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FREEHOLD TRANSACTIONS, TITLE INVESTIGATION - Coggle Diagram
FREEHOLD TRANSACTIONS
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CAVEAT EMPTOR
Buyer beware = buyer takes property as they find itBuyer can withdraw at any point up to exchange of contracts BUT after exchange they cannotSeller is under no obligation to give buyer all relevant information they may requireEXCEPTIONS:
- Misrepresentation = false statement
- Latent encumbrances and title defects
- Latent incumbrance = something which is not apparent / cannot be discovered, when inspecting property > seller is under a duty to disclose latent incumbrances of which it is aware of
-Defect in title = matter that brings into question seller's ownership of property / rights + burdens that affect the property
TITLE INVESTIGATION
REGISTERED LAND
DEDUCING AND INVESTIGATING TITLEPre-exchange
Seller: deduce title by getting together title documents + checking them to ensure seller is entitled to sell + sends them to buyer’s solicitor before answers pre-contract enquires + prepares the draft contract
- Land Registry official copies of the register
- Land Registry title plan
- Copies of any documents referred to
Buyer: investigate title, order and review pre-contract searches, raise pre contract enquiries + report on title.
- By checking the Land Registry official copies, title plan and other documents referred to on the register to ensure seller has the legal right to sell / property is adequate for the buyer’s intended use / no title defects
1. THE PROPERTY REGISTERDescribes property + any rights benefiting propertyProperty description
- freehold or leasehold.
- address + reference to the title plan which sent copy to buyer
Rights benefiting the property
- May be extracted = all the relevant text is shown, OR
- Refer to bundle of rights contained in document which seller’s solicitor provides (either from pre-registration deeds / Land Registry). Examples of rights:
- no rights
- right of way = needed if the property does not abut the public highway without crossing other private land
- Rights to run services = gas or water pipes, drains, electrical cables, optic fibre cables
- Right of light = enjoy the natural light which passes over someone else’s land
- Excluded rights = rights that are not included
Right of way1. Registration of the burden = must also be registered against the land over which the right of way passes2. Adequacy = legal or physical3. Maintenance = even if not specified, a person using right of way is obliged in common law to contribute towards its maintenance.4. Adoption
- Adopted highway is a public highway maintainable by the local authority at its expense.
- If a private road is adopted = frontagers are required to pay the costs of bringing the road up to adoptable standard.
2. THE PROPRIETORSHIP REGISTER
Gives registered proprietor’s (owner’s) name + address + class of title + entries affecting ownership
Also shows:
- Price paid / stated value of land if seller acquired it on / after 1 April 2000
- If registered proprietor gave an indemnity covenant to transferor on acquiring property
- Any restrictions on registered proprietor’s right to sell property
Class of TitleGiven by Land Registry + indicates how satisfied Land Registry is with registered proprietor’s proof of ownership to the property > guarantees by compensationDifferent classes of title1. Title absolute (freehold or leasehold)
- best and most common + indicates no issues
2. Qualified title (freehold or leasehold)
- specific defect in the title > covenants or easements was missing on first registration
3. Possessory title (freehold or leasehold)
- registered proprietor has shown physical possession of property, but has no title deeds OR claiming through adverse possession
4. Good leasehold title (leasehold only)
- IF leaseholder cannot provide evidence of landlord’s title to land
If title absolute = no further action need be taken.If qualified title, possessory title or good leasehold title, the buyer’s solicitor: should report it to their client / check mortgage lenders’ requirements / consider obtaining title indemnity insurance / consider upgrading to title absolute
The registered proprietor
Usually seller UNLESS seller is executor of a deceased person’s estate.
An individual = full name and address for service
LLP = LLP name, number and registered office address + verify with a Companies House search
Company = company name, company number and registered office address + verify with a Companies House search
Co-owners = combination of individuals, LLPs or companies up to a maximum of 4 > all co-owners required to sign contract + execute purchase deed
CO-OWNERSHIPWhere a property is owned by more than 1 owner
- Legal title always held by co-owners as joint tenants.
- Beneficial title can be held as joint tenants OR as tenants in common (Tenants in common hold beneficial shares in the property)If co-owners have notified Land Registry they hold as beneficial tenants in common = Land Registry will add a restriction to the proprietorship register to prevent Land Registry from registering certain dealings against title unless terms of restriction are complied with.
