4 - REGISTERED LAND

INTRODUCTION

1. Background

In the past the land registration system is said not to be a separate code of law but merely a means of proving title to land and indicating the encumbrances upon it more easily. This appears to have been changed by the Land Registration Act 2002 which the Law Commission said introduced a system of title by registration as opposed a system of registration of title. All land has been compulsorily registrable since 1990. Therefore the system is described as being based on 3 principles: 1. The Mirror Principle - the register is intended to reflect accurately all the facts material to a given title. The doctrine of notice does not apply. The register states all the material facts except a group of encumbrances known as interests which override" (also known as "overriding interests"). 2. The Curtain Principle - To maintain simplicity in respect of the legal title, Trusts are not set out on the register. They are entered as a restriction so that a purchaser knows that the proceeds of sale must be paid to at least two named trustees to ensure overreaching the equitable interests under the trust. 3. The Insurance Principle - The title is guaranteed as correct. A form of land registration has existed since 1862 however the present system was put in place by the Land Registration Act 1925. Over the years this has shown some weaknesses and reforms were needed in addition changes were needed to enable the system to cope with e conveyancing. The Law Commission prepared a report the The Law Commission Report No 254 and summary give a full account of the background to the Land Registration Act 2002 and the changes that the Act was intended to introduce. The Land Registry site also gives links and information. On the 13th October 2003 the Land Registration Act 2002 (with explanatory notes) together with the Land Registration Rules 2003 (SI 2003 No.1417) came into force.

There are 5 stages of the conveyance of land:

Pre contract Pre-contract enquiries and searches Contract Approval and exchange Post Contract/Pre Completion Investigation and Proof of Title Completion Transfer Post Completion Registration 2. The Register a) Content of the Register S. 1 of the LRA 2003 gives authority for the present register to continue to be kept. Under the1925 Act the register was divided into three parts and a plan and this will continue, although there are a number of amendments. 1. The Property Register This describes the land and may also refer to legal interests which are held for the benefit of the land such as easements and particulars of leases. 2. The Proprietorship Register This gives: - The type of legal estate or interest including the class of title; - The name and address of the proprietor and a description of the estate or interest; - Any restrictions that affect the right to deal with the land. 3. The Charges Register This lists the encumbrances in the form of charges, which are mortgages, and interests, which are equitable interests. Those that may be overreached will be found listed as restrictions in the Proprietorship Register. Those that are attached to the land are listed as notices on this register.

The Title Plan General boundaries only are indicated unless the boundaries have been fixed. b) Documentary proof of registered title In the past when land was registered in addition to the entry on the register a proprietor was given a Land Certificate as proof of title. If a mortgage (known as a Charge) is registered then a prior to the Land Registration Act 2002 a Charge Certificate was issued to the mortgagee instead of a Land Certificate to the Proprietor. However now no certificates are issues as the system is paperless. Only the register is a record of the title and encumbrances. The only paper evidence is a copy of the entry which may be obtained by members of the public. c) Public Access and Exempt Information Documents All documents received at the Registry on or after the 13th October 2003 will be open to public inspection (leases that were received before this date will be open to the public from 13th October 2005 (ss66-69 & rr131144). A concern is that leases granted with terms negotiated on a confidential basis will be compromised. However if a person believes that information sent to the Registry should not be put in the public domain then an application may be made for the documents to be designated as an Exempt Information Document. A full copy and an edited copy of the document must be sent to the Land Registry with the application and the Land Registrar will decide whether or not the information is prejudicial. "Prejudicial information" is: Information that relates to an individual who has applied for the document to be designated as exempt information document and if disclosed other persons would or would be likely to cause substantial unwarranted damage or substantial unwarranted distress to the applicant or another or Information that if disclosed to other personswould or would be likely to prejudice the commercial interest of the applicant. The decision rests with the Registrar. A person may apply for a full version of an Exempt Information Document. There are two grounds on which a full copy may be issued: None of the information omitted is prejudicial Although the information is prejudicial the public interest in issuing a full copy is outweighs the reason for not doing so.

THE OBLIGATION TO REGISTER 1. Entries on the Register S2 states the following estates and interest may now be registered: Freehold and Leasehold Estates in land Rentcharges Franchises

Profits a prendre in gross Interests or charges benefiting or burdening interests in land

Lordships of the manor are no longer registrable

2. Voluntary Registration

S3 states that a person who is entitled to have:

(a) an estate in land,

(b) a rentcharge,

(c) a franchise, and

(d) a profit a prendre in gross

vested in him or her may require the Registrar to register him or her as the proprietor.

