In recent months a new ‘buzz’ word has evolved in the conveyancing fraternity, that of ‘front-loading’ the residential conveyancing process. In an effort to reduce delay and to try to resolve issues early in property transactions, it is felt that the initial requirements placed upon the Vendor’s Solicitor should be dealt with as soon as possible, once a property has been genuinely put on the market for sale.
Possibly, the biggest current problem that Vendor Solicitors experience is the delay in receiving the Vendors Title Deeds, either from the Vendors (who have misplaced same) or from their lenders.
Often the lenders store the Title Deeds off-site and with employee redundancies as a result of the property recession, it seems that the delay in receiving Title Deeds from lenders has worsened over the last number of years. The knock-on effect of this delay can be particularly damaging if the Title has not been registered in the Land Registry. It is difficult to prepare the contract, apply for the Property Certificates and Searches and complete the Replies to Pre-Contract Enquiries. The impact of this delay can be considerable, particularly if the Vendor client is also purchasing and there is a lengthy chain of transactions. This pressure can escalate if the Solicitor, acting for the Vendor of the property that your client is purchasing, has been proactive and has front-loaded their client’s sale transaction. In these circumstances, you can then receive all the documentation required, shortly after the transaction has been Sale Agreed. The clock then starts to tick! I have been in these circumstances, on too many occasions, when everything in respect of my client’s purchase is in place and yet I have been unable to commence my client’s sale as the Title Deeds have not arrived or, even worse, have been lost!
Apart from the advantage of physically having the Title Deeds in your possession, early in a transaction, it is always advisable upon receipt of same to check them. There is a temptation to simply put the Title Deeds back into your storage room until the property has been agreed for sale. It never ceases to amaze me, when acting in a sale and inspecting Title Deeds, how often I notice something amiss. I don’t inspect the Title Deeds in the same detail as I would if I am acting for the Purchaser. Often at this stage, when the property is not agreed for sale but is on the market, there is time to sort out issues such as the absence of septic tank consent or lack of evidence of statutory approvals for alterations or lessor’s consent for same. In apartment transactions, you can request your client to obtain the information pack from the management company to include AGM minutes, service charge details, copy of block insurance policy, etc.
Another aspect of front-loading the sale process is the Vendor’s Solicitor applying for the Property Certificates and Searches early in the transaction. This has recently become an issue. Some firms unilaterally and contrary to the Home Charter Scheme hold off in relation to applying for these documents, until they have been advised by the Purchaser’s Solicitor that the Purchaser has obtained a satisfactory survey and mortgage offer. The difficulty with this approach is that, in a chain transaction, it can cause considerable delay in completing the transaction, as the documents take approximately 4-6 weeks to arrive. Quite often, at the time the Purchaser has obtained a satisfactory survey and mortgage offer, they are normally in a position and are ready to complete – so, to wait another 4-6 weeks seems unacceptable. The small number of firms who have adopted this practice argue that they want to avoid the Vendor client incurring unnecessary costs, particularly if the transaction falls through after they have applied for the Property Certificates and Searches.
It costs approximately £200.00 to obtain the Property Certificates and Searches. Searches are out of date after a period of 3 months and Property Certificates are out of date after a period of 6 months. I understand the desire to protect the Vendor client’s interests but if the Vendor puts the Solicitor in funds, in relation to the Property Certificates and Searches and is advised that the Property Certificates and Searches should be applied for early in the transaction, to ensure there are no issues with same, then I see no reason why these documents should not be requisitioned early in the process. I also feel that the level of aborted transactions and the circumstances where the Searches and Property Certificates become out of date is relatively rare.
In the current review by the Law Society Conveyancing and Property Committee and Home Charter Committee of the Home Charter Scheme and the General Conditions of Sale, they are possibly considering the extension of time periods for valid Searches to 6 months and Property Certificates to 12 months. If a Purchaser’s Solicitor or the lender is unhappy with this they could obtain updated Searches and Property Certificates at the Purchaser’s expense rather than the Vendor having to obtain the Property Certificates and Searches twice.
It is also relatively inexpensive to obtain Defective Title Indemnity Insurance to cover out of date Searches and Property Certificates. In a recent transaction I had to pay a premium of £20.00 for this which is another option to be considered.
