The Land Registry will apply its proposed "early completion" policy where an application for a discharge of whole is received on or after 3 August 2009 along with other applications, but without evidence of the discharge. For details, see Legal update, Changes to Land Registry practice: new early completion policy from 3 August 2009 (www.practicallaw.com/9-386-0832).
We have received a number of comments, which we would like to share with you. These include comments from the Land Registry (see A response from the Land Registry received 5 June 2009 and Land Registry.
We have sent a copy of these comments to the Law Society and to the Council of Mortgage Lenders. So far, we have heard from the Law Society who say that they will issue a practice note as soon as possible. There is no date fixed for this because the issue is taking some time to resolve: it is important that the Law Society is certain about the Land Registry's position in every scenario that could be affected by the proposed changes in policy (see also, comment from Michael Garson of Kagan Moss & Co, who is a constituency Law Society Council Member and member of the Law Society E-conveyancing Task Force and Legal Affairs and Policy Board).
If you would like to comment, please e-mail us on firstname.lastname@example.org.Close speedread
The Land Registry will apply its proposed "early completion" policy where an application for a discharge of whole is received on or after 3 August 2009 along with other applications, but without evidence of the discharge. For details, see Legal update, Changes to Land Registry practice: new early completion policy from 3 August 2009 (www.practicallaw.com/9-386-0832).
We have received a number of comments from subscribers, which we would like to share with you. If you would like to comment further, please e-mail us on email@example.com.
Roger Hurst (expressing his personal view) writes:
"Quite simply the Land Registry's changes post Chartermark (well earned until the in house strike/work to rule just over ten years ago over "proposed" changes in working practices), have failed to please.
We used to get form 53. It usually arrived within the 14 day undertaking period universally and customarily given and accepted by solicitors. The 94A was kept up to date if there was any danger of it running out. If an application was sent in early to comply with the rule that allowed freedom from entries if the A4 application was delivered to the Registry before the priority period expired, it was accompanied by a covering letter to say the Form 53 would follow. The registry (then called "Her Majesty's" land registry) would hold the application for a reasonable period until it arrived. This worked. It was helpful. We appear to be having to go back to that kind of system.
Then, Banks would not give mortgages to ordinary mortals - Building Societies (working not for profit although a "surplus" was allowed at end of year), gave excellent interest rates for both Investors and Borrowers. They were not quick with the Discharge document but were noticeably better than the following glut of thick skinned and immensely powerful banks that joined in who still work in the nineteenth century save for their moral standards and quality of customer service for ordinary mortals.
If we were carpenters having to decide how to tackle a particularly fine piece of work we would now find there are rules not only upon how it must be done but upon what tools to use and how to use them. Lawyers have inherently found ways of interpreting the ever increasing statutory output so as to minimise the effect on the lives and purses of themselves and their clients. A system of conveyancing that worked was one that by general unwritten consensus among practitioners evolved into a workable process. That system paradoxically became diversified and unstable immediately the Law Society's Protocol Scheme (based on common sense to be admitted) was "imposed" on practitioners. The system tried to answer critics who said the system of conveyancing could be streamlined; the seller might do the survey and local search and hand it to a buyer! There was at the time no sign of any authority whose service must be used by practitioners in the process, of streamlining their service, the main reason why any conveyancer had to say "I don't really know exactly how long the transaction will take, sir") to his client - and still does.
Lawyers are not slow to use modern technology to improve matters. In the late 1960's before home computers came on the scene it was mooted that a computerised land conveyancing system was possible. If the UK had been the USA, that system would have been put in place by 1975 - based on the efficient system of work of the time subscribed to by most firms.
Instead we now have an overregulated, sometime fraud vulnerable, sometimes inaccurate registration process that is ever changing to suit those system designers who have an interest in their work as opposed to the needs of the public and their solicitor. Once, the Land Registry worked according to Land Law. Now it makes it."
David Langley writes:
"I watch with continuing dismay the ludicrous approach of the Land Registry regarding its early completion policy.
It will of course be interesting to see what the Law Society Practice Note has to say about this but I suspect that if the Land Registry sticks to its policy we will see a significant adverse affect on conveyancing transactions and for a period at around the time of implementation a complete stagnation as Practitioners will be extremely nervous about having to take responsibility for matters which really are not their concern.
Simply due to pressure of work I did not respond to the absurd response of Pascal Lalande on behalf of the Land Registry on 5th June. This shows a complete lack of touch with the current market place or understanding of what is really going on or rather not happening with lenders and discharges.
The Land Registry has fundamentally misunderstood or deliberately chosen to ignore the fact that virtually all issues regarding delays in discharges are due to lenders and not to conveyancers.
Since the early completion policy has been proposed I have watched the issue with interest and amongst current files I have 5 matters either acting for Seller or Purchaser where discharges are delayed and potentially registrations are delayed. The early completion policy would cause total chaos in these circumstances. Of these five there is not one single matter where the fault lies other than with lenders and we have five different lenders involved. For obvious reasons I will not name them!
On one we have had a Bank where a payment to discharge was made by CHAPS(I have no doubt that the Solicitor honoured his undertaking to make the payment forthwith) which has still not produced a DS1 after six weeks and innumerable reminders. One part of the email correspondence indicated that the matter was waiting for the Relationship Manager who would get around to it when he could! How can that be a conveyancer’s fault?
On another we had 4 attempts at the lender producing an appropriate END and in the end it transpired that the Land Registry had taken exception to an END which was produced in exactly same way as all the others from that particulars lender’s department! Nevertheless it did take the lender 2½ weeks to issue the END in the first place!
The comment in Mr. Lalande’s response of 5th June at paragraph 6 about Practitioners delaying applications and extending priority periods is naïve and arrogant. Practitioners are undoubtedly well aware of what constitutes good practice but in a significant number of cases there are no issues and a useful expedient will simply be to continue regularly to renew official searches thereby extending priority periods. My discussions with Land Registry at Gloucester indicate that they really would not wish to see the Day List cluttered with innumerable searches although they fully appreciate the concerns which I expressed and that Practitioners may well do this. Clients will also not be happy to pay for the regular renewal of searches.
What Land Registry is doing is a simple target meeting exercise and a buck passing exercise and will do a major disservice to the Conveyancing and Land Registration processes.
Land Registry has been one of the most effective NGOs since its change of status but its recent approach on a number of issues is driven purely by targets and costs and its quality of service is diminishing rapidly in my opinion.
Land Registry will lose massive good will from Practitioners if it proceeds with its ridiculous proposals regarding early completion.
In conclusion I cannot remember the last time I encountered, either acting for a Seller or a Purchaser, a problem with a delayed discharge due to a failure or a delay on the part of another conveyancer."
David Langley goes on to say:
"I have also read the comment received from Michael Garson although I appreciate it is his personal view and not a statement of policy or practice by the Law Society.
Nevertheless if the Law Society is going to duck the issue by saying that it is difficult to issue a comprehensive Practice Note because there are so many areas in which the policy may operate then the Law Society will fail Practitioners very badly.
The USP of Solicitors and indeed other licensed conveyancers is that they are able to deal with discharges of mortgages by means of the acceptance of undertakings.
The undertaking in the Law Society’s approved form is clear and simple and any attempts to amend it so as to impose time limits for production of discharges on Practitioners who cannot control that issue will bring the process to a grinding halt. I for one will simply not give undertakings with time limits so then we will be faced with the need for all lenders, in advance of completion, as Andrew Campbell of Clarke Willmott suggested on 11th June, to produce discharges prior to completion to be held on Solicitor’s files.
