When purchasing or selling a property, the Title Deeds will inevitably come to your attention. But what exactly are they and why are they important?

 

Let’s investigate.

 

Copy of Namecard for article - Fiona Huang in English

 

What are title deeds?

 

Title deeds consist of various records that establish and track the ownership of a property over time. These may include documents related to mortgages, leases, agreements, and legal matters like wills or property transfers. From these records, we can see some basic information related to the specific property, e.g. who was the owner of the property during different periods, what is the boundary of the property, etc. We can also, from the title deeds, obtain information such as what kind of benefits can be enjoyed by the owner of the property and what kind of restrictions are attached to the property.

 

Why are title deeds important?

 

First of all, a title deed shows the current owner’s name and address of the property. By matching the owner’s information recorded in the title deed with the identity information provided to us by the seller, we will be able to know whether the seller we are contracting has the right to dispose of the property and we may avoid property fraud.

 

Secondly, a title deed with a title plan will clearly show the property’s boundary. By comparing the title plan with the actual site of the property, we can realise which part of the property is included in our purchase and which is not. Sometimes the title deed will also mention that our neighbour or other third party has a right to use a specific part of the property subject to some conditions. We will need to be aware of these third-party rights and protect our interest (i.e. who is responsible for any damages or who is responsible for maintenance?)

 

Thirdly, a title deed may contain restrictive covenants, which will affect how the property will be used or developed. These restrictive covenants are promises given by the seller or previous owners of the property to third parties, announcing that the owner of the property will not do things prohibited by the third parties. For example, a title deed may contain such a clause:

 

‘The Purchasers their successors and assigns would not carry on or permit to be carried on in or upon the said plot of land thereby conveyed any business for the sale of ale beer wine or spirituous liquors.’

 

Importance of restrictive covenants

 

Such restrictive covenants are registered in the title deed. They will restrict how the property can be used and/or developed. They sometimes cannot be removed or varied. Therefore, before purchasing a property with restrictive covenants, you need to first find out what the restrictive  covenants are and whether they can be removed or varied, so that they will not affect your intended use and/or development. Otherwise, if you breach such covenants, the covenantee may take legal actions against you and you may face financial consequences.

 

Final thoughts

 

Title deeds should always be one of the most important documents we need to pay attention to. Only when all potential problems revealed in the title deed have been resolved or understood, we can proceed with the transaction with manageable risk.

 

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