A purchaser was protected by permitting him to raise an objection on title, and validly exit the contract, if the title was later not established as being good and marketable.
Obviously, document production and data sharing has moved on very considerably, and, so too, practice has moved on.
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In the period leading to 2016, the Law Society’s Conveyancing Committee noticed the increasing practice in the profession of vendors requiring title matters to be addressed pre-contract.
This has been the long-established practice for conveyancing in the new homes market. However, it could be seen that more transactions were being structured in this way, especially in receiver-led disposals and in higher value or more complex cases.
The ultimate aim of the vendors in taking this approach is to achieve a more secure contractual position on contract exchange by ventilating title issues ahead of contract exchange.
The attraction for purchasers in this approach is that any title issues are flushed out before the purchaser is bound in.
The committee considered whether it was time for the profession to catch up with developments in document production and technology – and indeed practice itself.
'Any title issues are flushed out before the purchaser is bound in
So, in 2016, the Law Society sought submissions from the profession with regard to a proposed move to pre-contract title investigation.
A significant amount of feedback was received and, ultimately, a clear majority of those who responded declared support of the change.
Much of the feedback received formed the basis of the detailed review that followed.
The committee then established a task force to examine this area. Following on from that work, having regard to the report of the task force and the view of the profession, the committee formally approved the proposed change earlier this year, and a further consultation process began.
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In August, the terms of the proposed 2019 Contract and Explanatory Memorandum was published for review and comment by the profession.
While the consultation period was ultimately extended to a date in October, any comments received by 23 November to precontracttitleinvestigation@lawsociety.ie will be considered.
In October, the committee also published a list of frequently asked questions as a guide to the profession. The FAQs will be refreshed from time to time, so keep an eye out for it on the Society’s website.
The committee has also been working on a revised set of Requisitions on Title, which will be launched in time for commencement of the new system.
Both the 2019 Requisitions and Contract, and especially the former, contain a number of additional changes which are not consequent upon the change to pre-contract title investigation.
All these changes will be outlined in explanatory memoranda, which will accompany the new documents on publication.
As part of the consultation and information process, members of the task force delivered a dedicated CPD seminar on the topic on 18 October 2018 at Blackhall Place, chaired by Prof JCW Wylie.
This event is available as an online interactive course from mid-November onwards, which can be booked through the Society’s Professional Training section. In addition, the convener of the task force addressed the Annual Property Law Conference, also held on 18 October.
Key change
The key change for 2019 is that the purchaser must investigate title pre-contract. Consequently, the vendor must therefore produce adequate documentation to enable the title to be investigated ahead of the parties entering into the contract.
General Condition 6 now states that the purchaser accepts the title offered as described in the contract.
It is acknowledged in that condition that the purchaser has had the opportunity to raise any requisitions and rejoinders in the pre-contract period and, in effect, that no further requisitions can be raised.
This means that the full set of Requisitions on Title, rejoinders and replies will need to be settled pre-contract.
Duplication
Many practitioners have noted the duplication currently involved in raising or responding to pre-contract queries, only to have to address many of the same queries in post-contract requisitions.
From this January, this duplication will be removed, leading to a more streamlined and efficient process.
A requisition on title can be raised on any matter of title, post-contract, but it is very important to note that, as described in General Condition 7, it cannot be raised if the query was apparent to the purchaser prior to the date of sale.
The purchaser is fixed with notice of everything disclosed or revealed by the contract or the documents and information provided to the purchaser, pre-contract.
The purchaser is also fixed with notice of anything appearing from an inspection of the property, an inspection of the planning register, or the searches (if any) furnished to the purchaser by the vendor before the date of sale.
If the issue was otherwise known to the purchaser prior to that date, the purchaser cannot raise the requisition either so, if the issue was revealed, for example, by the purchaser’s own searches, pre-contract, then a requisition cannot be raised, post-contract, in that regard.
Q & A
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Question
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Response
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Why has the numbering of the contract changed?
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Unfortunately, this was unavoidable; see the quick reference guide published.
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Where did the non-title information sheet go?
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It will be absorbed into the 2019 requisitions.
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Will the 2019 requisitions include an ‘objections’ section?
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No, because if the purchaser has any objections on title, these will have been raised and resolved pre-contract.
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Will pre-contract queries be a thing of the past?
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The purchaser’s solicitor will receive the replies to the standard Requisitions on Title pre-contract, and should raise such rejoinders as are appropriate, and such additional pre contract enquiries as required for any matter not addressed in the standard requisitions.
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Acting for a vendor, do I need to do a full set of searches pre-contract?
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This would be preferable, but it is not required.
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Acting for a purchaser, what searches should I procure pre-contract?
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A planning search.
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Is there anything stopping a purchaser from carrying out a full set of searches pre-contract?
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No. The purchaser will be deemed to be on notice of the acts appearing, so adequate explanations of any acts appearing should be sought from the vendor pre-contract.
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Will post-contract requisitions be common?
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No – they are expected to be rare.
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What form will they take? Will there be a precedent?
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No – it is likely they will be raised by written communication between solicitors.
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Once a purchaser becomes aware of an issue post-contract, how long does he have to raise this as an issue?
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Five working days, and time is of the essence.
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Why so fast?
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This period is five working days from the date the purchaser becomes aware of the title issue, and not from the date of sale. This period could run right up to the closing date depending on the circumstances. Also, once aware of it, a purchaser should want to raise the issue fairly immediately. Also, it is expected that the average period between contract and closing will shorten, so the period can’t be too long.
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Why is time of the essence? That seems harsh on purchasers – why this approach?
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One of the key objectives is to achieve contract certainty, so if the purchaser does not raise the issue in time, the right to do so withers.
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Why does the vendor not have a fixed period to answer the post-contract requisition? That seems ‘one sided’.
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Depending on the nature of the requisition, it may take time to get to the bottom of the issue, so it is considered ‘contract friendly’ that the vendor be given adequate period to answer or find a solution.
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Can a purchaser withdraw a requisition raised under General Condition 7?
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Yes. There is no contractual limitation on a purchaser in this regard.
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Who will raise the requisitions?
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It is anticipated that the vendor will issue requisitions with replies when issuing the draft contract and title pack.
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Who will list the completion items in the requisitions?
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The approach is a matter for the parties to agree.
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Is it envisaged that, after the ‘backwards and forwards’ on the requisitions and replies, an up-to-date set of requisitions will be issued by the vendor?
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No, the parties should be able to rely on interparty correspondence to settle on the final requisitions and replies, but the approach is a matter for the parties to agree.
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Does this new system leave purchasers exposed, doing a lot of work pre-contract, without certainty that the vendor will contract?
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The vendor is usually very serious about contracting if he instructs his solicitor to prepare a contract and title pack. It is considered better that a purchaser would remove himself from a proposed purchase in the pre-contract phase rather than to have to do so post-contract.
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Will that leave purchasers’ solicitors commercially exposed?
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It should not, so long as the client engagement letter makes it clear what the fee and anticipated expenses are for the services provided in pre-contract phase.
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