What are the hidden risks for rural developments and how can title on land be assured?
When it comes to risk, rural developments are a real danger zone in Ireland – from loss of deeds to sporting and fishing rights. We asked Senior Underwriter, Aisling Monahan, to provide some insight into the risks faced.
Not all Republic of Ireland land is registered with Tailte Eireann
By international comparison, Ireland has an extensive and well-developed system of land registration. According to Tailte Eireann, 93% of the total land mass of the State and almost 90% of the legal titles in the Republic of Ireland are now registered in the Land Registry. That means that approximately 10% of land remains unregistered.
It is important to note that whilst all land in the Republic of Ireland is required to be registered with Tailte Eireann, following any significant change in title, this does not affect land that has not “changed hands” since registration was made compulsory.
Is this a real risk to a developer?
The answer is yes, not least because the assurance of land to a developer would trigger compulsory registration with Tailte Eireann and to do this the solicitor acting for the developer will be required to prove a “Good Root of Title” before the registration process can take place. They must be in possession of all title deeds, leases and maps, which are often missing where land has been gifted through the generations.
Whilst title deeds prove ownership, they also denote other aspects such as boundaries, access, rights, burdens and restrictions, as well as the terms of any leases that may have been granted. The aim is for the solicitor to obtain title absolute – a qualified or possessory title is not only less marketable but does not form the best possible security for a secured lender as it can be subject to challenge until it has been perfected.
Outside the issues that could be created by first registration, what are the other risks inherent in buying rural land?
- Proving ownership: We have seen numerous claims where land has been sold by a person who does not own it, as well as land that has been mortgaged by parties where the identity of the owner has been stolen, for example. Any loan secured in this situation would not be valid or enforceable.
- Turbary Rights/Fishing Rights: Rural property is subject to a number of turbary rights, which can significantly impede potential use and thereby adversely impact the value of the security. Fishing rights is a classic example. Whilst they may not be exercised at the time of lending, there is always the risk that the parties with the benefit may transfer them to a third party who may seek to exercise them in future.
- Planning: Rural land is typically agricultural in nature and this introduces some planning risks which are specific to these properties. Some properties may be burdened by agricultural ties and clawback provisions which either restrict or prevent change of use. Such risks can significantly impact the value of the secured property, especially where it is a specialist development, such as a renewable energy scheme.
It is important to note, the title shown on the folio following first registration is guaranteed by the State, which is bound to indemnify any person who suffers loss through a mistake made by the Land Registry and Tailte Eireann. A purchaser therefore can accept the folio as evidence of title without having to read the relevant deeds.
In the Republic of Ireland, until title to the Land is state-guaranteed, all historic conveyancing negligence errors are passed on to the new owner. This coupled with the solicitor’s report on title which usually contains a number of disclaimers on unknown or unclear documents means that all risk passes to the property owner for any unknown defects. Once this happens, there is no opportunity to claim against the solicitor’s PII policy resulting in potentially significant financial losses for new owner and funder.
What can be done when developers are faced with risk on title?
To counteract such first registration issues, Westcor International can provide insurance policies that will protect against the inherent risks associated with acquiring unregistered land. Any known defects on the title such as those outlined above can be covered by way of a bespoke title insurance policy. This means that if any issues come to light pre-completion, and during the course of first registration, then the policy will respond by meeting the legal costs of perfecting the title and will compensate for any diminution in value, should the worst occur – ultimately speeding up the process and protecting against financial loss in the future.
Subject to our review, Tailte Eireann are added as a co-insured on all our policies where the title is unregistered and is subject to first registration. Although Tailte Eireann do not have an insurable interest in the land, nor would they suffer the losses listed in our policies, as a co-insured they have the comfort that in the event of a claim arising in respect of the insured risk post registration, it would be met by the policy, if the claim had not already been made by the Insured.
As a leading title insurer in Ireland, we can prioritise comprehensive coverage and security for lenders, dealing with individual properties, land holdings, or portfolios. Beyond addressing typical transactional challenges like defective titles, our lender policies extend protection to safeguard against various unknown risks. Our commitment in this area is to provide robust coverage against a range of threats, such as fraud, forgery, capacity issues, missing security documents, and other unknown defects that could compromise the legitimacy and enforceability of secured debt and the marketability of your assets.
In an ever-changing landscape of rural development risks, our tailored solutions ensure your financial interests remain protected.
To find out more on Westcor International’s title insurance policies, you can contact our head of the Republic of Ireland, Senior Underwriter and Solicitor, Aisling Monahan.