Investigation of Title

Investigation of title will allow the solicitor to discover and anticipate and deal with any likely problems that might be revealed and thus allowing the transaction to go smoothly.

Buyers Investigation

Once the seller has supplied the buyer with evidence of his title, the buyer must do 2 things:

1. Ensure seller has right to sell property.
2. Identify any defects in, or problems raised, by the title.

Anything that’s unclear or unsatisfactory on the face of the documents supplied maybe raised as queries (requisitions) with the seller. Modern practice requires any investigation to be done before exchange of contract and all issues to be resolved before that point. Therefore entering into contract with full knowledge of what title contains.

As after exchange the contract may contain provisions preventing the buyer raising requisition after exchange (SC 4.2.1 & SCPC 6.2.1).

What to look out for on official copies and title plan?

When examining official copies and title plan, look out for the following:

The Property Register

1. Description of land agree with the contract description?
2. Title number matches the one given in the contract?
3. Is it freehold/leasehold? And does this accord with the contract?
4. Any easements enjoyed by the property? Do they match the needs of the client?

The Proprietorship Register

1. Is the class of title correct?
2. Is the seller the registered proprietor? If not, who is?
3. Are there any other entries, and what is their effect?

The Charges register

1. Are there any incumbrances?
2. How do these effect the buyer?
3. Which need to be removed upon completion?
4. Have you agreed In the contract to buys subject to these incumbrances?

The Title plan

1. Is the land being bought included in title?
2. Any colouring indicating rights of way? Possible covenants or land which has been removed from title?

Anything adverse found in the official copies will need to be reported to the buyer and resolved before exchange.

Overriding interests can be discovered through:

• Disclosure by the seller in the contract.
• Pre-contract enquiries where the seller will be asked to reveal details of adverse interest and occupiers rights.
• A local land charges search.
• Inspection of the property before exchange which may reveal evidence of such matters as non-owning occupiers, easements and adverse possession.

The Case of investigating UNREGISTERED land

Firstly a valid root of title must be provided. Once the solicitors have established a good root of title they are prevented from requesting the production of any other document dated prior to the root. The seller must then trace a link in the chain of title from the root document to the document or event by which the the ownership became vested in the seller.

It is then the sellers solicitors duty to provide the buyer with an epitome/abstract of title. Which is essentially a list of deeds and documents with photocopies attached. The abstract must contain all documents and events affecting the ownership of the land from root to present. This includes all mortgages ongoing and discharged e.g. conveyances, mortgages, leases, grants of representation, death certificates, assents, search certificates.

An examination of the documents supplied in the abstract or epitome for:

• The root document is as provided for by the contract. If the wrong one sent, the buyer can insist on the correct document being supplied in its place.
• There’s must be an unbroken chain of ownership, starting with the seller in the root doc and ending with the present seller.
• No defects in title which may adversely affect the buyer’s interest.

You will also have to verify the original deeds as well as checking for evidence of occupiers (done by inspection) as well as completing any pre-completion searches.

While investigating you should also bear in mind whether any transaction in the titles history should have triggered first registration. Compulsory registration occurs when:

• Theres a transfer of freehold
• A grant of a lease for more than 7 years or the right to possession is discontinuous, provided that the periods added together total more than seven years.
• An assignment of a lease which at the time of assignment has more than 7 years unexpired.
• A first legal mortgage of the freehold or of a lease which at the time of the mortgage has more than seven years unexpired.

Stamp Duty: Documents dated prior to 1 December 2003 require a stamp. Unstamped or incorrectly stamped documents are neither good roots of title. Consequently they cant be brought as evidence in civil proceedings nor will the Land Registry accept them on an application for registration.

Conveyance by Trustees to themselves: on the face of it, such a conveyance is in breach of trust and therefore voidable by the beneficiaries. But can be justified if:

• There is proof of a pre-existing contract in favour of the trustee or personal representative.
• The personal rep was a beneficiary under the will or intestacy of the deceased.
• The consent of all the legally competent beneficiaries was obtained to the transaction.
• The conveyance was made under an order by the court.

