2. Freehold Title Investigation Flashcards
What is title deduction?
The process by which the seller shows evidence of their right to sell a property
What is a seller’s duty in relation to title deduction?
Duty to supply sufficient evidence to prove they can sell land
Method of deduction in registered land
Official copies of the title are given to the buyer (must be less than 6 months old)
What is epitome of title?
Schedule of docs comprising the title accompanied by photocopies of the docs themselves
What is root of title?
Title in unregistered land
What makes a good root? s44 LPA 1925
- Is at least 15 years old
- Deals with or shows the ownership of the whole legal and equitable interest
- Contains a recognisable description of the property
- Contains nothing to cast doubts on title
Docs capable of being good roots
Conveyance on sale or legal mortgage
What should be included in the abstract/epitome?
Anything affecting ownership of land- unbroken chain of ownership from root to present seller
Examples of docs to be included in the abstract/epitome
- Conveyances on sale & gift
- Deaths
- Grants of representation
- Changes of name of estate owners
- Leases
- Mortgages
- Discharge of legal mortgages
- Docs prior to the root containing details of restrictive covenants affecting property
- Memoranda endorsed on docs of title
- Powers of attorney under which a doc within the title has been executed
- Docs of record (Death & marriage certificate)
What does not need to be included in the epitome/abstract?
Land charge dept search certificate
Leases expired by effluxion of time
Docs predating root title
Requirement for documents that are to be included in the abstract/epitome
Every doc must be the original, marked with original marking
Why does title have to be investigated?
- Accurately detail what it is the seller is selling to the buyer
- Anticipation of any problems that may occur that’re undesirable to the buyer
What to look out for in a title investigation
- Does land description match that of the contract
- Does title no match that given in contract
- Is the estate leasehold or freehold
- Which easements are enjoyed? Do they match the needs of the client?
- Is class of title correct
- Is the seller the registered proprietor? if not, who has the ability to sell the land
- Any incumbrances?
- How do these affect the buyer
- Which of them will be removed/discharged on completion?
- Has it been contractually agreed upon to buy subject to incumbrances that remain?
- Is land being bought included within the title?
- Are there any colourings indicating right of way?
How can overriding interests be discovered?
- Disclosure in contract
- Pre contractual enquiries
- Local land charges search
- Inspection of property
What are links in chain
Unbroken chain of ownership from root of title to present seller
What needs to be checked when investigating unregistered land?
- Root doc is provided for (Correct)
- Unbroken chain of ownership showing progression of title
- No defects in title
Are interests binding in unregistered land?
Legal estates and interests are automatically binding- buyer is automatically subject to interests. Other interests dependent on whether notice has been given
Main classes of land charges
- Class C(i) Puisne Mortgage (legal mortgage not protected by lender’s possession of title deeds)
- Class C(iv) Estate Contract (contract to convey/create a legal estate)
- Class D(ii) Restrictive covenant entered into or after 1 Jan 1926
- Class F Spouse or legal
partners right of occupation of matrimonial home under FLA 1996
Imputed knowledge
Within actual/constructive knowledge of their solicitor
Constructive knowledge
Knowable had they made enquiries that ought reasonably to have been made
What can be registered?
- The Freehold
- Lease that has more than 7 years unexpired
- Leases of any length where the right to possession is discontinuous (e.g. timeshare)
- Leases of any length granted to take effect in possession more than 3 months after date of grant
- Rentcharge (perpetual/a term of which more than 7 yrs are unexpired)
- Profit a prendre (fishing right) either perpetual or for a term of which more than 7 years is unexpired
- Franchise (right to hold a market) either perpetual or for a term of which more than 7 years is unexpired
Events triggering first registration
- Transfer of unregistered freehold
- Transfer of unreg leasehold with more than 7 years to run at the time of the transfer
- A grant of a new leasehold estate in land
- For terms more than 7 years, or
- For a term of any length to take effect in possession after a period of 3 months from grant date
Consequence of first registration
*Once the title has been registered, any subsequent dispositions must be registered to be legally effective. Must be done within 2 months of the triggering event, or becomes void (poss to apply for extension)
Do individual estates have separate title numbers
yes
Absolute title
- Title is near perfect
- Given to freehold or leasehold interest
- Proprietor of an interest reg with absolute title has the legal estate, appurtenant rights
What is a proprietor of absolute title subject to
- Entries on register
- Unregistered interests within Sch 1 or 3 LRA 2002
- Where the proprietor is a trustee, minor interests of which they have notice (e,g, interests of beneficiaries under the trust)
- Where land is leasehold, express & implied covenants and obligations under the lease
Registrar powers under s9(3)LRA 2002
Registrar has the discretion to overlook minor defects ‘curing’ the defect
Possessory title
- Same effect as reg with absolute title, proprietor is subject to all adverse interests existing at date of first reg.
