Full Title Guarantee vs Limited Title Guarantee — LPA 1994
Full title guarantee — implied covenants (LPA 1994 ss.2–5): (1) right to dispose (s.2(1)(a)): the seller has legal capacity and entitlement to transfer the title; protects against fraudulent sellers with no right to sell; (2) quiet enjoyment (s.2(1)(b)): the buyer will have undisturbed possession and the seller will take further steps to give effect to the transfer; (3) freedom from incumbrances (s.3): the property is free from incumbrances other than those the buyer knows about, those revealed by the standard searches (Land Registry; Local Land Charges; water and drainage; coal authority; environmental), those apparent on inspection, and those the seller could not know about — a significant limitation on the scope of the covenant; (4) further assurance (s.4): the seller will take further steps to complete the transfer if required; (5) leasehold additional covenant (s.4): the lease is valid and subsisting and the seller has not jeopardised it. Limited title guarantee: same covenants, except the s.3 freedom from incumbrances covenant is limited to incumbrances created by the seller — the seller does not warrant that there are no incumbrances created by predecessors in title or by third parties; common scenarios: personal representative sales (executor has limited knowledge of the property history); mortgagee sales under a power of sale; receiver/liquidator sales; gifts and undervalue transfers. What covenants for title do NOT cover: the physical condition of the building (requires RICS survey); matters revealed by the standard searches; matters apparent on inspection; incumbrances the seller did not know about and could not reasonably have known; planning matters revealed by searches; environmental risks.
Remedies for Breach, Title Indemnity Insurance, and Scottish Warrandice
Remedies for breach of covenant for title: claim in damages against the seller — the measure is the loss suffered (diminution in value of the property; cost of rectifying the incumbrance); 12-year limitation period from the date of the deed (Limitation Act 1980 for deeds); the buyer must have suffered actual loss (a theoretical unenforced risk = no claim); seller's knowledge carve-out: for the s.3 covenant under full title guarantee, the seller's genuine ignorance of an incumbrance is a defence; solvency risk: a covenant for title is a personal claim against the seller — if the seller is insolvent, deceased, or untraceable, the remedy may be worthless in practice; title indemnity insurance is often a more reliable protection for specific identified risks (one-off premium; covers the buyer and lender against a specific title defect such as a missing planning permission, a potential breach of restrictive covenant, or a potential but unregistered third party interest). Scotland — warrandice: Scotland uses warrandice as the equivalent of covenants for title; absolute warrandice = full title guarantee equivalent — the seller warrants against any challenge to the buyer's title, not just those created by the seller; fact and deed warrandice = limited title guarantee equivalent — the seller warrants only against their own acts and those of persons claiming through them; simple warrandice = minimal warranty that the seller will not actively do anything to undermine the title; a warrandice claim in Scotland typically requires the buyer to have suffered eviction (in the broad sense of a competing title being asserted) before the claim arises.