3. Compulsory Registration

S4 lists the events that will trigger compulsory registration for a first registration. These are:

Qualifying conveyances For consideration, As gift or Pursuant to a court order,

Vesting assents or deeds e.g. Executors/administrators (PRs) to beneficiaries under a will or intestacy and first legal mortgages will still apply. Grants of leases of more than 7 years Assignment of a lease which has more than 7 years unexpired (The period of 7 years is likely to be reduced to 3 years in the future) Reversionary leases of any length, which take, effect more than three months after date of the grant Discontinuous leases e.g. time share Where the landlord's title is registered these leases are compulsorily registrable; where the landlord's title is not registered these leases will be compulsorily registrable if the aggregate number of weeks year by year equals more than 364 (seven years) A first legal mortgage A franchise (e.g. a right granted by the Crown to hold a market or fair, or to collect tolls) A profit a prendre in gross (such as shooting and fishing rights

Under s 5 The Lord Chancellor has power to add further categories.

Under s 6 the estate owner must register within 2 months of the date of disposition.

If on the application of any interested person the registrar is satisfied that there is good reason he or she may extend the period for registration.

A mortgagee may require the estate charged by the mortgage to be registered whether or not the mortgagor consents.

4. Effect of failure to compulsorily register

Under s 7 if the requirement of registration is not complied with, the transfer, grant or creation becomes void as regards the transfer, grant or creation of a legal estate. Therefore the transferee will only have an equitable title. The transferor will hold the estate on trust for the transferor under a bare trust. Any mortgage or lease will be treated as a contract for a mortgage or lease.

By virtue of s 8 if the transferee seeks to transfer the estate or interest without registration then he or she:

(a) is liable to the other party for all the proper costs of and incidental to the retransfer, re-grant or recreation of the legal estate, and

(b) is liable to indemnify the other party in respect of any other liability reasonably incurred by him because of the failure to comply with the requirement of registration.

5. Effect of Registration

The estate is vested in the proprietor subject only to the following interests affecting the estate at the time of registration-

(a) Interests which are the subject of an entry in the register in relation to the estate,

(b) Unregistered interests which are interests that override (i.e. do not require registration to protect them (Schedule 1)

(c) Interests acquired under the Limitation Act 1980 (c. 58) of which the proprietor has notice.

If the proprietor is not entitled to the estate for his own benefit, or not entitled solely for his own benefit, then, as between himself and the persons beneficially entitled to the estate, the estate is vested in him subject to such of their interests as he has notice of. E.g. a trustee (Ss 11 and 12.)

REQUIREMENTS OF REGISTRATION

In order to register unregistered land it is necessary to prove a good title and to be able to list the encumbrances. Encumbrances are interest in land owned by persons who do not own the land itself such as easements, which are rights of way over land. The owner of the encumbrance will usually have to ensure that the interest is on the register to be able to protect the interest and be able to enforce its use. After the parties contract to buy the property, title is proved and the encumbrances are noted the property is actually passed from the seller to the buyer by a document known as a "transfer". The transfer is a deed to comply with s 52 of the Law of Property Act 1925. The delivery of the deed to buyer is known as "completion". On completion the buyer will send all the past conveyances, mortgages and any other documents relating to the land to the District Land Registry for the area in which the land is situated together with a form applying for registration of the land in the buyers (proprietors) name. This is usually Form FR1. The appropriate fee and any

stamp duty must also be sent. When the property has been registered all the documents are returned to the proprietor plus a copy of the Land Registry Entry.

TITLE

1. Proof of Title on First Registration

It is the sellers obligation is to show that the buyers will obtain a "good marketable title"

MEPC Ltd V Christian-Edwards [1979] 3 WLR 713

What needs to be checked: A good root of title A chain of title

a) Root of title

Title begins with: a good root e.g. a conveyance on sale, a legal mortgage, deed of gift or post 1925 assent 15 years old which clearly describes the land deals with the whole legal and equitable estate contains nothing to cast doubt

s23 Law of Property Act 1969

If a buyer accepts a short root title (less than 15 years) all matters bind him or her that a 15-year title root would have revealed. However the Registrar may only grant a possessory or qualified title with protective entries as undisclosed matters in such circumstances unless a "safe holding title shown"

b) Chain of Title

A clear chain of title must be shown from the root to the document vesting ownership in the current buyer