- IF NO restriction = can assume that the co-owners hold jointly
- IF restriction = can assume that the co-owners hold as tenants in common but check it is a tenancy in common restriction
Deaths
Legal joint tenant = right of survivorship applies > surviving joint proprietor takes legal title to property as sole legal owner
Beneficial joint tenant = right of survivorship applies > surviving joint proprietor takes legal title to property as sole legal owner
Beneficial tenant in common = no right of survivorship > surviving joint proprietor/beneficial tenant in common only takes their share of the property + other share passes to deceased person’s beneficiaries
Implications for our title investigationBuyer’s solicitor needs to satisfy Land Registry that both legal + beneficial title has passed to the buyer
- All co-owners should sign contract + execute transfer deed
- Surviving beneficial joint tenant should sign contract + execute transfer deed
- Surviving beneficial tenant in common appoint a 2nd trustee (often their solicitor) to sign contract + execute transfer deed + death certificate
2nd trustee needed as No disposition by a sole proprietor > transfer needs 2 people so buyer overreaches beneficial interests via money they have paid
3. THE CHARGES REGISTER
Lists rights burdening the property (eg, mortgage, covenants, easements and leases)
Leases = always reported
Easements = always reported
Mortgageslegal mortgage must be created by deed + entered in charges register IF NOT lender will not have a legal interest + buyer would take property free of mortgage
- Lender will usually require restriction in proprietorship register to prevent mortgagor (the owner) from selling property without lender’s consent
Mortgage entry on proprietorship register
- The restriction will prevent property being sold even if subject to mortgage to a third partyMortgage entry on the charges register
- Each mortgage usually takes 2 entries: date of mortgage + name and address of the mortgageeDealing with the mortgage - Buyer should:
- check early on in enquiries that seller will have sufficient funds to clear mortgage
- ensure it is a term of contract that mortgage will be redeemed on completion
- obtaining appropriate undertaking from seller’s solicitor to redeem mortgage from proceeds of sale on completion
CovenantsMay be restrictive, positive or unknown1. Restrictive = binding on the property > not to do something on property2. Positive = not always binding on the property > to do something on property
- examine if covenant affects property > check is there is a chain of indemnity which is covenant by buyer to seller to observe positive covenants
Chain of indemnity
- Original owner gave covenant, so if breached = original owner would be sued by covenantee and they will sue the subsequent ones
- Break in the chain of indemnity = If seller has neglected to obtain an indemnity covenant so original owner can still be sued, but chain will only go as far as last person to give one
- An indemnity covenant will appear on proprietorship register > if not chain of indemnity has been broken3. Unknown = could be positive or restrictive. If positive = very unlikely that a chain of indemnity exists SO solicitor should assume that some unknown covenants are restrictive
Buyer’s options for dealing with covenants
Indemnity insurance
- IF land’s current use is in breach of covenant, but no objection received = indemnity insurance policy (at seller’s expense).
Consent from person with benefit
- Approach person with benefit (PWB) for consent to breach of covenant BUT may be difficult to identify/trace
Application to the Upper Tribunal (Lands Chamber)
- If covenant meets certain grounds = application can be made to the Upper Tribunal to discharge the covenant BUT expensive and time consuming
Insurance should always be tried 1st > is not posable then approach PWB
UNREGISTERED LAND
DEDUCING TITLECompulsory first registration is only triggered on dealing with the property after 1990
- Land that is not being sold, given away or mortgaged may remain unregistered
Deducing Unregistered Title
- Seller’s solicitor deduces title by epitome of title (a schedule of title deeds and documents) + copies of listed documents provided to buyer’s solicitor + seller’s solicitor will undertake to provide originals on completion
- Property description, benefit and burden of rights, and ownership may be distributed amongst multiple documents so may need to trace back to first title document that defines land
- Should have originals of all relevant deeds and documents – if any missing, may cause issuesRoot of title = conveyance deed can be relied upon as proving title
Requirements:
- must be dated more than 15 years ago = as the date for compulsory first registration is over 15 years
- deals with both the legal and beneficial title to the property = if silent > beneficial title is assumed to pass with legal title
- adequately describes the extent of the land being conveyed = scale plan
- does not cast doubt on the seller’s title
The seller’s solicitor: identifies the root of title + establishes a chain of title from that deed to the seller - other documents to include:
- The power of attorney under which root of title has been executed