If the Land Registry thinks it is in step with reality then it must think again. The Law Society must itself face up to the fact that this is one of the most important issues it could address for Solicitors and it needs to take a very robust view on their behalf with Land Registry not be telling us how to handle the mess which Land Registry is threatening to perpetrate."
"As a member of the Legal Affairs & Policy Board, I write to give your readers my perspective in relation to the development of a Law Society Practice Note on this important topic.
The most recent changes in relation to identification requirements and what we still term "partial registration" have received detailed consideration over a long period by members of the Law Society E-Conveyancing Taskforce, Conveyancing & Land Law Committee and Property Section. Readers will have seen the submission made by the Law Society to the Land Registry opposing the new requirements which are now to be introduced from 3 August.
In relation to how solicitors might accommodate those changes, any practice information given by the Law Society by way of a Practice Note, may explain, clarify and suggest, alternative options that are available to solicitors. To that extent, any Practice Note is likely to be rather less than a complete and foolproof guide to every situation that arises in practice. It is also generally the intention of a Practice Note, to support the existing conduct rules, rather than impose new or additional standards on solicitors.
In the present instance, it is particularly difficult to issue comprehensive practice information, because there are so many areas in which the policy may operate, where the outcome is uncertain. A Practice Note dealing with the basic position as it is presently known and understood, is prepared and is expected to be issued shortly.
Aside from that, it is fair to say, that the new LR procedures will add a layer of complication and are likely to prove once more the law of unintended consequences.
Broadly in the residential home market (aside from remortgages), completion of the registration of a transaction is delayed, on account of delay in delivery of lender's discharges. Those delays are unpredictable and uncertain. The new procedure may well entrench those delays rather than remove them.
The underlying issue would be resolved if lenders would respond within 48 hours of the remittance of redemption monies. Solicitors would at least then know whether a discharge was in progress and likely to be received or not.
Separating cases of administrative delay from those where there is some other problem, is at the heart of solicitors' predicament concerning the undertakings at completion. It would be fair to say that the Law Society is extremely concerned at the implications of the new policy in relation to solicitors' undertakings given the importance they have to the conveyancing process. The Law Society is naturally reluctant to give advice that would see the disappearance of routine undertakings, either because they cannot be properly given by the seller's solicitor, or because they are inadequate for the purposes of the buyer's solicitor. It is also fair to say that the CML on behalf of lenders have not admitted that there is a problem that is for them to solve and that is a problem in itself.
The views expressed are personal and do not represent the views or policy of the Law Society" (22 June 2009
Ashley Bevans of Exeter writes:
"I feel that Mr Campbell's comments strike a cord with a number of issues that property lawyers face. There is too much encouragement on taking increased risk in order for transactions to proceed.
The further question I would ask is whether it is still acceptable for firms to take this risk on a cost benefit analysis. Given the value of a potential claim against the professional fees earned, this may no longer be attractive.
Indeed, this can be equally applicable as to whether firms should seek written authority before even proceeding to exchange contracts.
Undertakings were primarily introduced in order for the conveyancing process to continue in situations such as redemption of charges. If these are no longer viewed as sufficient, a radical rethink in the way matters are dealt with upon completion is needed.
I do not believe that firms or their professional indemnity insurers would thank their lawyers for continuing to take unnecessary risk. I still believe that the standard conditions of sale provide for completion 20 days after exchange, which should be more than enough time for banks to prepare and deliver discharge documentation in escrow upon receipt of completion monies." (15 June 2009)
"In the commercial sphere, many contracts are amended to state that completion can take place if the seller provides evidence that the mortgage will be discharged at completion. It would seem to be an adequate precaution to insist on a DS1 under this provision.
Similarly the Standard Conditions provide that the Seller must provide the Buyer with proof of his ability to transfer the property. Coupled with the full title guarantee, and the proviso that the relevant charges are to be discharged, it seems reasonable to require a draft DS1 and an undertaking to supply this at completion.
Requisitions on title can be amended to require sight of the draft DS1 or an undertaking that one is held and will be supplied at completion.
An additional Standard condition could be drafted that the Seller is not to be deemed ready, willing and able to complete unless they hold an executed DS1.
It seems somewhat bizarre to me that having moved over to electronic deeds registration, (enthusiastically adopted by the banks, presumably as they did not want to deal with the deeds storage issues) the banks are not able (or willing) to automate the END process on receipt of funds, and that the proposed solution to the issue involves ensuring a DS1 is sent instead.
What price an endorsed mortgage deed?" (15 June 2009")
Stephen Larcombe of Limbach Banham writes:
With regard to Tony's suggestion, and indeed the other suggestions which have been made, they are all examples of what lawyers do best, which is to come up with creative and professional solutions to clear up the mess caused by others.
However, the conveyancing process has always represented, in effect, an amalgamation of outcomes/conventions/processes/law and if any one or more of the "stakeholders" involved in the process "rocks the boat" excessively, then there has always been the potential for the whole process to seize up.
Lenders have become increasingly arrogant, with a creeping tendency to transfer more and more risk onto lawyers with, for instance, the small print on redemption statements making it clear that any shortfall on redemptions will entitle them to refuse to deliver evidence of discharge.
The Government calls for "simpler, faster and cheaper" conveyancing, whilst at the same time going in the opposite direction with complex legislation, so that solicitors are now having to worry about environmental law, anti-money laundering legislation, chancel repairs and barely comprehensible Stamp Duty Land Tax legislation even in the case of simple house purchases.
The Land Registry claims in effect that it wishes to take the lead in developing a 21st Century conveyancing system, and in the early days claimed that it would work closely with the legal profession to move forward to achieve this vision.
What has happened in practice is an increasing disconnect with the profession. The LR were warned by the profession that a move to "virtual titles" would significantly increase the risk of "cyber crime" and we then had the debacle of criminals downloading signatures to steal houses and engage in mortgage fraud.
The LR then demanded that the profession underwrite the anti-moneylaundering mess created by such a system, and although we have a little watering down, we still have the nonsense of carrying out substantial checks and giving certificates in application forms .
The Land Registry tried to interfere with the law of contract/leasehold law and dictate to companies and individuals alike what individual leases would say and initially suggested that all leases should be in a standard form, whether we were talking of a garage or an office block in Central London. On this occasion the LR backed down.
The proposed chain matrix system originally had the concept of a civil servant acting as "chain manager" and the LR still seems obsessed with the idea of a state controlled electronic conveyancing system offering features of little utility, oblivious to sensitive data protection issues and the increasing sophistication of cyber criminals being able to hack into and defraud such a system. The proposed Network Access Agreement is not based on equality, but is ridiculously one sided, with the Registry being given the power to suspend participants even for the most trivial infractions.
Now we have for the first time a policy which has the potential to undermine the whole process.
With power comes responsibility, and if the LR aspires to act strategically in the public interest in delivering a modern home buying system, then it must deliver policies which are actually workable, and only see the light of day following real consultation with the profession. What we have in the latest policy is an attempt to hide staffing shortages/lack of resources under the veneer of a policy being made in the public interest.
I will be urging my local law society to take on board the suggestions made in the last two comments on your blog. " ( 15 June 2009)
"My suggestion is that the seller's solicitor insists that the mortgage lender supplies a written consent to the sale before exchange of contracts. And why not? It should be good practice to get such a consent, and confirmation of the amount required to redeem, before exchange. The lender will then still be protected by its charge, which it will release (hopefully in a timely fashion) after completion.
