Pre-contract searches and enquiries - Bankruptcy searches

Learning Outcomes

This article outlines the purpose and process of bankruptcy searches in property transactions, when and how to conduct them, how to interpret results, and the legal consequences for buyers and lenders. It examines SQE1-relevant topics, including the distinction between registered and unregistered land, the use of Forms K16 and K15, the effect of section 86(5) of the Land Registration Act 2002, and the different insolvency regimes for individuals and companies. It also highlights common pitfalls such as relying on out-of-date results, failing to search under all name variants, or proceeding where a petition is revealed.

SQE1 Syllabus

For SQE1, you are required to understand the role of bankruptcy searches as part of pre-contract due diligence in property transactions, with a focus on the following syllabus points:

• The purpose and timing of bankruptcy searches in conveyancing.
• The procedures for conducting bankruptcy/insolvency searches against individuals (Land Charges Forms K16 and K15) and companies (Companies House and winding-up checks).
• The legal effects of bankruptcy on a seller’s capacity to transfer property, including the vesting of the estate in the trustee in bankruptcy and the risk of dispositions being void after presentation of a bankruptcy petition (Insolvency Act 1986).
• Section 86(5) Land Registration Act 2002 protection for buyers of registered land who act in good faith without notice where no bankruptcy notice or restriction appears on the register.
• How to interpret and respond to positive or negative search results, including false positives for common names and matches that do not relate to the client.
• The implications for buyers, lenders, and the validity of the transaction if bankruptcy is discovered, and the practical steps to take if a petition or order is revealed.
• Related pre-completion protections (official search with priority OS1/OS2) and how they differ from bankruptcy/insolvency searches.
• Professional obligations and negligence risks if searches are omitted, out of date, or misinterpreted.

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.

1. What is the main purpose of a bankruptcy search in a property transaction?
2. At what stages should a bankruptcy search be conducted?
3. What form is used to search for bankruptcy against an individual seller?
4. What are the legal consequences if a seller is declared bankrupt after exchange but before completion?
5. How should a solicitor respond if a bankruptcy search reveals a pending bankruptcy petition against the seller?

Introduction

Bankruptcy searches are a critical part of the pre-contract due diligence process in property transactions. They protect buyers and lenders from the risk of acquiring property from a seller who is subject to bankruptcy proceedings, which could render the transfer void or expose the buyer to claims from a trustee in bankruptcy. This article explains when and how to conduct bankruptcy searches, how to interpret the results, and the legal consequences for the transaction.

The Purpose of Bankruptcy Searches

A bankruptcy search is carried out to check whether a party to a property transaction—usually the seller—is subject to bankruptcy proceedings. If a seller is bankrupt or becomes bankrupt before completion, their ability to transfer valid title is severely restricted. A bankruptcy search helps ensure that the seller has the legal capacity to sell and that the buyer (and any lender) will obtain good title.

A second and equally important purpose is lender protection: where the buyer requires mortgage finance, the lender will insist on a clear bankruptcy-only search against the buyer/borrower immediately before completion. A borrower facing bankruptcy is unlikely to be advanced funds, and a lender’s security will be compromised if the borrower is or becomes bankrupt.

Key Term: bankruptcy search
A search of the official bankruptcy registers to determine whether an individual or company is subject to bankruptcy or insolvency proceedings that could affect their ability to sell property.

Key Term: Individual Insolvency Register
The Insolvency Service’s online register of current bankruptcies, debt relief orders and individual voluntary arrangements. It is a free, instant check to help verify search matches.

When and How to Conduct Bankruptcy Searches

Timing of Searches

Bankruptcy searches should be conducted at two key stages:

• Pre-exchange of contracts: To confirm the seller is not bankrupt and, if acting for a lender, to check the borrower’s status before the buyer becomes legally bound.
• Pre-completion: To catch any bankruptcy petitions or orders made after exchange but before completion. Searches must be as close to completion as practical.

Search currency matters. Many lenders require searches to be no more than six months old at completion, and conveyancers typically treat searches over three months old with caution. If completion is delayed, diarise to refresh searches so they remain current on the completion date.

