Defects in Title

Guest2011

Hi,

My parents are in the process of buying a retirement property and the solicitor has warned us there are defects in the title and will only be able to give them qualified title to the property not absolute title. They are purchasing the property with private funds i.e. their own savings and pension. They are buying from a receiver/liquidator.The house is brand new. My questions are:

What problems could arise from the defects in the title in the future?
Is there any way of fixing the defects in the title?

I have read should there be a bank financing the purchase they would have declined the loan due to this problem. The solicitor say's problems can arise on the future sale of the property or leaving it as an inheritance.

My parents have their hearts set on the property, should I tell them to just walk away?

Any advice, please.

Thanks.

dats_right

Guest2011 wrote: »

What problems could arise from the defects in the title in the future?

It depends entirely on the nature and seriousness of the defects that arise. The most likely problem would be that if the defects are of sufficient seriousness it could make it difficult to sell the property to purchasers in the future.

Most people buy property by way of bank mortgage. In all such cases the purchaser's solicitor must give a Certificate of Title to the bank confirming that the bank's security is registered over a title that constitutes a 'Good Marketable Title'. If there is a defect on title then a solicitor would be unable to give such a Certificate to a bank, meaning in turn that the bank will not lend money to buy that property. Cash buyers are free to ignore their solicitors advices and purchase whatever property they wish, but if your parents are depending on a cash buyer purchasing the property in the future then it severely limits the marketability and value of the property.

If the defect is minor in nature then in some cases the bank will agree to accept a conditional or qualified Certificate of Title and the purchase can proceed, but you state here that the solicitor acting for your parent's feels that the bank would decline a loan because of the defects so this may not be the case here. In my own view, if I received advice like that from my solicitor I would walk away.

Guest2011 wrote: »

Is there any way of fixing the defects in the title?

In the majority of cases the answer is yes, but in some cases the defect cannot be rectified. Your parents should ask their solicitor about whether this is an option for them or whether defective title insurance might be another
option here.

One should bear in mind that even if a defect on title can be rectified it most often involves a great deal of extra work, time and costs to do so.

Guest2011

Hi,

I have just been to the solicitor and she advises that its up to my parents to decide what to do next.

She has pointed out that the receiver acting in his capacity as such has not provided indemnities and assurances that would normally be found in a conveyance and has on more than one occasion excluded himself from making warranties and also he in his capacity as vendor will not be obliged to furnish any discharge of charges registered subsequent to the charge on folio, whether existing now or subsequently.

What she made me aware of is that because this is a sale through receivership problems can arise if the builders who are in receivership subsequently become insolvent.

I don't know much about whether these defects can be remedied and she is to get back to me on that.

Equality

Walk away from this. Very fast. If you go through with this deal you risk losing any money you put into the property.

You may be giving the bank a gift of this money if you proceed. You are not purchasing a property, as you do not have clear title.

There is no comeback against anyone, as the solicitor has warned you about this problem.

Kosseegan

What about getting title insurance? The insurance companies will sell a bond guaranteeing the title. They will want an opinion from a barrister as to the level of risk first.

Guest2011

Kosseegan wrote: »

What about getting title insurance? The insurance companies will sell a bond guaranteeing the title. They will want an opinion from a barrister as to the level of risk first.

Talked with the solicitor re that, she did not want to comment as it was not her area of expertise, been googling for a while now and can't find any insurance company located in this country offering title insurance, if any person knows of one please let me know.

Marcusm

There are lots of receiver sales across the country and many of them will have involved financing (which is not required here but which is one acid test you coud apply). Your parents' solicitor does not sound as if she should be handling this sale and you should ask her to refer you on to someone else. Is this a one off house or part of a development? Who has handled other sales? the receivers will never give warranties that might be available from other sellers so a higher lever of due diligence is required. Have they undertaken a FULL structural survey? Do they know the actual builder (workmanship, materials etc). The receiver should have satisfied himself that there weren't other financial claims on the property but searches etc are very important.

Guest2011

Marcusm wrote: »

There are lots of receiver sales across the country and many of them will have involved financing (which is not required here but which is one acid test you coud apply). Your parents' solicitor does not sound as if she should be handling this sale and you should ask her to refer you on to someone else. Is this a one off house or part of a development? Who has handled other sales? the receivers will never give warranties that might be available from other sellers so a higher lever of due diligence is required. Have they undertaken a FULL structural survey? Do they know the actual builder (workmanship, materials etc). The receiver should have satisfied himself that there weren't other financial claims on the property but searches etc are very important.

Thanks, no the solicitor has warned of extra costs involved other then original quote and the need to do due diligence exercise, and yes other houses have been sold in the development but I don't know their exact details, will talk with the estate agents and see whether they will be willing to discuss other peoples experience. The solicitor has informed me that even after carrying out the extra work involved (due diligence), because of the nature of this type of transaction she will only be able to certify a qualified title.
We have carried out the structural survey and there are no issues.
The receiver has put on notice that he has limited knowledge and does not give any assurances or accepts responsibility in relation to matters that may subsequently arise.

Grolschevik

Is it a general condition 36 issue (planning warranty)?

Guest2011

Grolschevik wrote: »

Is it a general condition 36 issue (planning warranty)?

I don't have the contract with me anymore, but there were 5 or 6 issues which the solicitor had highlighted and yes the planing one was one of them.

AnnaStezia

Walk away.

NUTLEY BOY

Sounds like the stuff of a classical bad bargain and a trail of trouble. Walk away.

NUTLEY BOY

Defective title indemnity cover might be a problem if the risk of a claim is nearer to inevitability than a truly chance event !

Guest2011

Thanks to all who replied.

My parents have decided to look for a different property, amazingly the estate agent was surprised and was willing to give contact of another solicitor one who would be willing to give a clear title, sounded fishy.

Once again thanks to all of replied.