Progressing to exchange of contracts - Timing for issuing ce...

Learning Outcomes

This article explains the legal and practical functions of certificates of title in property transactions and when they should be issued to lenders within the wider conveyancing process. It discusses a solicitor’s professional and legal responsibilities, including client care, lender compliance, conflicts of interest, and the consequences of premature or inaccurate certification, and examines how resolving title issues, pre-contract searches and enquiries, and requirements under the UK Finance Mortgage Lenders’ Handbook manage risk for both client and lender. It also outlines distinctions between residential and commercial transactions, common scenarios affecting timing, and how substantive defects and procedural delays can impact liability, fund release, and completion.

SQE1 Syllabus

For SQE1, you are required to understand the timing for issuing certificates of title to lenders within property conveyancing and the associated professional and legal compliance, with a focus on the following syllabus points:

• The function and legal significance of certificates of title in property conveyancing
• The appropriate timing for issuing certificates to lenders and the relationship with contract exchange and completion
• Understanding and complying with lender requirements, particularly the UK Finance Mortgage Lenders’ Handbook and approved forms
• The solicitor’s professional duties in investigating and certifying title, managing confidentiality, and ensuring all searches, enquiries, and defects are resolved
• Risk management and consequences for solicitors of premature or inaccurate certificates, including conflict of interest and the SRA Code of Conduct, lender redemptions, and defective titles
• Post-completion responsibilities relative to lenders, registration requirements, and resolving issues discovered before or after funds release

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 certificate of title issued to a lender in a property transaction?
2. At what stage in the conveyancing process should a certificate of title be issued to a lender?
3. What are the risks if a certificate of title is issued before all title issues are resolved?
4. Name one key document or protocol that sets out lender requirements for certificates of title in residential transactions.

Introduction

In English conveyancing practice, the issuance of a certificate of title to a lender is a key stage when mortgage finance is being used to fund a transaction. The certificate provides formal assurance to the lender that the title to the subject property is sound, marketable, and adequately secure for the amount to be advanced. The solicitor’s role in managing the timing of issuing this certificate is significant—not only for satisfying the lender’s requirements for fund release but also for managing professional risk. Issuing the certificate too early puts the lender at risk of advancing funds on a defective or unsuitable title; issuing it too late can delay completion and breach the buyer’s contractual obligations. The solicitor must carefully consider lender requirements, resolution of all title matters, and pre-completion procedures when certifying title to ensure compliance with professional obligations and to avoid personal liability.

Key Term: certificate of title
A formal document (often on an approved standard form) through which a solicitor certifies to a lender that the property offers good and marketable title suitable for use as mortgage security.

The Purpose and Content of Certificates of Title

The certificate of title has dual significance: it enables the lender to make a decision regarding the advance of funds and forms the solicitor’s formal representation regarding the security over the property. Certifying title is not a mere administrative step; rather, it confers a series of warranties on the solicitor that can give rise to personal liability if statements made are later found to be incorrect and the lender suffers loss as a result.

The document typically certifies:

• Good and marketable title to the property, free from (or with disclosure of) any material defects or adverse entries
• That, upon completion, the borrower will obtain legal ownership
• The amount of the advance and the proposed completion date
• Details of any indemnity insurance or special arrangements concerning defective title or unresolved matters
• Any specific exceptions, disclosures, or matters that the lender needs to be aware of

In residential conveyancing, standard forms of the certificate of title are mandated by lenders and/or professional bodies, notably the UK Finance Mortgage Lenders’ Handbook and the Law Society Conveyancing Protocol. In commercial transactions, more detailed forms—such as those from the City of London Law Society—are used, requiring more expansive investigation and reporting.

It is important to note the practical purpose of the certificate: it acts as the solicitor’s formal request to the lender for the release of funds and triggers the lender’s own completion processes.