Who Conducts the Search

The buyer’s solicitor is responsible for carrying out bankruptcy searches. If the buyer is obtaining a mortgage, the lender will require a clear bankruptcy search against the buyer as well, often carried out by the buyer’s solicitor on the lender’s behalf.

Registered versus Unregistered Land, and Against Whom to Search

• Against the seller (individual): prudent in unregistered land (usually via a Land Charges search on K15) and in registered land where there are concerns or high values. Registered land has a specific statutory protection for buyers (see section 86(5) LRA 2002 below).
• Against the buyer/borrower (individual): almost always required pre-completion where a lender is involved, via Form K16.
• Against companies (seller or borrower): search Companies House and, where appropriate, the companies winding-up register.

Procedure for Individuals

For individual sellers, the search is made using Form K16 at the Land Charges Department. The search covers the seller’s full name (and any variations) for at least the last five years.

Key Term: Form K16
The official form used to search the bankruptcy register for entries against an individual’s name.

Where title is unregistered, a Land Charges search on Form K15 should also be made against the individual estate owner(s) revealed in the epitome of title, for their years of ownership. K15 will reveal registered land charges and includes bankruptcy entries, and the official certificate confers a 15-working-day priority period for unregistered land.

Key Term: Land Charges search (Form K15)
A name-based search at the Land Charges Department (Plymouth) against estate owners in unregistered land to reveal registered land charges, including bankruptcy entries, with a 15-working-day priority period.

For individuals, always search against all known name variants, including middle names, previous surnames, nicknames or different orderings. For common names, use the Individual Insolvency Register to compare dates of birth and addresses. If a K16 search reveals an entry against an identical or similar name, take care before certifying that the entry does not relate to your client: a certificate to that effect to a lender is treated as an undertaking and must only be given where you have firm evidence it is a different person.

Where the buyer is borrowing, a K16 search against the buyer/borrower is a routine pre-completion requirement. A positive result almost always causes a lender to withdraw the offer.

Procedure for Companies

For company sellers, bankruptcy searches are conducted at Companies House. The search checks for:

• Winding-up petitions
• Administration orders or notices of appointment
• Company Voluntary Arrangements (CVAs)
• Filings indicating financial distress, and existing fixed or floating charges

A company search should be carried out both before exchange and again immediately before completion. For time-critical completions or high-risk cases, a same-day check at the Registry of Winding Up Petitions (Companies Court) or via a reputable provider can reveal very recent petitions or orders not yet visible at Companies House.

Key Term: company search
A search at Companies House to check a company’s solvency status and any pending insolvency proceedings, charges, and corporate authority.

Key Term: winding-up petition
A court application to wind up a company. After presentation, most dispositions of the company’s property are void unless validated by the court.

Related pre-completion title protection

Bankruptcy/insolvency searches are separate from the official search of title with priority (OS1/OS2). They serve different purposes and both are required for robust protection.

Key Term: official search with priority (OS1/OS2)
An HM Land Registry search of registered title immediately before completion to update title information and secure a 30-working-day priority period within which to register the transfer (and mortgage).

Legal Effects of Bankruptcy on Property Transactions

If a bankruptcy order is made against a seller (individual), their assets—including any property—vest in the trustee in bankruptcy. The seller loses the power to dispose of the property, and any transfer made after the bankruptcy commencement may be void unless approved by the court or trustee. Under the Insolvency Act 1986, dispositions of property made by a person after presentation of a bankruptcy petition and before the vesting of the estate in the trustee may be void if a bankruptcy order follows, subject to validation by the court in appropriate cases.

Key Term: trustee in bankruptcy
The person appointed to manage the bankrupt’s estate, with the power to deal with assets and property for the benefit of creditors.

If a bankruptcy petition is pending but not yet made, the court may still set aside any transfer of property made after the petition was presented.

Key Term: bankruptcy petition
A formal application to the court for a bankruptcy order against an individual or company.