If the lender delays the END or DS1 after completion, the land registry will complete the transfer registration because the consent required by the restriction will be supplied, but will not remove the charge until the END or DS1 is sent.
We know that is usually only a matter of delay, rather than complete failure, for the discharge to be supplied and the seller's solicitors undertaking will remain in place until discharge takes place.
This would save writing all those reminders." (12 June 2009)
"In my view, this issue is, in substance, the one that arose in Patel v Daybells. In what circumstances is a buyer's conveyancer negligent in relying on an undertaking in the Law Society's recommended form in relation to the discharge of the seller's mortgage(s)?
In summary, the Law Society's view of the law, post-Patel, as expressed in the May 30th 2002 Gazette article was that it was reasonable (hence not negligent) in a standard case and, by implication, not reasonable in an exceptional case.
This was an admirable attempt to square what had already become a circle, given that the list of exceptional circumstances was not closed. I suggest that, in the light of the Land Registry's new "early completion" policy, the presence of a restriction protecting a seller's mortgage is another such exceptional circumstance. The difference is that restrictions are now so common that the exceptional has now become normal.
On the basis of the Law Society's 2002 guidance, no solicitor can now be sure that it is ever safe, either for the firm or the client purchaser and its mortgagee(s), to rely on an undertaking if the seller's mortgage is protected by a restriction. Doing so is no longer "reasonable" in the Patel sense.
Buyers' lawyers therefore face being caught between Scylla and Charybdis. If they insist on a contract provision to the effect that the seller will not be ready, able and willing to complete unless executed discharges are in the seller's solicitor's possession or control, they will be accused by the seller and its lawyers of undue pedantry, excessive caution or having an unbusinesslike attitude - and probably all three. On the other hand, if they accept the risk that the buyer's Land Registry application is rejected for want of a DS1, they expose the firm to a negligence action if the DS1 is not forthcoming in time, a risk the client and mortgagee will be only too willing for them to undertake.
There is little disagreement amongst lawyers about what the "right" position is in the light of the Land Registry's new policy. DS1s should be executed as escrows in advance and the lawyers holding them authorised to release them to the buyer on receipt of the sale proceeds.
Lawyers acting for the buyer need support in insisting that the contract is phrased accordingly.
Sellers' lawyers are in equal need of support in conceding the point and telling a seller's mortgagee(s) that completion will not happen and their loans will not be repaid, unless the relevant DS1(s) are executed in advance.
The Law Society is uniquely well-placed to give that support and the Patel decision provides proper grounds for doing so.
I suggest that the Law Society's forthcoming guidance to the profession should say that, where a restriction protects a mortgage, it is no longer reasonable to rely on undertakings, in the light of the Land Registry's new policy and the decision in Patel. Such guidance will fortify lawyers for both seller and buyer, who will find it much easier to persuade all parties to agree that the seller's mortgagees are to provide DS1s at the appropriate juncture.
Such a standpoint is principled. Insistence on a DS1 can be dispensed with if either there's no restriction or the seller's solicitor is able to provide the buyer with an unconditional withdrawal of it on completion. In these circumstances the risk is probably no greater than it was before, provided the transaction is not otherwise "exceptional" in a Patel sense. But applying such guidance to all transactions where there is an unwithdrawn restriction that survives completion will put pressure on lenders on both sides to address the issue themselves, which is what ought to happen.
Moreover, the current economic climate is the right one in which to apply this pressure. Depressed property prices make negative equity more common. There are many fewer transactions, both residential and commercial. Chains are shorter and less frequent. From the profession's point of view conveyancing margins are much tighter so there's much less financial "cushion" to accommodate increased risk. In addition, the public odium being heaped on banks and other lenders means that, in the "court of public opinion" to borrow Harriet Harman's phrase, the Law Society ought now to be on the moral high ground and in a much better position to force this issue in this way than hitherto." (11 June 2009)
Pascal Lalande, Registration Change Group Leader, Land Registry writes:
"The Land Registry has decided to modify the early completion policy to address concerns raised by some practitioners about the potential loss of priority if applications are cancelled. In deciding our policy we have made a distinction between situations where a restriction prevents registration and situations where there is no restriction but we still have to raise a requisition.
We have to date informed practitioners that requests for an extension would be considered on their merits but would not be routinely granted. Our policy now is that we will allow one extension of 20 business days where a restriction in favour of the existing charge prevents registration provided the practitioner:
Specifically asks for this in writing;
Shows that they are actively pursuing the matter; and
Shows that the existing lender is causing the delay.
Further extensions after this additional period are unlikely to be given.
If we have to raise a requisition for another matter, i.e. there is no restriction in favour of an existing charge, requests for an extension will be considered on their merits but will not be routinely granted.
If no requisition points arise, the Land Registry will complete the registration of applications on the basis of early completion.
The Land Registry is reserving its position to review this policy and the use of restrictions in charges."
Chris Carr of Clarke Willmott LLP writes:
"I've read a statement by the Land Registry that the Early Completions Policy will reduce the amount of fraud because buyer's will be registered and the interests of their lenders will be noted, and that in the past sellers could raise a new mortgage during the period between completion and registration and disappear with the money.
Since the practice described by the Land Registry would require the collusion of legal professionals in order to provide the identity evidence, I don't see how the new procedure will avoid fraud, since an unscrupulous party could still register themselves and their mortgage lender in a fraudulent transaction with relative ease (provided they have a legal adivsor on side).
In recent months there has been much criticism of Land Registry for allowing fraudulent activity to take place so easily, especially where properties are not charged and criminal gangs have been able to transfer those properties with little or no interference from Land Registry. It was said the only way to avoid being a target was to have a mortgage as the lender's interest would prevent fraudulent transfers from being registered.
Now Land Registry has turned that process on its head, by removing even that protection. Far from decreasing fraud, it will inevitably see an increase in fraud at first as these fraudsters will now be able to target any property, provided there isn't a restriction on the title to protect the interest of the lender.
This also reveals what will happen in the future with all lenders. Whereas in the past, only some lenders insisted on a restriction to prevent disposition, all lenders will, in future, require a restriction, thereby adding further cost to the borrower's application to register, and completely defeating the whole Early Completion Policy, as Land Registry has already said it won't circumvent restrictions.
This displays, once again, the Land Registry's ill thought through changes. Far from speeding up applications it is going to lead to greater incidences of fraud, more restrictions on title, more requisitions from the Land Registry to remove those restrictions, greater costs to the buyers (who will now have to register restrictions) and more responsibility for legal practioners who will now also have to ensure that restrictions are applied for and registered." (8 June 2009)
Andrew Turner, Larcomes LLP writes:
"I have read Pascale Lalande's response. It is, as we must have expected, of no comfort or support to practitioners. The whole conveyancing process has depended for years on the willingness of the profession to provide undertakings in respect of subsisting charges. This has been our "USP", we trust each other and therefore the whole process of home moving has speeded up beyond recognition. The days of attendances at mortgagees' solicitors offices with bankers drafts in hand so as to secure redemption are but a distant memory. This has benefited everyone.
In our being able to provide that fundamental oil to the wheels of the process we have relied on the Registry to act fairly towards us and to support us in the commitment that we have made. In other words we have known that if we are let down by another practitioner we have been able to explain the situation to another body that has as part of its business philosophy and ethos a similar desire to ensure that the ultimate customer (the home owner) is not disadvantaged.
