Is your property blighted?
Thursday 7th February 2013, 5:00PM GMT.
Regular contributor Trevor Cooper considers property transactions and the legal ‘defects’ and ‘blights’ that can now more than ever mean the end of a house sale.
BY MY calculations, there were 228 property sales in Guernsey during the final three months of 2012. This compares with 281 during the same period in 2011.
Overall, last year saw 992 sales compared with 1,098 the previous year, a drop of virtually 10% but still significant activity in the current economic conditions.
I say ‘by my calculations’ because I have included only transactions that would be termed arm’s-length sales.
People often attend conveyancing court to transfer an interest in a property rather than full ownership. This can be a business arrangement or within a family or between civil partners where, for example, a property owned in joint names is transferred into sole ownership, or vice-versa.
These transactions often exchange for no more than £1 purely for contractual purposes, or for as much as one person’s share in the equity of a property, which can amount to a nominal sum or many thousands of pounds. But these transactions do not affect the property market as such. A person’s housing circumstances may change, legal fees are paid and new mortgages may be needed, but these transfers do not influence market conditions in the usual sense.
By way of example, among all of December’s transactions, 42% were other than arm’s-length sales.
What is of more concern is the number of agreements within those transactions rectifying a property’s title deeds. This might be because a boundary cannot be defined, or access onto a neighbour’s property is needed for future maintenance or some such other issue. This will come as a shock to a lot of homeowners who believe all is in order with their title deeds. Perhaps nothing was mentioned when they purchased their property, or, if it was, the insignificance of the matter was consigned to a file note made at the time.
There is not necessarily any fault in this. Indeed, it is said that in Victorian times, when a huge amount of development took place in Guernsey, title deeds were deliberately silent on some matters to allow a reasonable degree of latitude. Such flexibility nowadays is unacceptable among buyers and positively prohibited by mortgage lenders.
Banks and other mortgage lenders insist through their own advocates that a property’s title deeds must be completely without defect. What is seen by a bank as a defect might be seen by the owner or prospective buyer as being remedied with common sense. But a mortgage will not be offered if the lender considers there to be a legal defect or blight on the property – words that now haunt the housing market.
This has nothing to do with the structural condition of the house. This is about being able to maintain and repair walls and buildings. Legal rights allowing access onto the neighbouring property to carry out essential work only possible from the other side of the boundary is a typical case in point. And don’t think exchanging a handshake or nicely-worded letter with the neighbour is sufficient. That counts for a great deal in neighbourliness, but not much in legal terms. If not already covered in the title deeds, rights of way or rights of access should be given in perpetuity, in other words so they also bind successive owners of both properties, and this is only possible with a document registered through the conveyancing court.
Another common cause for rectification is when boundary features such as fences, walls and hedges have been replaced. Unless it can be shown without any margin for error that the new boundary feature is in exactly the same position as whatever it replaced, and even if the replacement was fixed, planted or built with the agreement and cooperation of the neighbour, a formal registered agreement is needed between the two owners. More than that, to cover the remote possibility that small areas of land have been gained or ceded in the positioning of the new boundary feature, then the agreement also takes the form of a conveyance by way of exchange. This acknowledges that land may have exchanged, without necessarily defining the areas in question, solely with the effect that both sides thereafter recognise the new boundary feature as defining the extent of their land.
There is a lot to commend this attention to detail in preventing later arguments. The problem for many people is that these matters are not bargained for in the house moving budget and usually come to light at the eleventh hour.
By way of example, say a homeowner has agreed to sell a property, often with a separate commitment to buy another to move into. A defect or omission discovered in the title deeds is considered a blight on the property. Even if the buyer is willing to accept the situation, the mortgage lender is unlikely to because of the risk in having to repossess a property that has a diminished value or is a problem to dispose of because of something that could have been attended to at the outset.
The owner of the blighted property then has to explain to the next owners in the property chain that the sale could be delayed or might not happen at all, depending on the outcome of further investigation. This can have a knock-on effect and those people involved further along the chain have to decide whether or not to continue spending money on surveys and instructing banks and advocates – the risk if they don’t being they will miss the boat when everyone else is ready to proceed. And all this during the very short time that everyone is looking forward to moving house.
These problems have always existed, but it is since the current economic crisis and the banks’ aversion to risk that instances have escalated to such a level that there were 241 such documents registered in 2012 and 260 the previous year.
The States of Guernsey is seriously looking at defining property boundaries in future by using satellite-fixed coordinates that anyone could recognise using a hand-held satellite navigation system. Where the States is dragging its heels, unfortunately, is in introducing an essential access law similar to the Access to Neighbouring Land Act 1992 in England – an imperfect instrument, perhaps, but a basis for reason and understanding that would save a lot of unnecessary pressure at a stressful time and save on advocate fees associated with the extra work.
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