For companies, after presentation of a winding-up petition, most dispositions of the company’s property are void unless validated by the court. On the making of a winding-up order (or on the appointment of an administrator), the company loses ordinary power to dispose of assets and a statutory moratorium may apply.

For registered land, the Land Registration Act 2002 provides important protection:

Key Term: section 86(5) LRA 2002 protection
Where no bankruptcy notice or restriction appears on the title and a buyer for value acts in good faith without notice of a bankruptcy petition or order, the buyer takes good title from the registered proprietor despite the bankruptcy.

This protection reduces the risk for buyers of registered land where the register is clear at the time of completion. However, good practice still requires updated searches because the section 86(5) protection will not assist where the buyer has notice, and it does not protect lenders from borrower insolvency.

Interpreting Bankruptcy Search Results

Negative Result

A negative search result (no bankruptcy entries) means the transaction can proceed, but does not guarantee that a petition will not be presented after the search. This is why a second search is needed before completion. For K15 searches in unregistered land, ensure completion occurs within the 15-working-day priority period; if not, repeat the search to maintain protection.

Positive Result

A positive result (bankruptcy petition or order found) requires immediate action:

• Notify the client and any lender at once and advise that completion must not proceed until the position is resolved.
• For an individual seller:
  • If a bankruptcy order exists, the seller cannot transfer valid title—completion must not proceed. Engage with the trustee in bankruptcy or Official Receiver.
  • If a petition is pending, seek urgent advice. Completion may render the transfer void if an order follows. Consider whether a court validation order is feasible; in practice, transactions are usually paused.
• For a buyer/borrower:
  • Lenders rarely proceed. Report immediately and await instructions. Do not complete without express lender authority.
• For a company seller:
  • If a winding-up petition has been presented, most dispositions after presentation are void unless validated by the court. Do not complete pending resolution.

False positives are common for popular names. Cross-check dates of birth and addresses (using the Individual Insolvency Register and identity documents). Only certify “not our client” to a lender where you have conclusive evidence. Treat that certification as an undertaking.

Worked Example 1.1

A buyer’s solicitor conducts a pre-completion bankruptcy search against the seller and discovers a bankruptcy petition was presented three days earlier. What should the solicitor do?

Answer:
The solicitor must immediately inform the buyer and any lender. Completion should not proceed, as any transfer made after the presentation of a bankruptcy petition may be void if a bankruptcy order is made. The solicitor should seek urgent advice and may need to contact the court or the petitioner.

Worked Example 1.2

A buyer’s solicitor only conducts a bankruptcy search before exchange. The seller is made bankrupt after exchange but before completion. The transaction completes. What is the risk?

Answer:
The transfer may be void under the Insolvency Act 1986, and the buyer could lose the property and the purchase money. The solicitor should have conducted a second search before completion to avoid this risk.

Worked Example 1.3

A K16 search against a buyer called “James A. Brown” returns a bankruptcy entry for “James Brown.” The buyer’s lender wants confirmation the entry does not relate to the borrower. How should you proceed?

Answer:
Obtain and check the buyer’s full legal name, previous names, and date of birth from verified ID. Use the Individual Insolvency Register to compare the entry’s date of birth and address history. If satisfied the entry relates to a different person, confirm that to the lender, making clear the basis for your conclusion. Treat the confirmation as an undertaking and only give it if the evidence is conclusive. If doubt remains, report to the lender and await instructions.

Worked Example 1.4

A registered freehold is being purchased. The register shows no bankruptcy notice or restriction against the seller. After completion (but before registration), it emerges a bankruptcy petition was presented before completion. Does the buyer take good title?

Answer:
Section 86(5) of the Land Registration Act 2002 protects a buyer for value acting in good faith without notice where no bankruptcy notice or restriction was on the title. If those conditions are satisfied, the buyer should take good title despite the earlier petition. The protection does not excuse a failure to carry out prudent pre-completion searches.

Worked Example 1.5

You act for a buyer of an unregistered freehold. A pre-exchange K15 search against the seller is clear. Completion is delayed by three weeks beyond the 15-working-day priority period. What must you do?

