Possessory Title Meaning, Risks & How to Upgrade
Looking at what a possessory title is and how it can affect you as a homeowner
Whether you are thinking of buying or selling a property with a possessory title, there are certain things you will need to consider. A property with a possessory title brings with it certain legal aspects that can be tricky to navigate.
In this blog post, we will be looking at what a possessory title is, whether you should get a possessory title upgrade, and how it can affect you as a homeowner.
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Possessory title meaning?
Should the HM Land Registry be uncertain about the ownership of a property or the ownership is disputed, then a possessory title deed will be issued to a homeowner. It means that whilst you are considered the homeowner of the property, there is some important information missing.
The possessory title meaning is that you should think of it as owning a property but without the full legal protection that a regular homeowner has.
As the HM Land Registry is legally unable to legally certify the deeds in a normal way, it is instead classed as defective. Because of this, it is possible for a previous owner or an interested property to dispute your right to either some or all of the property.
Some examples of a possessory title can include:
The original paper deeds have been destroyed or stolen.
If the house sale was fraudulent and there is no Title Deed for the property.
If you do not have the Land Registry title deeds in your name.
If the seller has obtained title by adverse possession (squatters rights).
A property has been passed on through generations, without deeds or proof of original conveyance.
When a property or plot of land is purchased through DIY conveyancing and there's no electronic proof of ownership
What are the risks of possessory title?
If you are a homeowner with a possessory title, then you potentially lose the rights to ownership if the land was bought by adverse possession, or if you can prove beyond a doubt that they
Possessory titles are not without risks. For a start, you run the risk of having your ownership challenged. If this were to happen to you, you would be unable to claim for any losses you may suffer.
If you are a homeowner, you also have the potential to lose your rights to ownership if the property was bought through adverse possession. This can also occur if another party were to prove ownership beyond doubt of the property. If your posessionary title is incorrectly processed then you could give a successful challenge to ownership.
Because of this, some buyers may see purchasing a home with a possessory title as risky.
What is the problem with possessory title?
A possessory title implies that there is an element of doubt over the ownership of the land, it means that in theory the title can be challenged by anyone who believes that they may have a better claim to the property. Furthermore, this also applies to any third-party rights or covenants which may have appeared in the original deeds but have since been lost.
Do possessory titles affect the value?
Yes, having a possessory title on your property can affect its market value. Exactly how much by depends on the property size, location, and condition but due to the extra complecations they can bring, they will often sell for lower than their market value.
How long before possessory title becomes absolute?
In order for you to upgrade a possessory title to an absolute title, you must have 12 years of unchallenged ownership.
Furthermore, only the following can apply to upgrade their class of title to title absolute:
The owner of a registered charge that affects the property
The property owner
Someone interested in a property that derives from the original estate
Anyone who is entitled to be registered as the property owner
It is worth keeping in mind that newly issued titles can also be challenged in the event that the original deeds include third-party rights or covenants.
What's the difference between an absolute title and a possessory title?
The level of protection that you will have against third-party claims is the biggest difference between a possessory title and an absolute title. This is because absolute titles are the most secure title issued by HM Land Registry and provide you with the most robust evidence of property ownership. They are used in the event that you wish to sell or mortgage the company and provide protection in the event that a third party tries to make a claim on the property.
On the other side of the coin are possessory titles. These are less secure and can be challenged by third-party claims. It can be a restrictive and complex process to turn your possessory title into an absolute title, so this is worth bearing in mind. Furthermore, possessory titles are subject to restrictive covenants.
Possessory title indemnity insurance
However, there is a way around this. Mortgage lenders may consent to an application if there have been measures put in place to protect the potential loan. Indemnity insurance is one such layer of security, which protects the buyer and the lender should the possessory title be challenged and they have to leave the property.
It is worth keeping in mind that not every possessory title may be able to take out an indemnity insurance policy. Furthermore, it can be a difficult process to find the right cover to mitigate all of the risks that can be involved.
How much does indemnity insurance cost?
Exactly how much your title indemnity insurance policy will cost depends upon the property's value, as well as how much you have been indemnified for in the event that someone makes a claim on your property.
As a rule of thumb, you can expect to pay at least £300, but if your property is valued at £500,000 then you are looking at paying in the region of £500.
Buying a Property with Possessory Title
Exactly how difficult it will be to secure a mortgage for a property with a possessory title will depend on the circumstances of the title. It is worth bearing in mind that there are a number of risks involved with purchasing a property in this condition. If you decide that you wish to purchase this type of property, you should:
It is important to fully inform your mortgage lender about any issues or extraordinary circumstances surrounding your property, and a possessory title is no different. It is important they are aware and consent to lending money for a property in this condition.
It is vital that you obtain a Statutory Declaration of ownership from the seller. This declaration must include the amount of time that they have held undisputed ownership.
Ensure you will not be breaching any title deeds, lost or otherwise.
In order to protect yourself against any future challenges, you should get a hold of any lost title deeds.
Can you sell a property with possessory title
You can sell a property with a land registry possessory title however, it is not always the easiest thing to do. You need to understand that there will be certain legal complications that come with selling a house in this condition that will be unavoidable.
Buyers may be attracted to your property due to the possessory title, as often buyers will be willing to sell them for a discount due to the trouble they can bring. If you do not make buyers aware of the possessory title, it will more than likely be flagged during the conveyancing process. Your buyer may understand the risk that purchasing a house with a possessory title brings, however, some may be put off by this.
Whilst selling with a possessory title can be difficult, it doesn't need to be. We are The Property Buying Company, a cash buying company who will buy any house, in any location, and in any condition.
Because we are a genuine cash buyer, we are able to purchase your property as soon as you are ready to sell, whether that's in as little as 7 days or as far away as 4 months. We pride ourselves on being able to tailor our service to you, helping you sell in your desired timeline.
Plus we will cover all of the legal fees that you would typically associate with selling your home, it's just one of the ways we make selling easy.
If you are ready to sell your property then get in touch today by filling in one of our free, no-obligation valuations to receive your CASH offer, which we could have sitting in your bank in as little as 7 days...