Possessory Title

What is Possessory Title?

Having Possessory Title means that you are considered the owner of a property, but HM Land Registry cannot legally certify the title in the normal way as it’s classed as ‘defective’.

Therefore, it’s possible for a previous owner or an interested party to dispute your right to some or all of the property / underlying land.

Think of it as owning a property without full legal protection.

This contrasts with owning with title absolute (or absolute title), the most common class of land registration in England and Wales.

Here, you can legally prove that you own the property without any possibility of dispute.

Of course, you can sell a property with Possessory Title – but most buyers would see the purchase as risky.   

What’s more, properties with this kind of title are likely to sell for a lower price compared to one with title absolute due to the potential complications and financial losses that could occur.

Governed by the Land Registration Act 2002, some examples of Possessory Title include:

• Not having the Land Registry title deeds in your name*;
• If the original paper (physical) deeds have been accidentally destroyed or stolen*;
• A property that has been passed on through the generations and there are no deeds or proof of the original conveyance;
• If someone buys a property / plot of land using DIY conveyancing and there’s no electronic proof of ownership;
• When house sale was fraudulent and there is no Title Deed;
• Where the seller has effectively obtained title by adverse possession (claiming squatters rights, see below).

*Note that, if you can provide suitable proof of title (to HM Land Registry) in these scenarios, the title will revert to absolute.

Both freehold and leasehold properties can fall under Possessory Title. 

How Long Does it Take to Get Possessory Title?

In short, a long time…

It is possible to claim Possessory Title by way of ‘adverse possession’.  This is informally known as having ‘squatters rights’ or ‘land grabbing’.

To do this, you must have:

• Exclusively occupied the property in question for 12 years (or 10 if the land is registered).  This means that no one else has attempted to occupy the land in your place throughout that time;
• Made no payment (rent or otherwise) or seeked the owner’s consent;
• Received no objections;
• Demonstrated a clear intention to own and protect the land (through maintenance or building surrounding walls / fencing).

Note that, HM Land Registry will write to any parties with an interest in the land.

If they respond, as explained below, they can put stop to the process and seek eviction.  If not, then Possessory Title may well be granted.

Can Possessory Title Be Challenged?

With Possessory Title essentially meaning that there are insufficient documents for absolute title, it’s entirely possible for someone to challenge ownership.

For this reason, you may lose the right to Possessory Title if:

• The possessory titled land was purchased via adverse possession;
• Another individual can produce clear proof of ownership of the property in question (also known as Epitome of Title);
• There’s proof of fraud or incorrect processing at the time of granting Possessory Title;
• There are forgotten about covenants or third-party rights in the original deed.  As there are no unregistered deeds available, it’s impossible to know what kind of restrictions could be enforceable at a later date;
• The other party can convince HM Land Registry that their title is stronger from a legal perspective.

Should any of these situations arise, as the ‘inferior’ titleholder, you won’t be able to claim for any losses.  This is the case even you have invested a significant sum of money into the property.

For example, if you have built any kind of structure or building on the land, none of your costs will be reimbursed.

The Value of a Property with Possessory Title

With the surrounding issues that come with this type of title, the property’s value is almost certainly going to be lower.

The problem comes down to reselling.  Whilst some buyers may feel confident that they can challenge the status of the title, this is not always a certainty.

For this reason, most will look for a discount to compensate for the risk.  After all, there’s a chance that the title and property ownership could be completely lost (with zero compensation).

However, most buyers will seek conveyancing-related advice to assess the extent of the issue.  If you’re selling, therefore, make sure you seek your own legal advice to check things for yourself.  You can then perhaps negotiate to an appropriate level, bearing in mind the buyer’s risk.

Can Get a Mortgage if You Have Possessory Title?

Although much will depend on the level of complexity, Possessory Title sales are more likely to attract cash buyers only.

Mortgage lenders will certainly look at the title as ‘qualified’.  In other words, there’s some kind of legal defect that renders the title as ‘not good and marketable’.  This will make them cautious before granting the loan.

The Council of Mortgage Lender (CML) governing body advises mortgage companies to assess each case on its individual merits.

If the reason for Possessory Title is easily explainable (and genuine), such as a lost or stolen title, then there shouldn’t be any issues. You will, however, need to provide sufficient evidence and remedy the situation prior to the sale’s completion.

The lender will request a statutory declaration (drafted by the conveyancing solicitor).  This is essentially a statement of fact signed in the presence of a qualified solicitor or notary.  The document needs to be approved by the mortgage company’s underwriting team.

