When a property is registered at the Land Registry it is registered with one of four ‘classes’ of title. If you are purchasing a property or land, it is important to understand the difference between the types of registrations and the additional risks involved with a possessory title.
Most properties registered at the Land Registry are registered with “title absolute”. This means that, when they were first registered, the Land Registry checked the old unregistered deeds to ensure that the applicant had good title to the property. Registration with title absolute is effectively a state guarantee of title.
Some properties are, however, registered with possessory title only. This is not based on a documentary title but on the occupation of the land (or receipt of rent from the land) for a period of time. In other words, “squatters rights”. The rules on what evidence the Land Registry requires to register possessory title are complex – but generally, an applicant must show at least 10 or 12 years exclusive possession without the consent of the legal owner.
There are two key differences between a possessory title and title absolute:
a) 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;
b) 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. It is, however, possible to insure against the risks mentioned above by a legal indemnity policy and a buyer or lender will often accept a possessory title with such a policy. This will depend on the circumstances.
Once a property has been registered with a possessory title for 12 years without a claim being made by any person with a documentary title, the title may be upgraded to title absolute. It will, however, remain subject to any earlier rights or covenants so an insurance policy is still required.
For more information please contact Partner and Commercial Property Solicitor Eleanor Rattay on 0116 281 6224 or email email@example.com.