Including certain words in a property contract is important to ensure a buyer receives implied covenants under the Law of Property (Miscellaneous Provisions) Act 1994.
If the contract states that “the Seller sells with a full title guarantee,” the buyer gets maximum assurance. However, with a “limited title guarantee,” the assurance level is lower. In some cases, the seller may declare no guarantee at all.
But what does this all mean in practice? In this article, we’ll pull out the key difference between full title guarantees, limited title guarantees, and no title guarantees to help buyers navigate what can feel like a minefield in property law.
What is a title guarantee?
When someone sells or transfers property, certain promises are automatically made, such as having the right to sell, ensuring a clear title, and guaranteeing freedom from certain liabilities.
These promises depend on the type of title guarantee mentioned in the transaction. If a property has a rentcharge or is a leasehold land, there are additional promises related to fulfilling obligations in those cases.
Title guarantees in property transactions come in three types:
Full Title Guarantee;
Limited Title Guarantee;
No Title Guarantee.
What’s the difference between a Full Title Guarantee and a Limited Title Guarantee?
The main difference between Full Title Guarantee and Limited Title Guarantee is the level of assurance they offer regarding the property’s title.
Full Title Guarantee means the seller is fully confident in the title’s validity, offering maximum security for the buyer. In contrast, Limited Title Guarantee leaves the door open for potential title issues, making the property riskier for the buyer.
Opting for a Limited Title Guarantee when buying a house may be risky and could mean you’re getting a less valuable property than one with a full title guarantee.
What is a Full Title Guarantee?
With Full Title Guarantee, a seller promises:
They have the right to sell;
They’ll ensure the buyer gets the claimed title;
They’re selling the entire property or lease;
For a lease, it’s valid with no breaches;
The property is free from known issues.
Simply put, when selling a property with Full Title Guarantee, the seller makes a promise that it’s free from known charges and rights, including legal obligations.
Sellers can only offer this guarantee if they have complete knowledge of the assets.
What is a Limited Title Guarantee?
In cases where the seller has no personal knowledge of the property, such as sales by attorneys, executors of a will, or trustees, a Limited Title Guarantee is used.
Limited Title Guarantee essentially includes the same covenants as a Full Title Guarantee but with a focus on the seller's recent actions. In this, the seller assures that there have been no recent encumbrances or third-party rights, however, they make no promises about the actions of previous owners.
What is a No Title Guarantee?
When a repossessed property is sold by receivers or mortgagees, they usually don’t provide a title guarantee because they don’t know certain information about the property.
This poses a risk for buyers as there could be undisclosed issues that the buyer may not discover during a title investigation, like overriding interests.
When a house is sold with a No Title Guarantee, the buyer has no recourse against the seller should problems arise after the sale. Therefore, before buying a property through auction or private treaty with no title or limited title guarantee, buyers should conduct a thorough title investigation to determine whether they should consider taking out defective title insurance or identify any issues that cannot be fixed.
Why would a seller choose to offer a Limited Title Guarantee?
When someone is selling a property, they might not be able to offer a clear and complete title for the property. This sometimes happens when trustees, personal representatives, mortgagees, or executors of a will are responsible for selling someone else’s property.
Opting to offer a limited title guarantee helps protect the seller from legal actions if issues arise after the sale. This is why buyers should exercise caution when dealing with a limited title guarantee and find as out as much as they can before going ahead, as the majority of the risk lies with them.
What should I do if I find out my property has a Limited Title Guarantee?
If you learn that your property has a limited title guarantee after buying it, you should speak to a property solicitor right away. Depending on the situation, you may need to address any title issues quickly to protect your investment and ensure a clear title for your property.
Conclusion
A full title guarantee is infinitely preferable for buyers as it makes sure they have exclusive rights to the property, making it much less likely that unexpected problems will arise post-sale.
Due to the complexity of this area of property law, hiring a property solicitor to handle the finer details and ensure buyers don’t fall foul of unforeseen issues, is essential.
For personalised advice relating to title guarantees, contact our legal assessment team for a free case assessment today.