Each document is a link in the chain and must connect one to another. The chain is described by an Abstract or Epitome including Conveyances, mortgages, leases, searches, contracts Abstracts are summaries of the documents and may become part of the chain in lieu of a currently unavailable document (e.g. because it deals with other land) marked as previously examined on the abstract.

c) Classes of title

Under section 9 and 10 the titles that may be registered are as follows:Absolute Title to Freehold - this is a fee simple absolute in possession, which is subject to overriding interests and the matters stated on the register. Qualified Title to Freehold - this appears to be a fee simple absolute in possession except that there is some defect on the title, which at the time of registration could not be overcome. Possessory Title to Freehold - the proprietors title of fee simple absolute in possession is not free from doubt but having regard to the length of time that the proprietor and his or her predecessors have enjoyed possession it is likely that there is no one with a better title. Absolute Title to Leasehold - This title indicates not only the proprietors right to the lease but also the landlord's right to the freehold. A purchaser of the leasehold interest will take subject only to implied and expressed covenants, encumbrances and other entries on the register and overriding interests. Good Leasehold - for this title the landlord's proprietorship of the freehold has not been investigated only the tenant's proprietorship of the leasehold. Possessory Title to Leasehold - this subject to the same restrictions as Possessory Freehold Qualified Title to Leasehold - this is subject to the same restrictions as Qualified Freehold.

Registration with qualified title has the same effect as registration with absolute title, except that it does not affect the enforcement of any estate, right or interest, which appears from the register to be excepted from the effect of registration.

Registration with possessory title has the same effect as registration with absolute title, except that it does not affect the enforcement of any estate, right or interest adverse to, or in derogation of, the proprietor's title subsisting at the time of registration or then capable of arising.

A qualified Title may be upgraded to Absolute if the defect can be removed or if time gives a better title.

Possessory Title may be upgraded after the requisite period of time. Good Leasehold may be upgraded to Absolute when the landlord's title is registered. (Ss 62 & 63)

2. Proof of Title on a Second or Subsequent Disposition

The parties can rely on the entries in the register. The seller does not have to provide a pedigree going back at least 15 years to show that he or she owns the property. The register is conclusive. It also has a curative effect in that the person registered is the proprietor even if there may be some minor defect in his or her title. A person's title may be challenged but only through the rectification procedure.

a) The Register is conclusive

Copies of original documents kept by the registrar are conclusive.

As between the parties to the disposition, the document kept by the registrar is to be taken-

(a) to be correct, and

(b) to contain all the material parts of the original document.

No party to the disposition may require production of the original document. No party to the disposition is to be affected by any provision of the original document, which is not contained in the document kept by the registrar. S 120

A purchaser of unregistered land when entered on the register on first registration will be registered as the legal proprietor of the land. The registration has a curative effect in that even if there is some defect, once entered on the register, the proprietor holds the legal estate. This would only be altered if there were a successfully application to rectify the register. S 58 LRA 2002

Dispositions of registered land are treated as if made expressly subject to: all charges and other interests appearing and protected on the register at the time of execution of the disposition and affecting the title of the registered proprietor any interests with overriding status falling within Schedule 3 to the LRA 2002 of which the person to whom the disposition is made has notice and will affect the estate

b) Implied Covenants for Title

Covenants of title are implied under Part I of the Law of Property (Miscellaneous Provisions) Act 1994 (LP(MP)A 1994 and under the Law of Property Act 1925. Schedule 10 of the 2002 Act enable rules to be made in respect of these implied covenants and these rules are found at rr67 and 68 LRR 2003.

A registrable disposition may be expressed to be made either with full title guarantee or with limited title guarantee. The implied covenants: Run with the land s7 LP(MP)A 1994 May be incorporated in all registered dispositions Are matter of agreement between parties in that they may be limited or extended but if registered the disposition must refer to relevant part of 1994 Act Are not referred to on the register except re leasehold land s4 LP(MP)A 1994

If a seller is in breach of the covenants then the buyer has a right of action against the seller.