What we now have is a radical rethink by a Registry that has lost that attitude in favour of efficiency at all costs. Whilst there is considerable logic in the early completion process where there is no restriction on the title - it actually does not in essence change the legal position at all - where such a restriction does exist it fundamentally undermines the whole accepted way in which a home move can be secured. Unless a practitioner acting for the seller (and existing mortgagee) is prepared to give an undertaking to produce the discharge within a time frame that is going to be compatible with the priority search ( and which one of us will?), then no transaction can be safely completed without the discharge actually being already held in escrow and what lender is going to understand let alone be prepared to commit to that process?
Mr Lalande has conspicuously failed to address this singular point. His response unsurprisingly makes no mention of it whatsoever and the Practice Bulletin and the Q&A merely say what we all know, that the application will be cancelled.
My firm will not accept the risk endemic in this process. We are likely to insist on a discharge document being handed over on completion or on a time limited undertaking (which we will not of course be prepared to give ourselves so why should anyone else?) where a restriction exists. Why should we do otherwise? It is a shame that the Registry refuses to address this singular issue, the only really important one to come out of its new policy." (8 June 2009)
Pascal Lalande, Registration Change Group Leader, Land Registry, writes:
"We have been monitoring the various comments posted on this site and wish to respond to some of the points made by practitioners.
Various practitioners have suggested that Land Registry should remove a charge from the title if a discharge is not produced, say, within 5 days of completion, or that we should fine lenders who do not provide evidence of discharge promptly.
There is no basis under the existing legislation for removing charge entries without evidence that the charge has been satisfied and it is difficult to see how the legislation might be amended to allow such an approach in any way that would be consistent with the property rights of registered chargees. Such an approach would do nothing to create pressure for improvement of the redemptions procedure, which is acknowledged to be unsatisfactory.
There is also no statutory basis for fining lenders and we do not see how lenders would ever agree to this voluntarily.
It has also been suggested that Land Registry is making this change purely to achieve efficiency targets.
Land Registry is, as it should be, required to meet progressively improving performance targets agreed with the Lord Chancellor. By consistently meeting those targets for the past several years we have significantly enhanced the service we offer to all customers. We are proud of these achievements. Meeting targets is never an end in itself and it is not true to say that we are making this change "simply" to meet performance targets. However, we are happy to acknowledge that the proposed change in policy is intended to contribute to further improvements in our service to customers.
Aside from the cost of requisitions, the time taken to raise and deal with replies to requisitions obviously diverts staff resource that could otherwise be utilised in relation to applications that are not defective. In short, requisitions cost time and money and directly affect the fee that a consumer is required to pay and the speed of service that Land Registry is able to provide. They also result in a cost to practitioners and to third parties such as lenders who are required to assist in addressing such requisitions. Accordingly, Land Registry is constantly looking to find ways to reduce the number of requisitions that it raises.
Applications are at present being cancelled for lack of proof of satisfaction of a charge when a discharge application accompanies that application. We do not consider that the fact that the discharge application may not be in order should prevent the registration of those accompanying applications, provided those accompanying applications are independently capable of completion by registration. Treating applications for a discharge, transfer and charge collectively so that a problem with the discharge application may result in the cancellation of all three applications may create real difficulties for the transferee and new chargee – and this is the primary reason for the change in policy.
Most practitioners say that lenders are to blame and Land Registry and the CML should sort out this problem.
There is a lack of consensus amongst lenders and practitioners as to the causes of delays. Although practitioners blame lenders, many lenders attribute the cause of some delays to practitioners. Most lenders will not provide evidence of discharge until all moneys have been paid and particular problems arise when standing orders are closed prematurely or the borrower continues to draw on the mortgage account after the redemption statement has been issued.
As previously mentioned on this site (see Land Registry's comment of 15 May) we are not a policeman for the redemptions process. We can try to facilitate improvements and have sought to do so over many years but our powers are limited. At the end of the day it is for practitioners and lenders to resolve the problem with delays. In the lead up to this particular change we sought an alternative way of dealing with this problem but it was not possible to achieve consensus amongst the Law Society and CML.
The fact that a discharging lender is also likely to be a new lender elsewhere will mean that it has an interest in making sure the redemptions process works to ensure that its new charges are registered as first charges.
This change has no advantage for the general public, the profession or its clients.
We have explained that early completion will ensure that buyers and new-mortgage lenders will have their interests protected by registration. The alternative would be that their applications for registration would be cancelled if evidence of discharge is not lodged and cancellation may risk a loss of priority for the interests of the buyer and new lender.
In one typical week in June 2008, Land Registry cancelled 357 registration applications because evidence of discharge had not been lodged, even after a requisition had been sent and the application had been stood over to await a reply for at least one month. Applications to register a discharge, transfer and charge will have been counted as one application for recording purposes and the number of buyers and lenders interests who will have placed at risk will have been significantly higher than 357. Even as a conservative estimate this would suggest over 37,000 buyers and new-mortgage lenders in a 12 month period who had the priority of their applications put at risk because of cancellation.
We believe that dispositions should be reflected in the register as soon as possible after they have taken place. The interests of buyers and sellers should not be placed at risk by a refusal to register their transfers and charges because of delays in the completion of discharges of prior charges.
We also believe early completion will help to prevent fraud. There are obvious problems if an application to register a transfer and new charge are cancelled because of a problem with the application to discharge an existing charge, as the transferee and new chargee will not then receive any notices of potentially fraudulent transactions from us, precisely because they will not have been registered as proprietors with addresses for service. Furthermore the seller, who retains the legal title even though no longer having any equitable interest in the property, might, for example, charge the title as security for a further loan or otherwise deal with it. Although legally effective, that dealing would potentially be a fraud against both the buyer and the new lender. Early completion removes the opportunity for such a fraud.
Practitioners will delay submitting applications until proof of satisfaction is available – applications will be made to extend the priority of official searches.
The decision as to when to submit applications will be for the practitioner but delaying submission of applications would constitute poor practice where such delay might threaten the priority of the practitioner's client's interest.
And, simply making successive applications for official searches with priority will not necessarily protect the priority of the transfer and new charge whereas the registration of the transfer and the new charge (if made for valuable consideration) will ensure that they gain the special priority afforded by section 29 of the Land Registration Act 2002, even if temporarily subject to an existing charge that will remain on the register until proof of its satisfaction is obtained.
It is not possible to extend the priority of an official search. A fresh priority period will be created for any new search but this fresh period does not extend the effect of any preceding search.
We would again encourage practitioners to read our Practice Bulletin (www.practicallaw.com/6-386-0485) and Land Questions and Answers (www.practicallaw.com/8-386-1115) when considering whether or not to post a comment. You may find Land Registry's considered view on the matter you are intending to raise. You may also wish to consider the additional background information about this change recently added to our website (see Land Registry website: Early completion (www.practicallaw.com/2-386-2882)). This will help to further explain the reasons for this change and the discussions we have had with representative organisations." (5 June 2009)
I'm in New Zealand at the moment. The system here is that a lender sends a sealed discharge document to the Sellers Solicitor prior to completion. This is held to order of the lender with an undertaking to send the funds on completion. Seems to be the best way to get round the problem and avoid delay. (29 May 2009)
Anthony Jackson of Stokes Solicitors LLP writes:
It is no particular surprise that we arrive at this point. For practical purposes the conduct and development of land law has been placed in the hands of the Civil Service. It would be quite remarkable if it was not, therefore, subsequently rearranged for the convenience of the Civil Service. It is perhaps unfair to use the word "convenience". From the Registry's perspective, this particular form of convenience is almost certainly efficiency.
