Advice on buying a new build on unregistered land

Gregster71

I'm looking at buying a house which is on a housing development on unregistered land.
The developer built houses on the land 5 years ago and he has no plans to apply for ownership titles as the council/mining company may try to claim the land also and it will also invalidate the indemnity insurance as soon as he does this.
I have spoken to the sellers solicitor today and he's completed the land searches / surveys and no records were found and he's dealt with other sales on the development advising mortgage companies on the situation.
The company are also going to be building another phase of building next year.
The indemnity insurance covers the price of the house and subsequent fees.
Sounds all a bit strange to me but we love the house and people have been living there a couple of years now with no problems.
HELP!, I'm a bit stressed by it all.

G_M

I don't fully understand.

If "people have been living there a couple of years" surely they bought a couple of years ago and must have registered the property? (a legal requirement).

And if the development was build 5 years ago, again, presumably the properties are all (mostly?) sold - the new owners must all have registered their purchases.

And why, at this stage, would the Developer be registering, if he's sold....

???

AdrianC

Quite simply, if you buy the place, your solicitor will make sure that there is good title before your purchase - so it's entirely the vendor's problem. The worst possible outcome for you is that you lose any pre-purchase fees. No more than that.

Gregster71

I think basically there is no land title and the original developer built on land which didn't belong to anyone on the land register.
Thanks

G_M

Gregster71 wrote: »

I think basically there is no land title and the original developer built on land which didn't belong to anyone on the land register.
Thanks

Whetehr land is registered or not when bought is irrelevant. What matters is whether the seller owns the land or not.

Until the mid-70s, almost no land was registered, and all conveyancing was done on this basis, with the seller's soliciors 'proving Title' to the buyer/solicitor.

There is still much unregistered land. The law only requires it to be registered when it is sold, so if it has not changed ownership since compulsory registration came into effect, it will not be registered.

Soliciors will just deal with it as pre 70s, and then register it.

Which is why I'm surprised, and said:

If "people have been living there a couple of years" surely they bought a couple of years ago and must have registered the property? (a legal requirement).

It would help if you clarified who owns the property you wish to buy? ie who is the seller?

* The developer? or
* someone he sold to 5 years ago?
* or the previous owner before the developer ie " the council/mining company"
* someone else?

Gregster71

To clear things up, this is what the sellers solicitor sent me;

I am writing to confirm and advise about the title you will be receiving as a purchaser of the above plot. You will recall our initial discussion about the plot and the possibility that some, or all, of the plot of land may not have any form of registered or otherwise provable legal title.

I have conducted an “Index Map” search with H M Land Registry, which is essentially a search against the Land Registry’s database and ordnance survey mapping systems for confirmation of which legal title a particular piece of land falls within. The results of that search confirm that no part of the plot has a registered title.

The Seller’s Ownership of the Land you are Buying

Put simply, the developer does not have a registered title, and cannot produce any evidence at all of ownership of that land, nor will the developer make any application to become the registered owner of that land, due to the absence of adequate evidence of ownership/occupation in preceding years.

History of the Land

As you may be aware I had some dealings with plots on this development when they were being sold a few years ago by the original developer, Xxxxx Homes Limited (now in administration and from whom the current seller has bought the property).

Xxxxxx Homes Limited (or its directors) began an application for a “possessory title” of the green land whilst the development was in its early stages. A possessory title is a secondary class of legal ownership of land, based on recognition by H M Land Registry of a right of ownership arising as a result of occupation over a given period of time. I was informed that the indications from H M Land Registry were that the evidence provided by Xxxxx Homes at that time was in fact satisfactory for the purposes of the application.

However in order to process that application fully, Xxxxx Council (the neighbouring land owner and owner of the public highway) and the Coal Authority (xxxxxx is a mining area) would have to be notified by the Land Registry of the application, in case either wished to object to the application and make a claim over the land.

An insurance policy was put in place by the developer to insure against the risks associated with not having any formal title for the land (for which see below). There was no indication at that time that either Xxxxx City Council or the Coal Authority would have any interest in the green land, but the insurers unsurprisingly stated that to notify either party would invalidate the insurance policy.

Consequently, the application went no further with H M Land Registry and the original developer decided to stick with the indemnity insurance offering as opposed to any form of legal title.

As a result, the current seller is only able to offer indemnity insurance (again, see below) in relation to the green shaded land for which they have produced no evidence of ownership.

Consequences & Risk

There are a few points to consider:-

Legal Title

On legal completion you will not become the registered owner of a legal title, instead you will take occupation of the extent of land shown on the plans.

The primary risk is that someone makes a claim, successfully, to ownership of the land. However this is the risk dealt with by the indemnity policy. Whilst I cannot guarantee there will never be a problem, it is my opinion that this risk is negligible and in any event it is supported by the indemnity insurance, save for claims made by the Crown. I am confident that this should not cause you concern in terms of your everyday use and enjoyment of the property.