Full Title Guarantee Covenants

Full title guarantee covenants include:

Seller has right to sell Seller will at own cost do all that is reasonable to give buyer title he/she purports to have inc. registered class Property free from all charges and incumbrances other than those the seller could not reasonably know about Where the disposition relates to a lease that there is no subsisting breach liable to cause forfeiture

Limited Title Guarantee

Implied Covenant (c) is replaced by:

The seller has not since the last disposition for value: created a charge or incumbrance or third party right over the property that is subsisting at the time of the disposition nor is aware that anyone else has done so

ENCUMBRANCES

1. Types of encumbrance

There are two types of encumbrance:

Legal interests are usually evidenced in the documents of title by deeds.

Equitable interests are of two kinds

a) Equitable interests that may be overreached

b) Equitable interests that are attached to the land

Before 1925 the Doctrine of Notice applied. The difficulties in respect of Doctrine of Notice led to the principles of overreaching and registration being developed by the 1925 legislation. The principles of overreaching and registration correspond to deal with the two types of equitable interest. However these two principles have not answered the problem of notice completely. 2. Overreaching interests under a trust (also known as family interests)

The principle of overreaching existed before 1926 but its application was greatly facilitated by the provisions of the 1925 legislation.

Overreaching applies where a person has an equitable interest in land e.g. because he or she has a life interest or an interest by virtue of having paid a share of the purchase price. The person who holds the legal estate does so subject to that interest and if the property is conveyed then it will still be subject to the interest unless the interest is released from the land in some way. Under the principle of overreaching the interest is released form the land by attaching to the purchase price of the property on a sale; the beneficial interest is converted into the proceeds of sale. However this will only happen if the purchase price is paid to at least two trustees under s 27 Law of Property Act 1925. The beneficial interests will not be overreached if the proceeds of sale are paid to only one trustee.

Before the Land registration Act 2002 on a first registration a purchaser who paid the proceeds to only one trustee could take free of an interest under the Doctrine of Notice. If the purchaser after having made inquiries and an inspection of the premises still did not have notice of the interest then he or she will be a bona fide purchaser for value of a legal estate without notice. This will mean he or she will take free of the interest and the beneficiary will have to find and sue the trustee for his or her share of the proceeds of sale.

Now on a first registration, Section 11 and Schedule 1 of the Land Registration Act 2002 (what was s 70 (1)(g) of the Land Registration Act 1925) applies. This states that the rights of a person in actual occupation of the land are overriding and the purchaser will take the land subject to the beneficial interests, which will remain attached to the land. Where a person has overriding interests these do not have to be entered on the register to be effective against a purchaser/mortgagee of the land i.e. the purchaser/mortgagee will take the land subject to those interests, Williams v Glyn's Bank v Boland [1981] AC 487. The onus is entirely on the purchaser/mortgagee to "find out about" any potential beneficiaries or other persons who might have an interest in the property who are in actual occupation.

The only way in which the purchaser will take free of the interest is if: The purchaser overreaches by paying the proceeds to 2 trustees; or The purchaser obtains the consent of the person with the beneficial interest to buy the land (Such consent may in some cases be implied Paddington Building Society v Mendelsohn [1985] 50 P & CR 244); or

The owner of the beneficial interest fails to reveal the interest when asked by the purchaser.

In order to come within Schedule 1 the occupier must show he or she:

a) Has a right or interest in relation to the land recognised in law or equity, National Provincial Bank Ltd v Ainsworth [1965] AC 1175

b) Is in actual occupation.

Chokar v Chokar [1984] FLR MB145

Kingsnorth Trust Co Ltd v Tizard [1986] 1 WLR 783;

LLoyds Bank plc v Rosset [1988] 3 WLR 1301;

Abbey National Building Society v Cann [1991] 1 AC 56

The idea is that since the person is on the premises it should be obvious that he or she may have an interest.

Where the unregistered proprietor shares property with others the cases show that it is necessary for a purchaser prior to a first registration to investigate the interests of all the persons in occupation to ensure that the land is not subject to an overriding interest.

Most of the cases relate to situations where the person sharing occupation with the unregistered proprietor had interests under a constructive or resulting trust. Such a trust may not be obviously apparent to a prospective purchaser/mortgagee. Unlike an express trust of land constructive trusts will not be in writing as the courts create (construct) them. Resulting trusts are where the beneficiaries have both contributed to the value of the property usually in relation to the initial purchase. These trusts may be in writing but may not be, for example where two persons pool their resources to buy a property but only one person's name is put on the title deeds. Where the beneficiary is not on the registered proprietor then the registered proprietor will be the trustee and will hold the property on trust for his or herself and the other person with the beneficial interest.