Timing for Issuing Certificates to Lenders

The strategic release of a certificate of title is essential to a seamless property transaction. The solicitor must balance competing demands: the buyer’s need for certainty that mortgage funds will be available on completion and the lender’s requirement that the property is, as of the date of certification, suitable and secure for lending.

The principal stages of the process can be summarised as follows:

• Pre-exchange of contracts: The buyer’s solicitor investigates title, checks the seller’s documentation, raises and resolves all relevant enquiries, undertakes pre-contract searches, and identifies and addresses any title defects or encumbrances. Where funding is being provided by a lender, the solicitor also ensures the client’s mortgage offer is in place and accepted, and lender requirements are reviewed in detail—including any specific conditions relating to the property or borrower.
• Pre-completion: After exchange, the contract becomes binding; however, significant steps remain before completion, including drafting of the transfer deed (usually a TR1 in registered land), requesting and reviewing completion information and undertakings from the seller’s solicitor, and arranging for the discharge of any existing charges revealed on the title. At this point, the solicitor must ensure that pre-completion searches (such as the Land Registry OS1/OS2 search for registered title or K15/16 bankruptcy searches) are current and satisfactory, and that all outstanding requisitions have been resolved.
• Issuing the certificate of title: Only after all title defects, search, and enquiry issues are addressed, and all lender requirements have been complied with—including the buyer having accepted the mortgage offer and provided all necessary documentation—should the certificate of title be issued to the lender. Lenders typically require a minimum notice period before completion for the release of funds—often five to seven working days, as specified in the UK Finance Mortgage Lenders’ Handbook.

Key Term: exchange of contracts
The point in a property transaction at which both parties become legally bound to complete the transaction on an agreed date.

Key Term: completion
The moment when legal ownership passes to the buyer, the balance of the purchase price is paid, and (usually) the buyer takes possession of the property.

Practical Considerations for Proper Timing

Solicitors must be acutely aware of the contractual timetable and the hierarchy of obligations:

• The contract may specify completion periods shorter than the required lender notice period, or chains of transactions may constrain the timing of completion.
• In chains, delays in any transaction can have a domino effect; therefore, coordinating the certificate issuance and fund requests is necessary.
• Commercial transactions can involve longer and more complex due diligence periods and more elaborate certificates. A solicitor may need to liaise with the lender’s lawyers directly and provide further assurance or disclosure on complex or high-value titles.

The solicitor should never submit a certificate of title until thorough investigation is complete, all adverse matters have been reported to the lender, and the solicitor is satisfied that the title is suitable for mortgage security, except where the certificate expressly and clearly qualifies any unresolved issues and appropriate consents or indemnities are in place.

Legal and Practical Risks

If a certificate of title is issued before resolving all substantive matters—such as breach of restrictive covenants, unresolved latent defects, unapproved alterations, or pending search results—the solicitor is at risk for professional negligence, breach of contract with the lender, and, potentially, disciplinary action. Lender reliance on an inaccurate certificate can result in mortgage fraud, refusal to lend, enforceability issues, and lawsuits seeking recovery of losses.

On the other hand, failing to provide the certificate in a timely way can imperil the buyer’s completion obligations, undermine client trust, and risk contractual penalties. Note also that some lenders will not process or release funds if the certificate is received late, particularly close to completion, as their back-office processes may require several days’ notice regardless of any urgency on the solicitor’s or client’s part.

Worked Example 1.1

A residential buyer’s solicitor discovers, after pre-contract searches but before exchange, that the property is affected by a breach of planning permission and a historic restrictive covenant. There is pressure to exchange contracts due to a chain, but the lender’s requirements demand that all title issues must be resolved or disclosed prior to requesting funds, and the lender requires five days’ notice before completion for funds release.

Answer:
The solicitor should not exchange contracts or issue the certificate of title until the planning and covenant issues are either resolved, adequately insured against with a policy acceptable to the lender, or expressly reported to and approved by the lender with written consent to proceed despite the issues. Early exchange or premature certification could expose the solicitor to client and lender claims if the transaction fails or the lender’s security is compromised.

