Q. Critically assess the enforcement rules applying to
registered titles.
The Land
Registration Act 1925[1]
introduced the rules of enforcement for registered land scheme, with the aims
of simplifying land conveyancing; in comparison to the old unregistered land system,
which dates back to the medieval era[2].
The idea was to consolidate the land register by recording all land related
transactions in an official land register; thereby eliminating the need for
purchasers to rely on title deeds. In the unregistered land scheme, purchasers’
expected sellers to provide a good root of title to the land, which needed to
be freshly investigated on each sale; on the other hand, under the registered
system, legal title could be verified from the Land Registrar, rather very
easily. Similarly, unregistered conveyancing required the transfer of a legal
estate to be recorded by a ‘Deed of Transfer’, whereas, in registered land, the
transfer itself needs to be recorded in the Land Register, for it to be
effective. The benefit that the purchaser of registered title has, that he
takes land free from most hidden interests, despite those which are overriding;
and is protected from all other rights which required registration for
protection. Nigel Gravells in his book “Land
Law”[3],
explains that, the land register formed the basis for all transactions to be
registered and as a result the land register provides the prospective purchaser
with an accurate record of all the relevant details relating to that land.
These rules of administration
are particularly important, as Dixon[4]
points out, that it is imperative for “a potential purchaser of land to know,
with as much certainty as possible, whether any other person has enforceable
rights over the land, and the extent and nature of those rights” and at the
same time “the owner of those rights needs to be sure that his rights will
remain protected, and remain enforceable, if the land over which they operate
is sold”. Thus, in order for these objective to be observed, the LRA 1925 and
2002 Acts aimed to developed such a system through statute and case law, also
referred as the enforcements rules pertaining to registered land; to balance
out third party rights against the purchaser. Essentially, the goal was to limit the rights
on the land which bound it, i.e. third party; making dealing with land easier. In
a way than, it is important to analyze the rules of enforcement from both the
purchasers point of view and the right holder/s.
This
land registration system is broadly based on three principles, mirror, curtain
and insurance. The mirror principle purported that the Land register should be
a mirror copy of all the rights which burden the land. However, it is evident
that this aim has not been completely achieved, the existence of overriding
interests; which despite not being protected on the land register, still manage
to bind future purchasers’. Similarly, it has been suggested for the curtain principle;
which kept trusts of land off the title in order to simplify conveyance; that
the ‘curtain is ripped’, State Bank of India v Sood [1997][5]
which holds that overreaching is only possible where the trustee has acted within
his legal power; and requires any future transferee to inspect the trust
document to verify whether the trustee has the power to transfer title or not. Lastly,
the insurance principle, where by the state insures your title, once it has
been registered. However, Professor Jackson correctly identifies that “worse,
the rectification provisions introduce even more uncertainty than exists in
unregistered land”[6]. Similarly,
Smith states that “rectification is an important topic because, like overriding
interests, it qualifies the guarantee given to the registered proprietor: the
register is that much less reliable”[7].
However, Schedule 8 LRA 2002, does provides indemnity provisions to mitigate
losses; thus if a purchaser suffers losses due to rectification of the land
register, compensation becomes due for the incurred losses. Nevertheless, it
must be submitted that these provisions provide only limited indemnity; Prestige
Properties Ltd v Scottish Provident Institution[8]
; thus rectification may sometimes cause doubt which the statutory indemnity
might not wholly compensate for.