Where there is an express trust of land the Registrar will know that there is a trust from the documentation. If the trustees are not the same as the beneficiaries then the Registrar will enter a restriction. This will tell a purchaser or mortgagee that no disposition of the property can take place unless the purchase price is paid to two trustees as per s27 Law of Property Act 1925. 2. Registration of interests attached to the land (also known as commercial interests)

Before 1926 the Doctrine of Notice applied to Restrictive Covenants, Equitable Easements, Equitable Mortgages etc. The purpose of the principle of registration was to negate the need for the Doctrine of Notice. Registration enables the beneficiary of an interest to protect it and enables a prospective purchaser to find out what interests the land is subject to.

The Land Registration Act 1925 established the principle of registration of equitable interests. Equitable interests attached to land were encumbrances that were to be entered on the Land Register. However it was appreciated that the registration of land would take a long time and therefore an interim register at the Land Charges Department in Plymouth just for equitable interests was created in relation to unregistered land by the Land Charges Act 1925, now replaced by the 1972 Act. As land became registered so the entries on the Land Charges Department register would be transferred to the Land Register. Eventually when all land is registered the Land Charges Department will become obsolete. Other registers are kept at Plymouth e.g. those concerning bankruptcy, so the Office will still continue to exist. As most land is being registered or has been registered the Land Charges Department will not be considered in detail. The Land Registration Act 2002 has replaced by the Land Registration Act 1925.

Interests attached to land may be classified as: Interests that must be registered to be enforced Interests which override (overriding interests)

3. Interests that must be registered

All mortgages equitable and legal, estate contracts, restrictive covenants, equitable easements and legal easements that the Registrar knows about (although note overriding interests), spouse's right of occupation under Matrimonial Homes Act 1983 must be registered. Before the Land Registration Act 2002 mortgages were known (and are still known) as charges; all other encumbrances that appeared on the register were known as Minor Interests; these are now just known as registrable interests.

1. Cautions against first registration

The Registrar maintains a register of cautions against first registration (Ss 15-22). A person who is an estate owner or has an interest in an estate may register a caution in respect of any interest relating to that estate. Where an application for registration under this Part relates to a legal estate, which is the subject of a caution against first registration, the registrar must give the Cautioner notice of the application and of his right to object to it. The Registrar must not determine an application for registration until the period of notice has expired and the Cautioner has not exercised his or her right to object. A person who owns unregistered land cannot put a caution against the land. Instead he or she will have to actually register the land. This is to encourage voluntary registrations.

2. Notices

The existing protection methods are reduced to two-notices and restrictions (ss32 -46). [The old cautions against dealings will be will be replaced by notices and inhibitions and restrictions will be replaced by restrictions only.] S33 provides for five kinds of interest which cannot be protected by a notice.

Notices can be 'agreed' or 'unilateral' notices. Notices cover much the same rights as prior to the Act. An Agreed Notice requires the consent of the proprietor or is entered where the Registrar orders it. A Unilateral Notice does not require the consent of the proprietor. However the registered proprietor can challenge it and seek to have it removed. Some notices will be treated as agreed notices even though the proprietors consent is not available (e.g. matrimonial homes rights under the Family Law Act 1996).

Notices cannot be used for the protection of some interests e.g. trusts of land which will usually be protected by restrictions, short leases and restrictive covenants between lessor and lessee relating to the demised premises. The registrar can enter notices for an interest with overriding status listed in Schedule 1 unless excluded by s 33.

Any interest, which is acquired for value and is completed by registration, will take priority over an interest that is not registered unless it is overriding. Eventually when all land is registered this distinction will not be so important as all interest will have to be completed by registration. 'Completed' in this context means that it needs to be registered to be effective.

3. Restrictions

The registrar will have power to enter restrictions without an application being made (e.g. to ensure beneficial interests are overreached). If a registered proprietor has any limitations on its powers of disposition those limitations should be recorded in the register by way of restriction (e.g. where a company is limited form entering certain land transactions by its Memorandum or Articles of Association). If a proprietor is bankrupt a

limitation will be entered informing a purchaser that the proceeds of same must be paid to the trustee in bankruptcy.