Lender Requirements and the UK Finance Mortgage Lenders’ Handbook

Mortgage lenders’ requirements regarding the content and timing of certificates of title are mostly harmonised through the UK Finance Mortgage Lenders’ Handbook for residential mortgage transactions.

The Handbook prescribes that:

• The certificate of title must only be provided when the solicitor is satisfied that the property has good and marketable title or, if there are adverse matters, these have been disclosed and the lender has provided written authority to proceed.
• The certificate should explicitly disclose defects such as breaches of restrictive covenants, lack of required planning or building regulation consents, unregistered easements, adverse searches, or any other entries adverse to title, unless specifically waived by the lender.
• The certificate to the lender also acts as a request to release funds; therefore, the lender’s formal notice period (commonly five to seven working days) must be observed.
• Any material change in circumstances between the date of the certificate and completion must be immediately reported to the lender, and, if relevant, the certificate updated or reissued.

Key Term: UK Finance Mortgage Lenders’ Handbook
The comprehensive standard instructions issued for residential mortgage transactions, detailing solicitors’ obligations to lenders, minimum requirements for investigation, reporting, and certification of title.

For commercial mortgages, lender instructions may vary and often require bespoke certificates of title or reporting on more extensive matters, such as environmental risk, commercial leases, or potential enforcement liabilities.

Key Term: completion statement
A document itemising all sums required on completion, including deposit, balance of purchase price, mortgage funds, and costs, helping ensure all completion finances are reconciled and accounted for.

Solicitors must cross-reference their actions with any lender-specific Part 2 instructions, which may mandate additional steps, searches, or consents.

Solicitor’s Duties and Risk Management

The solicitor’s professional obligations in this context include:

• Diligently investigating title, reviewing the contract package, conducting all searches and pre-contract enquiries, and resolving or reporting unresolved issues.
• Complying with lender requirements, which will often involve dual representation (acting for both the buyer and lender), thus implicating the SRA Code of Conduct and the solicitor’s duties regarding conflicts of interest and client confidentiality.
• Keeping under scrutiny the risk of acting for buyer and lender, particularly if instructed not to disclose certain matters to the lender—if the buyer refuses consent to disclosure, the solicitor must cease acting for the lender, putting professional rules beyond other client wishes.
• Ensuring that the certificate of title is only issued when fully satisfied that the property is suitable as mortgage security and that any indemnity insurance or waivers are fully documented and disclosed as required.
• Submitting the certificate in time to allow the lender to complete all its checks and release the funds, factoring in lender and banking cut-off times, and identifying public holidays or weekends that may impact clearance of funds.
• Immediately updating the lender to any change, defect, or material risk, including newly discovered encumbrances or adverse survey results arising between certification and completion.

The risk management element is significant: the certificate represents a significant warranty, and solicitors have been found liable for losses where lenders have advanced funds relying on incorrect certification. In addition to civil liability, there may be regulatory consequences under the SRA Code of Conduct if the solicitor has not acted with proper skill and care or failed to manage conflicts appropriately.

Conflicts of Interest and Confidentiality

When acting for both buyer and lender (common in standard residential conveyancing), the solicitor must remain vigilant to the potential for conflict. The exceptions in the SRA Code depend on there being a "substantially common interest" and informed consent; if the buyer instructs the solicitor not to pass on material information to the lender, the solicitor must withdraw from acting for the lender (and possibly from acting for both parties). Confidentiality between the buyer and the solicitor is essential, and disclosure to the lender without buyer consent (unless required by law) would breach these duties.

Exam Warning

If you issue a certificate of title with unresolved defects, or fail to promptly notify the lender of any change or risk after certification but before completion, you risk serious professional, contractual, and civil liability. The certificate is a warranty to the lender; its content and timing must not be approached lightly or rushed under client or commercial pressure.