- Those that have lost title deeds or claimed via adverse possession(LA 1980)
- Is initially possessory, but can be upgraded
Qualified title
Title shows a specific identified defect which registrar deems to be of a nature that they can’t use discretion to overlook defect (breach of trust e.g.)
How is the register divided
Property
Proprietorship
Charges
Property register
- Describes the estate in land which is registered (freehold/leasehold)
- Identifies the property
- Shows physical area of land subject of reg
- Gives details of rights benefiting land
Proprietorship register
- States the class of title which is registered
- Gives name/address of proprietor
- Personal covenants can be noted on this register
Charges register
- Contains details of charges/incumbrances currently affecting the title
- Burden of easements,covenants binding the title
- Covenants purely personal in nature noted on proprietorship register
- Details of mortgages
What is an overriding interest
interest binding on a proprietor of registered land even though they did not appear on the register irrespective of notice
What is an unregistered interest overriding first registration
- Sch 1 LRA 2002
- Leases for 7 yrs or less
- Interest belonging to a person in actual occupation
- Legal easement/profit
- Local land charge
Types of 3rd party rights
- Registered charges
- Unregistered charges overriding disposition
- Interests which must be protected by an entry on the register
Unregistered interests overriding a registered disposition
- Sch 3 LRA 2002
- Leases for 7 yrs or less
- Legal easement/profit
- Local land charge
Exception to overriding interests
- Interest under a settled land act settlement
- Interest of a person of whom enquiry was made before the disposition and failed to disclose when reasonably expected to do so
- Interest unobvious on reasonably careful inspection of land
- Lease granted to take effect in possession more than 3 months after the date of grant, had not taken effect in possession at time of disposition
Can easements be overriding?
Easements expressly granted on or after 13 Oct 2003 can never be overriding
How to investigate unregistered land
Index map search form SIM (reveals whether land is reg/subject to pending reg/caution against first reg)
- Examination of docs supplied in the abstract/epitome, checking that
- Root doc as provided for by the contract
- Unbroken chain of ownership beginning with seller in root doc, ending with present seller (no apparent breaks in chain)
- No defects in title adversely affecting buyer’s title
- Verification of original deeds
- Checking for evidence of occupiers
- Pre-completion searches
- Whether any transaction in title history should have triggered first reg
Method of investigation of unregistered title
- Root of title
- Links in the chain
- Stamp Duty
- Description
- Incumbrances
- Execution
- Searches
What happens if stamp duty doc is unstamped/incorrectly stamped
Cannot be produced in evidence in civil proceedings
Evidenced by embossed stamp placed on the deed
What if a stamping defect is discovered?
buyer entitled to insist the seller remedies such deficiency at their own expense
What if seller tries to contract out of rectification of SD defect
Contractual provisions requiring buyer to meet the cost of rectifying the defect will be void s117, Stamp Duty Act 1891
Ad Valorem duty
Conveyance is liable to AV duty according to the amount of consideration
Conveyance on sale which does not have a certificate of value, not bearing AD stamp has been stamped incorrectly
When is a property exempt from SD
- Conveyance/gift transfer/assent by which property is passed by personal rep or beneficiary under a will executed after 30 april 1987 are exempt from SD
- Requires certificate that they are categorised as being exempt under SI 1987/516
Particulars delivered stamp
- FFA 1931 provided that certain docs be produced to HMRC with form of particulars and any consideration stamped with PD stamp
- Without PD stamp, doc was not properly stamped and the person who failed to produce it fined
- Docs requiring PD stamp
Conveyance on sale of freehold
Grant of lease for 7 years or more
Transfer on sale of a lease of 7 years or more
Description in unreg land
to correspond with contract and is consistent throughout the epitome
- Deeds may show parts of land included in root doc as having been sold separately
- Copies of any plans referred to should be obtained, even if they are pre-root
Incumbrances
- Solicitor to check incumbrances are not disclosed by deeds other than those disclosed in the contract
- Copies of covenants, easements, other burdens affecting land should be supplied
- Burdens checked to ensure they have not been breached/impede Cl’s proposed use for the property
Execution
- Solicitor should check that all deeds/docs have been properly executed
- For transfer of legal estate, requirements for execution of deed must be satisfied
Searches
Correct, clear searches must be made against all estate owner names
- Whether search was made in the correct name as set out in the deeds
- Whether the search was made for the full period of ownership
- Whether search following transaction was made within the priority period
- Whether old/new names were searched in cases of name changes
How is a beneficiaries interest
Disposition must be made by all trustees (min 2)
Buyer must pay to all trustees (2 individuals or trust corp) to take land free from equitable interests