4. Charges

Charges (commonly known as mortgages) usually take priority according to the date upon which they are registered. This is still the rule under the Land Registration Act 2002. However under the 2002 Act in the absence of agreement between the parties additional priority for further advances may be secured in 3 ways (s49). A registered chargee's further advance will have priority over another chargee's advance if that other chargee failed to give notice of the subsequent advance (Tacking). Where a registered chargee is obliged to make a further advance and the obligation is recorded on the register then the registered chargee's further advance will have priority over another chargee's advance irrespective of whether that other chargee gave notice of that advance. The parties to a charge paid in tranches may agree that it will be security up to a certain amount whereupon it will take priority up to that amount against later charges.

4. Interests which override (Overriding Interests)

Interests which override on First Registration

Prior to the Land Registration Act 2002 overriding interests were listed under s 70(1) of the Land Registration Act 1925. These are third party rights that are considered of such importance that they should bind a purchaser even if they do not appear on the register.

Interest which iverride are divided into two categories-those which will be overriding on first registration and those which will override on the process of completing a disposition of registered land by registration. Different interests are listed as overriding for each process.

When someone is registered as first proprietor of freehold land he or she will take subject to interests that become entries on the register, and unregistered interests falling within Schedule 1 (interests with overriding status which override first registration) Leaseholds not exceeding 7 years

Interests of persons in actual occupation (except an interest under a settlement under the Settled Land Act 1925) Legal easements and profits Customary and public rights Local land charges Mines and minerals Franchises* Manorial rights* Crown rents* Maintenance of a sea or river wall* Corn rents (Payment sin lieu of tithes*

* will cease to be overriding in 10years

There were two interests, which caused some difficulty on both first registration and subsequent disposition under the 1925 legislation and are referred to here as it is questioned whether the problems have been overcome. The two areas are:

Easements and profits [S.70 (1)(a)] - Under the 'old' law it was held in the case of Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204 that, on an interpretation of r258 Land Registry Rules 1925, the list of overriding interests in S.70 (1) may be extended to cover not just legal easements but equitable ones provided they were openly exercised and enjoyed with the land. The decision was followed in Thatcher v Douglas [1996]. Under the new law only legal easements will be overriding on first registration. All equitable interests existing at the time of first registration should be registered. As now, legal easements of which the Registrar is aware will also be registered.

Rights of every person in actual occupation of the land or in receipt of the rents and profits thereof save where inquiry is made of such person and the rights are not disclosed [S.70 (1)(g)]. The problems relating to this interest on first registration have already been dealt with above.

A final point on encumbrances is that although the doctrine of notice has no effect in relation to registered land nevertheless equity will not allow a statute to be used for fraud. As noted in the cases of Peffer v Rigg [1978] 3 All ER 745 Lyus v Prowsa Developments Ltd [1982] 2 All ER 953. A person will not be able to make an interest void for want of registration if he or she knowing of an interest seeks to defraud the owner of that interest by failing to declare the interest on a disposition.

Interests which Override on Disposition

When land is already registered and has been the subject of a disposition, the person registered as proprietor is registered subject to matters which are subject to an entry on the register, and unregistered interests falling within Schedule 3 (interest with overriding status which override registered dispositions) Leaseholds not exceeding 7 years Interests of persons in actual occupation except for: An interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably be expected to have done so An interest which belongs to a person whose occupation would not have become obvious on a reasonably careful inspection of the land and of which the person to whom the disposition was made did not have actual knowledge at the time of the disposition Legal easements and profits except for: A legal easement or profit which at the time of the disposition is not within the actual knowledge of the person to whom the disposition was made and would not have become obvious on a reasonably careful inspection of the land

This exception will not apply if the person entitled to the easement or profit proves that it had been exercised in the 12 months ending with the date of disposition Customary and public rights Local land charges Mines and minerals (as specified) Franchises* Manorial rights* Crown rents* Maintenance of a sea or river wall*

Corn rents (Payment sin lieu of tithes)*

* will cease to be overriding in 10years

Differences between interests which Override on First Registration and Disposition

The impact of interests with overriding status is reduced as follows:

Rights of persons in actual occupation

The right of a person in actual occupation is less well protected than on first registration it would appear due to the restrictions on the overriding status of the right on disposition compared with that on first registration. On subsequent disposition of registered land the right will not remain overriding if: It is not disclosed on reasonable inquiry of the person with the interest; or It was not obvious on a reasonably careful inspection and the person to whom the disposition (e.g. sale) was made did not know about it;

Two preliminary points are that:

The right will only override to the extent that it relates to the land actually occupied (overruling Ferrishurst v Wallcite Ltd [1999] Ch 355 CA)

The definition of "actual occupation" has changed. Before the 2002 Act a landlord would be treated as being in occupation. A person who acquired an interest in the property (e.g. a mortgage) from the tenant believing the tenant to be the owner could not override the interests of the landlord (e.g. If the tenant failed to repay the mortgage the property could not be sold without the landlord's consent. It was essential for the mortgagee to get the landlord's consent to the mortgage). Now physical presence on the property is required (the idea is to limit overriding status to interests readily discoverable on inspection).

