Defect in the title of the property I'm buying - missing documents

BraveStave

I'm in the process of buying a house and am just about to exchange contracts and agree completion dates.

And I've just been sent all of the final paperwork, i.e. the contract/agreement and title documents etc.

But it seems that there is a defect in the title of the property that we're buying, and I'm just now finding out about this for the first time...

Apparently, in the title of the property, the Charges Register refers to 'rights exceptions and reservations' contained within:

* A deed of grant dated 9 December 1912

* A conveyance dated 29 April 1970

* A conveyance dated 3 February 1976

But our solicitors are unable to obtain these documents so we have no idea what these 'rights exceptions and reservations' are. There could be conditions within these documents that we would never agree to?

The current owners of the property have an Indemnity Policy to cover the missing documents/deeds, which is transferrable to us, and so we would be protected by that policy in terms of financial redress should it ever cause us to lose money.

Our solicitors have noted the following to us:

Please note and to make you aware that the defect could adversely affect the value of the property and either delay or prevent you from selling the property in the future; After completion, you could be served with a formal notice/order to remedy the defect or breach, cost of which (or cost of defending any such action) may prove significant; Any mortgage lender will not proceed with a loan unless the defect is remedied (or acceptable solution has been put in place).

On your behalf I could ask the sellers conveyancer to attempt to remedy the defect, but this is unlikely and would involve significant delay and extra costs and may not be successful. Taking steps to remedy the defect would also invalidate the indemnity insurance solution described below. Do consider this carefully, as in the event that the remedial action proves unsuccessful you might be left with no other alternative.
Or the defect could be left as it is, as we understand the sellers have an indemnity insurance policy to indemnify you should you suffer loss and expense in the future as a result of the defect.
However, it may be your view that the prospect of financial redress from the financial policy will not solve the problem for you. In these circumstances you could withdraw now from the transaction. You may wish to consider this option if you believe that the defect will severely affect your enjoyment of the property.

So if it could affect the value of the property, why am I only finding out about this now, after having already offered full asking price for the house. I know it would be up to every individual buyer to decide whether these missing documents are a deal breaker or not. But I don't want to be in the minority in purchasing the house if most wouldn't.

If we might have to remedy the defect in the future, should I be asking the current owners to remedy it before proceeding? Although my solicitors suggest that this would be unlikely to be successful, messy and costly.

If mortgage companies in the future might not offer someone a loan on this house due to the defect, has my mortgage company only offered me a loan because they don't know about it?

I really don't know how normal any of this is or how concerned I should be, I'm hoping that someone may be able to offer me some perspective or insight?

user1977

It's rather ar5e-covering wording from your solicitor. Your lender won't care, and doesn't even need to be told about it, as long as there is indemnity insurance covering the risk. The risk is tiny, which is why the insurers have insured it for peanuts.

BraveStave

user1977 said:

It's rather ar5e-covering wording from your solicitor. Your lender won't care, and doesn't even need to be told about it, as long as there is indemnity insurance covering the risk. The risk is tiny, which is why the insurers have insured it for peanuts.

Yeah I guess the risk of someone suddenly turning up with these missing documents and trying to enforce some long forgotten right is small enough that it's not worth worrying about.
If these mystery documents aren't held by the local authority then how would anyone have access to them to know what is written in them. They would have to be unearthed from some old archive.

I guess the more real risk is saleability of the property in the future, but then if the risk of being adversely affected by these missing documents is so low, hopefully most people wouldn't be put off.

Also, yep I was thinking that the solicitors probably have to outline the worst case scenario in order to cover themselves, to someone not experienced in these thing such as myself, it probably makes the situation sound worse than it really is.

princeofpounds

The main points that your solicitor is making is that a) a future buyer may have a wobble, like you are now and b) an indemnity policy only provides financial compensation - it can't cancel the rights anyone might have over the property if they suddenly turn up. Although in practice, they often do just pay the person to settle and go away if that's the cheapest option. 

These kind of things are not normal, but they are not at all uncommon.

