All practitioners should now be familiar with the LR’s policy of ‘early completion’, which came into force last August. The new policy applies whenever an application for discharge on the existing charge of whole is made, together with other applications (eg to register a transfer and a new charge), but without there being evidence of the discharge of the existing charge. In that situation, the LR will reject the application for discharge – but complete the other applications. Thus, the old (existing) charge will remain registered.

The Law Society Practice Note of July 2009 said that these changes of practice may make ‘a buyer’s solicitor want to seek further assurances from the seller’s solicitor. You may seek these by way of representations, contractual obligations and/or undertakings’. What this means is that the buyer’s solicitor does need to consider, on a case-by-case basis, what steps should be taken to cover the discharge of an existing charge. It is no longer enough to deal with the mechanics of discharge after exchange of contracts. Whilst most firms have adapted their pre-contract procedures to cope with these changes, this is a suggested list of additional enquiries that might usefully be made before exchange of contracts:

• Is the seller’s lender a member of the CML? Is it a member of the BSA?
• Is the seller’s lender represented by a solicitor in relation to the discharge?
• What method of discharge will be used: DS1, ED, or e-DS1?
• Will a DS1 be available at completion, held in escrow by the seller’s solicitors?
• If not, will the seller’s solicitors give a pre-completion undertaking in the Law Society Standard Form, to discharge the mortgage?
• Will written confirmation be provided from the lender, before completion, that it will discharge its charge on receipt of the amount of money specified in the confirmation?

Most practitioners deal with these issues through enquiries and so leave the matter outside the contract. The alternative, of course, is to introduce an amendment to the draft contract requiring the DS1 to be available on completion; that will at least concentrate the minds of the parties (although it may not be of much practical value, since the only person who can really undertake to produce the DS1 is the lender). Some firms may try to include a specific obligation for the seller to use its best or reasonable endeavours to ensure that the lender produces the discharge within a stated time, but the reality is that this probably adds nothing to the seller’s existing contractual obliation to transfer the property free of financial charges.

For more on this topic see article in [2010] 242 PLJ 6.