Use of this document is free, subject to the Conditions in GN/CPSE (version 3).
This document is part of the Commercial Property Standard Enquiries (CPSE) suite of documents, prepared by members of the London Property Support Lawyers Group and endorsed by the British Property Federation.
For more information about the CPSE see GN/CPSE (version 3).
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If you have any comments, please e-mail cpse@practicallaw.com.
For details of changes made between this document and its previous version, see Legal update, June 2010: new versions of the CPSE documents released.
For the PDF version of this document click here.
This document may be used free of charge subject to the Conditions set out in GN/CPSE (version 3) Guidance notes on the Commercial Property Standard Enquiries (www.practicallaw.com/1-502-0158).
Seller:
Buyer:
Property:
Transaction:
Seller's solicitors:
Buyer's solicitors:
Date:
1. This document is designed for use with pre-contract enquiries in CPSE.1 and deals with arrangements, as between solicitors, for completion.
The section on Interpretation in CPSE.1 is incorporated in this document and the following interpretation also applies save that:
"we" refers to the Buyer's solicitors and "you" refers to the Seller's solicitors; and
the following interpretation also applies:
Lease: means the lease proposed to be granted by the Seller to the Buyer or, as the case may be, the lease under which the Property is held and which is to be assigned by the Seller to the Buyer.
Tenancy Documents: refers to the Lease (or, where the Transaction is the sale of a property subject to tenancies, the instrument creating each tenancy), and to any of the following that relate to it: charges, mortgages, surrenders, variations, side letters, undertakings, applications, consents, memoranda, registrations, notices, rent deposit deeds, orders, guarantees, concessions, franchise agreements, counsel's opinions and arbitrators' or experts' decisions.
In order to apply, the Law Society's Code for Completion by Post must be expressly adopted by the parties, ideally in writing. Under the Code the Buyer's solicitor must give instructions to the Seller's solicitor as to documents to be examined and marked, memoranda to be endorsed, undertakings to be given, and deeds and other documents (such as rent authorities) to be handed over on completion. However, the Code itself involves undertakings by the Seller's solicitor confirming the necessary authorities to receive the purchase price and redemption money from the Seller and any lenders respectively. A Seller's solicitor who does not have such authorities is required by the Code to notify the Buyer's solicitor.
1.1 We wish to complete by post. Please confirm:
(a) you will adopt the current Law Society's Code for Completion by Post;
(b) the mortgages and financial charges listed in Schedule 1 to this form are those specified for the purpose of paragraph 3 of the Code; and
(c) you will mark the copies of those documents listed in Schedule 2 to this form (the originals of which are not to be handed over on completion) as examined against the originals.
1.2 If you will not be adopting the Law Society's Code for Completion by Post, please provide copies of the following authorities:
(a) from the Seller authorising you to receive the purchase money; and
(b) from the proprietor of each mortgage or other financial charge listed in Schedule 1 to this form authorising you to receive the sum needed to repay it.
1.3 If you will not be adopting the Law Society's Code for Completion by Post, please confirm that you will act as our agent (without fee) in marking the copies of those documents listed in Schedule 2 to this form (the originals of which are not to be handed over on completion) as examined against the originals.
Although the Seller's solicitor normally provides a completion statement, there seems to be no obligation to do so, either under the Standard Commercial Property Conditions (Second Edition) (SCPC) (SCPC 8.4 deals with the amount payable on completion, but there is no express obligation on the Seller to produce a completion statement) or the Law Society's Code for Completion by Post (which refers to the Seller's completion statement, but does not contain an obligation to produce one). Where the calculation of the completion figure is likely to be complex or controversial (e.g. on a sale of an investment property subject to numerous tenancies) the Buyer's solicitor might want to provide in the contract that the Seller's solicitor will produce a completion statement sufficiently far in advance of completion to allow for checking the figures.
