The Conveyancing Committee receives a lot of queries from practitioners as to what is best practice when acts appear on judgment searches on or before the completion of a sale or mortgage of property.
There is a frequently held misconception that a judgment search is a search for what are generally called ‘money judgments’. In fact, correctly speaking, a judgment search is a search on the Register of Lis Pendens in the Central Office of the High Court, which is a separate index from the Index of Money Judgments. However, most firms of searchers routinely include acts on both registers when asked to do a judgment search, and this is the recommended practice. The committee advises that solicitors should check with their searchers to establish what their standard practice is, to avoid any misunderstandings.
When acting for a vendor who has judgments registered against him/her and no action has been taken to convert any such judgments into judgment mortgages, a purchaser’s solicitor is not entitled to require that any such judgments be vacated. If judgments appear on searches, a purchaser’s solicitor is of course on notice of the potential for a judgment mortgage to be registered against the property and accordingly, to avoid unnecessary difficulty, registration of the purchaser’s title should be treated as a matter of priority. Consideration should also be given to lodging a priority search.
When acting for a lender in a commercial transaction and the bank is providing funds to a purchaser to complete, if the searches show judgments against the borrower, then the lender’s solicitor has a duty to inform the relevant lender prior to closing or releasing the loan cheque of the existence of any such judgments and let the relevant institution then decide whether it will authorise the release of the cheque.
The same duty of care does not apply within the certificate of title system for residential mortgages, as the purchaser’s/borrower’s solicitor does not act for the lending institution and therefore owes no duty to the lender to inform them if any money judgments appear on searches against the purchaser/borrower. Solicitors should, however, bear in mind that they must register the mortgage as a first charge in order to comply with their undertakings.
Practitioners are reminded that, under section 52 of the Land and Conveyancing Law Reform Act 2009, the entire beneficial interest in the property being purchased passes to the purchaser on the making of an enforceable contract for sale. The purchaser is deemed to acquire an interest in the property that will have priority over any judgment mortgage registered against the vendor’s interest in the property after the making of such an enforceable contract.