Of particular importance is that on first registration the purchaser or mortgagee must overreach or find any persons with an interest who are in actual occupation and get their consent (presumably in writing). If this is not done then the interest will override. The effect of an overriding interest is: the Purchaser pays the money to the single buyer (trustee) unaware of the interest of the person in actual occupation. After the sale the person

claims their interest and demands payment for it. The purchaser did not overreach (pay to two trustees) and did not obtain consent therefore is liable to the person in actual occupation.

However on subsequent disposition the purchaser must overreach or make reasonable inquiry of any persons with an interest who are in actual occupation who do not disclose it or inspect the property and make inquiry of the seller/mortgagor who in fact does not know of the interest. This gives a glimmer of hope for the purchaser. If the seller fails to disclose or genuinely does not know about an interest of an occupier then the interest does not override and the purchaser takes free of it. This appears to be very similar to the doctrine of notice.

Easements

The first point is that:

Equitable easements must be registered to be binding. Only a legal easement will be overriding on a first registration or disposition (reversing Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204).

Easements on First Registration

Legal easements should in any event be registered, as there is a duty under s 71 and rules 28 and 57 to disclose unregistered interests and the registrar will register such interest on their being disclosed. Where an easement is expressly granted or reserved in a transfer or lease of over 7 years it will be extracted from the document and entered on the register. However if they are not then on first registration they will be overriding.

Easements on a Disposition

However it would appear that legal easements are less well protected on disposition of registered land than on first registration due to the restrictions on the overriding status of the right on disposition.

Under s 27(2)(d) an easement that is expressly granted or reserved out of a registered estate will not be legal unless it is registered. Therefore it will be equitable and so not binding unless registered.

If a legal easement is not expressly granted but acquired by reason of the doctrine in Wheeldon v Burrows or s 62 Law of Property Act 1925 or Prescription then it will only override a registered disposition where:

It was within the actual knowledge of the person to whom the disposition was made or It would have been obvious on a reasonably careful inspection of the land and It had been exercised in the period of one year ending with the day of the disposition.

Therefore an easement is only overriding if the purchaser knows about it or it is obvious or it has been exercised in the last year.

There is an issue here. There may be some legal easements that have overriding status on first registration or are acquired between first registration and subsequent disposition but which are not known to the purchaser, obvious and been exercised in the last year. Such easements will cease to be effective on a disposition. See Kenny, P "Vanishing Easements in Registered Land" [2003] Conv 87 p304.

Note:

Easements acquired by reason of the doctrine in Wheeldon v Burrows or s 62 Law of Property Act 1925 or Prescription are legal easements that are implied. Briefly: The doctrine in Wheeldon v Burrows - This arises where a person sells part of his land. The part he or she retains has a right of way over it that was always used by the seller for the benefit of the part he sold when he owned both parts. An example would be where there was a pathway to the road from the sold land across the retained land. The right of way becomes an easement that is attached to the land that is sold and can be used by the buyer unless the doctrine is expressly excluded in the transfer. S62 Law of Property Act 1925 - Under this section easements etc are automatically included in a sale and do not have to be expressly mentioned. Prescription - An easement may be acquired by long user normally 20 years.

SAFEGUARDS

1. Duty to disclose unregistered interests

The Act (S71) and the Rules made under the Act impose a duty to disclose interests which override on a proprietor of land seeking to register a disposition.

An applicant for first registration as a proprietor is under a duty to provide information to the registrar about any of the interests that fall within Schedule 1 to the Act that: are within the actual knowledge of the applicant, and affect the estate to which the application relates,

The applicant is not required to provide information about an interest that cannot be protected by notice, an interest that is apparent from the deeds and documents of title accompanying the application

If an interest with overriding status is disclosed then the registrar may enter a notice in the register in respect of that interest. R 28 LRR 2003

An applicant registering a disposition of a registered estate is under a duty to provide information to the registrar about any unregistered interest that falls within Schedule 3 to the Act that: are within the actual knowledge of the applicant, and affect the estate to which the application relates

The applicant is not required to provide information about:

(a) an interest that cannot be protected by notice, (b) a public right, (c) a local land charge, or (d) a leasehold estate in land if it is within paragraph 1 of Schedule 3 to the Act (not exceeding 7 years) and at the time of the application the term has one year or less to run. r 57 LRR 2003

2. Suppression of information

A person commits an offence if in the course of proceedings relating to registration under the 2002 Act he suppresses information with the intention of-

(a) Concealing a person's right or claim, or

(b) Substantiating a false claim.

