Buying a Property is not a simple process, and discovering something unusual on the title review doesn’t help matters. Whilst there are no end of oddities that do arise, Simon Stempien, Senior Associate Solicitor discusses some of the most common issues encountered in both Residential and Commercial matters.
1) Existing breach of a restrictive covenant
A restrictive covenant is a promise not to do something. This may be a promise not to use the property in a particular manner (e.g. only as a single residential dwelling or not to sell alcohol from the Property). These promises bind the land and therefore any future owner of the property will need to comply with those restrictions no matter how long ago they were imposed. There are often arguments whether a covenant imposed, say, 100 years before the date of the sale is of any relevance, or whether the person who has the ability to enforce that promise can be found, but the starting point is always that they are binding unless there is clear evidence to the contrary.
Existing breaches are more common than you think as people may simply have not realised that their title stated that no greenhouses or sheds could be erected on to the Property. The converse may be true that they were well aware of the obligation and decided to proceed in any event. This leaves a few main options:
a) Right the wrong – The cleanest option would be to ensure that you are not breaching the covenant by undoing the breach. That may not be possible, or it may make the property less appealing, but the option is always there.
b) Seek indemnity insurance. This is likely the most common outcome. Imagine indemnity insurance as a plaster to cover a wound – it does not sort the underlying situation, but is there to offer a little protection. If the person who benefits from the covenant looked to enforce it, an indemnity insurance may help with legal fees, perhaps with paying a sum to have the covenant released. Ultimately, it is an insurance policy and there may be a battle to ensure that the insurer does help, but these policies are often used in the majority of breach conditions.
c) Reach an agreement with the person who can enforce- Such an option would likely mean that indemnity insurance is no longer a possibility as you have “tipped off” the person that they have the right, and it is being breached. Expect the person to look for something in return, often money, for releasing their benefit.
d) Look to remove the covenant without the other person’s consent. There is a procedure whereby you can apply to the Lands Tribunal to remove the covenant. This maybe on legal grounds, or that its use is no longer proportionate. The Lands Tribunal may allow a person to remove the covenant but may ask that they pay a sum to the other party. Such an approach is not particularly common, and the costs may be high.
2) Future breach of a restrictive covenant
What if you are buying a property, your solicitors tell you of restrictive covenants, and you know that you will want to breach in the future? For example, you buy a piece of development land which states that only one house may be built on it – but the land is being separated from a larger site that already has at least one property on it. What if you want to extend the property and the title states that you can only do so with the consent of someone else – knowing that you cannot guarantee who needs to give consent. Taking the four options a) to d) above:
a) The ‘wrong’ has not happened – so unless you change your plans and not breach in the future this may not be an option
b) Insurers do not like risk, this is a breach that has not happened as yet and therefore the risk is higher. With existing breaches insurers have seen that the breach has existed and there has been no enforcement, that small comfort is not possible on future breaches. If you need to obtain planning permission neighbours will be informed of the plans and they may then realise that they have a right that they can enforce. As such insurers may insure future breaches, but they are more cautious and the cost of insurance is higher. They may offer insurance in two stages, with an initial premium and a further premium once the planning has been submitted or indeed obtained.
c) Agreement- The same as discussed is true.
d) Remove- the same as above is true.
3) Boundary issues
Some of the most common issues are boundary issues. The Land Registry’s own tag line is “we guarantee the title to registered land in the UK”. Unfortunately, that does not mean that it is free from error. The key ownership documents for registered land are the Land Registry Title Register (a document which defines the property, who owns it, and the rights and obligations that bind the property) and the Title Plan. The title plan is a plan which shows the property edged in red. However, the Land Registry have the “General Boundary Rule” (basically, the boundaries are roughly as shown on the title) and when they draw their plans they can only rely on the information given to them at that time. Historic inaccuracies or a lack of diligence can cause problems that are hard to solve. Solicitors rarely view the property being purchased and it is always imperative that you consider the title plan and ensure that the plan shows the true extent of the property on the ground. A common issue is that is land in other titles that are missed without this inspection and then not purchased at the same time. If a boundary issue does arise the main options are:
a) Enter a Boundary agreement with the neighbour confirming the boundary. Whilst common, the Land Registry often looks less favourably on these documents and may not update the title plan to show the corrected boundary. Such an agreement may therefore be noted on the title, but the plan will look as if nothing has changed.
b) Transfer of the boundary in question. This is ultimately ‘righting the wrong’. The land Registry will need a decent scale plan but the boundary in question will be transferred in the correct ownership and the plan at the Land Registry will be accurate.
c) Adverse possession. If the boundary in question is unregistered, if the Seller cannot be found, or if you doubt you will obtain the agreement of the Seller, it may be possible to claim the area by adverse possession. Evidence of the boundary being in the correct position and in the ownership for 10 or 12 years would need to be proved, and it is far from certain that the Land Registry will agree the story told (if registered the owner may also object). In any event, if the relevant circumstances are present, a claim is a possibility.
4) Missing Documents
As mentioned above, the Land Registry maintains records of all the registered titles in the UK. When those titles were first registered, and indeed for any land that remains unregistered, title deeds were and are used. These told a story of who owned properties over the years, rights and covenants being created during different transactions and the various transactions involving the Property. This was a “document heavy” approach where the original documents were key. As a result if they were lost, swathes of information could be lost with them. If this were to happen, the Land Registry may state that “A [Conveyance] of the land in this title [and other land] dated –––––––, made between –––––––, contains restrictive covenants but no verified particulars of them were produced on first registration. The details set out in the schedule of restrictive covenants hereto of what purport to be the said covenant”. Given these are unknown, it may mean that there are rights that prohibit the intended use, or make it unworkable. Very little can be done in these circumstances:
a) Indemnity insurance. Again this is often available and for a reasonable price. It may help if a third party later finds the document and looks to enforce rights
b) Hope that a copy can be found. A copy may appear on a neighbouring title, or it may be held in a safe by one of the interested parties. In any event there is a very very slight chance that the document may be found – but this is certainly not a reliable approach.
5) Unknown rights (quasi easements)
Rights may be unknown because documents are missing (discussed above). Equally, there may be a statement on the title along the lines of “the Property is subject to all easements and quasi easements as affected the Property as at the date of the transfer”. Without those rights being specifically defined, they are therefore unknown. The same risks as Missing Documents applies here, but there is no hope of a document being found to define those rights, as they were never specified. Indemnity insurance is often a satisfactory option.
Things to think about
1) Address for service
The owner of the Property is named on the title as is an address where the Land Registry will correspond if they need to speak to the Owner. This address may be out of date and therefore the Land Registry send vital notices to the wrong address. Perhaps the property is a buy-to-let, and the tenant, living in the Property, can commit property fraud. The best advice is to double check the address for service on any property you own, and if the property is a buy to let perhaps consider a restriction on the title limiting any changes without specific consent of the true owner.
A restriction limits the Land Registry’s ability to register any changes without compliance with that restriction. Historic restrictions can remain in particular in relation to trusts which can cause problems. The best advice is to ensure that you keep records of any agreements or dealings with the Property in case an application to remove a restriction is ever required, and if the restriction is to remain, make sure you can comply.