Due diligence 1 - investigation of title

Question 1

Advise to BUYER if there is an easement benefitting the land mixed with burden?

Answer 1

1. Inform = If they want to use it (right of way) they will need to contribute to the costs of maintenance
2. Steps to take = Instruct a surveyor to inspect the land to establish if it is in useable and good condition/ is likely to give rise to substantial expenditure in the near future.
3. Questions = is the right of way expressed in these terms sufficient for their needs? (e.g. will they need to gain access after normal working hours)
4. Enquiry with seller = Has the seller been contributing to the maintenance cost, and how frequently and how much?
   - Are there any disputes about the use of the right and/ or the sharing of maintenance costs?

Question 2

If there is a mines and minerals exceptions and reservations = advice to BUYER? [4 points]

Answer 2

1. Enquiries should be made about the ground stability and whether there has been any subsistence
2. Find out - who is able to exercise this right and if it has been exercised in the past?
3. Coal mining search
4. conduct an Index Map search at the Land Registry (SIM)
   * to check if mines and minerals are registered under a separate title
   * and help identify the owner of mines and minerals
   * and any rights associated

Question 3

What does the propietorship register show?

Answer 3

• Current owners and their addresses
• Class of title
• Evidence of indemnity covenants/ chain of indemnity
• Notices and restrictions (for co-ownership or other beneficial interest)
• Declarations as to rights of light and air
• Mortgages

Question 4

What does absolute title mean?

Answer 4

It means that the owner has all the legal rights to the property. There’s no way that ownership can be contested or claimed against

Question 5

What does the possessory title mean?

Answer 5

• Means seller do not have access to the original land registry title deeds.
• Where seller has obtained title by adverse possession (claiming squatters rights)

Impact:
- The property may be subject to third party rights and/or covenants but it is not possible to know what these are as the deeds may have been lost
- Title can be challenged by someone who claims to have a better title to the property

Question 6

What is qualified titled?

Answer 6

• Where there is a specific defect in the title of the property
• Title will generally not be considered “good and marketable” = can affect the value of a property
• Lenders and buyers should be worried

Question 7

What to do if the title has possessory or qualified title?

Answer 7

• Possible to obtain a title indemnity insurance policy to reassure lender/buyer but could cause issues when re-selling
• It is sometimes possible to upgrade the title:

Possessory = must wait 12 years from OG registration before making application. The fact that it has been registered for 12 year period without challenge is sufficient evidence.

Qualified title = can apply at any time by providing evidence of the title to Land Reg which remedies the reason why the qualified title was granted in the first place.

Question 8

Advice to BUYER - If there is an indemnity covenant:

Answer 8

1. Inform:
   - Seller will require buyer to give equivalent indemnity cov. if its binding on them
   - Obligation to do the thing in positive cov.
   - might involve extra expense to buyer
2. Ask the seller
   - have they been complying w/ the covenant?
   - If not hss anyone tried to enforce it?
3. surveyor to inspect the wall to establish its condition

Question 9

Advice to BUYER if there’s unknown covenants?

Answer 9

• Safest option is to assume that the covenants are restrictive and will be binding (even though details unknown)
• Consider options for dealing w/ problematic restrictive covenants
• Best solution = obtaining indemnity insurance policy - is most cost-effective

Question 10

Advise to BUYER - options for dealing with a restrictive covenant (e.g not to use any building erected on property other than as an office)

Answer 10

1. Ask the seller if they know who currently owns the property with the benefit of the covenant ( for arrangements like permanent release of covenant or one-off consent)
   - not if covenant is v old and benefitting person can’t be identified
2. Get a restrictive covenant insurance policy for the proposed breach of covenant
   - Not if the person with benefit knows that they have benefit and likely to object to proposed use
3. Apply to the Upper Tribunal (Lands Chamber) for modification or discharge of the covenant - on the grounds that:
   - the covenant is obsolete/ confers no practical benefit of substantial value or advantage (or contrary to public interest)
   - And the loss of covenant can be compensated in money
   - downside = not quick or cost effective and outcome is discretionary