A person guilty of an offence under this section is liable-

(a) On conviction on indictment, to imprisonment for a term not exceeding two years or to a fine;

(b) On summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum, or to both. S 123

ELECTRONIC CONVEYANCING

This will be developed over the next few years

The key concepts set out in a Land Registry consultation document are:

A paperless system apart from correspondence No registration gap A viewable version of the register as amended to reflect the proposed contractual terms Draft documents verified against the register Chain transparency enabling swift identification of problems Simultaneous exchange of contracts and completion

However to achieve this the system must: Be flexible enough to allow withdrawals Able to deal with the documentation Be secure

The act sets out a framework for e conveyancing with provision for:

Rules to be made that specify what dispositions may use electronic documents Criteria for electronic documents essentials including the time and date for the document to take effect and the need for electronic signatures (s91) A Land Registry network to be created (s92) The system eventually to be compulsory (s93) Electronic funds transfer system to be incorporated (s94) Rules to be made for running the system (s95).

ALTERATION OF THE REGISTER

S 65 and Schedule 4 LRA 2002 rules 126-130 LRR 2003

Rectification is limited to the situation where a mistake is to be corrected, and where the correction also prejudicially affects the title of the registered proprietor. Rectification is just one particular form of alteration. When rectification under this definition occurs, the proprietor may be entitled to indemnity as he or she will have been prejudicially affected by the amendment made.

The court may make an order for alteration of the register for the purpose ofcorrecting a mistake, bringing the register up to date, (if, for example, a court decided that a claimant in proceedings had established his or her entitlement to an easement by prescription over a parcel of registered land, it could order that the benefit and burden of the easement be recorded in the registers of the affected titles) or giving effect to any estate, right or interest excepted from the effect of registration.

The registrar may alter the register for the purpose ofcorrecting a mistake, bringing the register up to date,

giving effect to any estate, right or interest excepted from the effect of registration, or removing a superfluous entry.

In cases of rectification only if the alteration affects the title of the proprietor of a registered estate in land, no order may be made under without the proprietor's consent in relation to land in his possession unlesshe has by fraud or lack of proper care caused or substantially contributed to the mistake, or it would for any other reason be unjust for the alteration not to be made.

Schedule 8 states that a person is entitled to be indemnified by the registrar if he suffers loss by reason ofrectification of the register, a mistake whose correction would involve rectification of the register, a mistake in an official search, a mistake in an official copy, a mistake in a document kept by the registrar which is not an original and is referred to in the register, the loss or destruction of a document lodged at the registry for inspection or safe custody, a mistake in the cautions register, or failure by the registrar to perform his duty under section 50.

No indemnity is payable under this Schedule on account of any loss suffered by a claimant-

(a) wholly or partly as a result of his own fraud, or

(b) wholly as a result of his own lack of proper care.

Where any loss is suffered by a claimant partly as a result of his own lack of proper care, any indemnity payable to him is to be reduced to such extent as is fair having regard to his share in the responsibility for the loss.

ADJUDICATION

This Part provides for an Adjudicator to HM Land Registry (a new judicial officer) to be appointed. He or she will deal with disputes that the registrar has not been able to resolve by agreement. He will also have additional powers (e.g. to rectify or set aside documents). The Adjudicator will be independent and appointed by the Lord Chancellor. The basic way in which disputed cases will be dealt with will not be changed.

For further information

The Law Commission Report No 254 and summary give a full account of the background to the Land Registration Act 2002 and the changes that the Act was intended to introduce. The Land Registry site also gives links and information.

See also articles:

Chamberlain, L "The Land registration Act Part 1" 19th July 2002 NLJ 152.7041(1093)

Chamberlain, L "The Land registration Act Part 2" 26th July 2002 NLJ 152.7042(1145)

Kenny, P "Vanishing Easements in Registered Land" [2003] Conv 87 pp304 - 313