What is Possessory Title and Can it Affect Your House Price?
We’ve spoken before about property jargon and how some of it can be confusing but important and the possessory title definitely fits those criteria. The Possessory title relates to complications or confusion over ownership. This can lead to buyers being reluctant to buy the property when it is up for sale. In this edition of our blog, we explain what Possessory title is, and how it may delay your sale or even drive the property price down.
What is a possessory title?
If you have possessory title, it means you are seen as the owner of the property/land, but it has been unable to be legally certified by the Land Registry due to it being classed as defective.
This can lead to confusion and complications as anybody interested in the land or property, or any previous owners of it, could raise a dispute regarding your rights to live there. Because of this, a property may be unable to fetch the price it normally would.
When would possessory title be applied?
When you have possessory title rather than the more common Absolute Title, it could be for a variety of reasons. This could include:
- No title deeds in your name
- Where the property has been passed down through generations and no deeds or conveyance proof exist
- Where a fraudulent house sale took place
- Where possessory title has been obtained due to squatter’s rights
How does possessory title come about?
There are commonly two main reasons why land or property may have Possessory title. This could be through war or natural disaster for example, where the documents proving ownership have been destroyed or lost. Or it could be through what is known as adverse possession or squatters’ rights. This is where someone has claimed the property or land due to occupying it, unchallenged, for twelve years when unregistered or ten years when registered.
Can you sell a home with possessory title?
You can, although it may be a little complicated. When people buy property, they want certainty. Certainty that it is safe to live in, certainty that it is affordable and ultimately, certainty that it is theirs. When a possessory title is attached to ownership, there is no cast-iron guarantee they will legally own the home once purchased. This no doubt raises the level of concern and may see those interested either offer you significantly less for it or not want to make an offer at all. However, it can also prove to be an attractive proposition as the price they need to pay will be significantly lower than that of a property with absolute title. This reduces the buyers’ market somewhat, as a result, cash house buyers are often the only way to guarantee the sale.
Some buyers or former owners may see an opportunity to challenge the status of the title and move the property from possessory to absolute though, and we will cover that shortly.
You may also find selling the property is made much more difficult due to the difficulty any buyer may have in securing a mortgage.
Can you get a mortgage for a property with possessory title?
It is possible but it can be quite rare. A lender will see the property as being burdened with added risk or defect and as a result, be uncomfortable with lending. However, should the reason for possessory title be due to a lost document, it is much easier to resolve, and lenders may feel a little more confident. They can’t just take your word for it though. You’ll need a conveyancer to provide a statement relating to the proof of title and an indemnity insurance policy.
How is possessory title challenged?
Whilst you do effectively own the property when you have possessory title, the lack of documentation to prove ownership can lead to challenges being made by those interested in the property or land. This means, that if successful, they could take the land or home and you could lose out substantially. You will not be awarded any compensation for your losses and basically have to start over.
Common reasons you could lose a challenge include:
- The interested party can prove to the HM Land Registry that they hold a stronger claim to absolute title.
- It has been proven that the granting of possessory title was done fraudulently.
- Somebody else can prove that have legal ownership of the land or property.
- The land with possessory title was purchased via adverse possession.
What is possessory title indemnity insurance?
Getting possessory title indemnity insurance protects buyers when someone else attempts to make a claim on the ownership of the property or land once it has been bought. Such policies cover the costs accrued if a successful claim was made against you, and cover any loss of market value. Conveyancers can provide this, but it must be in place between the exchange of contracts and completion. Costs will vary depending on the property and its location.
It should also be noted that such a policy will not offer any protection if there is already an ownership dispute ongoing.
Can I upgrade from possessory to absolute title to protect my house value?
You can and it should help you not only secure the property’s ownership status but also make it easier to sell and sell at a price the house is truly worth. You can apply to do this if:
- You are the property owner.
- You are a person entitled to be registered as the owner.
- You are a person interested in a property that derives from the original estate.
- You are the owner of a registered charge against the property.
This will only apply if you have been unchallenged on the ownership for at least twelve years. You’ll also need to show that any defects that led to the title being granted as possessory are now remedied.
Possessory title can bring your house value down due to the uncertainty of ownership. This can mean a quicker sale in some respects, but it also narrows your buyers’ market significantly. As we touched upon earlier, buyers want certainty and possessory title doesn’t grant this. This means quite often, the only way to sell your house fast, and at a more realistic price, is through a cash house buyer like Gaffsy. We buy any home, in any condition or location and remove the need for legal fees with our fee-free model. Why not contact our team today to find out how you can sell your home with possessory title in as little as seven days?
