When purchasing property the best title to get is that of ‘Absolute Title’ because it means that the Land Registry certifies that the title cannot be challenged. Whilst it is available for both freehold and leasehold properties it will only be granted in the case of leasehold if the registered proprietor has provided full details of the freehold title to the property to the Registrar. This acts as evidence of their right to grant the lease. If this the case then this guarantees that the landlord has ownership of the title.
The next best title is that of ‘Good Title’. This is held when the owner of the property does not hold a Freehold title registered by the Land Registry. Whilst it’s only because perhaps some of the documentation has not been registered it cannot be guaranteed that the landlord has the right to issue the lease title.
Although this title is usually enough to secure a mortgage (and the Council of Mortgage Lenders Handbook permits solicitors to certify the property as good and marketable), some lenders will not lend on a property registered with this type of title. So this needs to be checked early in the conveyancing process as should whether it is possible to find out whether the seller has information or documentation which could be submitted to Land Registry to have the class of title upgraded. This can be done before or after completion.
In the meantime, Good Leasehold Title Indemnity Insurance will be required because the quality of title of the freeholder and the right to grant the lease is not guaranteed. The seller will be expected to both get and pay for the policy but is not likely to be very happy about it, particularly if he/she differs in opinion with the conveyancing solicitor over the alleged defect.
Next comes ‘Possessory Title’ which is applied for on first registration, where the applicant is unable to produce any title deeds at all. This arises where the claim to freehold or leasehold title is based upon adverse possession (squatters’ rights), i.e. the squatter(s) has occupied the land for 12 years and the occupier has not been challenged. Possessory title is the same as absolute title except that it does not affect or prejudice the enforcement of any counter estate or rights that existed at the time of first registration.
The fourth title that the Land Registry recognises is that of ‘Qualified Title’. These are granted when there some specific defect that has been identified which is stated on the register. It is the least secure form of title and is granted where the proprietor can either a) only prove the title for a limited time, or b) where there are fundamental doubts about the subject of the title.The result is that the title is registered subject to any adverse interests that may later be discovered. Anyone can apply to have their title upgraded if they can convince the Registrar that this is proper. These are however rarer than possessory titles.
Note: If the leasehold title to the property is registered but the lease has been lost the lender will go ahead if a copy of the lease produced by the Land Registry is obtained, inspected and that it seems to be a complete copy.
It is important to note that some lenders will not lend on a property where it is registered with good leasehold title (see above) so it is important that you and your conveyancer pick up on this early on during the transaction so you can change lenders if necessary. Many lenders will lend, however, but you will have to take out indemnity insurance on completion. Your conveyancer should raise enquiries early on to find out whether the seller has information or documentation which could be submitted to Land Registry to have the class of title upgraded. This can be done before or after completion.
Where a defective title insurance is needed, the purchaser will expect the seller to get and pay for the insurance policy. This will not always be agreed by the seller, particularly where both they and their conveyancing solicitor differ in their view of the alleged defect. Where insurance is required to cover the absence of an official local search, and the urgency to exchange is coming from the purchaser, the buyer should expect to pay for his own indemnity insurance. Sometimes the cost is split between the buyer and seller.