I do think it is better to obtain these documents early in the transaction. I do not feel that they should be applied for upon receipt of instructions from the Vendor – this is too early. Receipt of the Titles Deeds is also possibly too early. The Title Deeds can give you some guidance as to whether or not there could be an issue with the Property Certificates and Searches. If there are no old Property Certificate Searches with the Title Deeds you will have no indication of any issues. If there are some recent Property Certificates and Searches, as your Vendor client may have recently re-mortgaged or purchased the property, then these can give some comfort. If the Regional Property Certificates confirm that there are no planning issues, the roads are adopted and there are main sewers and water available, it is unlikely that there will be an issue when re-applying for this Property Certificate.
In conclusion, I feel that the Property Certificates and Searches should be applied for after the property has been agreed for sale, once you are in funds from the Vendor client for same and after the Contract and Title Deeds have been sent to the Purchaser’s Solicitor.
The property recession is still very relevant in the Northern Ireland conveyancing market and it is particularly important to tackle debt issues as early as possible in a transaction. The Vendor’s Solicitor should, upon receipt of instructions, if there is a lender, request an up to date redemption statement. This can determine whether or not the sale is a stressed sale and the Vendors have underestimated their liability to the lender or they have been reluctant to disclose to the Vendor’s Solicitor the extent of any debts or other charges that may affect the Title. This issue can also be flushed out on the completion of the Replies to Pre-Contract Enquiries, early in the transaction. The benefit of this is to ascertain whether, in fact, the sale can actually proceed. Sometimes the Vendor needs to provide additional sums to allow the sale to proceed. In these circumstances, they have often miscalculated the amounts that are required to the lender or other creditors and also the cost involved in the payment of Estate Agent fees and Solicitor fees and outlays. By simply obtaining an up to date redemption statement, completing the Replies to Pre-Contract Enquiries and obtaining the Searches early in the process, these difficulties can be resolved.
When taking instructions with regard to the Pre-Contract Enquiries, the likely issues that can arise are in connection with neighbour notifications, lack of statutory approvals and lessor’s consent for alterations and the need to obtain the Energy Performance Certificate and, if applicable, an up to date Gas Safety Certificate. If these are obtained at the outset, it avoids delay and also the need to add Special Conditions to the Contract at a later stage.
A lot of what has been stated above may just seem common sense but unfortunately, from my experience, a lot of the documents that are required are not being obtained early enough in the process. By front-loading the system I believe it could improve considerably the time in which it takes for a property to be agreed for sale and to complete.
On the back of this idea of front-loading, the Memorandum of Understanding (MoU) was introduced between Residential Conveyancers, Estate Agents and Surveyors. It has now been in operation for approximately 6 months although I am not sure if it is working. Under the MoU there is a requirement upon the Estate Agents to request the Vendor to instruct the Solicitor they wish to act for them in their proposed sale. There is then a requirement for the Solicitor, once instructed, to obtain the Vendor’s Title Deeds and to prepare for the sale. I have not really noticed any change since the MoU was introduced. I have spoken to several Estate Agents who have been unaware of their requirement or even the existence of the MoU and this is rather disappointing.
More worryingly, I am still receiving a substantial number of Sales Advice letters from Estate Agents prior to receipt of any instructions from the Vendor. The knock on effect is that too many of my sale transactions are still being delayed, simply because I am not being instructed when the property goes on the market and I am unable to prepare for the sale by obtaining the Vendor’s Title Deeds. The creation of the MoU was a rather unique venture and it will need to be more robustly advertised and endorsed if it is to have any effect. I am currently forwarding a copy of the MoU to Estate Agents in circumstances where I have not received instructions, prior to the property being Sale Agreed. This is just a gentle reminder that it is in their interest, as well as mine and our mutual Vendor, that preparation work is done prior to the property being Agreed for Sale. I am confident that, if everybody agrees to work to this arrangement, it will mutually benefit all parties.
This concept of front-loading the process is also being substantially enshrined in the body of the new General Conditions of Sale (the fourth edition). This will, I hope, give it much more clout. These conditions are still a work in progress and will probably not be operational until 2019. For the concept of front-loading to work, everybody has to buy into the idea. It would be hoped that no enforcement or penalties would be required if Vendor’s Solicitors simply ignore their duties and do not bother to do anything until much later in the process. However, this may need to be revised, at a later stage. There will be a review of the MoU soon and also, once the fourth edition goes to consultation, those that object to this shift can voice their negativity to same. I find it difficult to think of anything significantly negative and I believe that if everybody buys into this process all will benefit and transactions will be quicker, less stressful and less likely to abort after being Agreed for Sale.