When first registering a property, H.M. Land Registry will assign one of three different types of title to the new owner: an absolute title, a possessory title, or a qualified title. Before diving into purchasing a property with a possessory title, we’ll explain what each of the three means in terms of property ownership.
The highest and most secure form of title, an absolute title gives the new owner exclusive rights to the property. This means that no other party has any ownership claims, possessory interests, or outstanding legal charges on the property.
A possessory title gives the new owner the right to possess and use the property but does not give them exclusive ownership rights. This means that there may be other parties with possessory interests or outstanding legal charges on the property.
A qualified title gives the new owner the right to possess and use the property subject to certain conditions. This means that there are other parties with exclusive ownership rights, possessory interests, or outstanding legal charges on the property which may limit the new owner’s use of the property.
Now that we’ve outlined the three different types of title, let’s take a closer look at possessory titles.
What is a Possessory Title?
A possessory title is typically given when the ownership of a particular property is debatable or subject to challenge. This usually happens when the owner of the property cannot provide documentary evidence to prove that they are the owner of the property.
In certain cases, there are legitimate reasons why the owner may be missing particular documents such as the original purchase documents or the property deeds. There have been cases wherein which the original documents were destroyed in a fire, flood or war.
Other times, possessory titles are given when the ownership of the property is unclear because there is more than one owner claiming possessory rights to the same property. This can happen when the property was passed down through generations and there is no will or documentation to determine who the rightful owner actually is.
Without determining the true owner of the property, selling the house can become complex and risky for all parties involved.
Is it safe to purchase a property without a possessory title?
There are a few risks to take into consideration before purchasing a property without a possessory title.
The first is that you may not be the only one claiming possessory rights to the property. If there are multiple people claiming possessory rights, then the rightful owner could come forward at any time and assert their ownership of the property. This would mean that you would have to vacate the property and may even be liable for damages.
Another risk to consider is that possessory titles are typically given when the ownership of the property is in dispute or there are outstanding legal charges against the property. This means that you could be held responsible for any unpaid debts or fees associated with the property.
Lastly, if the previous owner did not have a possessory title, then it is likely that they did not have insurance on the property. This means that if there are any problems with the property, such as structural damage, you will be responsible for repair costs.
Before purchasing a property without a possessory title, be sure to do your research and consult with a legal professional to understand all of the risks involved.
Can you get a mortgage on a possessory title?
Yes, it is possible to get a mortgage on a property with a possessory title. However, the circumstances of the possessory title will determine how difficult or complex it may be to secure a loan.
For example, if the possessory title is given because the ownership of the property is in dispute, then the lender may be hesitant to provide financing. This is because there is a risk that the rightful owner could come forward and assert their ownership of the property, leaving the lender without collateral for the loan.
If the possessory title occurs in the circumstances of lost deeds, then a ‘statutory declaration is required to satisfactorily explain the loss to the mortgage lender.
Possessory Title with Indemnity Insurance
In many cases, mortgage lenders will only consent to an application of a loan if the appropriate insurance is put in place. Indemnity insurance protects the buyer and the lender in the event that the possessory title is challenged and they are forced to vacate the property.
It is important to note that not all possessory titles will be able to get indemnity insurance and it can be quite difficult to find a policy that covers all of the potential risks involved.
Can a Possessory Title become an Absolute Title?
In some cases, a possessory title can become an absolute title. However, there are very particular circumstances under which this change can be made.
In accordance with section 62(7) of the Land Registration Act 2022, only the following individuals can upgrade the title of a property. These include the registered proprietor, a representative of the proprietor, a proprietor of a registered change over the land and an individual who is interested in the registered property that derives from the registered estate.
There is, however, an exception to the rule above. After a lapse of time, the current owner of the property is able to upgrade a possessory title to an absolute title. This change can only occur once the property has been registered under a possessory title for 12 years.
Whilst it is possible to make the change, insurance may still be required in order to cover previous covenants or rights to the property.
As you can see, there are a number of risks to consider before purchasing a property such as this. It is important to do your research and consult with a legal professional to ensure that you understand all of the risks involved.
If you are interested in purchasing a particular property under the discussed circumstances, you’ll likely be questioning whether it is safe to purchase a property with a possessory title. Any buyer should be sure to put in place the appropriate insurance to protect yourself and your investment.
When done correctly, purchasing a property with a possessory title can be a great way to get your foot on the property ladder. Just be sure that you are fully aware of all of the risks involved before making any decisions.