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Covenants for title

Posted on Wednesday, 23rd August 2017 by

convenants

 

Covenants in Title

 

We are often asked what the difference is between full and limited title guarantee as this is referred to in Contracts relating to property.

On completion of a transaction the Contract merges with the purchase deed in so far as the two documents cover the same ground and in general an action arising out of the contract is not possible after completion has taken place.  The main post completion remedy available would be an action for breach of the title guarantee. to do otherwise the contract would have to stipulate which clauses do not merge and an action for misrepresentation would also be available as this action does to derive from the contract itself.

Title Guarantee applies to the sale of both freehold and leasehold Property and on the grant of a lease.  The warranties given can be amended in the agreement.  The only matters not covered by the title guarantee are on the sale of a registered title which will be subject to any matters entered in the register of title at the time of the disposition

Full title Guarantee – the seller warrants that: –

  1. They have the right to dispose of the property in the manner stated
  2. They will at their own cost do everything in their power to give the buyer the title they purport to give
  3. They dispose of the whole interest where that interest is registered
  4. The whole lease is passed on where the interest is leasehold
  5. The disposition is of a freehold if this is unclear
  6. In the case of a lease they covenant that the lease is still subsisting and there is no breach which might result in forfeiture
  7. Where the property is subject to a mortgage any rentcharge or lease will be observed by the borrower
  8. That the seller is disposing of the property free from all charges or other encumbrances (whether monetary or not) and from all rights exercisable by third parties so long as it was reasonable that the seller should have known about such rights and charges

Under 2. The Seller promises to put right any defects in title and so therefore will sign any necessary deeds to rectify this

Any contract for the sale of leasehold land should be modified to ensure he will not be liable to the buyer for any breach of the tenant’s covenants which relate to the physical state and condition of the property.  The Standard Conditions of Sale modify the warranties by providing that the property is sold subject to any subsisting breach of a condition or obligation relating to the physical state of the property which renders the lease liable for forfeiture.

Any charges revealed in the title provided to the buyers would be except from 8 as the buyer has notice of them and it would be usual for any such charges to be cleared on sale and for which an undertaking would be given by the Sellers solicitors in relation to the discharge thereof.

Limited Title Guarantee is the same as above except for 8 which is replaced with the following:-

That the sellers have not charged the property with an existing charge and that he has not granted any third party rights and he is not aware that anyone else has done so since the last disposition (or sale) for value.

This covers the situation where the Sellers are perhaps executors of a deceased party as such a party may not have full personal knowledge of the property and whether any such charges might have been entered into and which it might be impossible for such a person to know about.

The Title Guarantee is enforceable by the buyer’s successors in title and any breach is actionable as a breach of contract. This is rare in practice and it is unlikely rescission will be granted, damages being the usual remedy except where the seller might be ordered to sign documents to perfect any defective title

These covenants exist to prevent problems arising in the sale of property and can be viewed as being effective in that enquiries raised by a buyers solicitors reflect their knowledge of the law relating to title guarantee and will ensure smooth progression of any transaction

 

If you would like to discuss anything covered in this blog or anything else related to conveyancing please do not hesitate to contact the conveyancing team in Leicester on 0116 266 5394.

 

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The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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