Getting your house in order pre-sale

When you start to consider strategy, and entering into deals with third parties, it’s a good idea to ensure that your house is in order, and you know what you own, how you own it, and whether there is anything affecting your estate that could become a development constraint down the line.

Common issues arising from initial title review are:

Unregistered land or parcels

On campus sites we often find unregistered roads, areas with possessory titles or odd gaps between sites. These can often be resolved in a number of ways, such as applications to adjust boundaries where the owner owns land either side of an unadopted road, using the ad medium filum rule – meaning ownership is taken to the centre line of the road. Unregistered parcels can be registered, and we have a team of expert paralegals who run those applications. It is helpful to resolve these issues early on as the Land Registry takes time to process applications. It also flushes out the possibility of ransom strips on a site which could prove costly to negotiate out of further through the process.

Covenants

We often come across historic covenants restricting the use of specific buildings – recent matters include single dwelling houses or heavily restricted numbers of occupiers. Historic long term breaches can often be covered by indemnity insurance, but it is essential to consider who the beneficiary of the covenant might be. On one particular matter we have an active estate who wouldn’t think twice about wanting considerable sums to release such a covenant and enforce any breach. Just because a covenant is old doesn’t mean there isn’t someone interested in it, and knows the value of releasing it. Caution should be practiced though, as seeking consent from someone with the benefit of a covenant directly could mean that the availability of any potential indemnity insurance may be limited, or sometimes unobtainable due to any such approach.

Third party consents

A recent title review of a site revealed the necessity to seek a third party consent from the railway operator, due to the fact the land we were reviewing abutted the railway. Such third party consents can be problematic, particularly if the university is running a procurement process alongside taking a site to market, as the third party could effectively veto any proposed scheme. Ideally sites such as these should be excluded from transactions, or early negotiations are had with the third party.

Lenders

In some transactions, even if the property itself is not already charged, lenders may have imposed restrictions in the lending documents around further indebtedness, which restricts the ability to enter into a transaction such as an income strip. Some lending documents also have automatic equitable charges over land acquired by the university, which might then need releasing, or consents obtaining for any income strip or DBFO. Often lenders will give the necessary consents but usually on condition of at least a partial repayment of a debt. They also require reporting from the university’s legal team, and it can take time to obtain consents if disposals are outside of any anticipated strategy when the finance documents were entered into.

Summary

This part of the process is vital in being able to present to any third party a good and marketable site, that is also fundable. The advance work not only ensures your estate is in good order, but also means there are likely to be less surprises and renegotiation due to a title issue down the road.