Possessory Title

21/10/2019
Possessory Title is where the actual ownership of the land/freehold you are buying, or that you own, is debatable and technically subject to challenge. It arises because an owner doesn't have enough documentary evidence to prove that they are the owner of land, such as the deeds or the original purchase documents.

Top tips for buying a Possessory Title


  • Get your mortgage lender's consent
  • Take out Possessory Title Indemnity Insurance (lender will expect this)
  • Statutory Declaration of seller's ownership (particularly length of continuous ownership of land so you can upgrade the title to absolute after 12 years)
  • Watch out for breaching the terms of the deed you don't have

The seller effectively makes a blanket legal declaration covering their completed TA6 Property Information Form, however you'll need to ensure above all that you have proof of when your seller took up their possessory title ownership, particularly because the duration will count towards any 12-year ownership needed to upgrade your title to absolute - more on this below.

It is one of seven types of title to land of which the the most common is absolute title, which is 'proof against the world' and means no-one can dispute your ownership. This article examines this subject and considers:



Buying a property with possessory title?

Get our specialist help when buying a possessory title. We offer all our years of experience backed by a No Sale No Fee and a Fixed Conveyancing Quote. Click to get an online quote or call us and speak to on eof our team on 0333 344 3234 (local call charges apply)


* Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels - Specialist in Complex Titles



    1

    How does possessory title come about?

There are two broad reasons:

  1. An event, such as war or a natural disaster, has resulted in original documents/deeds for a property or land being destroyed (e.g. by fires caused by bombing).
  2. Someone has claimed the property or land in question on the basis of occupying it, for 12 years in the case of unregistered land or 10 years if registered. This is often referred to as adverse possession, possessory rights and/or 'squatters' rights'.

What's the difference between possessory title and absolute title?

There are two key differences between a possessory title and title absolute:

  1. a possessory title can be set aside if the legal owner applies to the Land Registry with the necessary deeds to prove ownership of the property;
  2. a possessory title is subject to any covenants or rights affecting the property – without the old unregistered deeds there is no way of knowing what these may be but these could include matters which would restrict the use of the property or prevent building on the land.

Because of this, a possessory title is not a "good and marketable" title and this is likely to affect the value of the property. You can, however insure against these risks by taking out a legal indemnity policy and a buyer or lender will often accept a the title with such a policy.



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    2

    Can possessory title be disputed?

Yes. It's always possible that someone might produce title deeds and/or be able to prove the Epitome of Title in which case you stand to lose the property/land.

Into the bargain, if you've invested in your title, for example if you've extended or constructed outbuildings, you cannot claim any compensation.

As indicated above, this is why lenders and buyers would expect you to have taken out indemnity insurance to ensure that if someone does come forward, you/they will at least be fully compensated.

Example of a possessory title

  • A buyer is purchasing a property that has a possessory title. The seller cannot provide evidence of the original transaction and the buyer needs to inform their mortgage lender and take out indemnity insurance
  • An owner of a property cannot prove they own their property and are looking to register it at the Land Registry. The property has been passed down through the family generation after generation and only now are the current owners looking to register the property at the Land Registry. Without the deeds or proof of purchase they can only get possessory title.

    3

    Can you get a mortgage on a possessory title?

Yes, depending on the individual circumstances, however it depends on why the title has been been given this class.

The Council of Mortgage Lenders states that where a title is based on adverse possession, Possessory Title will be acceptable if the seller is, or on completion the borrower will be, registered as the registered proprietor of the title.

In the case of lost title deeds, a statutory declaration – i.e. a 'sworn statement' - from the seller must explain the loss satisfactorily before the lender will lend.

However, if the title is based on possessory rights (also known as squatters' rights), there is a risk that the true owner could come forward with a better claim for possession, with deeds to prove they are the true owner. This could leave you, if you have bought the property, with no title to the property and no compensations for your loss, even if you had, for instance built a house on the land.

Possessory Title only with Indemnity Policy

In most cases when buying a Possessory Title, indemnity insurance is put in place to protect against any possible loss arising from successful claims on your property. So it is vital that you take out an indemnity insurance policy to protect you and your mortgagee against such losses.

It follows that if a lender decides to consider granting you a mortgage on such a title, they will want to carry out a possessory title valuation.