Title deeds used to be stored on paper and things get lost over time. The risk of anyone turning up to enforce rights is very low - no-one has in almost 50 years and it's very possible the paperwork no longer even exists, or if it does the 'rights, exceptions and reservations' are not even anything important. As has already been pointed out, that's why indemnity insurance is so cheap.

So most people tend to proceed bearing in mind the two points above, but ultimately it has to be a personal choice. 

canaldumidi

I was actually quite impressedby the solicitor's explanation. It was clear, laid out the issues and alternatives, pointed out the drawbacks of each alternative, and left the decision (rightly) to you.

Of course, that does not tell you what to do, but there again, it is not the solicior's job to tell you what todo - it's ultimatley your life and your money, so your decision.

As others have said, the likelihood of someone popping up with a claim in the future is very very low, and insurance will cover any financial consequential consequences (as he explained).

user1168934

Feels like Dejavu!

I was recently in a similar situation with a property I was buying. In my case, an old deed containing the restrictive covenants were missing (which I believe is the same things you are referring to). You might still be able to find some threads I created at the time on the forum. I really sympathise with you because I can recall how devastating it was for us.

I spent weeks asking around, researching, etc. I have tried to answer some of your questions - hopefully it will help.

BraveStave said:

So if it could affect the value of the property, why am I only finding out about this now, after having already offered full asking price for the house. I know it would be up to every individual buyer to decide whether these missing documents are a deal breaker or not. But I don't want to be in the minority in purchasing the house if most wouldn't.

The sellers don't care whether you get all the information or not. They just want your money.

FYI - it will definitely affect the value of the property as many buyer would be put off by this - Are you not put off by this yourself? Other buyers will be the same. But it does not mean that it is un-sellable or un-mortgageable.

Also remember, your solicitor will try to downplay it - mine did. They also just want a simple conveyancing case and take their money in a smooth and easy way.

If we might have to remedy the defect in the future, should I be asking the current owners to remedy it before proceeding? Although my solicitors suggest that this would be unlikely to be successful, messy and costly.

How would you remedy it whether now or in future? If it is genuinely missing then its gone for good. Unless someone "finds" it somewhere you will just have to accept it as missing.

Have you asked the sellers to try finding the documents? Ask the seller to check with other companies such as previous solicitors who might be have done conveyancing in the past or previous mortgage lenders might have a copy on file or if it is an ex-council then check with the council or planning departments. The documents seem to be quite old so chances are slim anyone would still have it on file but it is worth a shot.

If mortgage companies in the future might not offer someone a loan on this house due to the defect, has my mortgage company only offered me a loan because they don't know about it?

This is a difficult one. I had the same concern. I am on very friendly terms with my mortgage broker that I have known for years so I consulted him. This is what he told me. In the current market mortgage lenders should not have a problem with it. But you never know what will become an issue a few years from now. There is a chance that the solicitors doing coveyancing (when mortgaging down the line) discover it and raise it with the mortgage lender and then it may or may not become an issue. At the moment, most (not all) will offer mortgage as long as an indemnity policy is in place.

I really don't know how normal any of this is or how concerned I should be, I'm hoping that someone may be able to offer me some perspective or insight?

My surveyor who has been surveying for 25 years told me that he has never come up with a single case where such documents were missing. He told me that it does happen but it is not very common.

In short, it is not good news.

There are only two options for you.

1. Someone somehow finds the documents.

2. You accept they are missing. You ask the sellers to get you an indemnity policy at their expense and you accept the risk. You can also reduce your offer if you want.

After a lot of thinking, venting and god knows what else I had basically decided that I was not ready to accept the risk and I had told the seller that I will not be buying unless the document is found. For me it was simply not worth the risk. You make up your own mind.

I found it quite hard to get any information at the time. I am more than happy to answer if there is anything I can help with.

Brie

The only additional suggestions I can make is to ask a local historian/historical society or the oldest nearest neighbour who might have the same/similar documents.  

user1977

user1168934 said:

it will definitely affect the value of the property as many buyer would be put off by this

That doesn't mean it affects the value. Any aspect of a property might put off a certain sector of buyers, that doesn't mean it makes any material difference to the open market value. For a problem as trivial as this, with insurance in place, I have never seen any professional state it actually affects the value.

