Considerations when buying land with possessory title
Where a seller’s title is based upon adverse possession (commonly known as squatting) or where a title cannot be proven because the title deeds have been lost or destroyed, a seller is said to have a ‘possessory’ title only, rather than ‘absolute’ title.
Purchasing such a property where very little is known about it is never going to be as satisfactory as purchasing a property where a solicitor can check everything that may affect the title.
Let the buyer beware
The principle of ‘let the buyer beware’ applies so the buyer is immediately on the back foot when, for example, unregistered title deeds have gone missing. If the seller has lived in the property for a long time, then you may find that you can tell more about the property as long as the seller is of sound mind. If a buyer is going to use the property and develop it there could be a potential risk of bogus owners coming out of the woodwork because, for example, they do not like the proposed change of use.
Absence of deeds
Lenders will generally still lend on possessory titles when deeds have gone missing. However, the absence of deeds may affect value. The Council of Mortgage Lenders states that where a title is based on adverse possession, the possessory title will be accepted if the seller is, or on completion, the borrower will be, registered as the registered proprietor of the possessory title. In the case of lost title deeds, a statutory declaration from the seller must explain the loss satisfactorily before the lender will lend. A lender will also require indemnity insurance to be put in place when there are buildings on the property or where the land is essential for access or services.
However, once a possessory title has been purchased and registered to a buyer, it may be upgraded to title absolute (the best class of title available) under certain circumstances. Generally, Land Registry will upgrade possessory title where the land has been owned for 12 years or more and the owner is in occupation.