Learning Outcomes
After reading this article, you will be able to identify and explain the essential pre-completion steps in a property transaction, including the drafting and execution of the transfer deed, the purpose and process of pre-completion searches, the preparation of completion statements, and the coordination of financial and practical arrangements for completion. You will also be able to apply these principles to SQE1-style scenarios and avoid common errors.
SQE1 Syllabus
For SQE1, you are required to understand the practical and legal requirements of the pre-completion stage in property transactions. This article focuses on the following syllabus points:
- The purpose and content of the transfer deed and the formalities for its execution.
- The types, timing, and purpose of pre-completion searches and checks.
- The preparation and use of completion statements.
- The coordination of financial arrangements, including mortgage redemptions and undertakings.
- The practical steps and checklists required to ensure a smooth completion.
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What is the main purpose of a pre-completion Land Registry search (OS1) in a registered land transaction?
- Which party is responsible for preparing the draft transfer deed in a standard freehold sale?
- What is the effect of failing to submit an SDLT return within the required time after completion?
- Name two key items that must be included in a completion statement.
Introduction
The pre-completion stage is a critical phase in any property transaction. It bridges the gap between exchange of contracts and completion, ensuring that all legal, financial, and practical matters are in order before ownership is transferred. This article outlines the key steps, searches, and checklists required to complete a transaction efficiently and in compliance with legal requirements.
Pre-completion Steps: Overview
The main objectives of the pre-completion stage are to:
- Prepare and execute the transfer deed.
- Carry out pre-completion searches to confirm title and solvency.
- Finalise financial arrangements, including mortgage redemptions and completion statements.
- Confirm practical arrangements for completion, such as the handover of keys and documents.
Each step is essential to protect the interests of both buyer and seller and to avoid delays or disputes on completion day.
Drafting and Execution of the Transfer Deed
The transfer deed is the legal document that transfers ownership of the property from the seller to the buyer. It must be prepared, agreed, and executed in accordance with strict formalities.
Key Term: transfer deed The legal document (e.g., TR1 or TP1) used to transfer the legal estate in land from seller to buyer. It must be executed as a deed and comply with Land Registry requirements.
The buyer’s solicitor usually prepares the draft transfer deed, using information from the contract and title documents. The seller’s solicitor reviews and approves the draft, and both parties arrange for execution. The seller must always sign the transfer; the buyer signs if the deed contains covenants or declarations by the buyer (such as an indemnity covenant or declaration of trust).
Key Term: execution as a deed The process of signing a document in the presence of a witness, with the intention that it is legally binding as a deed.
Pre-completion Searches
Pre-completion searches are essential to confirm that the title remains as expected and that there are no new adverse entries or insolvency issues affecting the parties.
Key Term: pre-completion Land Registry search (OS1/OS2) A search made against the title number of registered land to check for new entries since exchange and to secure a 30-working-day priority period for registration.
- For registered land, an OS1 (whole) or OS2 (part) search is made against the title number from the search from date on the official copies.
- For unregistered land, a Land Charges search (K15) is made against the seller’s name to check for new entries and to secure a 15-working-day priority period for completion.
Key Term: bankruptcy-only search (K16) A search made against an individual buyer or borrower to check for bankruptcy entries, usually required by the lender before releasing funds.
If the seller or buyer is a company, a company search is made at Companies House to check for insolvency or undisclosed charges. These searches should be done as close as possible to completion.
Worked Example 1.1
A buyer’s solicitor receives the official copies for a registered property and completes all pre-contract checks. On the day before completion, the solicitor carries out an OS1 search and discovers a new unilateral notice on the title.
Question: What should the solicitor do before proceeding to completion?
Answer: The solicitor must investigate the nature of the new unilateral notice, raise urgent enquiries with the seller’s solicitor, and ensure the issue is resolved or removed before proceeding. Completion should not take place until the buyer is satisfied that the new entry does not adversely affect the title.
Completion Statements and Financial Arrangements
A completion statement is prepared to set out the exact financial sums required to complete the transaction. It includes the purchase price, deposit, apportionments (e.g., rent, service charges), legal fees, SDLT, and any other disbursements.
Key Term: completion statement A document itemising all sums due on completion, including the balance of the purchase price, apportionments, fees, and taxes.
The seller’s solicitor obtains up-to-date redemption figures for any existing mortgage and gives an undertaking to discharge the mortgage out of the sale proceeds. The buyer’s solicitor ensures that mortgage funds and the buyer’s balance are received in cleared funds before completion.
Key Term: undertaking A binding promise by a solicitor to do (or not do) something, such as redeeming a mortgage or sending documents after completion.
Worked Example 1.2
The seller’s solicitor receives a redemption statement showing a mortgage balance of £120,000. The sale price is £200,000. On completion, the buyer’s solicitor sends the purchase money to the seller’s solicitor.
Question: What must the seller’s solicitor do regarding the mortgage?
Answer: The seller’s solicitor must use the sale proceeds to redeem the mortgage in full, provide evidence of discharge to the buyer’s solicitor (e.g., DS1 or confirmation of electronic discharge), and fulfil any undertaking given in the completion information form.
Practical Arrangements and Checklists
A standard completion checklist should be used to ensure that all steps are completed. Key items include:
- Confirming execution of the transfer deed.
- Checking that all pre-completion searches are clear and within their priority periods.
- Ensuring mortgage funds and buyer’s balance are in cleared funds.
- Preparing and agreeing the completion statement.
- Confirming arrangements for key handover and document exchange.
- Ensuring all undertakings (e.g., mortgage discharge) are in place.
Key Term: completion information form (TA13) A standard form used to confirm practical arrangements for completion, including undertakings to discharge mortgages and details of key handover.
Revision Tip
Use a written checklist for every transaction. Tick off each item as it is completed to reduce the risk of missing a critical step.
Key Point Checklist
This article has covered the following key knowledge points:
- The transfer deed must be prepared, agreed, and executed as a deed before completion.
- Pre-completion searches (OS1/OS2, Land Charges, bankruptcy/company) are essential to confirm title and solvency.
- A completion statement sets out all sums due and must be agreed before completion.
- The seller’s solicitor must obtain redemption figures and give undertakings to discharge any mortgage.
- All practical arrangements for completion, including key handover and document exchange, must be confirmed in advance.
- Using a standard checklist and completion information form helps ensure all steps are completed and reduces the risk of errors.
Key Terms and Concepts
- transfer deed
- execution as a deed
- pre-completion Land Registry search (OS1/OS2)
- bankruptcy-only search (K16)
- completion statement
- undertaking
- completion information form (TA13)