Question 11

Advise to SELLER - unknown covenants

Answer 11

Take care to disclosure this defect in the title in the contract so that the buyer can’t object to it and use it as a reason to back out of the purchase

Question 12

Advise to BUYER - if there’s a mortgage [charges register]

Answer 12

Inform:
Buyer will want this to be discharged on completion so that they do not take subject to it
Solicitor steps:
- We will check that the contract states that the seller is selling the property free of the mortgage
and that the seller’s solictior gives an undertaking to discharge the mortgage immediately on completion

Question 13

If there is a lease?

Answer 13

• Check if it will be binding > registered?
• Report to buyer and check if the existence and its terms are compatible with the buyer’s proposed use of the property?

Question 14

Notices (registered land only)

Answer 14

Inform:
- indicates a burden of an interest affecting a registered estate/charge
- Purpose = to ensure that the priority of the interest referred to in the notice is protected against any subsequent interests

What to do?
- Require the seller to get the notice cancelled by Land Reg. before the exchange of contracts
- If seller agrees/ untileratal notice was related to an option that has now expired = no problem
- If notice is related to a valid interest - e.g. contract for sale/ covenants/ a lease over property = bigger problem.

Question 15

If there is a home right? [protected by notice in charges register/ Class F land charge]

Answer 15

• Require seller to get from the non-owning occupier a release of all rights in the property; and
• agreement to vacate on or prior to completion (usually dealt with in contract)

Question 16

Leases in registered land is binding when?

Answer 16

• Lease for a term of more than 7 years = requires registration w/ a seperate title number and against landlord’s title
• if registered by the date when the transfer of the property to the buyer is registered = will bind the buyer
• if not registered might qualify as an overriding interest if the tenant is in occupation
• Legal leases for > 7 years and equitable leases where T is in actual occupation = may be enforceable as overriding interests

Question 17

Lease in unregistered title

Answer 17

• Legal lease, created by deed (should be one of the title deeds in schedule of epitome of title) = binding
• Parol lease (for 3 years or less) does not require any formalities = will be binding on the buyer whether they know about it or not

Question 18

If there is a restriction for co-ownership

Answer 18

• Is the property owned jointly but 1 person selling? = need to find out what happened to missing co-owner
• If owner 2 is alive = they must be party tot he contract and the transfer of the property
• If owner 2 is deceased = seller’s solicitor will need to provide a certified copy of death certificate
• If equitable title held as JT = seller can sell on their own so no further action needed
• if equitable title held as TC = need to appoint a second trustee to overreach the equitable interest of the [deceased] co-owner > appointment can be made in the transfer or by separate deed of appointment

Question 19

If there is a resevation of rights of light and air?

Answer 19

• enquiries about the extent and location of the adjoining land owned by the Vendor should be made
• the buyer will need to be informed and asked whether this reservation of rights to light and air causes concern given their intended use of the property and the likelihood of development nearby.

Question 20

What classifies as a good root of title (unregistered land) (s44 LPA 1925)?

Answer 20

1. Deals with or shows who owns the entire interest (legal and equitable) that is being sold by the owner
2. Contains a recognisable description of the relevant land
3. Does nothing to cast doubt on the sellers title
4. at least 15 years aold

Question 21

Advice for buyer in relation to a home right?

Answer 21

A home right is a statutory right created under the Family Law Act 1996 for a non-owning spouse or civil partner to occupy the matrimonial home. A home right does not create an interest in land. In registered land, a home right will bind a buyer if it is protected by a notice in the Charges register by the date when the transfer of the property to the buyer is registered. The solicitor should therefore check whether this is the case and, if so, the seller should be required to obtain from the non-owning occupier a release of all rights in the property and agreement to vacate on or prior to completion