Why title matters in development finance
The lender's security in a development finance deal is the property itself. If there are defects in the title — restrictions on use, third-party rights, or uncertainty about ownership — the lender's security is compromised. Title issues are one of the most common reasons for delays in completing development finance facilities.
Common title issues
- Restrictive covenants — restrictions on the title that limit what can be done with the land. For example, a covenant preventing commercial use, restricting the number of dwellings, or requiring consent from a third party before development. These may need to be released, insured against, or modified via a Lands Tribunal application.
- Easements and rights of way — third-party rights to cross or use part of the site. These can affect the developable area and may need to be relocated or extinguished.
- Ransom strips — narrow strips of land between the development site and the public highway, owned by a third party. The owner of the ransom strip can demand payment for access, potentially making the scheme unviable.
- Flying freeholds — where part of one property overhangs or underlies another property on a different title. These create complex legal and structural interdependencies.
- Unregistered land — land that is not registered at the Land Registry. While not a defect per se, it adds complexity and cost to the conveyancing process.
- Chancel repair liability — an ancient obligation to contribute to the repair of a local church. Easily insured but must be identified.
How to identify title issues early
The most effective approach is to commission a title review from your solicitor before exchanging contracts on the site purchase. This should include review of official copies, the title plan, any filed documents (transfers, leases, covenants), and a search of the local land charges register. Identifying issues early gives you time to resolve them — or to factor the cost of resolution into your acquisition price.
Impact on development finance
Lenders' solicitors will conduct their own title review as part of the facility completion process. If they identify issues that were not flagged in the credit paper, it creates delay and undermines confidence in the borrower's due diligence. Addressing title issues proactively — and noting them honestly in the credit paper with proposed solutions — demonstrates professionalism and speeds up the legal process.