What if there is only one trustee
buyer must insist a second be appointed to overreach the interest of beneficiaries
What is a personal representative
Enjoys broad powers such as trustees of land
If there is only one PR, they have the powers of two or more and can convey land on their own, giving valid receipt for the proceeds of sale
Buyer must call for grant to see who has or have been appointed PR and insist all PR named in the grant join in the assent/conveyance or call for evidence of the death of any PR
Can buyer get good title from PR
Provided buyer deals with registered proprietors and complies with restrictions on the register, they will get good title
What does a PR need to produce to buyer as proof that they can deal with the land
grant of probate- If buyer takes transfer from all proving PR and submits an office copy or certificated copy of grant with application for registration, buyer will obtain good title
What is required to get good title from PR in unreg land
Assent made by PR must be in writing to pass legal estate in land to B
What is a s36 statement
- Provides protection for buyer purchasing from PR
- Based on the premise that PR (not dealing with their own property, with large complicated estate) likely to attempt to dispose of the same property twice
When does buyer take good title even if there has been a prior disposition?
Conveyance contains statement given by PR that they have not made any previous assent or conveyance of that same land
- no memorandum of prev conveyance or assent of land is endorsed on the grant
- Any prior disposition is not for valuable consideration
Things to check when buying from a personal representative
- Inspect grant of probate to check authority of personal representatives
- Ensure all proving personal reps are joined in conveyance
- Check grant of probate contains no memorandum of prior disposition of land
- Check conveyance contains s36 statement
How to overreach TIC
- If co-owners are tenants in common in equity → restriction on proprietorship register
- In the event of death of a co-owner, second trustee is appointed to join with the survivor in transfer
- If seller can prove they are sole and beneficially entitled to the whole legal & equitable interest, buyer can deal with them alone
- proof of death must be provided
Overreaching JT
- No restriction placed on register
- Buyer can generally deal with survivor alone on proof of death (of deceased co-owner)
- Pre-contract searches and enquiries reveal info as to occupiers
What is needed when buying from seller who owned as TIC of unregistered land
- Buyer from survivor should insist on taking conveyance from 2 trustees to overreach beneficial interests subsisting under the trust
- If survivor has become solely & beneficially entitled to whole legal & Equitable interest, they may convey alone as sole owner on proof to the buyer of this fact
- Certified copy of grant of probate and assent made in favour of survivor
What is needed when buying from seller who owned as JT of unregistered land
- Survivor entitled to whole legal and equitable interest
- Buyer accepts conveyance from survivor if they are satisfied they will benefit from protection of Law of Property (Joint Tenants) Act
- JT could have been severed into a TIC
- Act allows buyer to assume no severance has occurred before death of deceased joint tenant, if transfer by surviving JT to buyer contains a statement that surviving JT is solely and beneficially entitled to the land and neither of the following has occurred before transfer date
- Memorandum of severance endorsed on conveyance to JT
- Bankruptcy proceedings registered against either JT at Land Charges registry
- If following applies, surviving JT to be treated as surviving TIC
How is mortgage discharged for reg land
- Deleted from charges register -no concern to buyer
- Effected by filing DS1 form at LR
- Buyer should raise requisition requiring it to be removed
How is a mortgage discharged for unreg land
- Provided by seller and checked by buyers solicitor to ensure discharge was validly effected
- Where lender has exercised POS → no receipt
How is mortgage discharged by mortgage society
Provided that receipt is in the prescribed wording by Building Societies Act 1986 and signed by person authorised, receipt may be treated as proper discharge without further enquiries
Other mortgages
- Receipt endorsed on mortgage deed operates to discharge mortgage, provided it is signed by lender and names person making repayment
- Where money appears to have been paid by person not entitled to immediate equity of redemption, receipt usually operates as transfer of mortgage
What is POA
May be necessary for seller to give someone POA to execute docs on their behalf (eg seller is going abroad and unavailable when docs need to be signed)
5 types of POA
- General power (s10, Powers of Attorney Act 1971) entitling attorney to deal with all of donor’s assets
- Special power permitting attorney to deal with only certain specified/categories of assets
- Trustee power where property is held on trust
- Enduring power (endures through donor’s mental incapacity)
- Lasting power (has replaced enduring power)
When can POA be revoked
POA may be revoked expressly by donor/automatically on donor’s death, mental incapacity or bankruptcy. Once registered, enduring powers are irrevocable except by court order