Answer:
Repeat the K15 search before the delayed completion to maintain a valid priority period and to check for new adverse entries (including bankruptcy). Without a refreshed search, completion could be vulnerable to intervening entries.

Practical Implications for Buyers and Lenders

A failure to conduct timely bankruptcy searches can have serious consequences:

• The buyer may not acquire good title and could lose both the property and the purchase money if a disposition is later treated as void.
• The lender’s security may be invalidated, or funds may be advanced contrary to underwriting requirements, exposing the firm to risk.
• The solicitor may be liable for negligence if searches are not performed, are out of date, or are not properly acted upon.
• In many residential transactions, the deposit is held by the seller’s solicitor as stakeholder. If the contract cannot be completed because of the seller’s bankruptcy, stakeholder status should protect the deposit pending resolution; however, the buyer may incur costs and delay.

Additional practical safeguards:

• For registered land, always undertake an official search with priority (OS1/OS2) immediately before completion. This protects the buyer (and lender if searched in the lender’s name) for 30 working days against adverse register entries.
• Keep a tight diary for searches. If completion slips, refresh K16/K15 and company searches as needed.
• When acting for a lender, ensure the bankruptcy-only search against the borrower is carried out pre-completion and report any adverse findings to the lender. Do not proceed without express lender authority.

Special Considerations

• Always search against all known variations of the seller’s name and the buyer’s name (including previous surnames and middle names).
• For unregistered land, searches should cover all estate owners in the chain of title for their period of ownership (K15), in addition to the seller’s current status.
• If the seller is acting as a personal representative, search against both the deceased and the representative. Estate assets form part of the deceased’s estate and may be affected by insolvency of the representative or issues in the deceased’s estate.
• Joint ownership: if one joint tenant is declared bankrupt, their beneficial interest is severed and vests in the trustee in bankruptcy. Transactions involving such property may require engagement with the trustee.
• Companies: In higher-risk or high-value cases, carry out a day-of-completion check for winding-up petitions in addition to Companies House. Check corporate authority to sell (board minutes, articles) and any lender consents if charges are registered.
• Communication and documentation: If asked to certify that a bankruptcy entry does not relate to your client, record the basis for your conclusion (e.g. date of birth mismatch), retain screenshots from the Individual Insolvency Register, and qualify your report appropriately.

Key Term: section 86(5) LRA 2002 protection
Where the register shows no bankruptcy notice/restriction and the buyer for value acts in good faith without notice, the buyer takes good title from a registered proprietor despite a pending bankruptcy. Revision Tip Always diarise the need for a second bankruptcy search immediately before completion, especially in transactions with a long gap between exchange and completion.

Key Point Checklist

This article has covered the following key knowledge points:

• The purpose of bankruptcy searches is to check for bankruptcy or insolvency proceedings affecting a seller’s capacity to transfer property and a buyer’s capacity to borrow.
• Bankruptcy searches must be conducted both before exchange and before completion, and refreshed if completion is delayed.
• For individuals, use Form K16 for bankruptcy-only searches (commonly for borrowers) and K15 Land Charges searches for unregistered land estate owners. Company searches are made at Companies House, with additional winding-up checks where appropriate.
• Section 86(5) of the Land Registration Act 2002 protects buyers of registered land who act in good faith without notice where no bankruptcy entry appears on the register, but it is not a substitute for prudent searches.
• A positive bankruptcy search result requires immediate action—do not proceed to completion without resolving the issue or obtaining appropriate court validation and lender authority.
• Official search with priority (OS1/OS2) protects registration priority but does not replace bankruptcy/insolvency searches.
• Failure to conduct timely searches can result in loss of title, loss of funds, and professional negligence claims.

Key Terms and Concepts

• bankruptcy search
• Form K16
• Land Charges search (Form K15)
• company search
• winding-up petition
• trustee in bankruptcy
• bankruptcy petition
• section 86(5) LRA 2002 protection
• official search with priority (OS1/OS2)
• Individual Insolvency Register