    4

    Can you update possessory title to absolute title?

According to HM Government via the Land Registry, under section 62(7) of the Land Registration Act 2002 , only four groups of people are entitled to apply to have their class of title upgraded from a sub-standard class of title to a better one:

  • The registered proprietor
  • A person entitled to be registered as proprietor, to include a personal representative of a deceased proprietor and a purchaser of the land
  • A proprietor of a registered charge over the land
  • A person who is interested in a registered estate that derives from the registered estate to be upgraded
    • Once the land is registered, you can make an application to upgrade the class of title at any time. In order to make a successful application, you must satisfy the Land Registry that any defects in the title have been remedied and therefore the reasons for granting an inferior class of title no longer apply.

      The only exception to the above rule is in the event of such a title after a lapse of time. In this instance, you can apply to upgrade the title, whether freehold or leasehold, to either an absolute freehold or a good leasehold title once the possessory title has been registered for 12 years. It will, however, remain subject to any earlier rights or covenants so an insurance policy is still required.

      1 - Possessory Titles after lapse of time

      Where title to an estate in land is a possessory one, whether freehold or leasehold, you can apply to upgrade the title to either an absolute freehold or a good leasehold title once the possessory title has been registered for 12 years (section 62(4) and (5) of the Land Registration Act 2002).

      The date on which the title was first registered is stated in the property register, taken as the date on which the first proprietor was registered.

      Use panel 10(C) of form UT1 to tell the Land Registry who is in physical possession of the property. Where this is not the registered proprietor, you must be able to demonstrate the applicant’s relationship with the person who is in possession that, for the purposes of section 131 of the Land Registration Act 2002, means they are to be treated as being in possession. An example would be where a landlord is the registered proprietor but his tenant actually occupies the property.

      2 - Possessory Titles in other situations (and qualified titles)

      You can apply at any time after registration to upgrade a possessory or qualified title in land, or a possessory or qualified rentcharge, by producing additional evidence of title to HM Land Registry that would remedy the reason why a possessory title or a qualified title was granted in the first place.

      An example is where previously lost deeds have come to light.

      Possessory title registered before January 1909
      When application is made to upgrade a possessory title that was originally registered before January 1909, a certified copy of the conveyance or assignment to the first registered proprietor should, if possible, be produced.

      How much does upgrading your title cost?

      It currently costs £40 per title or £20 if carried out online.


        5

        How can you claim possessory title on a property?

      Adverse Possession

      To acquire possessory title via adverse possession and you can't demonstrate you're the landowner of the property in question, you have to show the Land Registry that you've been in continual occupation of the of the land with an intent to possess it to the exclusion of others, openly and without payment or consent for at least 12 years.

      If the land is unregistered, you can apply after 12 years' occupation however if it is registered you can do this after 10 years. When the Land Registry receives your application, they serve notice on the registered proprietor at the address (or addresses if more than one) given in the official copies. The proprietor - if there is one available - then has 65 business days in which they can object to the application and evict you, after which your application becomes successful.

      What evidence do you need?

      You need to produce a statutory declaration setting out such facts as:
      • when the occupation commenced
      • the purposes for which the land has been used, confirming that no consent for the use was obtained
      • that the use is and always has been open and apparent
      • that no objection has been raised
      • that the use has been continuous
      A statutory declaration must be sworn in the presence of a solicitor, licensed conveyancer or commissioner for oaths and the making of a false declaration is a criminal offence.

      Possession has to be continuous - there can't be a break, even a day in your possession - however this doesn't mean that you can't leave the land for a period. That said, if you, for example, were seeking to claim title to a house but at some point you had moved out with an intention to live elsewhere on a permanent basis, then moved back in, the 12 year period would commence from the date you moved back in.

      You have to be clear and open about your possession of the land and, if required to make the extent of your claim clear, to build fences around any land to help this. This is among other things to make it clear to the proprietor, if they turn up, that someone is in occupation of their land.

      What Land Registry forms must you complete?
      You must make the application on form FR1: rule 23 of the Land Registration Rules 2003. Please note the need to attach to form FR1 a plan showing the land if the verbal description in panel 2 of form FR1 is not sufficient to identify the location and extent of the land on the Ordnance Survey map. You must fill in panel 12 or your form will be returned to you.