Unfortunately, as with dematerialisation, the same approach is evident here. The profession tried (and failed) to get across the concept that stealing peoples' identities would be vastly easier than stealing their deeds and their identities. Dematerialisation occurred regardless and saved nobody any paper.
Whilst even now the introduction of a single sheet certificate with forgery safeguards and an appropriate surrender back double-check system would cure most of the common frauds, it is not, as far as I know, even a remote consideration. Instead the profession is required to become expert on passport forgery detection.
The present change, whilst less damaging than dematerialisation, has the same ingredient of passing the consequences of an inadequate system to the legal profession to resolve. This change has no advantage whatsoever for the general public, the profession or its clients. Like dematerialisation, if the problem can be successfully passed to the lawyers, it is a problem no longer.
Discharge delay is almost invariably the fault of lenders. Imposition of a mandatory and escalating late delivery fine by the Registry payable by the lender would probably cure the problem within a month. Obviously such an approach would engender serious practical difficulties if applied on a case by case basis, but creating a regulatory regime with fines based on inadequate performance should be easy work for the present administration. The Registry should have no difficulty extracting the delay data.
The present arrangement has arisen because it is far easier for the Registry to impose new rules for the conduct of land law procedures on the lawyers than to tackle the problem itself. That would involve taking on the far more powerful and influential lenders. If the problem is not resolved, presumably once a title showing the previous mortgage still in place is received, the practitioner would be left with few alternatives but to send a daily fax and e-mail to the Land Registry enquiring whether they have yet received the outstanding END. That could create quite a lot of traffic. (28 May 2009)
"As head of private client at Tozers LLP I thought I should respond on behalf of our conveyancing team who are dismayed and disgusted by this unilateral action by the Land Registry, heedless of the representations made by the Law Society and the Council of Licensed Conveyancers.
Assuming the changes are made as planned our conveyancing team will not in future lodge any application for registration of a property subject to a charge until we have evidence of discharge of all charges registered against it at the time of completion. We will be forced to lodge priority searches as late as possible before completion and to renew them before expiry all to avoid the problems envisaged below.
We cannot as conveyancers run the risk of having registrations completed and returned to us with existing charges in place and with priority over the very charges we have been required to register simply because the existing lender has been slow at discharge and the land registry want to clear their decks of pending applications. One shudders at the thought of the extra work required to get the register corrected and the mistakes that are bound to occur and the time wasted in the process.
Once again the Land Registry is showing itself to be out of step with the realities of the likely response from the very practitioners on whom the conveyancing process relies to run as smoothly and efficiently. The fact that the CML supports the changes is meaningless - any faults or errors and losses flowing will be passed on to our professional indemnity insurers not the lenders who are the principal cause of the problem.
We are already endlessly involved in unnecessary correspondence over delays in lenders dealing with discharges - not because mortgage have not been redeemed but because some of the same members of the CML as support the proposed Land Registry changes are inefficient, slow and incompetent at dealing with notification of discharge to the Land Registry.
It would have been better to direct any changes at the lenders who are slow to deal with discharge so they are penalised for clogging up the system rather than leaving their loans in place . In these days of electronic notification why not automatically discharge all charges where a lender has failed to respond to a request for discharge within 5 working days of notification from the registry to a lender that an application to discharge is pending . It would save requisitions from the Land Registry to the profession, conveyancers chasing each other to chase lenders etc etc. " (26 May 2009)
"Despite the very sensible comments being made by practitioners on the subject of the Land Registry's new early completion policy, I fear no amount of comment will change the entrenched views of those who man this and other government sponsored organisations.
From a practical perspective, would the extension of the priority period conferred by the OS1/OS2 to say 8 weeks not go some way to generate a compromise?
Applications to register dispositions could then be submitted within the extended priority period with a greater chance that evidence of the discharge of mortgages will have been provided during the extended time.
This, coupled with strenuous lobbying of the Council of Mortgage Lenders to press its members to produce the forms of discharge in a far more timely fashion might just do the trick and save everyone concerned a huge amount of extra stress." (26 May 2009)
David Langley of David Langley & Co writes:
"This change by the Land Registry dumps firmly in the laps of lawyers problems caused by total inefficiencies of lots of lenders to issue confirmations of discharge in DS1 or END correctly and quickly.
The problems Land Registry encounters are almost always due to lender errors or delays, and to penalise lawyers by making them have to take even more responsibility for lender delays is totally unrealistic and completely unfair.
It will not speed up applications but do the opposite as lawyers will simply keep extending priority periods on OS1 searches and not submit applications at all until discharges are in hand. Clients will also pay more in search fees as priority periods are extended
Land Registry has the clout to sort out the lenders not dump the problem on the lawyers.
This is extremely ill thought out and will be absurd in practice!" (26 May 2009)
"It seems a dangerous idea to me and goes completely against the grain. What about the new lender to whom we have promised a first legal charge with no other financial interest?
The way to deal with the problem is to get the lenders to deal with the DS1 immediately or, better still, for them to remove the entry electronically within (say) 5 days of receipt of the funds. This should not be impossible in this day and age." (26 May 2009)
"I believe the new policy is misguided and helps no one (except the Land Registry). It is inherently dangerous to complete ownership changes without resolving mortgage matters at the same time." 26 May 2009).
"Unlike most other commentators, and the views of the Law Society, I think the new policy is preferable to the rejection of an application. But it is a perfect illustration of the tangles that are being produced, instead of improvements to the conveyancing system.
Lenders should be bound by their redemption statements. If they cannot, or will not, issue timely discharge forms, then why not stop using them? Instead the seller's solicitor could produce the redemption statement and evidence that the sum had been transferred to the correct account. Not very modern practice, but if lenders will not behave responsibly, and the Land Registry is happy to deny title to be transferred to a purchaser in good faith for value, something needs to be done.
I agree completely with comments concerning the change to the Land Registry, which appears intoxicated with the power it has been given to interfere in conveyancing practice." (26 May 2009)
"My comment is that yet again, conveyancers and their clients are being put at risk and expense owing to the failings of third parties.
In our view a mechanism needs to be devised whereby the 'consequences' of a mortgagor failing to provide the necessary discharge which it is obliged to provide are felt by the mortgagor in default and not by their customer or by us. In other words if an applicant's solicitor can provide evidence of the amount claimed by the mortgagor to discharge a mortgage (either a redemption statement or if 'net proceeds' a copy of the undertaking and a completion statement) together with evidence of payment of the required sum to the mortgagor, why shouldn't the Land Registry give the applicant the benefit of the doubt and remove the charge from the register.
If this were to be the case, mortgagors may be persuaded in this instance to forward undated discharges to solicitors in advance with authority for them to date them once the redemption/discharge monies have been sent by TT/cheque (as required).
Whatever method is chosen, the defaulting party ought to be the one to face the consequences and not their innocent victims (their customers and their conveyancers)."
Nick John of Hopkin John writes:
"As the proposal completely negates the intention of the transaction ie for the buyer to obtain a clean title, why is it being pursued?
And, is anyone other than the Land Registry, interested in how quickly they clear their desks?
