Independent review and analysis

Solving the title deeds challenge

The recent activity in property portfolio trades in Ireland has highlighted the lack of attention given to the registering of title deeds by lenders during the boom and this has led to significant problems when it comes to carrying out verifications on behalf of the potential portfolio purchasers.

In some cases it has been shown that solicitors, who acted for both lender and purchaser in the property transaction, haven’t registered the lenders interest in the title correctly. However, a bigger issue is the fact that for one reason or another, the lender is not in possession of the deeds at all and only becomes aware of this situation when the loans are being sold.

There are many reasons why this situation arose against the background of a record number of property transactions during the boom. The system was put under serious strain, with the need to ensure that the transaction closed in a timely fashion leading to a serious backlog in registering the deeds. And, of course, lenders did not give this issue the priority it deserved as they were focussed on driving volumes.

A number of high profile fraud cases involving solicitors in the early 2000’s brought these issues to the fore and a major exercise was undertaken by lenders to ensure that their interests were registered correctly. In addition, the advent of title insurance helped to give comfort that the issue was under control. However, these initiatives did nothing to ensure that the title deeds were in the safe possession of the lender and could be readily accessed when required.

Compounding the problem was the fact that most lenders outsourced the storage of title deeds to third parties and were, therefore, reliant on these third parties management controls to ensure that they were being managed correctly.

However, recent due diligence exercises undertaken by Rockstead has discovered that in many cases these controls have not proved reliable and have led to problems in locating the relevant deeds. We have seen examples where deeds have never been received since completion, or have been lost and the lender is simply not aware of the issue. We have also found problems with legal title and some evidence of fraud. The most basic of systems control could have mitigated or solved most of these issues.

As a result, we have built a new, specific service – ‘Remediation of Title Deeds’ and are working with recent purchasers of portfolios to report on missing information or lost deeds packs. This work includes following up with solicitors, title deed insurers and other interested parties to discover the whereabouts of the deeds and to ensure their safe return to the purchaser.

Where we find the title deeds are defective or lost, we can work with our local solicitors to rectify these issues and give more comfort to the purchaser. In addition, we will look closely at the management controls employed by lenders or outsourced parties and recommend any improvements that are required, to ensure this important area gets the focus it deserves in future.

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