Most will also require a suitable indemnity policy to be in place too (see below).

Our advice is to work with a good mortgage broker who can advise on your options.  There may be niche lenders out there, for example, who will charge a higher rate of interest and require a larger deposit (amongst other possible conditions).  They will often down-value the property (even if you have solid comparable evidence).

What is Possessory Title Indemnity Insurance?

A Possessory Title indemnity insurance policy protects buyers if another individual makes an ownership claim on the property (or part of the property) after purchase.  

The policy will also cover the value of the loss of market value and costs incurred if you have to surrender to the claimant.  For example, insurance will cover for any compliance for any demands / court injunctions made if the claim is successful or if money has been spent on demolition or building works.

Conveyancing solicitors can provide you with a policy like this if you’re planning to purchase a property with Possessory Title.  It will need to be in place between exchange of contracts and completion.

Underwriters (i.e. the mortgage approvers), will also want to look at the specifics of the title in question.   The ultimate question will be how likely is it that there will be attempts to prove any other legal rights affecting your property or its surrounding land.

It’s worth noting that Possessory Title indemnity insurance will not cover you if there is already an ownership battle.  Similarly, if there’s another claim taking place at the time you attempt to purchase, the policy is likely to be rejected.

What’s more, you won’t be covered if you make contact with any individual who may have a claim on the property or ownership interest.

In most cases, you’ll only have to pay for the policy once and there will be no cut-off point for the cover.

Cost of a Possessory Title Indemnity Insurance Policy

As with most property-related insurance policies, the cost will depend on the size and location of the property.  If there are commercial elements, expect more questions and (probably) a higher premium.

If the above occurrences lead to your property dropping in value, that decrease will be covered by your insurance.

However, a policy of this kind will not cover you if the Land Registry rejects any title registration claim.

Upgrade Possessory Title

It is possible to apply to the Land Registry to upgrade the class of title from possessory to absolute (i.e. freehold ownership). 

This will make your ownership position much more secure.  Selling will be a lot smoother and you’re likely to get a better price. 

The 2002 Land Registration Act, Section 62(7) states the following person(s) can get their title upgraded:

(a) the property owner;
(b) a person entitled to be registered as the property owner;
(c) the owner of a registered charge affecting the property ;
(d) a person interested in a property that derives from the original estate.

For this to apply, you must have enjoyed unchallenged ownership of a particular property / underlying plot of land for at least 12 years.

In essence, you will need to show that any title defects have been remedied.

There is a range of other legal rules and requirements depending on specific situations.  We would recommend talking to an experienced conveyancing solicitor to understand the best way forward.

Note that newly granted absolute title could still be contested if there are third-party rights or covenants on the original deeds.  For this reason, having an insurance policy in place is strongly suggested (see below).

Furthermore, if it’s later demonstrated that any grant of title was based on fraud or deliberately incorrect information, then:

• The title will revert back to being possessory; and
• Legal action will be taken against the perpetrator.

In Conclusion…

Selling a Property with Possessory Title

It’s entirely possible to sell a property that’s underlying land has Possessory Title, but the legal complications that will inevitably emerge will not make the process easy.

At face value, properties that are on sale with Possessory Title will often be tempting to buyers as they’ll be cheaper relative to those with absolute title.

The term Caveat Emptor (‘Buyer Beware’) very much applies here.

If the estate agent doesn’t bring the issue to the buyer’s intention, possessory title will be flagged up and cautioned against during the conveyancing process.  Conveyancers indeed have a legal obligation to do so (even if the property is sold to a fast homebuying for cash company).

In some cases, the buyer may understand the risks and still choose to proceed.  Perhaps, for example, he/she may have an angle on how to approach the issue after ownership.

Bearing this in mind, it’s worth seeing if you resolve the situation before putting the property on the market.  Alternatively, using a We Buy Any House company (like ours) or an auction sale may be a good place to dispose of the property.

Buying a Property with Possessory Title

For property and land buyers, there are a number of potential risks you may be facing before you make an offer on a property of this kind. 

If you’re going ahead with a purchase property with possessory title, you will need to / should:

• Inform the mortgage lender – where necessary – of the property’s title.  You’ll also need to make sure they consent to lend funds under these circumstances.  In reality, most will not (see above);
• Obtain a Statutory Declaration of ownership from the seller. This should include information of the amount of time they have had undisputed ownership;
• Take care that nothing you are planning to do on or with the property is likely to breach the terms of any lost title deed;
• Get hold of Possessory Title Indemnity Insurance to make sure to cover against any challenges in the future.