SINCE news of the Title Deed scams hit the headlines and made potential buyers much more aware of the problems, a number of developers are advertising their properties with slogans like ‘Guaranteed Title Deeds’ and ‘Title Deeds to be Delivered Shortly’ in their efforts to entice buyers.
Do not be fooled by this advertising; there is no such thing as a ‘Guaranteed Title Deed’ (unless the property you are thinking of buying already has one and there are no claims lodged against it at the Land Registry).
A Title Deed guarantee is a limited ‘insurance policy’ from a bank (a bank guarantee) against which buyers may claim compensation if the developer fails to register the property in their name by a specified date. They do provide property buyers with an added degree of protection and making a claim against a Bank Guarantee should not result in buyers losing their property.
But this added degree of protection comes at a cost; somewhere between 1.5% and 2.0% per annum of the sum insured. So if you take a Bank Guarantee of £200,000 for a period of five years, it will cost you between £15,000 and £20,000 to insure for something that is yours as a right; the property’s Title Deed.
Some developers refuse to give bank guarantees as they have to ‘lock’ the sum insured with the bank for the duration of the guarantee. Furthermore it leaves them exposed in situations where delays in issuing Title Deeds are outside their control.
In some areas of the island, property developers agree to bear the costs of a Bank Guarantee for two years, although I suspect that its cost is factored into the selling price. In most areas of course it takes significantly longer than two years for Title Deeds to be issued.
I have been assured that the specimen below is a ‘standard’ Bank Guarantee letter. Please ensure that you take independent legal advice before signing any agreement.
Body specimen of Letter Guarantee
In consideration of your granting a loan to xxxxxxxxxxx (hereinafter called ‘the buyer’) for the purpose of enabling the buyer to partly meet his obligations under a contract date xx/xx/xxxx entered into between the buyer on the one part and Messrs xxxxxxxxxx (hereinafter called ‘the seller’) on the other part, for the purchase of an xxxxxxxxx, forming part of the project xxxxxx, which will be constructed on part of the land under Reg. No. xxxxxx plot No.xxxxx sheet/plan xxxxx at the area xxxxxxxxxx (hereinafter called ‘the property’) we hereby at the request of the applicant guarantee the seller up to the sum of £xxxxxxx- (say: xxxxxxx) plus interest at a variable rate to be determined by reference to the Central Bank’s Rate from time to time plus margin …..% p.a. to the effect that the seller shall, until xx/xx/xxxx register the aforementioned property in the name of the buyer, free of any encumbrances.
Provided always that the total liability of the Bank hereunder is limited to £xxxxx,- (say: xxxxxxxxxxx) plus interest at variable rate to be determined by reference to the Central Bank’s Rate from time to time plus margin ….% p.a.
With reference to the above we, xxxxx Ltd, xxxxx Branch, undertake to pay to you the aforesaid amount of up to £xxxx, (say: xxxxxxxxxxxx) plus interest at a variable rate to be determined by reference to the Central Bank’s Rate from time to time plus margin …..% p.a without any reference to and in spite of any contestation by the applicant or the seller on your first demand being made to us in writing by registered mail, or by delivery by hand at our offices stating that:
- The seller has not by xx/xx/xxxx registered the aforesaid property, free of any encumbrances, in the name of the buyer OR
the seller transferred the title of the property to the buyer without giving at least 15 days written notice to you through the Issuing Bank (ourselves) of the intended transfer and
- That you claim payment under this guarantee.
Any claim under this guarantee must be made as stated above in time to be received by us not later than xx/xx/xxxx (one month after the date seller is obliged to transfer) after which date our guarantee shall cease and be of no effect whatsoever whether returned to us or not.
This guarantee becomes ipso factor null void and no effect if at any time during its validity the title of the property as above is transferred by the seller to the buyer and the buyer mortgages it in favour of your Bank, such Mortgage becomes your security in lieu of this Guarantee.
Provided that in case the title of the property will not have been issued by the District Lands Office until xx/xx/xxxx and provided you have not submitted a written demand as provided above, this Guarantee shall automatically be renewed for a further period of one year under the same terms and conditions except the present condition of renewal and it shall finally expire on xx/xx/xxxx.
Provided that any claim in case of renewal must be received by us not earlier than xx/xx/xxxx – (the renewal registration date) ant not later than xx/xx/xxxx.
xxxxxxx Bank ltd