Possessory title affects property where the seller’s title is based upon adverse possession (commonly known as squatting) or where title cannot be proven because the title deeds have been lost or destroyed.
Acting for a client who is purchasing such a property where very little is known about it is never going to be as satisfactory as purchasing a property where one can check everything that may affect the title.
The principle of “let the buyer beware” applies so the buyer is immediately on the back foot when unregistered title deeds have gone missing for example. If a buyer is going to use the property and develop it there could be a potential risk of bogus owners coming out of the woodwork because, for example, they do not like the proposed change of use.
Lenders will generally still lend on possessory titles when deeds have gone missing. However, the absence of deeds may affect value. The Council of Mortgage Lenders, for example, states that possessory title will be acceptable if the seller is, or on completion the borrower will be, registered as the registered proprietor of the possessory title. In the case of lost title deeds, a statutory declaration from the seller must explain the loss satisfactorily before the lender will lend. A lender will also require indemnity insurance to be put in place when there are buildings on the property or where the land is essential for access or services.
Lenders may not need indemnity insurance in cases where possessory title affects only land on which no buildings are erected or which is not essential for access or services. In such cases the lender will often require just a plan of the land to be mortgaged to be sent to them identifying the area with possessory title on it.
Once a possessory title has been purchased and registered to a buyer, it may be upgraded to title absolute (the best class of title available) under certain circumstances. Generally, the Land Registry will upgrade possessory title where the land is owned for 12 years or more and the owner is in occupation. A fee is usually payable to Land Registry in order to upgrade the title.
For further information on possessory title or upgrading a class of title, please contact Frank Smith & Co Solicitors on 01242 801748 or www.franksmithandco.com.