Be that as it
may, from a right holder’s point of view, the LRA 2002[9],
has firstly made registration of title compulsory, whenever the holder decides
to deal with their unregistered land; as under s.4 LRA 2002, and includes gift,
sale or assent of freehold; a lease for more than 7 years; an assignment of
lease for more than 7 years to run; first legal mortgage of freehold, or a
lease for more than 7 years. Secondly, s.4-8 provides that any conveyance,
first legal mortgage or assent; must be registered within 2 months, or the
legal title reverts back to the seller on trust for the buyer; with buyer left
with only an equitable interest in the land. On the first application for
registration, the purchaser produces all the title documents to the Land
registry; who after receiving the documents, conduct their own survey of land title
to ascertain appropriate title to be granted to the purchaser. Despite these
efforts, the Land Registry estimates that “approximately a quarter of
land/property in England and Wales remains unregistered because no dealings
affecting it have led to compulsory registration.”[10]
Regardless, the
2002 Act, groups interests into three categories; firstly, dispositions and
interests which are registerable; secondly, those interests, which require the
protection of Notice or Restriction; and lastly, interest which are overriding,
i.e. interests which would override registered disposition. S. 27 of the LRA
2002 lists the substantive registrable titles; on the other hand, s.32 lists
interests which require protection by notice. S.32(1) LRA 2002 provides the
procedure for the entering a Notice of an interest which burdens a registered
estate or charge. Registering a notice of an interests serves to warn everyone
about the existence of that interest; s.28 & 29 LRA 2002; at the same time,
if such an interest is not registered, the purchaser for value takes land free
from that interest. S.38 LRA 2002 requires a notice to be placed in the Charges
Register, corresponding to the registered interest of the proprietor within the
scope of rights under s.27(2)(b) to (e).
Those interests which
cannot be protected by a notice on the register, use Restriction; such as
trusts or co-ownership, bankruptcy or over-reachable interests. A restriction
in the land register serves to control and avert, entries in the register; with
respect to dispositions of any kind; s. 40 (1) LRA 2002. It serves as an
appropriate method of warning would-be purchasers, of the existence of any family
trust of land; thus its only function is to notify the purchaser. Thus in a
way, the use of restrictions and notices go a long way in providing protection
for interest holders.
However, as far
trust of land are concerned, the doctrine of overreaching developed rules to
further the cause which the LRA 1925 began, i.e. to fast track conveyancing; as
it allows for the rights of beneficiaries under a trust of land to become
detached from land on conveyance and attach to the proceeds of sale. Thus, a
beneficial title holder, under a trust of land, would only have rights in the
value of that land rather that piece of land itself. However, the real issue
arises when the trustee conveys land without the consent of the beneficial owner/s,
who does not hold legal title. Although, the purchaser takes free from any
beneficial interest, irrespective of any notice; the rule has been criticized
of being biased and favoring the purchaser; City of London Building Society v
Flegg [1988][11]. In total, s.29 of the LRA 2002 states that the
purchaser of a freehold estate is able to acquire the land free from all burdens
excluding registered charges, interests protected by notices on the register of
the estate and interests noted in Schedule 3 of the act, which override
disposition but cannot be registered themselves.
It is imperative
to mention that the 2002 Act, firstly, replaced the old name of overriding
interest to “interests that override”; and introduced 2 distinct and limited
category of rights which would; either override on the first registration of
title, under Schedule 1 of the 2002 Act; including leases up to and including 7
years, the rights of people in actual occupation, easements and profits. The
second category refers to those interest which would override on a later
disposition, where the land has already been registered, Schedule 3 LRA 2002;
including leases up to and including 7 years, the rights of people in actual
occupation, easements and profits; with the exception being the rights of those
inhabitants who are in actual occupation but their rights are not readily
discoverable. As a result, those in actual occupation, whose rights cannot be
ascertainable by inspection or fail to disclose their rights when asked; would
most likely fail to protect their rights, if not protected on the land
register.
The 2002 Act
kept a long list of interest which would override on first registration as, it
is stated that the act of registration must not in any way limit proprietary
rights. Thus, s.71(b) impose a duty if disclosure, at first registration, of
any right within the scope of Schedule 3, and thereby would override. It was
planned that in such a manner, as more and more dispositions take place,
overriding interests might decrease, as more interest would be registered
compulsorily. Martin Dixon[12]
emphasizes towards the possibility of people losing rights, as even if their
interest override on first registration but mostly would be struck out at a
later disposition. Many overriding interest under the old regime, s. 70(1) have
been either modified or abolished; e.g. equitable easements, granted either
expressly or impliedly, have been abolished; overruling Celsteel vs. Alton
House Holdings Ltd (1985)[13].