      With form FR1 you need to send in form DL in duplicate listing the supporting documentary evidence: rule 24 of the Land Registration Rules 2003. You also need to send the appropriate fee under the Fee Order and the inspection fee. If you are providing a statement of truth, you should also complete form ST1.

      Lost Deeds

      If you are the legal owner of the land but you've lost the title deeds for whatever reason, then you need to swear a statutory declaration detailing when you acquired the property and under which circumstances and how the deeds were lost. The declaration should also confirm that should the deeds be located they will be submitted to the land registry. Any available supporting evidence should be produced, such as photocopies of deeds, sworn statements from neighbours who can confirm how long you've occupied the property, statements from any mortgagee who has a debt secured against the property and a statement of truth from any conveyancer who acted in the conveyance in connection with when you acquired the property.

      What Land Registry forms must you complete?
      You must make the application on form AP1: rule 13 of the Land Registration Rules 2003. You must also send the appropriate fee under the current Land Registration Fee Order. The Land Registry will return as defective any application made in respect of land that was not already registered on 13 October 2003, and any where there is no evidence of at least 12 years’ adverse possession by that date. If you are making a statutory declaration as evidence, you will once again need to fill in form ST1.

      Please note that the 12 year period of continuous occupation does not have to be by the same person. If a person is buying a registered property for example where the seller has no title to part of the garden and he has owned the property for, say, 6 years and so cannot make a claim, he can provide the buyer with a statutory declaration covering his period of ownership.

      Once the buyer has lived there for 6 years he can then make his own declaration covering his period of ownership and based on the two declarations together can claim make a claim. Alternatively, if he sells the property within 6 years, he can make a declaration to pass on to the buyer together with the original declaration, and so on.

      What happens after you've made an application?

      Once you've made your application to the Land Registry, it sends a notice to the owner of the land who has 65 business days to object. A simple objection is enough to deny your claim, however the landowner can give a counter-notice which requires you to show that your situation falls into one of 3 categories:

  1. That it would in some way be morally wrong for the owner to defeat the application, for example, where the owner allowed or encouraged the squatter to believe that they actually owned the land;
  2. That the squatter is for some other reason entitled to become the new owner of the land, for example, where they contracted to buy the land from the owner and paid the purchase price but the land was never transferred to them;
  3. That the land is next to land already owned by the squatter, the exact line of the boundary between the two pieces of land has never been formally determined and the squatter mistakenly but reasonably believed that they were already the owner of it.

If the Land Registry don't receive an objection or if the owner's objection fails for any reason, you'll be registered as the new owner of the land.

How much does the Land Registry charge for a possessory title application and claim?

It currently costs £130 per title.


    6

    What if your application for adverse possession fails?

If your application fails because the owner serves a counter-notice and you do not fall into one of the three categories above, you can apply to the Land Registry again at a later date, providing you remain on the land for a further two years.

It is much more likely that you will succeed with your application the second time around if the owner has failed to evict you from the land in the meantime.


    7

    Frequently Asked Questions (FAQs)

How long before a possessory title becomes absolute?
As long as the land has been registered with a possessory title for a minimum of 12 years without anyone objecting then you can apply to the Land Registry via form UT1 to upgrade your title to an absolute title.

Does possessory title affect value of property?
Yes, although sellers will always argue it doesn’t affect the buyer if they can get a mortgage. The challenge is that there is a risk that someone will come along with a better title than the buyer and then they are forced into transferring to them without compensation. While there are indemnity policies that can be taken out to protect against this eventuality, the uncertainty can make the whole prospect seem less attractive. That's why you can often find possessory titles being sold at auction - they are harder to sell on the open market.

Can a possessory title be challenged?
Yes - you're technically always at risk of losing the property.

How can someone prove they have a better title than you?
  • Evidence of original purchase
  • Original documents such as deeds


Buying a property with possessory title?

Get our specialist help when buying a possessory title. We offer all our years of experience backed by a No Sale No Fee and a Fixed Conveyancing Quote. Click to get an online quote or call us and speak to on eof our team on 0333 344 3234 (local call charges apply)


* Fixed Fee – No Sale No Fee – On all Mortgage Lender Panels - Specialist in Complex Titles



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