The recent Scottish case of Morris v Rae [2011] CSIH 30 has been a timely reminder of the possibility of claiming damages for breach of warrandice, if you are evicted from all or even part of your land or buildings due to a defect or encumbrance on your title. Rights to claim, that might not have been enforced a few years ago, are now more likely, in the current economic climate, to be of greater importance, and it is useful to know what those rights are in case you find yourself in the position of receiving, or being able to make, a claim for breach of warrandice.
What is warrandice?
Warrandice is a personal guarantee by the granter of a deed, most commonly a disposition, that the right conferred in the deed will be effectual and that the granter will indemnify the grantee if he suffers any loss or damage arising from:
- total or partial eviction of the grantee from all or part of the property resulting from a defect in the title; or
- a material encumbrance affecting the property, not known by the granter at the date of delivery of the disposition, that has been made effective against the grantee. This is often referred to as 'partial eviction'.
Warrandice does not guarantee against losses suffered by the grantee arising from any other circumstances, for example destruction of the property from a natural cause. It should also be noted that the obligation of the granter is to indemnify the grantee for loss suffered - he is not required to correct the title or restore the parties to their original position – and it does not cover emotional as opposed to physical or financial loss.
Eviction
One of the key requirements of a successful claim for breach of warrandice is that there must be an actual or threatened eviction of the whole or part of the property. The mere existence of a defect in title is not enough to claim for breach of warrandice.
The decision of the Inner House in Morris v Rae further emphasises the need for eviction in a breach of warrandice claim, and also the requirement that the party threatening eviction must hold the unquestionable title to the property or the part of the property from which they are attempting to evict the occupier.
A company, Ransom Developments Limited had bought a property, the extent of which was identified on a plan, from Ms Rae, the defender, but it was then discovered that she did not in fact have title to a substantial part of the property when she sold it to Ransom, and had therefore not granted an effective title to that part of the property to them. The pursuer in this case, Mr Morris, acquired rights to the property from Ransom's liquidator.
Threatened eviction
Following the purchase, the pursuer received a letter from agents acting on behalf of a company called James Craig Limited, threatening eviction from that part of the property to which Ms Rae had been unable to grant effective title. However, it also transpired that James Craig Limited had inadvertantly conveyed that part of the property in error several years earlier to a Mr. Lynch. Mr Morris paid £70,000 to James Craig Limited for a disposition to him of the relevant portion of the property, and subsequently Mr. Lynch also granted a title in Mr Morris's favour.
Mr Morris then raised an action against the original seller, Ms Rae, for breach of warrandice, in order to be reimbursed for the £70,000 paid to James Craig Limited. However the action was dismissed, as it was held that there had been no eviction, or threat of eviction, because James Craig Limited did not, in fact, have title to the property when the letter threatening eviction was sent by them, as the land had already been accidentally disponed to Mr. Lynch. Mr Morris was therefore unable to claim breach of warrandice against Ms Rae, as eviction had not been established.
Degrees of warrandice
There are three degrees of warrandice that can be granted in documents relating to heritable property. The degree of warrandice being granted is usually stated expressly, this is because in the absence of express provision a degree of warrandice will be implied, which might be a greater degree than the granter wishes to give (the implied degree being dependent on the nature of the transaction). The three degrees of warrandice are:
Simple warrandice
This type of warrandice is generally used in deeds being granted for no consideration. It is a guarantee that protects the grantee against future voluntary acts or deeds of the granter, and it does not protect against past acts or deeds of the granter or against any acts or deeds of a third party. Simple warrandice will be implied in gratuitous transactions where warrandice is not expressed.
Fact and deed warrandice
This type of warrandice is commonly used in deeds where the consideration is not for the full value of the property. Fact and deed warrandice protects the grantee against past and future acts or deeds of the granter. It does not protect against any acts or deeds of a third party. This type of warrandice is often used when the granter is acting in a representative capacity, for example, as a trustee.
Absolute warrandice
This is the most burdensome type of warrandice and is commonly used where full consideration is being granted for the property. Absolute warrandice protects the grantee against all past and future acts and deeds of the granter and of any third parties. Absolute warrandice will generally be implied in onerous transactions where warrandice is not expressly stated.
It is possible to have more than one type of warrandice expressed in a single deed. For example, in a trust situation absolute warrandice may be granted against the trust estate and fact and deed warrandice granted by the trustee.
Also, given that in the absence of an express statement a degree of warrandice will nevertheless be implied, if the granter wishes to grant no warrandice he must expressly say so in the deed. Of course if that is done, it is possible that on registering the deed the Keeper will exclude indemnity unless a suitable explanation for the lack of warrandice is given, for example if the deed is being granted by an insolvency practitioner. An exclusion of indemnity could have an adverse impact on the marketability of the title.
It should also be borne in mind that as warrandice is a personal guarantee, the effectiveness of any claim for breach of warrandice is of course dependent on the financial position of the granter. This can prove a particular problem in insolvency situations as warrandice granted by an insolvent company is worthless, and insolvency practitioners, as a general rule, will not grant any warrandice at all so as to avoid personal liability.
The practical application of warrandice
Eviction from land or buildings by someone with a better title is, fortunately, not particularly common. If however, you are threatened with eviction from your land or buildings from someone claiming to have a better title than you, that claim turns out to be correct and you are evicted as a result, you may be able to claim damages for your loss from the person who sold the land or buildings to you. Whether you can claim or not depends on whether and to what degree warrandice was given in the disposition in your favour, and the cause of the defect in your title – but it could be just the remedy that you need.
To read the decision in Morris v Rae click here.