The transaction was sanctioned by the trust instrument.

Disclosure Obligation

What to send to the buyers solicitor:

1. Title Documents to check that the seller owns and is entitled to sell what he has instructed the solicitor to sell and to draft the contract of sale (the location of the title documents will need to be ascertained in the initial interview).
2. Other documents accompanying the title documents: Land and Charge certificates for all titles registered prior to 13 October 2003. Possibly any planning consent etc. When requesting title documents from lenders it is customary to include in the letter that the solicitor will either repay the loan to the lender (thus ending the mortgage and entitling the seller to the return of his deeds) or return the deeds to the lender.
3. An application to the Land Registry for official copies of the register entries: Made by using form OC1 and if there’s other documents that are known to be filed at the Land Registry i.e. a conveyance imposing restrictive covenants, you’ll need to apply using form OC2. Applications can be made by post but usually made by telephone or fax.
4. Home Information Packs: Properties for sale from 14 December 2007 need a Home Information Pack (HIP); containing an Energy Performance Certificate (EPC), also including documents such as sale statements, searches and evidence of title. Along with a Property Information Form and/or a Fixtures and Fittings and Contents Form. If the land is unregistered, a up to date search of the Index Map should be included.
5. The Pre-contract package; this should include a minimum of 2 copies of a draft contract, details of the sellers title, and the following if following protocol:
1. Sellers Property Information Form: originally given to the seller at the initial interview.
2. Fixture Fittings and Contents Form: also given at the initial interview.
3. In unregistered land, an Index Map Search @ Land Registry: to ensure there are no interests registered at the Land Registry adverse to the seller’s title.
4. A Land Charges Search against the seller and all other estate owners revealed by title deeds: this will reveal any incumbrance affecting the property and if any insolvency proceedings are pending.
5. Any property related Planning permission.

The purpose of this is to help the buyer quickly make up his mind if he wishes to continue with the transaction.

What the buyer should do?

1. Start pre-contract searches.
2. Deal with his clients mortgage and survey arrangements if required to do so.
3. The pre-contract package; once received its contents must be studies carefully to ensure that what is being offered for sale matches the instructions given by the buyers.
4. Home information Pack (HIP); Obtain a copy from the estate agent and study its contents In particular its searches and if any additional searches will be required. If the Property Information Form and the Fixture Fittings and Contents Form has been included and nothing in the pre-contract package from the sellers solicitors that may require changing.
5. The buyer client should be advised of any changes as soon as possible.

Powers Of Attorney: is a deed under which the donor appoints someone to carry out certain actions on his behalf. There are four types of power of attorney:

1. A general power, under s10 of the Power of Attorney Act 1971, entitles the attorney to deal with all of the donors assets.
2. A special power, permits the attorney to deal with specific assets.
3. A trustee power, used where property is held on trust.
4. An enduring power, under the Enduring Powers of Attorney Act 1985, endures through the donors mental incapacity.

The buyer is entitled to a certified copy of any power of attorney which affects the title. If the transaction is not made within 12 months of granting the power a statutory declaration should be obtained, to the effect that he had no knowledge of the revocation of the power. Otherwise its unlimited.

A trustee may delegate to another trustee by The Trustee Delegation Act 1999.

An attorney may not act as an attorney and a beneficiary for a sale of land. Over reaching allows buyers to take free of beneficial interest. Buyer’s interest passes from the land to the money.

Matters of Disclosure: Matter which do not relate to defect in title do not need to be disclosed. As it pertains to the use and enjoyment of the property. Unless asked and they mislead. Under s 2(b) addresses if theres been a formal complaint.

All easements should be discoverable and disclosed on inspection (under 2(a)). However to avoid a dispute all incumbrances should be disclosed in the contract.

Planning permission is needed in respect of any activity which constitutes ‘development’ as defined in s55 of the Towns and Country Planning Act 1990. Enforcement in respect of any breach must be started within four years of the alleged breach.