Practical Steps for Issuing Certificates

The solicitor’s process for preparation, certification, and fund request is as follows:

• Complete all pre-contract searches (local authority, water and drainage, environmental, highways, mining (if relevant)), check replies to pre-contract enquiries, and complete inspection and risk assessment based on the survey (reminding clients that under the principle of caveat emptor—buyer beware—physical defects are generally not the seller’s responsibility unless there is misrepresentation or concealment).
• Fully investigate title and ensure any discrepancies, outstanding mortgages, or third party rights are resolved or reported, including checking for up-to-date Land Registry entries and ensuring all relevant undertakings for redemption of any existing mortgages are obtained firmly in writing.
• Where issues or defects persist (e.g. breach of covenant, lack of planning or building regulation consent), consult with the lender regarding indemnity insurance or propose special arrangements and obtain their formal agreement before proceeding. Where indemnity insurance is used, ensure the policy is lender-compliant and covers lender loss appropriately.
• Prepare and obtain client authority to issue the certificate in the exact form required by the lender—including, where relevant, all necessary disclosures and qualifications—and ensure the certificate is factually accurate and comprehensive.
• Submit the certificate to the lender in line with prescribed periods (often five to seven working days before completion) and follow up to confirm receipt and the timetable for the release of funds.
• Once written confirmation has been received that funds will be provided, update the completion statement and, prior to the day of completion, ensure all conditions precedent (such as final bankruptcy checks on the buyer, particularly if acting for the lender, and final pre-completion official Land Registry searches) are fulfilled.
• Ensure you are familiar with lender requirements for the format and method of requesting funds—this may be by electronic portal, formal letter, or designated certificate template—and follow all prescribed steps precisely.
• On release of funds, coordinate completion precisely per the agreed date and time, ensuring cleared funds are available in the designated client account.

Worked Example 1.2

A buyer’s solicitor raised routine pre-contract enquiries and discovered that the property (a residential dwelling) had an extension built without building regulations approval. The lender’s terms require all alterations to be properly authorised and indemnity insurance for unconsented works to be provided if approval is not obtainable. The completion is booked for a week’s time; the lender’s funding notice period is five days.

Answer:
The solicitor must report the lack of building regulation approval to the lender and obtain written confirmation that the lender will accept indemnity insurance for the extension (and arrange the policy in accordance with lender requirements). Only after this is secured can the certificate of title be validly issued and funds requested. If these steps are not completed and the title is later revealed to affect lender security (e.g. enforcement action is taken), the solicitor would be liable to the lender for loss arising from breach of warranty.

Worked Example 1.3

A commercial property purchase is scheduled for simultaneous exchange and completion at the client’s request (to meet a business launch date). Environmental searches are not yet complete and the lender requires seven days’ notice from receipt of a fully compliant certificate of title to release funds.

Answer:
The solicitor must alert both the client and lender that simultaneous exchange and completion cannot proceed until all title and search issues are resolved and the lender’s seven-day notice is satisfied. The commercial pressure to complete must not override compliance with lender requirements and the need for a fully investigated and reported title. Failure to comply with the required timescales and investigation would expose the solicitor to liability for any loss to the lender from an incomplete or faulty transaction.

Post-Completion Reporting and Obligations

After completion, the solicitor must attend to post-completion steps necessary to both buyer and lender interests:

• File SDLT/LTT returns and ensure payment is made within the statutory period (14 days for SDLT in England, 30 days for LTT in Wales), as lender security can be compromised if registration cannot proceed.
• Submit the appropriate Land Registry application to register both the transfer and the lender’s charge (via AP1 for registered land) within the priority period of the OS1/OS2 search (30 working days for registered title), or within two months of completion in the case of first registration (FR1 for unregistered title).
• Provide the lender with confirmation of registration, including the title number and updated Title Information Document.
• Where any post-completion defect or issue becomes apparent (for example, a registration requisition arising from misdescribed title, incorrect plan, or unresolved restriction), the solicitor must act promptly to remedy the issue and must inform the lender if their security could be affected.
• Where outstanding mortgage(s) of the seller remain registered, the solicitor must obtain and forward evidence of release (e.g. DS1, e-DS1), and provide the lender with proof that its charge is now first priority.