Similarly, rights of the adverse possessor have been limited to person who are
in actual occupation; and the rights of persons receiving rent and profits,
also no longer overrides. Now, only those leases which run for 7 or more years
can be registered and all other short leases of 7 or less year can override;
Para.1 of both schedules.
Despite these
advancements, actual occupation still lacks any statutory definition, thus is
reliant on the dictums of Lord Wilberforce in Williams & Glyn’s Bank Ltd
vs. Boland (1981)[14]
that “it is the fact of occupation that matters” and what is essential is the
“physical presence on the land and not some entitlement in the law”. Summing up
the scope of overriding interests, Lord Denning in Strand Securities Ltd v.
Caswell (1965)[15]
famously said that "Section 70(1)(g) is an important provision.
Fundamentally, its object is to protect a person in actual occupation of land
from having his rights lost in the welter of registration. He can stay there
and do nothing. Yet he will be protected. No one can buy the land over his head
and thereby take away or diminish his rights. It is up to every purchaser
before he buys to make inquiry on the premises. If he fails to do so, it is at
his own risk. He must take subject to whatever rights the occupier may
have."
Keeping in line with
these dictums, both Schedules 1 & 3, allow rights to only override where
the applicant/s were in reality in occupation at the time of the claim; thereby
reversing the decision in Ferrishurst ltd vs. Wallcite(1998)[16].
The intention was to serve actual occupation as a form of notice to future
invertors, to the existence of third party rights; but does not guarantee their
efficacy from the beginning. Reinforcing the mirror principle, Schedule 3
limits the purchaser right from being overridden, where the occupants were in
actual occupation and either; despite inquiry, failed to disclose the right, in
the circumstance and it could reasonably be expected of the occupant to
disclose them. Secondly, where the actual occupation could not be discoverable
upon a reasonable inspection, and the would be investor does not have knowledge
of the interest at the time of disposition. The new rule, essentially serves to
be gentler on non-disclosers; as only those persons whose right are impossible
to be reasonably discovered; that the 2002 Act has removed protection; Chokkar
vs. Chokkar(1984)[17]
and Malory Enterprises Ltd vs. Cheshire Homes (UK) Ltd & Others (2002)[18]
. Although, most of the case law concerning s.70(1)(g) remains relevant for the
new Act’s interpretation.
Schedule 1
enlists all those legal easements, which have not been registered, to override
on first registration; but Schedule 3 limits protection to implied legal
easement which are either; a. registered under the Commons Registration Act
1965[19],
b. Are actually known to exist by the purchaser, c. Are obvious upon reasonable
inspection, and d. Implemented prior to a year from the date of disposition. In
essence, all expressly granted easement need to be registered for them to be
legal and overriding; otherwise remain equitable and outside the scope of
Schedule 3 LRA 2002. Admittedly, the Law Commission in “Law Commission Report
No.271, Land Registration for the Twenty-First Century: A Conveyancing
Revolution (2001)”[20]
specified that ‘the guiding principle' underlying the new 2002 overriding
interest provisions was the intention that interests should only have
overriding status “where protection against buyers is needed, but where it is
neither reasonable to expect nor sensible to require any entry on the register”.
Martin Dixon,
with Harpum and Bridge; all maintain that “overriding interests are an obstacle
to achieving a conclusive register, which is one of the principal objectives of
the LRA 2002”[21]. Adding to that, Bostick[22]
states:
“This provision
has undercut dramatically the philosophical underpinning of the 1925
legislation…The reason is obvious. To the extent that one can prevail on the
basis of rights outside the register, the seeker of good title must return to
the dreary business of establishing who is or is not in possession of the
property, and who knows or should have known about those claimed rights.”
Although it was calculated
that the process of registration, would enable the Land Register to be the
hands-on and comprehensive record of land interests; reflecting, a mirror image
of the totality of interests which affect and bind registered land in the U.K.
Nevertheless, it must be submitted that the existence of overriding interests
and their enforceability without being present on the register, under LRA 2002
regime, undermines the whole purpose of having the mirror principle. This destabilization
of the land registration system is often referred as the ‘crack in the mirror’.
In conclusion it can be understood that, on the face of it, the enforcement
rules relating to registered title are vastly superior to those relating to
unregistered title, but in practicality that is not the situation.
