Defective title insurance and auction packs

The following Property practice note provides comprehensive and up to date legal information covering:

  • Defective title insurance and auction packs
  • Responding to the CPSEs

Defective title insurance and auction packs

Defective title insurance policies, or policies covering breach of restrictive covenants, usually contain conditions relating to the disclosure of the policy to potential purchasers. The insured party must carefully abide by these so as not to invalidate the policy. However, when the owner intends to sell the property, it must not only adhere to the conditions but must also ensure that full disclosure is made to the buyer.

The safest course is to obtain written confirmation from the insurer that the policy can be disclosed to the prospective buyer. Where there is an identified buyer and/or mortgagee it is usually possible to obtain that consent. However, difficulties arise where the property is to be sold at auction. The seller cannot establish, with certainty, whether a request for the auction pack comes from a bona fide prospective buyer. The request could come from someone who is seeking to take advantage of the fact that the title is defective, or from a person with the benefit of a restrictive covenant that has been, or will be, breached. Even if the breach occurred

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