Warren Gordon looks at the implications of the sixth edition of the CLLS Land Law Committee Long Form Certificate of Title


The City of London Law Society (CLLS) represents the professional interests of City solicitors by commenting on matters of law and practice, and by lobbying extensively on the issues and challenges facing the profession. The land law committee is one of the specialist committees of the CLLS. One of its primary products is the CLLS Land Law Committee Long Form Certificate of Title.



Certificates of title are used in many different transactions, including secured loans and acquisitions of properties and businesses. Over a decade ago, the CLLS decided to produce its own form of certificate of title to reduce the negotiations over the form of certificates. The certificate has now reached its sixth edition and is accepted as the standard by most firms in England and Wales. A number of Scottish firms have collaborated in producing an equivalent certificate - the PSG Certificate of Title - for use in relation to properties in Scotland (see www.psglegal.co.uk).



For the purpose of rule 6(3) of the Solicitors Practice Rules 1990, the Solicitors Regulation Authority (SRA) recognises that the sixth edition of the CLLS certificate of title may be provided by a solicitor, acting only for a borrower, to a lender in cases where the property is not to be used solely as the borrower's private residence. The sixth edition was recognised by the SRA on 16 April 2007. It will be published in the Encyclopaedia of Forms and Precedents and on the CLLS website (www.citysolicitors.org.uk). There are various aspects of the new edition that have changed.



Format

As well as updating, the committee has decided to make some important alterations to the format of the certificate, which it hopes will improve the certificate's user-friendliness. The certificate better highlights key provisions by putting them at the front of the certificate. Most of the 'variable' information is now in one place - schedule 5 provides details of the particular property, searches, lease, letting documents and qualifications to the certificate's statements.



Statement of lease provisions

An important change from the fifth edition is that, in relation to the lease and letting documents, the certificate contains an additional series of statements describing material provisions of a 'typical' headlease and institutional occupational lease. Such an approach is intended to reduce the amount of information which needs to be incorporated in the certificate. The certificate provider will highlight any departures from the certificate's statements in the qualifications in schedule 5.



Since the precise wording of the certificate's statements may not be reflected in the wording of the particular lease or letting document, the committee's view is that a qualification should be made when the certificate provider considers that there is a material difference in the wording. While this introduces an element of subjectivity, that position is no different from the requirement under the fifth edition to specify 'material' details of the lease and letting documents. The committee also considers that this approach makes the certificate more useful because it focuses on those aspects that are different from the norm.



Matters no longer dealt with

Certain issues covered in the fifth edition are no longer covered in the new certificate, mainly because they are usually dealt with outside of the certificate. Examples include specific insurance details in relation to the property, licensing, environmental matters and details of the valuation report.



General comments

It is for the solicitors giving the certificate to decide how best to elicit necessary information from the owner of the property. To assist solicitors, examples of letters or questionnaires seeking information and confirmations from the owner may appear on the CLLS's website, but the use of such letters and questionnaires is not obligatory.



Often the certificate will be given to a lender that is providing finance for the company (for which the certifying solicitor acts) to purchase the property. The company's knowledge of the property will be slight and it will rely on information provided by the seller's solicitors. There is sometimes a mismatch between the information received from the seller and that needed to produce the certificate for the lender. Some companies' solicitors ask the seller further enquiries to enable them to produce the certificate, but resistance is sometimes encountered. If the seller is not prepared to answer such enquiries, an appropriate disclosure will have to be made to the recipient of the certificate.



It is not suggested that the sixth edition can be used unchanged in every situation. There will be transactions where its use will be inappropriate and a certificate in a quite different, probably shorter, form is required. Consideration should be given to using the CLLS Short Form Report on Title. A new third edition, recognised by the SRA for rule 6(3) purposes on 16 April 2007, can be found on the CLLS website.



The certificate is intended to be comprehensive, striking a reasonable balance between the interests of the addressee and the solicitors who give it. If the certificate provider wishes to change the certificate's form, he should make this clear to the recipient. This is particularly important in view of the fact that the form of the sixth edition has been approved for rule 6(3) purposes. The committee has introduced a new paragraph in schedule 1 to highlight this point. If the provider is unable to give the statements in the certificate, he should make appropriate disclosures or qualification.



The committee has always considered that the function of the certificate is to provide specific information about the property. The recipient of the certificate, with the help of his own professional advisers, can then assess any risks and decide whether the property is acceptable.



The committee's view is that normally the certificate should summarise any relevant documents and it should be unnecessary to annex copies. The certificate is intended to replace an investigation of title by the recipient's solicitors. If they have to read not only the certificate but other documents, the point of the certificate is to some extent lost. However, there may be circumstances when a document is so important or complex that it cannot be summarised accurately and needs to be annexed.



The committee recognises that the solicitors giving the certificate may seek a limitation on liability where the same certificate is addressed to more than one person to ensure that the solicitors' liability to all ultimate addressees does not exceed the liability to the original addressee. The committee's view is that any such limitation must be a matter to be agreed by the solicitors and the addressees.



The firm giving the certificate will need to draw the company's attention to the fact that the certificate states the company has inspected the property not more than 20 working days before the date of the certificate. If this is not the case, a qualification will have to be made.



The committee considers that the new format of the sixth edition means there is no longer a need for an alternative version of the letting documents scheduled for use where the property is subject to a large number of leases in a standard form. The certificate provider can agree with the recipient a reduced version of part 8A of schedule 5 to limit the amount of specific information required in relation to each letting document.



Warren Gordon is head of real estate know-how at London firm Olswang and a member of the Law Society's conveyancing and land law committee, and writes on behalf of the CLLS's land law committee