After careful consideration, the Conveyancing Committee has decided to amend its longstanding recommendation regarding the manner in which completion moneys are to be furnished where there is an existing mortgage or charge (‘mortgage’) on title and a release, e-discharge, discharge or vacate (‘discharge’) will not be available on closing.

Up to now, the following was the recommended practice:

• Prior to completion, the vendor’s solicitor would furnish the purchaser’s solicitor with redemption figures in respect of the mortgage(s) secured against the subject property,
• On completion, the purchaser’s solicitor would furnish the completion moneys to the vendor’s solicitor by way of two bank drafts, one in the sum required to redeem the mortgage(s) and made payable to the relevant lending institution, and the other for the balance of the purchase moneys (if any) made payable to the vendor’s solicitor.

The committee has decided to recommend a change in practice, having considered the matter carefully, and in particular:

• There are increasing difficulties, costs, and delays for solicitors in obtaining bank drafts. In particular, because of the reduction in services and lack of availability of tellers in banks, it can take a very significant length of time to get a bank draft. Banks are continuing to reduce branch numbers and the services available in the branches that remain open. Some solicitors may now be practising in areas where there are no banking services that would allow for obtaining a bank draft.
• A bank draft takes up to five working days to clear.
• An increasing number of contracts for sale contain a condition that closing moneys are to be provided on closing by electronic funds transfer.
• The decision of the English Court of Appeal in the case of Patel & Anor v Daybells ([2001] EWCA Civ 1229).
• Undertakings are an integral and essential part of the conveyancing process.
• The practice of completing on a vendor’s solicitor’s undertaking to discharge the mortgage(s) on title is widespread, convenient and efficient.

In arriving at its view, the committee has been mindful of weighing the risks against the benefits of a change in recommended practice and has considered carefully the question of comparative risks and benefits.

The committee has considered the risks associated with a purchaser’s solicitor accepting an undertaking from a vendor’s solicitor to discharge the mortgage(s) secured on the subject property. In the Patel case, it was common case “that there would always be some unquantifiable (but no doubt small risk) whether from fraud or misadventure, in any conveyancing procedure designed to achieve … the payment of money and the perfection of title [as] simultaneous transactions”.

The risk involved in accepting an undertaking from a vendor’s solicitor to furnish a discharge of a mortgage is that it may not be produced. Such failure may be caused either by the solicitor’s dishonesty or by a dispute, misunderstanding, oversight or other error. The risk of the latter four is reduced for a vendor’s solicitor who requests redemption figures using the QeD form or requesting same under the certificate of title system, as he/she is entitled to rely on those figures. The lenders who use the QeD procedure or operate under the certificate of title system have agreed that, where the redemption figure provided by the lender to the vendor’s solicitor is incorrect, the lender will furnish a discharge of its security.

Taking into consideration that the failure by a vendor’s solicitor to comply with an undertaking to furnish a discharge of the vendor’s mortgage(s) is an extremely serious but rare event, and is a breach that may be enforced ultimately by the High Court by a claim on the vendor’s solicitor’s professional indemnity insurance or by application to the compensation fund, the committee has taken the view that it is acceptable for a purchaser’s solicitor to accept from a vendor’s solicitor an undertaking to furnish a discharge of mortgage except in cases where:

• a) The lender is not one who is a party to the certificate of title system, or
• b) The transaction is so large that the sum required to honour the undertaking might exceed the mandatory minimum level of solicitors’ professional indemnity cover.

The committee accordingly now recommends (save in the cases referred to at (a) and (b) above) that:

• Prior to completion, the vendor’s solicitor would furnish the purchaser’s solicitor with redemption figures in respect of the mortgage(s) secured against the subject property. The vendor’s solicitor should, when requesting redemption figures in the case of residential property, use the QeD form in order to avail of the protections provided by its use.
• On completion, the purchaser’s solicitor would furnish the completion money to the vendor’s solicitor’s client account by way of electronic funds transfer.
• The vendor’s solicitor on completion furnishes to the purchaser’s solicitor an undertaking in the Law Society approved form (see ‘practice notes’, ‘Precedent Letter of Undertaking re Mortgage on Title’ at lawsociety.ie) to pay to the vendor’s lender the money required to redeem the mortgage(s) secured against the subject property and to forward the discharge as soon as possible thereafter.
• The vendor’s solicitor shall, within five working days of the date upon which the sale has completed, furnish to the purchaser’s solicitor evidence that he/she has discharged to the vendor’s lender the money required to redeem the mortgage(s) secured against the subject property.

The attention of practitioners is drawn to the practice notes issued by the Guidance and Ethics Committee on undertakings.

Where the foregoing arrangements apply, general condition 6(f) of the standard Conditions of Sale (2019 edition) should be amended by special condition.