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What is a letter of non-crystallisation?

Title due diligence against property owned by a company may disclose the existence of a floating charge.

See Practice Notes: Pre-contract searches—Company search and Pre-completion searches—Company search.

Where this is the case, a letter or certificate of non-crystallisation may be required in order to confirm that:

1. •

   the floating charge has not crystallised in respect of that particular property

2. •

   no steps have been taken which have caused or would cause the crystallisation of the floating charge so that it fixes on the property, and

3. •

   the chargee consents to either the sale of the property or the creation of a second floating charge over it

This ensures that the company is free to deal with the property (subject of course to any fixed charges and other title restrictions).

A letter of non-crystallisation may be provided by either the chargee or the chargor. However, it is preferable to obtain the letter from the chargee because evidence of non-crystallisation is not conclusive unless it is given