Key Term: completion statement
A comprehensive schedule prepared pre-completion, summarising all payments, receipts, and balances due for completion to ensure sufficient funds are available and correctly allocated on completion.

Worked Example 1.4

A solicitor acts for a buyer using a company as the special purpose vehicle to purchase a mixed-use property with mortgage finance. The lender requires registration of the charge at Companies House and as a legal charge at the Land Registry. The priority period on the OS1 search expires in two days, but the solicitor is still waiting for the Companies House registration certificate.

Answer:
The solicitor should expedite the submission of all registration documents, monitoring and ensuring the Companies House registration is achieved within the 21-day statutory period. It is necessary to ensure the Land Registry application is submitted within the OS1 priority period to preserve the lender’s security and priority, notifying the lender immediately if any delay might compromise the priority of their registered charge.

Remedies for Delayed Completion or Errors

Delays or errors in the certification process (including late funds requests or incomplete title investigation) can lead to contractual penalties, compensation obligations, or loss of contractual rights. Both the Standard Conditions of Sale (SCs) and Standard Commercial Property Conditions (SCPCs) provide for contractual compensation for late completion, and the process for serving notices to complete and, where necessary, rescinding the contract and seeking damages.

A notice to complete serves to make time of the essence in the transaction and gives the defaulting party (be it buyer or seller) a fixed period—usually 10 working days—to remedy the default.

If the buyer is at fault, they may forfeit the deposit and be liable for compensation and damages. If the seller is at fault, the buyer is entitled to a return of the deposit, accrued interest, and may seek specific performance or further damages for losses.

Key Term: notice to complete
A formal notice served by either party when the contractual completion date has passed and the party is ready, willing, and able to complete; makes time of the essence, and gives the defaulting party a fixed period (usually 10 working days) to complete, after which the contract may be rescinded.

Key Term: contractual compensation
A sum (usually interest at the contract rate) payable by the defaulting party for delay in completion, calculated on the balance of the purchase price for the period of default.

Solicitors must stay alert to these remedies and default management processes as failure to properly coordinate lender fund requests and certification can be the primary cause of late completion.

Summary

• Certificates of title are the fundamental mechanism for assuring mortgage lenders that property is suitable and secure for lending.
• Certifying title and issuing the certificate should only occur after all title defects, searches, and enquiries have been resolved or appropriately disclosed, never simply for speed or under pressure.
• Compliance with lender requirements, particularly those in the UK Finance Mortgage Lenders’ Handbook and lender-specific instructions, is non-negotiable to avoid civil and regulatory liabilities.
• Timing is essential—certificates must be sent after investigation but within any contractual timeframes, and always allowing for lender release periods.
• Solicitor duties extend beyond completion, including prompt notification of any defects or registration issues that could affect the lender’s security.
• Effective communication and rigorous risk management are necessary to minimise exposure to claims, delays, and failed or aborted completions.

Key Point Checklist

This article has covered the following key knowledge points:

• The purpose and substantive content of certificates of title in property transactions
• The relationship of certificate timing to exchange, completion, and lender requirements
• The application of the UK Finance Mortgage Lenders’ Handbook and typical lender instructions
• The solicitor’s professional and regulatory duties concerning certification, disclosure, and risk management
• The contractual and statutory consequences of errors in timing or content of the solicitor’s certificate of title and the remedies for delayed or defective completion

Key Terms and Concepts

• certificate of title
• exchange of contracts
• completion
• UK Finance Mortgage Lenders’ Handbook
• completion statement
• notice to complete
• contractual compensation