If the problem is lenders getting up to speed with sending ENDs, why do solicitors have to suffer? Surely HMLR should sort this out with the CML." (22 May 2009)
Michael Garson of Kagan Moss, constituency Law Society Council Member and member of the Law Society E-conveyancing Task Force and Legal Affairs and Policy Board, writes:
"Whilst the Property Section may continue to lobby to change the Land Registry Early Completion policy, the Law Society’s immediate task is to help the legal profession to meet the requirements of the new policy. This will involve adding a layer of process. A practice note will be published shortly." (20 May 2009)
Maureen Jenkins of Mann Jenkins writes:
"Crazy idea. Additional work for the solicitor acting for buyer. One can imagine the reaction of clients to whom one sends evidence of their registration showing the seller's charge/s on the title.
Nor could one send the TID to the lender at that stage, not without a follow up letter showing 'clean' title - so what's the benefit?
It's analogous to the 'perceived benefit' of HIPs which are, at best, a disorganised muddle with HIP providers / estate agents / solicitors telephoning each other, growing frustrated with the difficulty in downloading electronic links, following up outstanding information etc.
I'm surprised at the Land Registry coming up with this proposal ostensibly after consultation with conveyancers and lenders." (19 May 2009)
"Aside from the fact that one would be in breach of one's undertaking to the lender client by not ensuring the new mortgage is the first and only mortgage at the time of early registration, there is a further implication of the new Land Registry policy.
Where there exists a lender's restriction on the title, the registration of the transfer and the new mortgage would be prevented, thereby potentially leading to expiry of the original priority period. Where does that leave the solicitor as regard his/her undertakings to the new lender to register the mortgage within the original priority period, and the buyer client who could potentially find they have entries on their title prior to their registration since their original priority expired and someone else got their application registered on their title? This clearly cannot be in the interests of the consumer or the solicitors' profession, or indeed in the interests of the lenders.
To overcome the potential difficulties, the profession would probably (should??) start to insist upon discharges (DS1/END) being given at completion rather than, as at present, solicitors' undertakings at completion, which the writer suspects lenders will probably not provide.
Since the problem originates with lenders not providing confirmation of discharge within a short period of time after redemption monies are received, the lenders should now take the lead to resolve the impending chaos and agree an industry standard on redemptions, which the Land Registry also need to buy into. All lenders should agree to the standard, including those that currently have a policy of providing their confirmations of discharge within 30 days of actual redemption, by which time the original priority may well have expired. " (18 May 2009)
"The simple solution is to force lenders to register the discharge of a mortgage at the Land Registry within 5 days of receiving the money - and to send an END to show they have done it."
"The various reasons given for the changes are:
1. The Land Registry's worries about increasing fraud.
This has been caused solely by the Land Registry's decision to do away with deeds and have paperless titles. Everyone else warned them of the problems that would be cause. Solicitors are now going to suffer all the consequences if this new policy is implemented.
2. The total failure of the END system to be implemented swiftly and correctly by Lenders on redemption of charges.
Here again – who brought in the End system? Answer - the Land Registry in conjunction with Lenders, but it has never been a success because of the failure so often by Lenders to act under the system properly and quickly.
3. The Land Registry's time targets for completing applications.
It looks to me as if someone wants to introduce the new scheme so that the Land Registry can pick up brownie points for meeting time targets – the usual rubbish that government departments seem to be plagued with. In order to achieve this, some bureaucrat co-ordinating this new policy within the Land Registry is not interested in the consequences for solicitors.
Solicitors have been urged by their professional body, their insurers and conveyancing experts to get their application in to the Land Registry as soon as possible so as not to miss the expiry date of their Land Registy search. Accordingly, we put our applications in to the Land Registry within a few days of completion, obtaining our SDLT Certificate online. We state in the application that the evidence of the discharge will be dealt with as soon as we receive it or the Land registry receive it direct.
The Land Registry has given as a reason for registering the transfer without discharging the mortgage that this would save fraud. Bearing in mind our Land Registry application is submitted straight away, any purported dealing would show the application as pending and prevent any such attempt at fraud. The fact that the Land Registry would have to raise a requisition and give a date by which it has to be dealt with is simply something that they will have to put up with until they can persuade lenders to deal with END discharges immediately.
Many, many charges now prevent any dealings with the land in the title without their consent. Accordingly in many cases the Land Registry will not be able to register the transfer. We also suspect that those lenders who do not include such a restriction in their charge will be advised to include one immediately and effectively completely block the Land Registry's proposed new policy.
Where a lender delays in dealing with the discharge of its charge, solicitors are going to receive new copy is able to register a transfer. Is that going to impress our Lender Clients and are the Land Registry going to send out another set of entries when the charge has been discharged which we can send to our Client and our Lender Clients?
The next thing we are expecting is for the Land Registry to charge separately for discharging mortgages. Why should solicitors have to engage in more work in submitting a completely separate application to discharge the charge because the Land Registry has dealt with the registration of the transfer but has then treated the discharge of the charge application as defective because of no evidence of the discharge being produced?
Should all solicitors be writing to the guilty Lenders telling them that we will be holding them responsible for our costs in dealing with a separate application for the discharge of their mortgage where they have failed to comply with the discharge within a certain timescale?
The whole situation is totally unsatisfactory to solicitors who try to deal with their Land Registry applications quickly and this new system will inevitably create a lot of bad feeling between solicitors and the Land Registries they deal with.
We have an excellent Land Registry in Croydon who deal with all applications quickly and efficiently and what is needed is not this crazy new proposal but the Land Registries dealing with the Lenders and agreeing with them agreed timescales within which they must complete the paperwork/computer entries to discharge their charges.
For instance, what dialogue has taken place between the Land Registry and Lenders to improve the current position? From a solicitor's point of view all I can see happening is that applications will be rejected, priority will then be lost because no further Land Registry search with priority has taken place because the application had been lodged at the Registry and claims will start to be arise against solicitors.
As far as we are concerned pressure should be placed on the Land Registry to drop this scheme immediately. In addition the Law Society and others should advise all Lenders to immediately include restrictions in their charges if they do not already do so to render the Land Registry's proposal inoperative.
Someone from the Land Registry should actually take account of the practical difficulties that solicitors have in trying to get their Land Registry applications done quickly and take measures that assist that process rather than try and look after their own position and hit some meaningless set of time targets some statistically minded bureaucrat may be seeking to introduce."
Mike Haslam of Taylor & Emmet writes:
"I have never understood why buyers should take the risk and not be given a release of the sellers mortgage in return for the purchase money. I firmly believe that the lender should appoint, preferably the seller's solicitor, failing which their own solicitor as their agent, to whom they would deliver a release prior to completion against the solicitors undertaking to send them the amount required to redeem the mortgage.
They would have total redress if the solicitor failed to send them the redemption money, the buyer would receive the release on completion, and be able immediately to complete the registration, everybody is happy.
It's such a simple, risk free solution which would only take the will of lenders to implement. Why are lenders reluctant to adopt it?" (15 May 2009)
"This is definitely a double-edged sword. The main reason for the change, and the driving force behind this particular amendment, is the lethargy of certain banks and financial institutions (although not all of them can be tarred with the same brush) when asked to release security on settlement of liabilities, especially where this is a partial discharge rather than a complete release of the borrower from all obligations to the bank in question.
