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The committee has received several queries about whether a solicitor is entitled to be released from an undertaking to a lending institution where title has earlier been certified, but where the common areas in a relevant development have not yet been transferred to the management company.

The committee wishes to remind practitioners that a property does not automatically become unsaleable because the common areas in a relevant development have not been transferred. A solicitor’s certificate of title is usually given to a lending institution in residential mortgage lending cases following completion of stamping and registration by the borrower’s solicitor. As previously indicated by the committee, such certificates of title should operate as of the date of parting with the loan funds, or the first drawdown of loan funds where stage payments are involved, which date is usually also the date of the mortgage and of title searches. Such certificates of title certify the title to the property as of that date, and they speak only to circumstances that pertained as of that date. If some title matter arises subsequent to that date, it does not impact on the certificate of title.

In relation to multi-unit developments where units had been transferred to purchasers prior to 1 April 2011 (a pre-2011 development), the Multi-Unit Developments Act 2011 (MUD Act) imposed a statutory obligation on developers to transfer the relevant parts of the common areas in developments to owners’ management companies (OMCs) by 30 September 2011. The act did not provide a sanction for failure by a developer to comply with these statutory obligations, but the obligation to transfer remains with the developer. In cases where no units had been sold before 1 April 2011, there should not have been any sales of units unless the common areas had already been transferred to the management company.

The normal practice prior to the coming into force of the MUD Act was to provide a contract between the developer and the purchasers of individual units for the transfer of the common areas after the completion of the development to an OMC.

It appears to the committee that some solicitors may be unnecessarily qualifying their certificates of title, on account only of the fact that common areas in relevant developments have not yet been transferred to management companies. This causes lenders to reject these certificates of title and causes unnecessary difficulty for solicitors in being released from their undertakings.

Solicitors should, of course, bring any title issues present in advance of drawdown to the attention of a lending institution as early as possible, and certainly before any drawdown. This would necessitate a qualification to the solicitor’s undertaking – to be agreed with the lending institution in writing in advance of drawdown of the loan funds (or first drawdown in the case of stage payment loans). It would also necessitate a qualification to the solicitor’s certificate of title when lodging registered title and deeds with the lending institution at a later stage. The fact that the relevant parts of common areas had not yet been transferred to an OMC in a pre-2011 development at the time of a sale of a unit in such a development does not constitute a ‘blot’ on the title at the date of the certificate of title, and does not require qualification of the undertaking or certificate of title.