A defective title means there is a problem with the legal ownership of a property, the rights attached to it or the information recorded about it. Sometimes the problem is relatively straightforward to resolve. In other cases, a title defect can delay a sale or purchase, cause problems with a mortgage or even make a property difficult to sell until the issue has been addressed.
AFG Law’s Residential Property team can investigate potential title defects, explain what they mean for your transaction and advise on the steps available to resolve them.
What does a defective property title mean?
When you buy a property, you are not simply buying the building itself. Your solicitor needs to establish that the seller has the legal right to sell it and understand exactly what is included within the title. The title also contains important information about rights, restrictions and other matters affecting the property.
A defective title arises when there is a legal problem or uncertainty concerning that ownership or those rights. For example, the property might rely on access across neighbouring land but have no adequate legal right of way. Alternatively, the title plan may not accurately reflect the land being occupied and sold. These issues are particularly important because a buyer’s mortgage lender will also want to know that it is obtaining satisfactory security over the property.
What are common title defects?
There are many different problems that can affect a property title. One example is where the boundaries shown on the title appear inconsistent with the property on the ground. A garden, driveway, garage or other area being used by the owner could potentially fall outside the registered title.
Problems can also arise because of missing rights. A property may require access over a private road, for example, without the title containing an appropriate legal right to use it. Other potential title defects can include missing or unclear deeds, errors in the registered title, problematic restrictions, issues involving leasehold documentation and uncertainty over ownership of part of the property.
Older and unregistered properties can sometimes present additional difficulties because establishing ownership may require investigation of historic deeds and documents.
How are title defects discovered?
A title problem will often be identified during the conveyancing process.
As part of the legal due diligence carried out when purchasing a property, your conveyancer reviews the registered title, title plan and other relevant documentation. Searches and enquiries can also reveal matters requiring further investigation.
Sometimes the buyer identifies something themselves. For example, the estate agent’s particulars might show a large garden or parking area, while the Land Registry title plan appears to show something different. Sellers can also discover title problems when they put their property on the market, particularly where the property has not changed hands for many years.
Can you sell a property with a defective title?
You may be able to sell a property with a defective title, but the defect will usually need to be investigated. Whether a sale can proceed will depend on the nature and seriousness of the problem.
A minor error might be capable of being corrected through an application to HM Land Registry. More complicated problems could require additional evidence, documents from another landowner or further investigation into the property’s ownership history.
In some circumstances, title indemnity insurance may be considered. This can provide financial protection against certain risks associated with a known title problem. However, insurance does not actually correct the underlying defect and will not be appropriate in every situation.
The buyer’s solicitor and mortgage lender will also need to be satisfied with the proposed solution.
Can a defective title stop me getting a mortgage?
In some cases, a defective title can stop a mortgage from being approved. A lender takes a legal charge over the property as security for the mortgage. It therefore needs to be satisfied that the property provides adequate security and that there are no unacceptable legal problems affecting the title.
If a conveyancer discovers a significant defect, it may need to be reported to the lender. The lender might accept a proposed solution, require further steps to be taken or, in more serious circumstances, decide that it is unwilling to lend against the property until the problem has been resolved.
This is why title problems should not simply be ignored in an attempt to keep a transaction moving.
Can a defective property title be fixed?
Many title problems can be resolved, although the appropriate solution will depend entirely on what is wrong. It could involve correcting the Land Registry title, locating historic documentation, formally documenting a right of way, obtaining consent from another party or providing evidence establishing ownership of land.
Where a defect cannot practically be corrected, a solicitor can advise whether another solution, such as appropriate indemnity insurance, could allow the transaction to proceed. The important thing is to identify exactly what the defect is before deciding how to deal with it.
How AFG Law can help with defective property titles
Discovering a title problem does not necessarily mean that your sale or purchase has to fall through.
AFG Law’s Residential Property team can review the title and supporting documents, investigate the problem and advise on possible solutions. Where necessary, we can also deal with applications to HM Land Registry and liaise with the other parties involved in the transaction.
If a title defect has been identified during your sale, purchase or remortgage, or you are concerned that the legal title does not accurately reflect your property, contact AFG Law’s Residential Property team for advice.