(2440 words)
Bibliography
1.
Dixon
M, Modern Land Law (9th edn, Routledge 2014)
2.
Roger
Smith, Introduction to Land Law (3rd edn, Pearson 2013)
3.
Judith-Anne
Mackenzie & Mary Phillips, Textbook on Land Law (10th Edition)
4.
Nigel
Gravells, Land Law (4th edn, Sweet & Maxwell 2010)
5.
Edward
Burn, John Cartwright, Maudsley & Burn’s Land Law (9th edn, OUP 2009)
6.
Roger
Smith, Introduction to Land Law (3rd edn, Pearson 2013)
7.
Charles
Harpum, Stuart Bridge, Martin Dixon, Megarry & Wade: The Law of Real
Property (8th edn, Sweet & Maxwell 2012)
8.
“The
Reforms of Property Law and Land Registration Act 2002: A Risk Assessment” By
Martin Dixon.
9.
Law
Commission Report No.271, Land Registration for the Twenty-First Century: A
Conveyancing Revolution (2001)
10.
D.C.
Jackson, ‘Security of Title in Registered Land’ (1978) 94 LQR
11.
Dent
Bostick, ‘Land Title Registration: An English Solution to an American Problem’
(1987) 63 Ind LJ 55
[2] Edward
Burn, John Cartwright, Maudsley & Burn’s Land Law (9th edn, OUP 2009) pg.57.
[3] Nigel
Gravells, Land Law (4th edn, Sweet & Maxwell 2010) pg.153.
[4] Martin
Dixon, Modern Land Law (9th edn, Routledge 2014) pg.108.
[5]
State Bank of India v Sood [1997] Ch 276. - http://e-lawresources.co.uk/Land/State-Bank-of-India-v-Sood.php
[6]
D.C. Jackson, ‘Security of Title in Registered Land’ (1978) 94 LQR, pg. 239
& 243.
[7]
Roger Smith, Introduction to Land Law (3rd edn, Pearson 2013) pg.139.
[8]
Prestige Properties Ltd v Scottish Provident Institution and another [2002]
EWHC 330, [2003] Ch 1. - http://lexisweb.co.uk/cases/2002/march/prestige-properties-ltd-v-scottish-provident-institution-and-another
[11] City
of London Building Society v Flegg [1988] 1 AC 54 - http://www.bailii.org/uk/cases/UKHL/1987/6.html
[12] “The Reforms of Property Law and Land
Registration Act 2002: A Risk Assessment” By Martin Dixon - http://www.academia.edu/852288/The_Reform_of_Property_Law_and_the_Land_Registration_Act_2002_A_Risk_Assessment
[13] Celsteel vs. Alton House Holdings Ltd (1985) -
http://swarb.co.uk/celsteel-ltd-v-alton-house-holdings-ltd-chd-1985/
[15]
Strand Securities Ltd v. Caswell (1965) - http://judgmental.org.uk/judgments/EWCA-Civ/1965/%5B1965%5D_EWCA_Civ_1.html
[16]
Ferrishurst ltd vs. Wallcite (1998) - http://swarb.co.uk/ferrishurst-ltd-v-wallcite-ltd-ca-30-nov-1998/
[17]
Chhokar v Chhokar and another [1984] FLR 313 - http://www.bailii.org/ew/cases/EWCA/Civ/1983/7.html
[18]
Malory Enterprises Ltd vs. Cheshire Homes (UK) Ltd & Others (2002)- http://www.bailii.org/ew/cases/EWCA/Civ/2002/151.html
[20]
Law Commission Report No 271, Land Registration for the Twenty-First Century: A
Conveyancing Revolution (2001) - http://lawcommission.justice.gov.uk/docs/lc271_land_registration_for_the_twenty-first_century.pdf
[21]
Charles Harpum, Stuart Bridge, Martin Dixon, Megarry & Wade: The Law of
Real Property (8th edn, Sweet & Maxwell 2012) pg.151.
[22]
Dent Bostick, ‘Land Title Registration: An English Solution to an American
Problem’ (1987) 63 Ind LJ 55, pg.94.