First Interview Sale Checklist

Suggested Sale Checklist

Date of Instructions

Seller’s Full Names

Contact Address

Address of Property Being Sold

(If Different From Contact Address)

Contact Phone Number(s)

Daytime

Evening

Mobile

Estate Agents

Contact

Buyer’s Name & Address

Solicitors Acting

Mortgage Details

1^st Mortgage

2^nd Mortgage

Other Mortgages

Occupiers Over 18

Agreed Sale Price

Fixtures and Fittings Included

Fixtures and Fittings Excluded

Details of Connected Purchase

Target Completion Date

ID Inspected

CGT Relevant? Yes/No

Client Care Information Given

Special Features /

Additional Information

Buying a Property Expense

Financial calculations must be made ensuring client has sufficient funds to purchase the property and pay related costs.

Land Registry Fees are payable for registering the land or a dealing at Land Registry after completion. Fee’s are payable on a scale published by the Land Registry and the client can find out the exact amount (£40-300 ish).

Stamp Duty tax is payable at the rate of 1 % on the whole consideration paid. Where it exceeds £125,000 (Residential property) or £150,000 (Commercial property) or property is within a disadvantaged area (check hmrc website for list of disadvantaged areas) and not exceeding £250, 0000.
Prices between £250,000 and £500,000 will pay at 3%. Anything that exceeds £500,000 will need to pay 4%.
Bare in mind total tax payable does not include price of chattels. But in some cases m, if the sale includes chattels its possible to alleviate tax payable by apportioning some of the price to the chattels included in the sale i.e. furniture, carpets etc. However this amount must be a fair reflection of the value of the chattels otherwise both the solicitor and the client will be liable to criminal sanctions.

Deposit: Buyers are usually required to pay a deposit of 10% on the purchase price (although it maybe possible to negotiate a smaller sum). Solicitors need to discuss with their client how they intend to fund this.

Mortgage: Most clients will choose to fund their purchase via a mortgage. Plus an arrangement fee (£200-300).

Mortgage Premium Insurance- Pays for the mortgage on the off chance the client falls ill or looses work. Although it has its limits as well as requiring the client to have worked a certain number of years.

Survey: Commission an independent survey of the property ensuring the property is free of unknown defects. There are different types, the more detailed the survey the higher the cost i.e. a valuation will only provide basic information and usually carried out by the lender.

Searches: Anything between £200-300

Professional Fees (solicitors) usually in the range of £350-£1000 + VAT. Depends on the property. Always added onto the disbursements.

Land -> Mortgagee's Remedies4

A legal mortgagee has a common law right to posession of the mortgaged property (Four-Mains v Dudley). However in practice a mortgage deed will often provide the mortgagee's right of possession shall only arise on the mortgagors default.

Where a mortgagee brings a claim for possession, this right will be restricted by the Admin of Justice Act 1970, s36. Which is operable only where court proceedings for possesion take place (Ropa v Barclay). So the m'gee right to possession could be exercised by peaceable entry withut court assistance (but regulated under s6(1)) Criminal Law Act 1977 preventing use of threatening behaviour or force).

In practice a m'gee will usually seek possession in order to sell the mortgaged property. The statutory power of sale in LPA 101 arises where the mortgage money has become due (legal date of redemption has passed). Exercisable under one of the three sections of LPA s103.
In exercising a power of sale, a m'gee must take reasonable are to obtain a proper market price for hte property.

In Cuckmere Brick v Mutual Finance the m'gee had failed to obtain the true market value of the property and were liable to the mortgagor in damages. Such a claim must be brought within six years (Raja v Lloyds TSB). M'gee's have a duty in exercising this power of sale in equity. Thus a m'gee needs not carry out any improvements to the property or obtain planning permission (Silven v RBS) but merely duties of good faith and diligence.

However there is no duty on the m'gee to delay power of sale until market conditions are more faourable. Therefore a m'gor may not argue theres been abreach merely because the market value of the property has risen since it was sold (Palk v MSF).

LPA s105 states all proceds of sale must be paid in order of priority of mortgages and any o/s amounts maybe claimed personally.