How to get good title when purchasing from POA
power
- Authorises transaction which is to take place between attorney and buyer
- Is valid and subsisting at date of completion of the transaction
General power
General power of attorney (s10, POA 1971) entitles attorney to take any action the donor could have taken with regard to any of the donor’s property
Can buyer take good title if they are aware of donors death
No
What if a buyer acquires property in bad faith
- Obtains protection of s5(4) POA 1971 if
- Dealing between attorney and the person who dealt with them took place within 12 months of the grant of power, or
- The person who dealt directly with the attorney made a statutory declaration before or within 3 months of completion of a purchase by C to the effect that they had no knowledge of the revocation of the power
- If either apply, presumed in favour of buyer that person who dealt with attorney had no knowledge of the revocation and will obtain good title
When purchasing from an attorney holding enduring power
- Search at office of public guardian, ensuring no application for registration of power is pending
- If pending, this suggests mental incapacity on the part of the donor
- Buyer should wait until registration has been completed
- Once registered, attorney to produce registration certificate to buyer
When purchasing from attorney holding lasting power
- Give attorney the power to deal with matters when donor has no capacity
- Required to be in prescribed form- effected when registered at OPG
- Obtain office copy of the power from OPG as evidence that lasting power has been registered and check attorney is acting within scope of their authority
What negates buyer protection from invalid lasting power
- They knew the power was invalid
- Were aware of circumstances terminating attorneys authority to act
What is a transaction at undervalue?
Consideration received significantly less than OG purchase (gifts, inter-spouse transfers, marriage breakdown)
When will a buyer not be protected from transaction at undervalue
- Buyer acquired property, had notice of insolvency and that disposition was at an undervalue
- Buyer was connected with or an associate of co who made the OG transaction at an undervalue. associate is widely defined to include persons spouse, ex spouse, members of family, members of spouses family, their partner/their family and employees
- Registration of bankrupycy = notice (buyer needs to make bankruptcy search against individual making undervalue transaction for 5 years from date of transaction)
Issue with restrictive covenants
Instructions may reveal buyers intended use after completion causes a breach of existing covenants (eg to prevent use of property except as a single private dwelling house and cl wants to convert it into flats)
Restrictive covenant remedies
- Check covenant has been registered
- See wording of covenant to see it has been annexed effectively to the land and is binding
- Obtain insurance policy covering future breaches
What is needed for restrictive covenant indemnity insurance
- Copy of doc imposing covenant/exact wording
- Exact nature of the breach occured/action contemplated which will cause breach
- Date when covenant was imposed
- Whether or not covenant is registered
- Nature of other properties in the immediate neighbourhood (risk assessment)
- Planning permission permitting development
- Steps taken to trace person with benefit of C and enquiry results
Benefit of taking insurance
If insurance has been obtained, usually single premium policy (single sum paid) Benefit can be passed on to successors
Other ways of dealing with covneants
Approaching benefittor of covenant
They may be prepared to modify/release the buyer from the covenant or consent to a particular activity
Pay them for modification, release or consent
Application to upper tribunal (lands chamber)
may, under s84 LPA 1925 grant modification or discharge of restrictive covenant (may not be cheap)
What does competition act 98 prohibit
agreements affecting trade within UK and which prevents, restricts, or distorts competition within the UK
OFT guidance on application of CA to land agreements
- Restriction preventing high street retail unit being used for sale of same products sold in premises adjacent
- Restrictive covenant on sale of land not to sell to sellers competitior
- Covenant by landlord not permitting another business of the same type as T to open in its shopping centre
- Unless the covenant has an appreciable effect on the market affected, it will not fall within competition legislation (scope of market, degree of market power)
What happens if CMA discovers a prohibited restriction
CMA can impose up to 10% of firms turnover if it discovers prohibited restriction - also void and unenforceable
For deeds post 31 July 1990
- It is signed by its maker
- The signature witnessed and attested.
- Clear the doc is intended to be a deed (description of doc as a deed or doc is expressed to be executed as a deed)
Execution of deed by co
- Affixing co seal
- Clear on the face that it is intended to be a deed
- Affixed in the presence of and attested by 2 members of the board
- Signed by director and sec or by 2 directors, provided doc is expressed to be executed by the co
- Must be delivered as such
- Presumed unless it can be reubtted
SC 4.3.1
buyer must make requisitions within 6 working days of the later of exchange/delivery of epitome
