Property ownership is covered by a few titles regulated by the Land Registration Act 2002. These are mainly ‘absolute title’ and ‘possessory title’.
The main distinction between the two lies in the level of ownership protection and the potential for legal disagreement. This article covers possessory title in more detail, including how to sell a property.
Table of Contents
What is Possessory Title?
Having possessory title means that you are considered the owner of a property, but there’s some important information missing. HM Land Registry cannot certify the title in the normal way, classing it as ‘defective’.
This means that a previous owner or interested party can dispute your right to some or all of the property or underlying land. Think of it as owning a property without full legal protection.
This is in contrast to owning with title absolute, the most common class of land registration in England and Wales. With this, you can legally prove you own the property without the possibility of dispute.
You can still sell a property with a possessory title, but most buyers would see it as a risky purchase. Such properties are likely to be valued lower than ones with title absolute due to the potential complications and financial losses that could occur.
Examples of possessory title include:
- Not having the Land Registry title deeds in your name,
- The original paper (physical) deeds being destroyed or stolen,
- A property passed down through the generations with no deeds or proof of the original conveyance,
- Someone buying a property using DIY conveyancing without electronic proof of ownership,
- A fraudulent house sale with no title deed,
- Someone obtaining title by adverse possession (claiming squatters rights).
Note that if you can provide suitable proof of title to the HM Land Registry, the title will revert to absolute. Both freehold and leasehold properties can fall under the possessory title.
How Long Does it Take to Get Possessory Title?
It is possible to acquire Possessory Title via ‘adverse possession’, which is commonly referred to as having ‘squatters rights’ or ‘land grabbing’.
To do this, you must have:
- Occupied the property in question exclusively for 12 years (or 10 if the land is registered). This means that no one else has tried to occupy the land in your place during that period.
- No payments (rent or otherwise) should have been made, nor should permission have been sought from the owner.
- There should not have been any objections, and you should have demonstrated a clear intention to own and protect the land (e.g. through maintenance or building of surrounding walls/fencing).
HM Land Registry will send a notification to any parties with an interest in the land. If they respond, they can put an end to the process and seek eviction. If not, Possessory Title may well be granted.
Can Possessory Title Be Challenged?
With Possessory Title, meaning there are insufficient documents to gain absolute title, it is possible for someone to challenge ownership. For this reason, you may lose your Possessory Title if:
- The possessory titled land was acquired through adverse possession or squatters rights;
- Another person can provide clear evidence of ownership of the property (also known as Epitome of Title);
- There is evidence of fraud or errors during the granting of Possessory Title;
- There are forgotten covenants or third-party rights in the original deed, and as no unregistered deeds exist, it is impossible to know what restrictions could be enforced in the future;
- The other party can convince the HM Land Registry their title is more legally valid.
If any of these scenarios arise, as the holder of the ‘inferior’ title, you won’t be able to claim any losses – even if you have invested a large sum of money into the property. For example, if you have built any structure or building on the land, none of your costs will be refunded.
The Value of a Property with Possessory Title
With the issues that accompany this type of title, the property’s value is likely to be lower. The problem is, when it comes to reselling, some buyers may feel confident that they can challenge the title’s status, but this is by no means guaranteed.
Therefore, most buyers will look for a discount to compensate for the risk involved, as there is a chance that the title and property ownership could be lost without compensation. For this reason, it is important to seek conveyancing-related advice to assess the issue’s extent.
So, if you are selling, make sure you get your own legal advice to check things yourself and then negotiate to a suitable level, taking into account the buyer’s risk.
Can You Get a Mortgage if You Have Possessory Title?
Possessory Title sales tend to be attractive to cash buyers only. Mortgage lenders view such titles as ‘qualified’, meaning there is some legal defect that makes them ‘not good and marketable’. This makes them wary of granting the loan.
The Council of Mortgage Lenders (CML) advises mortgage companies to assess each case on its own merits.