- death certificate if the property has passed by survivorship, / grant of representation + assent if the property has passed under a will or intestacy
- mortgages created after the root of title
Investigating unregistered titleBuyer ensures seller has the legal right to sell / property is adequate for the buyer’s intended use / no title defects AND that the epitome of title will be sufficient to register property with title absolute at the Land Registry1. Check the land is not registered
- carrying out an index map search (SIM) of the property to reveal: any registered titles within the boundaries / any pending applications for registration / caution against first registration2. Checking the root of title meets requirements3. Checking the chain of title
- Complete from the root of title to the seller’s title + that each deed forming part of the chain of title is validly executed and stampedValidly Executed
- Before 31 July 1990 > common law formalities: Clear on its face that intended to be a deed / Signed (Individual = in presence of witness who also signed OR Company = 2 company directors / 1 director and company secretary must have signed) / Sealed (must have a seal - wax or paper disc) / Delivered as a deed (inserting the date)- After 31 July 1990 > LPMPA1989: Clear on its face that intended to be a deed / Signed (Individual = in presence of witness who also signed OR Company = 2 company directors / 1 director and company secretary must have signed) / Delivered as a deed (inserting the date)4. Check extent of land conveyed
- Scale plan in the epitome of title or address
Stamping
Each conveyance in chain of title must have been correctly stamped, showing correct amount of ad valorem stamp duty has been paid
- Property transactions for value subject to stamp duty until 1 December 2003, when it was replaced by Stamp Duty Land Tax (SDLT)
- After 1931 should also have a “Particulars Delivered” stamp meaning that they have been presented to stamp office
Conveyance needs to have a certificate of value / properly stamped with the ad valorem stamp duty
If stamp duty is missing = buyer’s solicitor should insist that seller pays the outstanding stamp duty and + proof that this has been done > interest and penalties for late payment of stamp duty
TITLE ISSUES
1. Co-ownershipNOT issue if all the co-owners are all able to sign the contract and execute the purchase deedBUT, if the seller is a surviving co-owner = necessary to identify whether seller has obtained the full beneficial title by co-ownership, or was a surviving beneficial tenant in common.Beneficial Joint Tenancy = assume if conveyance from seller to buyer states seller is beneficially entitled to whole of property + no memorandum of severance converting their interests into a beneficial tenancy in common + no bankruptcy order or bankruptcy petition
- If the seller is a surviving joint tenant > buyer’s solicitor should ask for certified copies of the deceased joint tenant’s death certificate.
Beneficial Tenancy in common = If the above conditions are not met, then the seller should be treated as a surviving tenant in common
- If seller is a surviving tenant in common > buyer’s solicitor should ask for 2nd trustee to be appointed in conveyance to buyer to overreach beneficial interest of the deceased tenant in common
2. Land chargesSome rights burdening property will only bind unregistered land if they are registered at the Land Charges Department of the Land Registry.
- C(i) puisne mortgage
- C(iv) estate contract
- D(ii) restrictive covenant
- D(iii) equitable easement
- F home right
The search is by years of ownership + full name against each owner of the land in the chain of title
3. Mortgages
NOT concern provided that buyer’s solicitor ensures seller is to discharge them on completion
The mortgage deed should be listed on the epitome of title = If discharged (repaid in full), should be a vacating receipt + signed on behalf of the lender
1st legal mortgage NIT registrable as a land charge, as lender will not release original deeds until mortgage has been repaid BUT second or third mortgage (puisne mortgage) can be protected by a c(i) land charge
4. Rights benefiting and burdening unregistered land
- Identify any covenants, easements or leases.
- If the root of title refers to covenants or easements in an earlier deed, should be provided in the epitome of title
5. Covenants
- Positive = Only bind unregistered land if there is a chain of indemnity covenants + must check each deed in the chain + not registrable as land charges
- Restrictive = only bind unregistered land if the burden is registered as a d(ii) land charge
- Unknown = arise from a missing deed containing covenants referred to in the chain of title > raised with seller + if necessary indemnity insurance taken out6. Easements
- Legal = registrable by land charge
- Equitable = registrable as d(iii) land charges as these are not necessarily apparent from epitome of title 7. Estate contracts
- Protected as c(iv) land charges to protect the buyer’s interest if likely to be a long period between exchange and completion.8. Leases
- not registrable, as leases that have not ended should be included in the epitome of title.9. Home rights
- protect right of a spouse or civil partner to occupy home.