Solicitors have for years given undertakings to discharge existing securities and register the new charge at the land registry, however have been frustrated by the efforts required to secure a simple DS1 from certain banks. However, it is precisely this pressure, and the concern as to what would happen if you breached your undertaking particularly in relation to property finance in the present climate, which meant that the discharge was pushed for until it was received, however long that took, as registration simply could not take place without obtaining the same. If registration can be effected, and the issue of actually releasing the prior charge falls into a post-completion black hole, then what is to stop the first bank, especially in a "discharge of part" scenario, from relying on that security in the event of a seller's default? This may have particular relevance in residential conveyancing on purchases in new developments, however could have repercussions across all aspects of property practice, especially as more and more banks are forced to call in facilities and enforce whatever security they may have." (15 May 2009)
David Freedman of Aubrey David writes:
"Frankly this is one of LR's daftest ideas I've seen in nearly 25 years of practice. If, on the one hand, one of their stated aims is to make sure that the register is as up to date as possible, but, on the other hand, applications requiring a discharge of an existing mortgage, which are submitted without one, will either be rejected or end up with the old charge remaining on the title (and any new charge being registered as a second charge only), this will clearly mean that the register will not accurately reflect the factual position.
Yet again, pressure needs to be exerted on lenders to expedite the prompt production of their discharges, which still take far too long." (15 May 2009)
"The present system works well for practitioners. It probably does not work for the Land Registry as it probably means that their target time for completing a registration is not achieved. However, the Land Registry needs to be reminded that it is their responsibility to provide a workable service and as 'the tail' in the process not attempt 'to wag the dog'. The Land Registry has the option and right to cancel the application after the requisition period has expired, rather than to extend this.
It is the practitioner that is in the middle of this process but with no control over that process other than to promptly forward the evidence of discharge to the Land Registry following receipt from the Seller's solicitor or the Mortgagee.
The law should penalise the delaying party in some way and that includes the mortgagee or lender who should be subject to an automatic fine and liable in damages for any loss that arises as a result of their delay in processing an END or producing a DS1 or DS3 or other evidence of release or discharge." (15 May 2009)
Henry S. McKeown of Preston Redman writes,
"Risk passing – what about the economic cost to the country? How can we safely enter into chain transactions? The emphasis must be on requiring lenders to co-operate on sale.
Below is my e-mail to the Practice Advice Section of the Law Society. I have had a response which is to the effect that the profession will be surveyed in the coming months. It seems to me far more urgent and for once we can argue that it is not 'special pleading'. These changes could damage the economy when it is struggling to get back on its feet.
"I have recently had real difficulty in organising redemptions. In days past we used to obtain deeds from the lender and at that time obtain confirmation from the lender that we could act on their behalf in dealing with the redemption.
In today's world there are no 'material' deeds. How can we oblige a lender to co-operate? If we exchange contracts and before completion request a redemption figure then we could be met with silence. Also current experience is that some lenders refuse to give a definitive redemption statement even on the day of completion. How can a solicitor proceed without the co-operation of the lender? He presumably cannot compel the lender to complete at the lender's registered office with a banker's draft for an unknown amount? If he does not have a definitive redemption statement then how can he complete on a related purchase until he has a clear statement upon which he can rely?
Couple these problems with the proposition that the Land Registry propose to introduce a new policy of registering transfers and new charges without evidence of former charges, and what is the position of a solicitor acting on the sale of a property recently the subject of a sale and which has two mortgages registered against it and when there is a failure of the lenders to give reliable redemption statements?
Are we heading for the situation where 'chain' conveyancing can no longer be conducted safely?
Should solicitors be advised to ensure that they make contact with mortgagees before exchange of contracts and to ensure that the lender will co-operate?
Will the Law Society attempt to obtain some understanding with the CML?"
(15 May 2009)
Julie West of Julie West Solicitor writes:
"I have recently handled a case where the Land Registry's new requirements on verification of ID were not recognised by the lender leading to stalemate. A major lender declined to discharge its mortgage using the END procedure and instead provided a DS1, so that a DS2 was required. The lender refused point blank to provide the now requisite DS2, despite letters from the Land Registry explaining this is now required in addition to a DS1.
Eventually after 6 weeks involving much correspondence and many telephone calls the Land Registry agreed, as an exception, to discharge the mortgage on the basis of the DS1 alone. It did so having checked in its own existing records that the signatory of the DS1 was a recognised signatory for the lender concerned.
Wouldn't this be a more sensible approach to have adopted in the first place?" (15 May 2009)
Pascal Lalande, Registration Change Group Leader, Land Registry writes:
"The early completion policy will commence on 3 August 2009. We have no plans to postpone this. The change was originally due to start on 1 June but we moved this to 3 August following representations by the Law Society.
It is clear from some complaints we have received that some correspondents have not read either our Practice Bulletin or the Questions and Answers on our website before writing to us. We would encourage all conveyancers to do so.
Land Registry is a registration authority, we are not a policeman for the redemptions process. We have, over many years, sought to find agreement amongst stakeholders on how to end delays in providing evidence of discharge without success. There is a lack of consensus amongst lenders and conveyancers as to the causes of delays and alternative ways forward have not been achievable. (15 May 2009)
PLC's response to Ashley Kopetko of Speechly Bircham is incorrect as there has not been a rule change." (15 May 2009)
PLC Property: For ease of reference:
Here is a link to the Practice Bulletin LR Practice Bulletin 16: Early Completion (www.practicallaw.com/6-386-0485).
Here is the link to the Questions and Answers: Land Registry: Early completion - questions and answers (www.practicallaw.com/8-386-1115).
"As a commercial property lawyer I find the Land Registry's sudden realisation that the LRR require it to treat an application to register (i) the discharge of an existing charge (ii) a transfer and (iii) a new charge by the transferee as three distinct applications almost as puzzling as the Law Society's reaction to it.
Most lenders taking security on commercial property insist on a restriction preventing the registration of further dispositions so the new LR practice will, in the majority of cases, be of no effect at all. In those cases where it is, however, I should be glad if someone could explain why a buyer's solicitor would be in any worse position after "early completion" of stages (ii) and (iii) above (within a search priority period) than if, under the current practice, all three applications had been rejected because a DS1 had not been lodged within the Land Registry's time limits.
The elephant in the room is surely the fact that it has become increasingly unsafe for a buyer's solicitor to accept from a seller's solicitor the Law Society's recommended form of undertaking for production of a DS1 - an undertaking which (understandably) imposes no time limit.
A number of factors have brought this about - the (no doubt, target-driven) imposition of registration time limits by the Land Registry coupled with its new rules on identification and the fact that banks can no longer be relied upon to understand or care about the extent to which their refusal to make DS1s available at completion imposes time pressures on the solicitors acting for both the seller and the buyer to whom the risk is thus passed." (15 May 2009)
Michael Griffiths of Morris Roberts writes:
"I believe this is a bad decision and potentially dangerous. I suspect a great deal of present requisitions and cancellation warnings are linked with the lenders failing to quickly return evidence of discharge either by END,DSI or DS3 as the matter may be. The new system will mean that technically we will be in breach of our lenders instructions because we will not have a first charge registered but a second charge. If solicitors continue to chase for the sellers charge to be redeemed that may be all right but there is a danger that busy firms could overlook this.
I firmly believe that the Land Registry, where it has proof that redemption monies have been paid to the lender, should exercise its muscle by threatening sanctions on those lenders who continue to delay sending evidence of discharge to them.