Receipts for any payments which are being apportioned on completion should be provided. On the sale of a leasehold property, a rent receipt is evidence of the landlord's waiver of the right to forfeit for earlier breaches of the tenant's covenants (except to the extent that they are continuing breaches, where the right will revive the day after the receipt) and in all cases the Buyer wants evidence that it is not being asked to reimburse the Seller for payments which the Seller has not in fact made.
2.1 Please supply a completion statement, showing how any apportionments have been calculated.
2.2 Where any payments are being apportioned, please supply copies of the most recent receipts for them.
For guidance from the Law Society on accepting an undertaking to discharge a mortgage, see Guidance on acceptance of undertakings (Law Society) (www.practicallaw.com/5-106-6969).
In Patel v Daybells [2001] 32 EG 87 (CS), the Court of Appeal ruled that the acceptance of a solicitor's undertaking for a DS1 will not normally be negligent. The Court of Appeal left open the possibility that it could be negligent in "exceptional circumstances". These were not specified. The expert evidence in the case (set out in the judgment, but not expressly endorsed by the court) was that it would not be normal or advisable (and therefore might be negligent) to rely on an undertaking:
Where the mortgagee was not a member of the Council of Mortgage Lenders (list of members on the CML's web site www.cml.org.uk); or
Where the amount required to redeem the Seller's mortgage exceeded the minimum level of solicitors' indemnity insurance.
The court did state that the fact that the Seller's solicitor in the case was a sole practitioner was not relevant to the question of the acceptability of an undertaking.
If a DS1 (or DS3 on a sale of part) will not be available on completion and the Buyer's solicitor considers that the circumstances of the transaction might be regarded as exceptional (so that accepting an undertaking from the Seller's solicitor might be negligent), the Buyer's solicitor should consider:
Arranging to send that part of the purchase price required to discharge the mortgage direct to the lender;
Asking to see confirmation from the lender that the Seller's solicitor has been appointed the lender's agent for the receipt of the redemption money (confirmation from the Seller's solicitor alone is not sufficient despite provisions for this in the Law Society's Code for Completion by Post);
Where the amount of the mortgage debt exceeds the minimum indemnity insurance, only accepting an undertaking for the DS1 (or DS3) coupled with a warranty from the Seller's solicitor that its insurance cover exceeds the amount required to redeem the mortgage; or
Refusing to accept an undertaking from the Seller's solicitor. There is no obligation to accept an undertaking in place of performance of the obligation. However, if that is the Buyer's solicitor's position, a condition to that effect will be necessary in the contract.
Before the Buyer's solicitor accepts an undertaking where it would not be normal practice to do so, it is essential to explain the risks to the Buyer and get clear instructions that the Buyer is willing to accept them.
Even where the lender is separately represented, the Buyer's solicitor should consider whether there are any exceptional circumstances making it unwise (or potentially negligent) to accept an undertaking (at least without evidence of the lender's solicitor's authority to accept the redemption money).
The use of EDs and e-DS1s is becoming more popular, although at present only in the residential field. As its name implies, no paper DS1 is produced and the Buyer's solicitor has to rely on an undertaking from the Seller's solicitor. In this situation acceptance of the Seller's solicitor's undertaking is inevitable and in exceptional cases the Buyer's solicitor will have to take such additional steps as are available (e.g. split payments, evidence of authority, evidence of sufficient insurance cover).
3.1 In relation to each of the mortgages and financial charges listed in Schedule 1 to this form will you:
(a) hand over DS1 (or DS3, as the case may be) on completion;
(b) be giving an undertaking for DS1 (or DS3, as the case may be);
(c) be giving an undertaking for an ED; or
(d) be giving an undertaking for an e-DS1?
3.2 Where an undertaking will be given, please provide a draft for our approval.
4.1 Where the Property is subject to Tenancies, please provide a draft rent authority for our approval.
4.2 What arrangements will be made:
(a) to hand over keys; and
(b) where there is a security system at the Property, to supply codes etc?
Please confirm that the Seller is not aware of anything which would change or make incorrect the reply given to any pre-contract enquiry.