English conveyancing relies heavily the enforceability of solicitors’ undertakings. Essentially, solicitors acting for sellers undertake to procure the discharge of the mortgages affecting their clients’ property and to forward the requisite discharges to the buyer’s solicitors after completion. Consequently, solicitors’ undertakings offer valuable protection to purchasers and compliance is essential.
Thames Valley Housing Association Ltd v Elegant Homes (
The housing associations pressed for discharges that they had been promised on completion of purchase. The bank offered to release the land on payment of £1.35m, which would suffice to discharge most of the developer’s debts in respect of the site; it could have asked for more because the developer owed it several millions of pounds. The developer’s solicitor did not suggest that the sum demanded exceeded the value of the plots but argued that the bank would have accepted payments of a lesser sum on each plot sale and asked for clemency.
The court held that the bank was entitled to require payment of the sum demanded and ordered the developer’s solicitor to comply with its undertaking. The judge ruled that the latter should have taken steps to avoid any dispute with the bank. He warned that if a solicitor gives undertakings without due care and attention, it should not complain if the court requires it to take steps that it might regard as excessive in order to comply.
Buyers’ solicitors will welcome the judge’s comments that buyers should be entitled to rely on an undertaking by a seller’s solicitor to discharge a mortgage. However, they may be concerned by the judge’s acceptance of remarks made in Angel Solicitors v Jenkins O’Dowd & Barth [2009] EWHC 46 (Ch); [2009] 1 EGLR 71; [2009] 14 EG 88. In that case, the judge suggested that there may be circumstances in which an undertaking will not be fully enforced. For example, the courts might enforce a modified version of an undertaking or order the payment of compensation for its breach, if a lender were to insist on a payment that far exceeded: (i) any sum that could reasonably have been contemplated when the undertaking was given; and (ii) the present unencumbered open market value of the relevant property.
The case highlights that care is needed when giving and accepting undertakings to discharge all moneys charges. Enquiries should be made of lenders and agreements reached on the provision of discharges before contracts are exchanged and undertakings are given. If in doubt, a buyer’s solicitor should consider requiring a discharge (in place of an undertaking) on completion.
Allyson Colby is a property law consultant