What is Limited Title Guarantee & How Does it Affect a House Sale?

When conveyancing happens, the conveyancer spends time investigating a wealth of information relating to the property. One area in particular is the title. They’ll need to find evidence of a good title via a form of Title Guarantee. There are three types of title guarantee, and each has different implications for the seller. A Limited Title Guarantee is one of the most common and confirms uninterrupted ownership of the property for a limited period.

In this blog, we look at the role Limited Title Guarantee plays in a property sale, and explain the other types of title guarantees.

What is a Title Guarantee?

A Title Guarantee is an assurance to the buyer that the seller has legal ownership of the property and, therefore, has the right to sell it and transfer it to the new owner.

The seller provides a title guarantee with the conveyancer drafting the legal documents after searches are completed, confirming the title, the owner's right to sell and demonstrating that there are no potential barriers to sale such as easements, restrictive covenants or outstanding mortgages.

There are three main types of title guarantee:

• Full Title Guarantee: The seller confirms ownership for the entire period they have owned the property. The solicitor ensures the title history from the date the seller obtained the property.
• Limited Title Guarantee: The seller confirms ownership for a limited period. Specifically, their period of ownership. The conveyancer will only ensure this recent history, but nothing further back.
• No Title Guarantee: The seller will only provide proof of current ownership, with the buyer required to investigate any past titles. There is no form of protection with No Title Guarantee.

What legal protection does a Limited Title Guarantee offer?

Under a Limited Title Guarantee, the seller is only giving two main assurances:

1. They have the right to sell the property.
2. That the property has not been mortgaged or restricted during the time of ownership – unless they have told the buyer otherwise.

It’s important to remember that a Limited Title Guarantee does not cover any issues that arose before the seller took ownership. Only a Full Title Guarantee does this.

When is a Limited Title Guarantee used?

For the majority of sales, a Full Title Guarantee is in place; however, sometimes a seller will decide that a limited title guarantee is more likely to help secure the sale and keep a buyer satisfied. Examples of where a Limited Title Guarantee will be used include:

Missing title documents

If the original title deeds have been lost, it becomes harder to prove a history of ownership. With a Limited Title Guarantee, only a more recent ownership history is required, and with these documents more likely to exist, buyers are given some reassurances rather than none at all.

Property registration issues

If gaps appear in the Land Registry record due to delayed registrations or missing documents, a Limited Title Guarantee helps to avoid claims for the historical gaps.

To get a quicker sale

A Full Title Guarantee requires much more work. Especially if the home has a long history of ownership records. With a Limited Title Guarantee, only an investigation into the more recent ownership is needed, which is considerably easier for a conveyancer to do.

Cost saving

If the property has not changed hands for many years (20/30+), Land Registry charges could be quite high if the solicitor has to carry out specific work to ensure records are brought up to date. With a Limited Guarantee, the costs will be reduced as only a short period of ownership will need to be proven.

Less complicated

Both buyers and sellers want a smooth and stress-free process. By providing a Limited Guarantee, the seller can have confidence in the information they are providing the buyer, and it can be obtained more quickly. Without having to track down the full history, the seller can get a quicker sale, and the buyer can move forward much faster.

Is a limited title guarantee a problem?

It can be, whilst it helps buyers and sellers in some instances, it can be problematic in others.

• Buyer uncertainty. The buyer takes additional risk when they buy a house with only a Limited Title Guarantee. Any defects in the title from before the guarantee period are not covered.
• Reduced sales price. Some buyers may find that a Limited Title Guarantee doesn’t offer the kind of protection they would like. With this added uncertainty comes the potential for lower offers.
• Ownership disputes. A Limited Title Guarantee ensures a specific period of time but does not cover any issues that may exist outside that period. Should issues with past titles be discovered, expensive disputes may follow.

How long should a Limited Title Guarantee last?

The length of a Limited Time Guarantee will affect how any risk is mitigated. The shorter the guarantee period, the lower the cost for the seller, but the bigger the risk for the buyer. Some Limited Title Guarantees will cover 3-6 years, which covers the average ownership period of a house. 10 to 15 years satisfies the needs of most mortgage lenders and provides moderate levels of protection.

Once you aim for 20 years or more, you are nearing a full title guarantee, the buyer risk is significantly reduced, but the costs for the seller can mount up.

When considering how long a Limited Title Guarantee should last, sellers should consider:

• How long they have owned the property, with the guarantee covering this period at least.
• What the buyers' mortgage lenders expect.
• If any gaps have been identified in past title records
• If there are any other noticeable risks in the property history

How can a seller ensure a Limited Title Guarantee will be accepted by a buyer?

In simple terms, they can’t, but it is possible to put the wheels in motion to make the whole process much easier and make a buyer feel much more comfortable.

• The seller's solicitor should instigate communication with the buyer's solicitor as soon as possible to find out whether a Limited Title Guarantee is acceptable to the buyer.
• If the seller can justify why a Limited Title Guarantee is preferable to a full title guarantee and prove it with paperwork and relevant information, a buyer may be more at ease.
• With all paperwork for the guarantee period kept safe and together, the majority of questions a buyer or solicitor may have can be answered quickly.
• Factor the Limited Title Guarantee into the asking price. This isn’t always essential, but if the market is slow, adding a discount to compensate for any risk the buyer may encounter could help speed up the sale and give the buyer some added confidence in moving forward.

If you have been wanting to sell, and have found title guarantees a sticking point, why not speak to Bettermove? We guarantee you will sell your house fast, and without having to spend a penny. We cover your legal fees, allowing you to sell your house for free and keep the money you bank from the sale. With two routes to sale, we cut out the hassle, delays and stress, providing you with a better way to sell.