such as a charging order. You therefore run the risk of negligence. You need to attempt to pass the risk over to the seller, by removing SCPC 1.1.3(b) from the sale agreement (so that the seller cannot argue it is ready, able and willing to complete), and insisting (by pre-contract requisition, or, possibly, by contractual clause) on either a DS1 at completion, a sufficient consent pursuant to the restriction, or a modified undertaking to supply a DS1 within a time period that falls within the priority period of your search.
Your requirements will be unpalatable to a seller’s solicitor, simply because they run contrary to long-standing traditional conveyancing practice. But conveyancing will have to change as a result of the Land Registry’s change of policy.
Full consideration of the practical implications of “early completion” will be provided in this month’s CPI Update, and further commentary will be given as, inevitably, other views and opinions emerge.