Land -> Mortgagee's Remedies3

The whole purpose of amortgage is to provide security which the mortgagee can release if the mortgagor fails to repay the loan.

Foreclosure
When a borrower can not repay a loan and the lender seeks to sell the property. The legal process by which the mortgagor's equitable/statutory rights to redeem property is terminated.

• Forclosure can not besought before contractual obligations to repay has been broken (Williams v Morgan).
• A court order is required for foreclosure, its effect is to vest the mortgagor's estate in the mortgagee in ful settlement of debt (LPA 1925, s88(2) & 89(2))
• If the property is worth more than the debt, the m'gee is not liable to pay the balance in value to the m'gor.
• On hearing an application for forclosure the court will give the m'gor a period to redeem the mortgage. However since m'gor usually in financial difficulty therefore unable to repay the loan.
• M'gor has right to ask for an order for sale instead of foreclosure (LPA s91(2)). This is advantagous because after sale the m'gee can only keep the sum for debt while the remainder goes to the m'gor or others entitled.
• Disadvantage to the m'gor, as even after an order for foreclosure has been given, the case can be reopened and allow m'gor to redeem property (Campbell v Holyland); provided critera are: Speed of mortgagors application, reason for failure to redeem and nature of property. UNLESS property already sold by m'gee.

Possession
Although the m'gee hass the right to possession, the m'gee will not nomrally exercise hte right where the borrower has not defaulted (Exp Bignold).
Requires a court order (Barclay Bank v Bird). Although theoretically they do NOT need one, acording to the article by Wade (1995).

Equity & Trusts -> The 3 Certainties

The Settlor holds absolute title in the property before the creation of a trust.

The Trustee once a trust has been created the legal title in the trust property must be vested in the trustee and held by the trustee on trust for the beneficiaries.

The Beneficiary the person(s) for whom the property title is to eventually end up in.

Bare Trust: where the trustee holds property for a single absolute beneficiary and therefore owns the entire equitable interest in the trust fund, the trustee has no discretion or any obligation other than stewardship.

Fixed Trust; when a trust is held by a trustee for a fixed list of beneficiaries.

Discretionary Trust and power of appointment: discretion of distributing property in a manner the trustee deems suitable.

Notice: A purchaser is taken to have notice of an equitable interest unless they had either actual notice of the equitable interest of the beneficiaries or constructive or imputed notice.

Capacity: the ability to own property (under 18s cant legally own property[land]). Therefore a trust is usually created to transfer property once he/she turns 18.

A valid trust can only exist if the settlor intends to create a trust and defines the relevant property an beneficiaries clearly. The criteria to decide this was established in Knight v Knight per Lord Langdale;

• Certainty of Intention, which is an intention on the part of the settlor to create a trust. This is usually done by examining the words used by the settlor. Did he intend to impose a trusteeship on the recipient of the property? 'The words must be imperative' Wright v Atkyn. However since equity looks at intent rather than form theres no technical way to create a trust. Re Hamilton is the authority for looking at the entire document to determine the existance of a trust. Mere expression of hope, wish and trust does not amount to a trust.
• Certainty of subject matter, which the settlor expresses the a clear description of the trust property and what type of interest each beneficiary has and the respective interests they will share. Re London Wine Co buyers of wine stored in warehouse-not segregated-unable to ID which bottles belonged to whom... therefore no trust. However in Hunter v Moss oral declaration of 5% of shares - held valid. If shares in the same company and of the same class, no need to segregate. The rule in Hancock v Watson states where a property has been left to a beneficiary as an absolute gift subject to a trust which has failed, then the bene takes the property absolutely.
• Certainty of Object, sufficient identification of the beneficiaries.

Re Aster Settlement Trust: a trust was created with the objective of advancing 'the preservation' of the independant and the integrety of newspapers in particular the Observer. It was held that there was no beneficiary of such a purpose and uncertain therefore the trust was held void.

Deal with each certainty in a logical order even where there are no problems.

• Intention
• Subject Matter
• Property
• Beneficial Interest
• Objects
• Effect of any uncertainty.