Possessory title is just one of the classes of land registration in England and Wales, but what does it mean and how does it affect the owner’s rights?
When the Land Registry registers a piece of land for the first time it will assign it a class title: absolute, qualified or possessory. These titles are covered by the Land Registration Act 2002, which was introduced to simplify and modernise how land is registered.
So, let’s take a look at what these titles mean…
What is “Absolute Title”?
Having an absolute title provides someone with an unequivocal right of ownership to the property, which is why it is also known as a perfect title. Buyers will have the peace of mind of knowing that the property they are purchasing is free of any legal weaknesses.
To prove an absolute title, the owner needs to show the Land Registry the title deed and an unbroken chain of deeds dating back at least 15 years. Legally this is described as the epitome of title.
What is “Qualified Title”?
Qualified titles are rare. They refer to property titles which have been submitted to the Land Registry with a particular defect qualification that can’t be ignored.
For example, if there is a question mark over part of a garden which may have been sold to a neighbour, the title can be registered subject to the rights of anyone having a better title to that part.
What is “Possessory Title”?
The term possessory title simply means that the applicant did not have all the necessary documentation to meet the Land Registry’s criteria for absolute title.
Before the Land Registry started storing property records electronically, owners had to produce the physical title deeds in their name to prove absolute title. These days, if you do not possess the title deeds or have not registered an electronic proof of ownership at the Land Registry, you can only claim possessory title.
There is nothing wrong with a property only having a possessory title, as there are plenty of legitimate reasons why documents might be missing. For example, original deeds may have been destroyed by floods and fire, or even stolen.
When original documents are missing, the applicant must source copies of documents and explain any the situation in their application.
How long does possessory title last?
After the land has been registered with a possessory title for at least 12 years, the owner can apply to the Land Registry for an upgrade to absolute title.
Possessory title and adverse possession – what is the difference?
Also referred to as squatters’ rights, the term adverse possession relates to occupying a piece of land which belongs to someone else or is unregistered, and then treating it as your own.
It is possible to apply to the Land Registry to own the land, providing you meet the following criteria:
- You have possessed the land to the exclusion of anyone else, without objection or consent.
- You have shown an intent to own the land by fencing it off and performing maintenance.
- You have never paid rent for the land.
To qualify for adverse possession, you will need to prove that you have satisfied the criteria continuously for at least the last 10 years. For unregistered land, an application can be submitted after 12 years of occupation, but for registered land it is only 10 years.
The Land Registry will then serve notice on any parties with an interest in the land to give them an opportunity to object to the application and evict the squatter.
When an adverse possession application is successful, the owner is usually awarded a possessory title as they cannot produce the title deeds as evidence of ownership.
Click here to read more about how our Adverse Possession Solicitors can help you
Can a possessory title be challenged?
As we have explained, a possessory title means the applicant did not have all the required documents for an absolute title, so in theory it can be challenged. Anyone who feels they have a “better” claim can also apply for registration.
In this situation, if another person can persuade the Land Registry that their title to the property is indeed better than your possessory title, that possessory title will cease.
This can prove disastrous in certain circumstances – because the owner of the limited “possessory title” will have no claim for any losses, even if they have built a property on the site.
Can I sell land with a possessory title only?
The shot answer is yes, you can, but it is never going to be as straightforward as selling a property with an absolute title.
As the purchaser of a possessory title you need to be aware of the principle of “caveat emptor”, which applies in this case. It means, in plain English “let the buyer beware”. So if you are thinking of buying a land with possessory title only, you and your conveyancing solicitor will need to carry out as much due diligence as possible – so that you fully understand the situation surrounding ownership of the property before complete your purchase.
If the vendor has occupied the property for a long time, they will probably be able to fill in some of the gaps about the history of ownership of the land or property involved.
It is essential to understand what the potential buyer wants to use the land for, so that the risk of problems further down the line can be assessed.
Does a possessory title affect the value of property?
Yes, owning a property with a possessory title is likely to have an adverse effect on its market value. This could be good news if you are purchasing the property, but what happens when you come to sell?
The exact scale of any discount depends on the exact nature of the possessory title. A more robust case will lead to a higher market price, but you will need the expert advice of an experienced property solicitor to gauge the quality of the possessory title.
In any sale of land with a possessory title, an indemnity insurance policy will be required (see below).
Can I get a mortgage on land with a possessory title only?
Cash buyers are usually associated with possessory title purchases, but the good news is that many mortgage lenders will still lend money.
According to the Council of Mortgage Lenders (CML), the possessory title will be recognised if the ownership is based upon adverse possession. When possessory title is granted due to lost title deeds, a statutory declaration will be required from the seller. The money will only be released when the lender is happy with the explanation.
The first thing you need to do is talk to an independent mortgage adviser who can recommend the right lender for your situation. They will have access to specialist lenders who will have a wider range of products compared to high street banks.
It is also common for the mortgage lender to insist upon possessory title indemnity insurance if there are buildings on the site, or others require access to the land.
Can an insurance indemnity policy help me?
If you are buying a possessory title property with a mortgage, an indemnity insurance policy will usually be required to protect you against another party staking a claim on your land.
Indemnity insurance normally involves payment of a one-off fee and never expires.
Policies vary depending on the individual provider, but typically an indemnity insurance policy covers the following areas:
- Any unregistered, enclosed land which has been used to the exclusion of others for several years.
- It will compensate you in the event of another party claiming the land, or a third party applying for legal rights on the land, such as rights of way.
- Any drop in the market value of the property if the adversely possessed land has to be surrendered.
Please be aware that your policy will be invalid if you contact anyone with an interest in the land, or if your legal rights to the property were being contested when you took out the policy.
Furthermore, the policy won’t give you protection if you make an unsuccessful claim for registration of the title at the Land Registry. Similarly, you won’t be covered for failed attempts to register any extra land which is neighbouring your plot.
A typical possessory title indemnity insurance policy will cost more than £300, but for properties valued above £500,000 expect to pay at least £500.
The maximum limit of indemnity depends on the insurer, but it is roughly £5 million for a residential property sale and £25 million for a commercial deal. When it comes to any insurance policy, you must read the small print and get legal advice.
Can I build on land with just a possessory title?
Once you have been recognised as the owner of the land, there is no legal reason why you can’t build with just a possessory title. It is worth remembering that you can apply for planning permission on land that you don’t even own, so the type of title is not a factor.
Can my possessory title be upgraded?
Yes, fortunately, being awarded a possessory title is not the end of the story as it can be upgraded to full legal ownership – what is known as “title absolute”. Upgrading title in this way is likely to be really useful. It makes selling the land much easier and will have a positive effect on the market value.
In order to satisfy the Land Registry and convert possessory into absolute title, you must have owned the land for at least 12 years and remain in occupation of the site before an upgrade is granted.
Can a possessory title be challenged?
A possessory title implies that there is an element of doubt over the ownership of the land, so in theory the title can be challenged by anyone who believes they have a better claim to the property. This also applies to any third-party rights or covenants which may have been in the original deeds but have since been lost.
How common is this kind of limited ownership?
Statistics released by the Land Registry show that in 2008/09 there were 1,111 successful applications for adverse possession of land, followed by 1,059 in 2009/10 and 868 in 2010/11. More recent figures show that in the financial year 2014/15 there were only 749 applications for adverse possession, dropping to just 598 for 2015/16.
These stats show a clear trend that the number of adverse possession applications is falling, probably due to the lack of available unregistered or unoccupied land.