The Land Registry has the power that solicitors do not have and it is us that are being penalised and we will have to continue to waste time with extra letters and phone calls having to be made because some lenders have not put in sufficient resources to ensure speedy and efficient discharge notifications being processed." (15 May 2009)
Peter Levy of P S Levy & Co writes:
"This is only one example of draconian and idiotic measures forced on what used to be a user-friendly Land Registry by a Government, anxious only to save money, regardless of the chaos and extra expense that will have to be borne by solicitors and their clients.
There is a simple answer.
If the Land Registry wants to avoid the cost of making Requisitions, why not give applicants say 28 days to lodge evidence of discharge of a mortgage, in the absence of which, and any application for an extension of time, the entire application will be automatically rejected.
In my experience, part of the problem lies with solicitors who delay in getting the discharge process dealt with and who deserve to be penalized, but the main fault lies with many lenders, who sometimes delay for weeks after redemption before providing evidence of discharge.
There should be financial penalties imposed on such lenders in the case of delay, which I am sure would solve the problem.
I have very recently had to wait more than 3 weeks to obtain a DS1 from Nationwide, and that only after severe prompting by the solicitor who dealt with redemption.
The problem is that lenders simply don't care although, predictably, they do when they are lending and want registration done." (15 May 2009)
Stephen Larcombe of Limbach Banham writes:
"As an interim measure would protecting the contract by the registration of a Notice provide a fall back protection if ultimately a purchaser's application was cancelled resulting in loss of priority?
I feel very strongly that an intellectual arrogance/ omnipotent culture is developing on the part of the Registry, which is ironic, when you consider that at every seminar and even on its web site the profession were assured that all changes would only take place follow consultation.
It is the type of consultation that is all too prevalent in Government- consult then ignore A stand must be taken on this issue since I see further trouble ahead with the dreaded and unwanted Chain Matrix being imposed on the profession providing "toys" nobody wants." (15 May 2009)
Robin Hill of Kershaws writes:
"Many major lenders do not inform the conveyancers acting for a seller that they have discharged their charge at the Land Registry. The Land Registry should inform that conveyancer by e-mail on receipt of such a discharge where there has been an early completion rather than leave it to the conveyancer to ring up from time to time. If the Land Registry has that information, it should be passed on rather than keep the conveyancer out of the loop. The early completion protocol confirms the good practice of not putting in the Land Registry search until three days before completion in order to maximize the priority period." (15 May 2009)
"Some might say that this will only work if lenders smarten up their act in processing discharges.
Solicitors may not wish to rely on Law Society undertakings any longer, and this could be a problem for the whole conveyancing process generated, (it might perhaps be cynically speculated) by a need to hit targets in processing applications.
What it really does is to bring into sharp focus where problems in conveyancing practice arise. Given that in acting for a lender in taking a mortgage a solicitor is under instructions to obtain a first legal charge, undertakings only limit or transfer the risk of being in breach of the instruction, and only do this effectively if time limited. Solicitors acting in a sale / redemption quite rightly are not prepared to give undertakings where they cannot control the outcome - ie where the issue of a DS1 or END is in the hands of a lender.
It is perhaps ironic that it is some lenders with the most draconian instructions as to obtaining first charges are among the worst in the processing of redemption formalities
Are we to go back to personal completions at the offices of the Lender or its solicitor?" (15 May 2009)
"Thanks for the opportunity to comment. This is a typical land registry ploy which offloads the consequences of the failings of lenders onto the profession. The Registry has been completely unsuccessful (as in fairness has the profession itself) in getting many lenders to react properly to a redemption. Rather than continue to work to this end, to save itself money (when it is putting up fees anyway) the Registry decides to act unilaterally. The biggest danger is the restriction situation. There are any number of lenders who won't or can't produce a redemption document in 20 days. All the Registry is interested in is its turnaround time figures and cost minimisation. Practitioners can be left out to dry. From being a responsive and helpful public body with real professional expertise the Registry is now, as far as I can see, run exclusively for profit and performance targets." (15 May 2009)
"You suggest that buyers might have to accept that they would get less than good title, but of course this would be unacceptable to lenders. This change in practice seems to be driven more by Land Registry desire to improve on turn-round times than by a need to improve on the quality of registered land practice as such. Further, it seems that the Land Registry is attempting to change unilaterally the nature and priority of applicants' applications set out in panel 4 of the AP1 form, where most applications will stipulate that the first application is to discharge the existing charge, then register the transfer to the buyer etc."
PLC Property: We agree, the position will not be acceptable to lenders, any more than it will be to buyers. We have amended the update to make it clear that by referring to clients, we are referring to both buyers and lenders.
"Are representations still being made to HMLR about their proposed 'early completion policy' and are they trying to sort out the underlying problem caused by the delay of lenders producing DS1s?
Rather than addressing the cause of the problem they seem to be passing the buck to solicitors!"
PLC Property: The Law Society's website indicates that the Law Society will publish a practice note on the changes soon. PLC Property will cover the release of this note, which may also give an indication of the Law Society's intentions.
You might be interested to read the Law Society's submission to the Land Registry Board (www.practicallaw.com/6-385-9241), as this highlights that the real problem is delays in lenders producing the discharge evidence.
It is also worth noting the Law Society's point that this might not even save the Land Registry work, leaving no winners, but problems for lawyers and their clients.
"I believe the Law Society will be issuing further guidance on this change. Do you know if they are proposing to alter their recommended form of undertaking and if so, what that may be? I share your concerns, particularly the possibility that a fraudulent seller might draw down further funds under an all monies charge. I also worry (and have done for years) that the buyer's solicitor bears all the risk of the DS1 failing to materialise and have had occasions when production of the DS1 has been substantially delayed. It would be more helpful if lenders agreed (and CML could endorse as best practice) to deposit the signed but undated DS1 with their solicitors before completion against an undertaking not to complete or release it until the monies required to redeem the charge have been received by the solicitor/sent to the mortgagee. Do you have any views as to how this might be promoted to lenders?
In the 80s, we often completed in person and only released the completion monies once we had checked all the documents and that a release was amongst them. If the completion was outside of London, we used to appoint a local firm as agents to attend the seller's solicitors (or the lender's office) to collect the release. I'm not advocating a return to those days, but it would certainly eliminate the problem!
I thought the Law Society submission was good and I liked their suggestion that the Land Registry agree a protocol with the CML that lenders should produce the DS1 within 5 days of completion, failing which the Land Registry would remove the charge from the title. The idea of a 'name and shame' of worst offenders in producing the discharge was also interesting, but I can't see the Land Registry agreeing to either of these proposals.
I also imagine that any real problems will only involve fraudsters or private mortgage arrangements where there is no pressure which can be brought to bear on an individual mortgagee after the event. But in those cases practitioners should already be alert to the need to collect the DS1 on completion."
PLC Property: You are quite right that the Law Society intends to issue guidance on the change to the Land Registry's practice.
The real problem is, as you and many others have identified, simply that a lender's delay in producing a discharge causes substantial problems. Anything that attempts to deal with that issue must either have statutory authority behind it (for example, fines for lenders that do not produce a DS1 punctually), or be self-evidently beneficial to the lender (or perhaps self-evidently detrimental if they do not follow it). The rule* change is very much treating a symptom of this problem, rather than the cause.
*PLC Property apologises for incorrectly referring to this as a rule change. It is a policy change. We are grateful to Pascal Lalande of the Land Registry for pointing this out (see comment, Land Registry).