If the title is due to an easily explainable reason, such as a lost or stolen title, then there should be no issues. You must provide sufficient evidence and remedy the situation before the sale is completed.
For this, a statutory declaration (drafted by the conveyancing solicitor) is requested.
This is a statement of fact signed in the presence of a qualified solicitor or notary and must be approved by the mortgage company’s underwriting team. A suitable indemnity policy must be in place.
There may be niche lenders that charge higher interest rates and require larger deposits (amongst other conditions). They may also down-value the property despite having solid comparable evidence.
What is Possessory Title Indemnity Insurance?
A Possessory Title indemnity insurance policy provides buyers with protection if someone else claims ownership of the property (or part of it) after the purchase.
It covers the loss of market value and costs incurred if you have to cede to the claimant, such as any compliance with demands, court orders if the claim is successful, or money spent on demolition or construction.
Conveyancing solicitors can arrange such a policy if you are planning to buy a property with Possessory Title, which must be in place between the exchange of contracts and completion.
The mortgage approvers, or underwriters, will also want to look into the details of the title in question and assess the likelihood of attempts to assert any other legal rights concerning the property or its surrounding land.
It is important to note that Possessory Title indemnity insurance does not cover you if there is already an ownership dispute or if another claim is in progress at the time you try to buy the property.
The policy will not apply if you make contact with anyone who may hold a claim on the property or an ownership interest.
In most cases, you will only have to pay for the policy once, and the coverage will not expire.
Cost of a Possessory Title Indemnity Insurance Policy
As with most policies regarding property insurance, the cost will depend on the size and location of the property. If the property has any commercial elements, more questions will likely be asked, and the premium may be higher.
Should the property’s value go down due to the occurrences mentioned previously, the insurance will cover the decrease. However, this kind of policy will not cover any rejection of title registration claim by the Land Registry.
Upgrade Possessory Title
It is possible to apply to the Land Registry to upgrade the title from possessory to absolute (i.e. freehold ownership). This will make your ownership position much more secure. Selling will be simpler, and you are likely to get a better price.
The 2002 Land Registration Act, Section 62(7) states that the following persons can get their title upgraded:
- The property owner;
- A person entitled to be registered as the property owner;
- The owner of a registered charge affecting the property;
- A person interested in a property that derives from the original estate.
In order to qualify, you must have enjoyed unchallenged ownership of a particular property/underlying plot of land for at least 12 years. You will need to demonstrate that any title defects have been remedied.
There are other legal rules and requirements depending on the specific situation. We recommend speaking to an experienced conveyancing solicitor to understand the best way forward.
Note that a newly granted absolute title could still be contested if there are third-party rights or covenants on the original deeds. Having an insurance policy in place is strongly suggested.
If it is demonstrated that any grant of title was based on fraud or incorrect information, then the title will revert back to being possessory and legal action will be taken against the perpetrator.
Buying a Property with Possessory Title
For property and land buyers, there are a number of potential risks to consider before making an offer on a possessory title property. It is important to inform the mortgage lender of the title, as most will not consent to lending funds under these circumstances.
The seller should provide a Statutory Declaration of ownership, including how long they have had the property. Make sure that nothing you do with the property breaches the terms of any lost title deed.
It is wise to obtain Possessory Title Indemnity Insurance to protect against future challenges.
Selling a Property with Possessory Title
It is possible to sell a property with Possessory Title, but the legal complications that will arise make the process difficult. At first glance, properties with Possessory Titles are often more attractive to buyers as they tend to be cheaper than those with absolute titles.
This is where “Buyer Beware” applies. During the conveyancing process, possessory title will be highlighted and warned against, even if the property is sold to a fast home buyer.
In some cases, the buyer may be aware of the risks and still decide to go ahead, such as when they have a plan to address the issue once they own it.
Therefore, it’s wise to see if the situation can be resolved before putting the property on the market. Alternatively, disposal through a Cash Buying Company or an auction sale may be a good option.
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