Days before exchange of contracts we find lenders won't lend based on defective title. Any thoughts?

user1977

As I said on the other thread, I'm surprised that a lender doesn't want to touch it even with an indemnity policy. Is that because the solicitor is advising them to do so?

The risk of an owner of the road suddenly turning up and kicking up a fuss after a century of use seems bizarrely remote, and if that tiny risk is insured against, I don't really see what the problem is. I suspect your solicitor has managed to spook the lender somehow.

lika_86

Caveat emptor - buyer beware, it's the principle conveyancing in England works on. You need to take the emotion out, you weren't 'days away from exchange' because this issue wasn't solved and presumably was something your solicitor was trying to address with the sellers. Personally I'd let this go unless you're willing to hang in and see if the access issue can be resolved. I would not chance issues trying to sell in the future even if you could find a lender now who would lend.

Wonka_2

MorecambeBay82 said:

Thanks for responding.  It is our own solicitor advising the lender.
As far as we know we're the first people who have had an offer accepted by the vendor.  It's not a probate situation.  The seller has been living there for 15 years and has another property.  The seller is a property developer.
The EA have said other properties have acquired mortgages on the street in the past.  So, as far as they're concerned the unadopted and unregistered status has never been a practical problem.
The seller has the option to remarket but would they have to revalue and draw attention to the defective title or just see what people will pay in the hope cash buyers don't notice/mind a defective title?

So did the 'property developer' build the property or did they buy/live in it throughout that period ? Were they connected in any way to the surrounding landowners or has there been a dispute which has led to this situation ?

Irrespective as a 'property developer' they must know the impact that lack of access is going to have to the value of the property and you'd like to think they haven't already exhausted all avenues to resolve this before going to market 

MorecambeBay82

@lika_86
Thanks for responding.  I'm reading that caveat emptor princeple was essentially reversed not just with the Protection of Consumer Rights Act 2008 and with a number of cases where land and property were sold without clear knowledge of potential risks to value, development and future sale.  
This is not the situation we're in because the purchase has not been made but... various legal articles are saying that with the act and won cases in the buyers favour, effort has to be made to draw attention to those things mentioned above (especially with cash sales).  I'm hoping for some clarity on this... Whether it has become law to 'Make the buyer beware' or whether this is a grey area.

In terms of being days away from the exchange.  The seller had accepted our offer on the terms that we complete by this coming Thursday 20th October.  We only had news the mortgage had been refused at end of day last Thursday.  We had made arrangements with time off work and removal with this date in mind.  I may have been labouring under a false date set by the seller that we thought all parties involved were in accordance with?

This is 6 months after our first offer was accepted so it's not been anywhere within the timeframe we were lead to believe when we began the process.

I'm still wondering if something has gone 'wrong' in the process that we're becoming aware of this now and not earlier?

MorecambeBay82

Thanks @Wonka_2.
The seller lived in it throughout and has not disclosed/not had any legal challenges to use.  It's an existing property on unregistered land.

I wondered the same... that a Property Developer/seller would have this knowledge before taking to market?  It's hard to know.  People do things in their own ways... We've been told 'there have never been issues in the past' from the seller and the EA who have sold similar property on the street.

If there are no viable options to naviagate and make a reasonable purchase, do we have any way of recourse in lieu of the costs and time investment so far?

loubel

You don't have any recourse for costs, no. Your solicitor has done their job in investigating the title and found that it doesn't meet the criteria of your lender. That is your cost to bear.

I am surprised that 15 years of use along with title insurance is not sufficient for your lender but that does remind you that insurance does not resolve issues and even if your lender accepted it you may still have had problems with remortgaging or selling in the future due to this issue. Worth considering before looking for a different lender.

housebuyer143

loubel said:

You don't have any recourse for costs, no. Your solicitor has done their job in investigating the title and found that it doesn't meet the criteria of your lender. That is your cost to bear.

I am surprised that 15 years of use along with title insurance is not sufficient for your lender but that does remind you that insurance does not resolve issues and even if your lender accepted it you may still have had problems with remortgaging or selling in the future due to this issue. Worth considering before looking for a different lender.

Isn't the title the first thing they look at though? Should it have got this close to exchange without being flagged?

Tiglet2

I would imagine that your solicitors reviewed the documents they were supplied with at the start of the legal work and would have raised some initial enquiries.  They probably would have asked for other documents, e.g. old Transfers or Conveyances referred to in the title.  Obviously they wouldn't have known there was an issue until all the relevant documents were reviewed.

It is likely that they have been asking for relevant evidence/paperwork for quite some time, but the seller's solicitor has been unable to provide what they want, so now at an advanced stage of the conveyancing, they've reported it to their lender and the lender, on the solicitor's advice, has withdrawn their offer.  So, no, matters such as this are not discovered right at the start.  If the initial enquiry had been satisfactorily responded to, there wouldn't have been a problem or delay.

I'm also surprised that the solicitor and lender won't accept title insurance.  I wonder if there is any possibility of the current owner applying for prescriptive rights.

Unfortunately, as you now know, agreeing a completion date with the seller without knowing what might come up during the conveyancing, has little leverage.  Of course, six months should be ample time, but title issues can and do severely delay matters.  The point, as someone upthread stated, was that you were not near exchange as no solicitor would contemplate even discussing exchange until all enquiries are dealt with satisfactorily.  Whatever you and the seller agreed, cannot be promised.  The solicitors will often state that they will do their best to meet your wishes, but that's as good as it gets.

Emily_Joy

Tiglet2 said:

Unfortunately, as you now know, agreeing a completion date with the seller without knowing what might come up during the conveyancing, has little leverage. 

I believe they agreed on the date of exchange of contracts, not completion date.

MorecambeBay82

Thanks @housebuyer143.
I've just had a look at the stages of conveyancey process supplied by the co-op
 Conveyancing Process Stages and Timeline | Co-op Legal Services
which kind of backs up what you're suggesting in that title deeds are looked at in some of the earlier stages.  So... on Monday I requested a copy of the TA6 form filled in by the seller from our solicitor.  It contains info on legal rights of way and various details about the structure and asks to declare any known issues amongst other things.  This was dated 26th June '23.  It's well over 3 months since that document was completed.  Either it's been given over on a much later date than filled in, not looked over at all or it's taken this long to do the relevant checks and get a response from the mortgage lender.
If this is normal and we just have to take the hit then I've learned a great deal, fast.  But I'm still not clear on why we had envisaged no navigable problems until we got an email on Thursday saying the lender couldn't offer the mortgage without the title issue being remedied so late into the process...