BraveStave

user1168934 said:

Feels like Dejavu!

I was recently in a similar situation with a property I was buying. In my case, an old deed containing the restrictive covenants were missing (which I believe is the same things you are referring to). You might still be able to find some threads I created at the time on the forum.

I've had a read through your old threads, yep it seems like I'm having the same issue.

user1168934 said:
Also remember, your solicitor will try to downplay it - mine did. They also just want a simple conveyancing case and take their money in a smooth and easy way.

Yeah, it feels like this issue has been known for a long time by everyone but us. The seller will have been very aware of the issue at least, but they have not volunteered this information. On one hand I can see that they wouldn't want to flag up the problem because they just want to sell the house, on the other hand they now risk losing a buyer after stringing us along for 10 months. Had they been up-front about the issue we may never have put in an offer and they would have had 10 months to find a buyer that would.
Our solicitors did these searches months ago and told us that all the information will be given to us at the end. So they also knew about this but didn't alert us. It's possible that we have been incurring additional solicitors costs while they have been withholding this information from us. It would be interesting to know whether I can dispute any costs incurred from the date that they received the title information without informing us of the title defect.

user1168934 said:

How would you remedy it whether now or in future? If it is genuinely missing then its gone for good. Unless someone "finds" it somewhere you will just have to accept it as missing.

Have you asked the sellers to try finding the documents? Ask the seller to check with other companies such as previous solicitors who might be have done conveyancing in the past or previous mortgage lenders might have a copy on file or if it is an ex-council then check with the council or planning departments. The documents seem to be quite old so chances are slim anyone would still have it on file but it is worth a shot.

Yep I'm not sure how it could be remedied now - my only idea was that perhaps mention of these historic documents could be removed from the current title documents - but I doubt this would be possible and would at least involve courts even if it were. And I'm not going down any route like that.

I think the current owners of the property didn't have the documents either which is why they took out the indemnity policy to cover themselves. 
The property was a new build (built around 2011), the current owners bought it from the developer in 2014 so I suspect that no one has ever had these missing documents.

But you have given me an idea that perhaps I could contact the management company (made up of the residents of the same street - they collectively look after shared areas) to see if they have the documents or whether they had the same problem when they bought their house.

user1168934 said:
My surveyor who has been surveying for 25 years told me that he has never come up with a single case where such documents were missing. He told me that it does happen but it is not very common.

Interesting, good to get an idea of how common this is. Reassures me a bit that I'm not overreacting in treating this as a serious problem.

user1168934 said:
I found it quite hard to get any information at the time. I am more than happy to answer if there is anything I can help with.

Thanks, I'll get back to you if any questions come up, I've got a couple of things to try for now at least.

p00hsticks

BraveStave said:

Yeah, it feels like this issue has been known for a long time by everyone but us. The seller will have been very aware of the issue at least, but they have not volunteered this information. On one hand I can see that they wouldn't want to flag up the problem because they just want to sell the house, on the other hand they now risk losing a buyer after stringing us along for 10 months. Had they been up-front about the issue we may never have put in an offer and they would have had 10 months to find a buyer that would.

Too late for you, but for the benefit of others looking to put offers on properties;

Your initial post suggests that these restrictions are contained in the charges register section of the title ?

If this is the case, then if you'd just paid £3 to get a copy of the title from the Land Registry for yourself you'd have been aware of them from the get-go and could have started asking questions before you even put an offer in.

https://www.gov.uk/search-property-information-land-registry

BraveStave

Sorry to double post - I couldn't see a way to edit.

Just in case it's relevant,  I thought I'd expand on the history of these properties.

The road is built on land that used to have a railway line on it, and a factory - many many years ago.
These residential properties were built on the land in 2011, there were no other residential properties there prior to that.

So whatever these missing documents are, I doubt they relate to residential properties, as none existed back then. It'll be related to the land, possibly the factory or railway line.