Your Mortgage Lender

For the sake of clarity, the Council of Mortgage Lenders, in its instructions to solicitors, confirms that where title is unregistered and there is no evidence of ownership:-

“A title based on adverse possession...will be acceptable if the seller is or on completion the borrower will be registered at the Land Registry as registered proprietor of a possessory title...”

On the current documentation, the requirements of the mortgage lender are not satisfied as neither the seller has now, nor will you have on completion, possessory title. I have written to the lender about this and have sent them a copy of the indemnity insurance policy and have asked them to provide me with instructions.

Future Sale Transaction

I cannot, however, offer you any assurance that the issue we are currently examining will not be noted by the legal representative of any future purchaser of your property. Whilst you may accept the information being presented (e.g. the low risk), there is no obligation on any subsequent purchaser (or their lawyers or their mortgage lender) to do so. Any difficulties encountered in any future sale of the property will not be covered by indemnity insurance.

I should also point out that should you look to remortgage in the future, even if this lender accepts the position, a future lender may not give you a mortgage.

noh

Unless it is really cheap and you do not expect to ever sell it, then I would say, it is not worth the risk.

AdrianC

Gregster71 wrote: »

To clear things up, this is what the sellers solicitor sent me;

I presume that came from your solicitor? You wouldn't normally have any contact at all with the vendor's solicitor directly.

The Seller’s Ownership of the Land you are Buying

Put simply, the developer does not have a registered title, and cannot produce any evidence at all of ownership of that land, nor will the developer make any application to become the registered owner of that land, due to the absence of adequate evidence of ownership/occupation in preceding years.

The bold is the relevant bit there. The vendor can't prove the house has any right to have been built there.

the original developer, Xxxxx Homes Limited (now in administration and from whom the current seller has bought the property).

...and there's no comeback possible against the people who built them...

Xxxxxx Homes Limited (or its directors) began an application for a “possessory title” of the green land whilst the development was in its early stages. A possessory title is a secondary class of legal ownership of land, based on recognition by H M Land Registry of a right of ownership arising as a result of occupation over a given period of time. I was informed that the indications from H M Land Registry were that the evidence provided by Xxxxx Homes at that time was in fact satisfactory for the purposes of the application.

So hoops _were_ being jumped through, and they may have worked, but they may not - and the only way you'll find out is by jumping through those same hoops yourself.

However in order to process that application fully, Xxxxx Council (the neighbouring land owner and owner of the public highway) and the Coal Authority (xxxxxx is a mining area) would have to be notified by the Land Registry of the application, in case either wished to object to the application and make a claim over the land.

...and, if they object and those objections are upheld, you own a worse-than-worthless liability.

An insurance policy was put in place by the developer to insure against the risks associated with not having any formal title for the land (for which see below). There was no indication at that time that either Xxxxx City Council or the Coal Authority would have any interest in the green land, but the insurers unsurprisingly stated that to notify either party would invalidate the insurance policy.

Consequently, the application went no further with H M Land Registry and the original developer decided to stick with the indemnity insurance offering as opposed to any form of legal title.

As a result, the current seller is only able to offer indemnity insurance (again, see below) in relation to the green shaded land for which they have produced no evidence of ownership.

Find out how much that insurance policy will pay out. Will it pay just the legal costs? If so, you still own a worse-than-worthless liability, but at least you haven't got a monumental legal bill to go with it.
Hopefully, it'd pay out the market value of the house. But I wouldn't hold my breath.

On the current documentation, the requirements of the mortgage lender are not satisfied as neither the seller has now, nor will you have on completion, possessory title. I have written to the lender about this and have sent them a copy of the indemnity insurance policy and have asked them to provide me with instructions.

So this might all be academic, as you may not be able to get a mortgage on it.

Future Sale Transaction

I cannot, however, offer you any assurance that the issue we are currently examining will not be noted by the legal representative of any future purchaser of your property. Whilst you may accept the information being presented (e.g. the low risk), there is no obligation on any subsequent purchaser (or their lawyers or their mortgage lender) to do so. Any difficulties encountered in any future sale of the property will not be covered by indemnity insurance.

And this is where you are now. If you're looking at this, and thinking "Hmm..." and your mortgage lender is looking at it and thinking "Hmmm..." - why would any future buyer not do exactly the same? If mortgage lenders crack down, then they'll stand an even slimmer chance of being able to borrow to buy the place.

Your call... But I know where I'd be sitting on this one.

G_M

Well, if you are relying on a mortgage, the lender is unlikely to approve the loan.

If you are not, then ask yourself: "Why would a mortgage lender not be happy to lend on this property? Should I take a similar view?"

Another big question to ask yourself: suppose you buy; suppose the council or a n other claim ownership; OK - you have indemnity insurance in place which will pay out any financial losses but.... it won't stop you losing your home! Are you happy with that?

I know what I would do.

ps - a note to others thinking of posting questions (and to OP next time):
It's frustrating getting a very brief query, expressed unclearly, and missing key facts, and then, once we've devoted thought and time to it, discovering the poster had all the facts available but simply did not post them..........

:wall: