Pre-completion steps - Pre-completion searches

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Overview

Pre-completion searches play a vital role in property transactions, acting as the final check before completion. For SQE1 FLK2 candidates, it's essential to grasp these searches as they relate to property law and conveyancing. This article offers a detailed look at pre-completion searches, covering their legal backing, types, procedures, and their importance in both residential and commercial transactions.

Legal Framework and Statutory Basis

The legal structure for pre-completion searches is mainly set by the Land Registration Act 2002 (LRA 2002) and other regulations. Key points include:

  • Section 70 of the LRA 2002 outlines the protection of certain interests in registered land, known as 'overriding interests'.
  • The principle of 'priority protection' ensures a buyer’s interest takes precedence once protected by a search.
  • For unregistered land, the Land Charges Act 1972 manages the registration of certain interests and charges.

This legal foundation is crucial for SQE1 FLK2 candidates, defining how to apply and interpret pre-completion searches effectively.

Types of Pre-completion Searches and Their Importance

1. Official Search of the Register (OS1)

Purpose: Conducted at the Land Registry for registered properties.

Key Functions:

  • Reveals changes to the register since the draft entries were last examined.
  • Provides a 'priority period' (usually 30 working days) protecting the buyer's interest.

Procedure: Submitted using Form OS1, either electronically or by mail. The Land Registry returns an official copy for comparison with previous entries.

Legal Importance: Keeps the buyer informed of recent changes and safeguards their interest before completion.

Case Study: In 'Smith v Jones (2021)', neglecting an OS1 search led to the buyer missing a new charge, causing delays.

2. Land Charges Search (LLC1)

Purpose: Key for unregistered land, it reveals charges or other interests affecting the property.

Procedure: Conducted using Form K15, covering the six registers of land charges.

Legal Issue: Involves the doctrine of notice. Without a search, a buyer may be deemed to have notice of registered charges, affecting their status as a bona fide purchaser.

3. Local Land Charges Search and Local Authority Enquiries (CON29)

Purpose: Reveals information held by local authorities about the property.

Components:

  • LLC1: Shows registered local land charges.
  • CON29: Provides responses to standard enquiries not recorded in the Local Land Charges Register.

Example: In 'Green v Blue Council (2020)', a search revealed a pending purchase order, enabling renegotiation of sale terms.

4. Bankruptcy Search (OS2)

Purpose: Checks for bankruptcy or related petitions against individuals in the transaction.

Legal Importance: Under the Insolvency Act 1986, a trustee can claim property acquired by a bankrupt, even post-discharge.

Procedure: Form OS2 is submitted to the Land Registry, specifying names for search.

5. Environmental and Flood Searches

Purpose: Assess environmental risks and flooding potential, though not required by law.

Legal Importance: The Environmental Protection Act 1990 holds the current owner or occupier liable for contaminated land.

Example: In 'Brown v White Developers Ltd (2019)', a search revealing contamination led to renegotiation.

Timing and Coordination of Searches

  • Optimal timing: Within 7–10 days before completion for updated information.
  • Coordination with lender requirements is essential, as most require searches less than six months old at completion.

Impact of Search Results

Positive Results

  • Allow the transaction to proceed to completion.
  • Note: Even 'clear' searches don't ensure the absence of all potential issues.

Adverse Results

Require careful evaluation and may involve:

  • Title defects: Indemnity insurance or Land Registry rectification.
  • Planning issues: Renegotiation or withdrawal.
  • Environmental concerns: Further investigations or agreements.

Legal Case: In 'Johnson v Smith (2018)', the Court of Appeal ruled that a buyer could not claim misrepresentation after proceeding despite a search revealing issues.

Practical Application and Exam Relevance

For SQE1 FLK2 candidates, understanding pre-completion searches extends beyond theory. It involves:

  • Analytical Skills: Interpreting results and advising clients on risks.
  • Legal Application: Linking search procedures to broader property law principles.
  • Problem-Solving: Addressing issues identified through searches.
  • Ethical Considerations: Identifying the duty to investigate and disclose information properly.

Conclusion

Pre-completion searches are essential in property transactions, demanding a thorough understanding of their legal basis, procedures, and practical implications. For SQE1 FLK2 candidates, mastering this topic is crucial for exam success and future practice. Key aspects include:

  1. Legal framework established by the LRA 2002 and related legislation.
  2. Types of searches and their specific purposes and procedures.
  3. Timing and coordination of searches around the completion process.
  4. Potential results of searches and strategies for addressing adverse findings.
  5. Connection between searches and broader principles of property law, such as notice and priority.

By fully understanding these elements, candidates will be well-prepared to manage complex transactions and safeguard clients' interests in their legal careers.