The Conveyancing process is a complex interplay of legal responsibilities, deadlines, and client expectations of which the pre-exchange and post-completion stages play pivotal roles. Understanding the relationship between these stages is vital for ensuring smooth transactions and mitigating potential risks. This article explores the significance of these phases, the benefits of managing them effectively, and the risks associated with improper handling.
Pre-Exchange Stage
Qualified conveyancers will know the key aspects of the pre-exchange stage of the conveyancing transaction like the back of their hands and will have all the skills necessary to conduct these aspects. However, it is important to highlight the skills of this stage which have a direct correlation with the post-completion phase, as focusing on and enhancing these skills reduces post-completion problems. These skills are:
- Due Diligence: Very simple checks against the client’s name can avoid unnecessary post-completion delays, for example on the client’s identification document is the name spelt the same as what is on the Transfer Deed and/or Mortgage Deed? Without cross-referencing the client’s identification with documents, they have signed could lead to a name discrepancy causing a requisition or even a client complaint, which could have easily been avoided if due diligence was performed at the start of a file.
- A thorough title check of the property: This is imperative to ensure there is nothing onerous on the title that would prevent registration from taking place. This will be explored in more detail in the next section.
- Detailed drafting and checking of documents: It is vitally important that all documents are drafted correctly prior to exchange. Inaccurate documents will result in requisitions being raised at HM Land Registry and it is much easier and quicker to get the drafting solicitor to amend documents pre-exchange than post-completion when the file may have left the fee earners hands.
- Accurate Information gathering: Accuracy pre-exchange will ensure the smooth running of the post-completion stage. If for example, inaccurate information is obtained regarding stamp duty land tax this could delay the submission of the return resulting in penalties or the wrong amounts of stamp duty land tax being paid.
- Pre-exchange checks: These are imperative. This is the last chance to warrant you have everything you need to carry out accurate post-completion duties. It is much easier to ask a client to return a signed form or provide required information prior to exchange when they are driven by the desire to complete rather than when they are pre-occupied by moving house, surrounded by boxes and unable to find the information required.
Post-Completion Stage
Below are some aspects of the post-completion stage that can be negatively impacted if the pre-exchange stage is not managed correctly.
Stamp Duty Land Tax submission and payment –If a SDLT 5 certificate is not obtained this will delay registration. Late submission penalties will cost the firm money and will lead to client complaints as will errors in the amount of SDLT paid.
- Title Review – A conveyancer needs to ensure that all charges currently registered can be removed prior to the client’s ownership or if not, has consent been obtained to register the clients’ title and any new charge? Have the required consents for restrictions been obtained or undertakings to receive these post-completion? If not, exchange should not take place as there is no guarantee that these documents will ever be obtained post exchange and therefore no guarantee that the property will be successfully registered. Other questions that should be asked at this stage, are:
- is the beneficiary of the restriction holder a valid company?
- have they been taken over or are they dissolved? If dissolved what steps are going to be taken to achieve compliance?
- how many restriction holders are there; and
- how many companies require notices to be served.
These are all basic points which, if overlooked, can cause severe delays to the registration process, but affect best practice in the pre-exchange process.
- Registration – This is perhaps the most important and fundamental aspect of the conveyancing process. It goes without saying that if the property cannot be registered in the client’s name, they may never be able to sell the property. Likewise, if a charge cannot be registered on the title, and is a reoccurring pattern then worse-case scenario a lender may remove the acting firm from their panel resulting in loss of future clients and business.
All the documentation and information required for a successful registration is obtained prior to exchange, whether these are the actual documents and information themselves or undertakings for them. Therefore, from the start of the transaction the fee earner should be constantly thinking, is there anything preventing this property from being registered in the client’s name and can the lender’s charge/s be registered? The conveyancer should be asking these questions right from the start of the transaction when all due diligence checks are being conducted.
Interrelationship Between Stages – Benefits and Risks
The above examples show that the pre-exchange and post-completion stages are intrinsically linked. Effective due diligence and thorough preparation during the pre-exchange stage can significantly reduce the risks and complications encountered post-completion. Conversely, insufficient attention to detail early on can lead to unforeseen challenges and financial burdens later in the process.
Effectively managing the pre-exchange stage of the conveyancing process greatly assists the post-completion phase and yields significant benefits such as:
- Enhanced client satisfaction – Clients expect a seamless transaction process. By ensuring that all documentation is in order and that the necessary due diligence is completed before exchanging contracts, clients are more likely to feel confident and satisfied with the services provided.
- Reduced delays and costs – Proper management of the pre-exchange phase can minimise delays that often arise from incomplete or inaccurate documentation. This efficiency can save both time and money for clients and conveyancers.
- Legal protection and improved risk management – Ensuring everything is in order for registration prior to exchange reduces the risk of not being able to register the property.
- Streamlined process – reduces administrative burden and ultimately time and money.
- Repeat clients and recommendations – Satisfied clients will refer others and return to the firm, increasing the revenue of the firm.
Conversely, if the pre-exchange phase is not conducted effectively, it creates problems in the post-completion phase leading to risks for the firm such as:
- Legal complications – Claims of not being able to register a property because complete due diligence was lacking at the pre-exchange stages.
- Financial Implications – arising from penalties of late SDLT submissions, and the costs involved with dealing with avoidable requisitions.
- Reputational damage
- Loss of clients – Unsatisfied clients will not recommend or return to the law firm which will cause a loss of revenue for the firm in the future.
In conclusion, understanding the relationship between the pre-exchange and post-completion stages in conveyancing transactions is crucial. By recognising the diligence required in the pre-exchange stage the conveyancer will see the benefits and potential risks in the post-completion stage. Conveyancers can better protect themselves and their clients from future risk and liabilities, streamline their processes, saving time and money and improve the overall service they offer which will ultimately enhance client satisfaction and lead to more business in the future.
