Absolute Title & Possessory Title (and Limited Title Guarantee)

In law there are 3 types of title (legal ownership) that are given to registered properties:

1. Absolute Title.  Which is awarded by the Land Registry if the ownership of the land is clear and not disputed. 

   
   

2. Good Leasehold.   Where the freehold is not registered, and the leasehold title can only be granted as Good Leasehold.  This may be rectified by registration of the freehold unregistered title.   Lenders do not like this title.

   
   

3. Possessory Title.  Which is awarded when the ownership of the land is not clear. Lenders do not like this title.  It is worth checking the online UK Finance Handbook for your lender’s requirements. 

   
   

POSSESSORY TITLE

There are two reasons why the ownership of land may be unclear.  The first reason is that the original Deeds of the property were lost.  In order to register the property for the first time the seller provided Statutory Declarations regarding ownership and stated that the paper deeds were lost/damaged or destroyed.   In these circumstances Land Registry will award a Possessory title as someone could, in the future, claim ownership by producing the original Deeds.

The second reason is via someone claiming ownership of the land through adverse possession.   In other words, someone using an area outside of their boundaries, for example to the rear of their property, fencing it off and using it or claiming it as their land.  Once a period of 10/12 years has elapsed, without any questioning this, the party having sole use of this land can claim a possessory title.  Again, after further passage of time the possessory title may be upgraded to Title Absolute. 

Possessory title is not classed as “Good” title to property and is sometimes refused by lenders.   Lenders must be advised where title is Possessory to ensure that they are happy to accept the Title as it stands.  They may not be.

It is always worth checking the lending bank’s requirements via the UK Finance Handbook where the property does not have Absolute Title. For Building Societies this will be the Building Societies Association Mortgage Instructions. Each lender has different lending policies so you must check this.

Another common issue is what Title Guarantee the seller is going to be selling with.

LIMITED TITLE GUARANTEE

These words in the Sale Contract and Transfer Deed automatically imply the following:

• Right to Dispose. The Seller has the right to sell the property in the way he or she purports to do so (for example to sell the property with the benefit of rights of way or subject to covenants or obligations).

• Further Assurance. The Seller will do all that he / she reasonably can to transfer the property to the Buyer at the Seller’s expense. This will include satisfying the Registry as to the title sold (where appropriate).

• Freedom from Encumbrances.  The Seller guarantees that at the point of sale the property is not mortgaged or encumbered, and that no person has been granted rights over the property since the last disposal for value. Except for those to which the transfer of the property is expressly stated to be subject.

• In the case of leasehold property - validity of lease - the Lease is subsisting and there is no breach of covenant or condition rendering it liable to forfeiture, other than those breaches to which the transfer is expressly made subject.

FULL TITLE GUARANTEE

The same obligations are imposed as for a transfer with Limited Title Guarantee but in addition, obligation (c) above is extensively widened so that the Seller covenants (promises) that the title to the property is free from all charges, mortgages, encumbrances and rights exercisable by third parties other than those which the Seller does not and could not reasonably be expected to know about.