Progressing to exchange of contracts - Timing for issuing certificates to lenders

Learning Outcomes

By the end of this article, you will be able to identify the purpose and content of certificates of title, explain when and how they should be issued to lenders, and apply the correct timing within the conveyancing process. You will also understand the solicitor’s duties, lender requirements, and the risks of incorrect timing, ensuring you are prepared for SQE1 exam questions on this essential topic.

SQE1 Syllabus

For SQE1, you are required to understand the practical and legal aspects of issuing certificates of title to lenders in property transactions. As you work through this article, focus your revision on:

  • The function and legal significance of certificates of title in property transactions
  • The correct timing for issuing certificates to lenders and its relationship to exchange and completion
  • Lender requirements, including the UK Finance Mortgage Lenders’ Handbook
  • The solicitor’s duties and risk management when certifying title
  • The consequences of errors in timing or content of certificates

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 property transactions involving mortgage finance, issuing a certificate of title to the lender is a critical step. The certificate provides the lender with formal assurance that the property has a good and marketable title, free from defects that could affect their security. The timing of issuing this certificate is essential: too early, and the lender may be misled; too late, and completion may be delayed. For SQE1, you must know when and how to issue certificates of title, the relevant lender requirements, and the solicitor’s responsibilities.

The Purpose and Content of Certificates of Title

A certificate of title is a formal report from the solicitor to the lender confirming that the property has a good and marketable title and is suitable as security for the mortgage advance.

Key Term: certificate of title
A formal document in which a solicitor certifies to a lender that the property has a good and marketable title and is suitable as mortgage security.

The certificate typically confirms:

  • The property’s title is free from defects or adverse matters (other than those disclosed)
  • The borrower will acquire legal ownership on completion
  • The completion date and amount required for completion

In residential transactions, standard forms approved by the Law Society and UK Finance are used. In commercial transactions, a more detailed certificate—such as the City of London Law Society form—may be required.

Timing for Issuing Certificates to Lenders

The timing of issuing the certificate of title is closely linked to the conveyancing process and lender requirements.

Key Stages

  1. Pre-exchange of contracts: The solicitor investigates title, raises and resolves any issues, and checks all lender requirements.
  2. Pre-completion: Once all title issues are resolved and the contract is ready for exchange, the certificate of title can be issued to the lender.
  3. Immediately prior to completion: The certificate is usually submitted to the lender in accordance with their required notice period (often 5–7 working days before completion) to allow for the release of funds.

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

Key Term: completion
The stage when the balance of the purchase price is paid, the transfer is completed, and the buyer becomes entitled to legal ownership.

Factors Affecting Timing

  • Lender requirements: The UK Finance Mortgage Lenders’ Handbook sets out standard notice periods for submitting the certificate of title and requesting funds.
  • Resolution of title issues: The certificate should not be issued until all title defects, searches, and enquiries have been satisfactorily resolved.
  • Type of transaction: Commercial transactions may require earlier or more detailed reporting due to complexity.

Legal and Practical Risks

Issuing the certificate before all issues are resolved may expose the solicitor to negligence claims if the lender suffers loss due to undisclosed defects. Delaying the certificate may result in late release of funds and delayed completion.

Worked Example 1.1

A solicitor is acting for a buyer purchasing a residential property with a mortgage from a high street lender. The lender’s requirements specify that the certificate of title must be submitted at least 5 working days before completion. The solicitor discovers a restrictive covenant affecting the property, but the lender has not yet been informed.

Question: Should the solicitor issue the certificate of title before resolving the covenant issue?

Answer: No. The solicitor must resolve the restrictive covenant issue (either by obtaining indemnity insurance or reporting to the lender) before issuing the certificate. Issuing the certificate with unresolved issues could expose the solicitor to liability if the lender suffers loss.

Lender Requirements and the UK Finance Mortgage Lenders’ Handbook

Most lenders follow the UK Finance Mortgage Lenders’ Handbook, which sets out standard requirements for solicitors acting in residential transactions. The Handbook specifies:

  • The certificate of title must be submitted only after all title issues are resolved
  • The lender must be notified of any adverse matters or defects
  • The certificate must be submitted within the lender’s required notice period before completion (often 5–7 working days)
  • The certificate is a formal request for the release of mortgage funds

Key Term: UK Finance Mortgage Lenders’ Handbook
A standard set of instructions used by most UK residential mortgage lenders, setting out requirements for solicitors acting in property transactions.

Key Term: completion statement
A document prepared by the solicitor showing the balance required from the buyer to complete the transaction, including the mortgage advance.

Solicitor’s Duties and Risk Management

The solicitor must:

  • Conduct thorough title investigation and resolve all issues before certifying title
  • Disclose all relevant matters to the lender, including adverse entries or defects
  • Issue the certificate of title only when satisfied that the property is suitable as security
  • Submit the certificate within the lender’s required notice period to allow timely release of funds

If the solicitor is acting for both the buyer and the lender, they must manage any conflicts of interest and comply with the SRA Code of Conduct.

Exam Warning

If a certificate of title is issued before all title issues are resolved, the solicitor may be liable for negligence if the lender suffers loss. Always ensure all matters are resolved or disclosed before certifying title.

Practical Steps for Issuing Certificates

  1. Complete all searches, enquiries, and title investigation.
  2. Resolve any defects, adverse entries, or outstanding issues.
  3. Prepare the certificate of title in the lender’s required form.
  4. Submit the certificate to the lender within the specified notice period (usually 5–7 working days before completion).
  5. Request the release of funds for completion.
  6. Ensure all lender conditions are satisfied before completion.

Worked Example 1.2

A solicitor is acting for a company buying a commercial property with a mortgage. The lender requires a detailed certificate of title and 7 days’ notice to release funds. The solicitor discovers an environmental issue two days before completion.

Question: What should the solicitor do?

Answer: The solicitor must immediately report the environmental issue to the lender and cannot issue the certificate of title until the lender has considered the matter. If the certificate has already been issued, the solicitor must update the lender and seek further instructions.

Summary

  • Certificates of title assure lenders that the property is suitable as security.
  • Timing is critical: certificates must be issued only after all issues are resolved and within the lender’s required notice period before completion.
  • The UK Finance Mortgage Lenders’ Handbook sets out standard requirements for residential transactions.
  • Solicitors must manage risks and comply with professional duties when certifying title.

Key Point Checklist

This article has covered the following key knowledge points:

  • The purpose and content of certificates of title in property transactions
  • The correct timing for issuing certificates to lenders and its link to exchange and completion
  • Lender requirements, including the UK Finance Mortgage Lenders’ Handbook
  • The solicitor’s duties and risk management when certifying title
  • The consequences of errors in timing or content of certificates

Key Terms and Concepts

  • certificate of title
  • exchange of contracts
  • completion
  • UK Finance Mortgage Lenders’ Handbook
  • completion statement
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Pleased to share that I have successfully passed the SQE1 exam on 1st attempt. With SQE2 exempted, I’m now one step closer to getting enrolled as a Solicitor of England and Wales! Would like to thank my seniors, colleagues, mentors and friends for all the support during this grueling journey. This is one of the most difficult bar exams in the world to undertake, especially alongside a full time job! So happy to help out any aspirant who may be reading this message! I had prepared from the University of Law SQE Manuals and the AI powered MCQ bank from PastPaperHero.

Saptarshi Chatterjee

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Senior Associate at Trilegal