Deeds and Titles
The authority of the freeholder comes from the deed, a legal document relating to the mortgage lenders interest in the property. It will confirm evidence of title (proof of ownership) of land (that may or may not have buildings on it) and create and confirm a binding obligation on someone.
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 on completion 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.
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.
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.
Errors in Deeds
The following information concerning errors found in deeds has been extracted from the Land Registry Practice Guide No 68.
If an error in a deed is discovered before registration then the parties to it can simply alter the deed provided such alterations are signed by all of them.
If the error is discovered during registration the parties may request the Land Registry temporarily returns the deed. The Land Registry will oblige in certain circumstances with a requisition requiring the deed to be amended by a deed of variation and countersigned by all parties and then returned.
However as any amendment to the Land Register needs to be by way of a registerable deed, it will be a little more extensive than the above two situations.
If an error is found within the deeds during the conveyancing process, such as an incorrect term for example, then the parties can amend the lease by a deed of variation which extends the term. A deed of surrender can be created by expressly surrendering the existing lease and creating a separate new lease of the same premises for the extended term. Or, the existing lease cen be kept and a further lease of the same premises granted for a term that begins on expiry of the existing lease and ends on the final day of the extended term.
If a registered lease is incorrect as to the extent of the premises then the parties can amend the lease by reducing the extent of the premises: any deed purporting to reduce the extent of the land leased will be treated as a deed of surrender of the part that is not required.
If the extent of the premises needs to be increased it can be achieved in a number of ways. Again, any deed that purports to extend the premises is deemed to take effect as a surrender of the existing lease and as a grant of a new lease of the original land and the part being added to the demised premises.
In either of the above cases if the term is 7 years or less but more than 3 years then an application to note the new lease against the landlord’s title may be possible. Where the lease term granted is longer than 7 years then either the lease or the deed (whichever is used in the circumstances) must be drafted as a ‘prescribed clauses’ lease.
If the existing leasehold title is charged then it will be necessary to discharge this using form DS1 (cancellation of entries relating to a registered charge) and if necessary arrange for the tenant to execute a fresh charge in favour of the lender over the lease of the extended area.