E-discharges in receiver sales – registration timeline warning
A difficulty has come to the attention of the Conveyancing Committee arising out of the use of e-discharges in receiver sales, whereby, if the mortgage on foot of which the receiver was appointed is cancelled off a Land Registry folio by e-discharge prior to lodgement of the transfer by the purchaser’s solicitor, the application for registration of the transfer will be rejected by the PRA because there is, by then, no evidence on the folio that the transferor (the receiver) has any power to sell the property. When a dealing is rejected in these circumstances, the remedy appears to be an application to the High Court under the Registration of Title Acts, which is a cumbersome procedure and involves the purchaser in considerable expense.
The committee has been in touch with the PRA about this issue, and it appears that the Land Registry’s hands are tied, as it must register an e-discharge when it is lodged by a receiver. A change in legislation would be required in order to address the matter, and the committee is preparing a submission to Government in this regard.
In the meantime, however, there is no fail-safe solution, but the committee is issuing this practice note to alert practitioners to the risk. There is obviously some merit in purchasers’ solicitors ensuring that they lodge the transfer dealing in the Land Registry as quickly as possible following closing. However, there could still be a problem if the e-discharge has been lodged ahead of the transfer dealing or, if the dealing is rejected, before the dealing is re-lodged. Ideally, provision should be made in the contract to provide for the use of a paper discharge in receiver sales, which would be channelled through the purchaser’s solicitor. While all who support e-conveyancing (including the committee) might see this as a retrograde step, it seems to the committee that a paper form of discharge is safer than an e-discharge from a practice point of view in receiver sales.
Purchasers’ solicitors might also consider lodging a priority search on or before closing.
The committee also intends highlighting this issue to the Banking Payments Federation Ireland with a request that their members, when appointing receivers, would ask receivers to instruct their solicitors acting in sales to use a paper discharge.
The committee will keep this matter under review.