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The use of a nebulous phrase such as ‘net proceeds of sale’ is inherently dangerous, and the Conveyancing Committee is of the view that undertakings to discharge net proceeds of sale should rarely be given. Solicitors should always first consider whether or not there is some alternative way of dealing with the issue besides the solicitor giving the undertaking. For example, can a charge, or perhaps a second charge, over the property be put in place, even if on a temporary basis?

If, however, a solicitor decides to give such an undertaking, the following, while not comprising an exhaustive list, are some of the issues that require to be addressed:

• Has the full (and irrevocable) written authority of the client been obtained?
• In a probate/administration case, what is to happen if the instructing executor/administrator dies?
• Is the undertaking worded so as to apply only ‘if and when the property is sold’?
• Is the undertaking stated to be subject to the solicitor having carriage of sale?
• Is the undertaking stated to be subject to the sale proceeds coming through the solicitor’s office?
• If the undertaking relates to the sale of property, does the solicitor have possession of the deeds and does the solicitor have actual and unfettered control of the deeds? Check the wording of any ATR under which the deeds have been taken up from a lending institution – if the ATR requires ‘net proceeds of sale’ to be lodged, this should be negotiated with the lending institution to specify the exact agreed figure that the lender requires in order to release the deeds and to give a discharge/release of any charge/mortgage on the property.
• ‘Net proceeds’ should be clearly defined and quantified, that is, a specific figure should be agreed in advance.
• Any undertaking should be to pay the exact agreed figure rather than the ‘net proceeds of sale’.
• Do not give the undertaking where a sale has not already been agreed.
• Carry out searches against the client and the property before giving the undertaking.

The committee would strongly suggest that, if giving an undertaking to a lending institution to lodge monies out of the proceeds of sale, a solicitor should establish exactly what and how much monies are to be retained by the vendor from the gross sale proceeds, and that these amounts should be agreed with both the client and the lender at the pre-contract stage, before the undertaking is given.