The effects of the Land Registration Act - Free Essay Example

The system of land registration inaugurated by the Land Registration Act 1925 was a laudable and important step in simplifying the way title to land was recorded and conveyed. In time, however, significant defects began to emerge. What were those defects and to what extent has the Land Registration Act 2002 provided a cure? Prior to the introduction of a system of land registration, the only way to establish a sellerà ¢Ã¢â€š ¬Ã¢â€ž ¢s right to dispose of a property was from title deeds, searches and inspection of the land itself[1]. The system of registered conveyancing, introduced in the late 19th Century and simplified by a body of legislation created in 1925, offered a single statement of title guaranteed by the State. The Register purported to operate as a à ¢Ã¢â€š ¬Ã‹Å"mirrorà ¢Ã¢â€š ¬Ã¢â€ž ¢, reflecting the totality of estates, interests and charges affecting the land so that any prospective purchaser in good faith and for value could be confident that the title they acquired was absolute and indefeasible[2]. If any person suffered loss as a result of an omission or mistake in the Register, they were entitled to be indemnified for that loss (Gray Gray, pp.1288-1289[3]). However, it was soon apparent there was no perfect reflection of the state of the title to land at all. The history of the title did not appear on the Register as this was not relevant to the current state; neither did rights affecting the land which were capable of registration but had not been registered. Further, rights obtained by fraud appearing on the Register were not binding, and finally, some rights were protected without the need for registration if they could not easily be registered. These were binding if they coul d be discovered without looking at the Register or were matters of common knowledge (Carter, p.128[4]). Consequently, it was not possible to rely on the Register as the à ¢Ã¢â€š ¬Ã…“complete record of everything that affects the titleà ¢Ã¢â€š ¬Ã‚ [5] that was envisaged. It was recognised in time that the 1925 legislation was poorly drafted in a time when registered land was seen as a à ¢Ã¢â€š ¬Ã…“procedural adjunctà ¢Ã¢â€š ¬Ã‚  1 to unregistered land and the main aim was to minimise the differences between the registered and unregistered systems, rather than achieve a complete and accurate register of title to all land. It is perhaps for this reason that, despite introducing compulsory registration that extended to the whole of England and Wales by 1 December 1990, a large proportion of land still remains unregistered. Further, the Register did not reflect a wholly accurate picture of all rights and interests in the land. Too many valuable property rights remained unreg istered and this resulted in an unsatisfactory system of uncertainty. An important example of such unregistrable rights can be found in short leases for a fixed term of 21 years or less. The Regulatory Impact Assessment of 2001 estimates that there are approximately three million short leases in existence in total, with about 45,000 granted or sold each year. Of these, 6,500 are estimated to be commercial leases with the average new commercial lease term being fifteen years long1, although recent research has suggested that the average length of a lease for commercial property has nearly halved over the last 3 years from 12.8 years to 7.7 years[6]. However, under the 1925 legislation, these would only be protected as overriding interests. A purchaser for value takes subject to the overriding interest if it subsists at the date of registration of the purchaserà ¢Ã¢â€š ¬Ã¢â€ž ¢s title[7]. This position resulted in the register being of little use to those dealing with commercial p roperty of this type1, and promoted a system of uncertainty and lack of transparency. A further problem with the 1925 legislation was that registration did not protect a registered owner against adverse possession of his property by squatters. Under the Land Registration Act (à ¢Ã¢â€š ¬Ã…“LRAà ¢Ã¢â€š ¬Ã‚ ) 1925, when a squatter took adverse possession of land, the paper owners had 12 years within which to bring action against the squatters before their right to take action was statute barred. Generally this involved cases of land theft and boundary disputes, with the RIA reporting millions of pounds worth of property belonging to local authorities in London being successfully claim by squatters in the 1990s and hundreds of cases per year being assessed in relation to plot definitions on new build housing estates1. In addition to providing a lack of security for the land owner that registration of land ought to provide, where a squatter has been in adverse possession of th e land, the Register does not accurately mirror ownership as it may be the case that the squatter has acquired title which is not reflected by the Register[8]. Although the paper ownerà ¢Ã¢â€š ¬Ã¢â€ž ¢s title may have been extinguished[9], the legal estate was still vested in him as registered proprietor. The squatter had to apply for registration and pending this, the paper owner held the estate on bare trust for the squatter[10]. The squatterà ¢Ã¢â€š ¬Ã¢â€ž ¢s rights were protected as an overriding interest under Section 70(1)(f) of the LRA 1925. As there was no requirement that the squatter should be in actual occupation, they might not be discovered from an inspection of the land and may even be unknown to the Vendor, as was the case in Red House Farms[11] where the owner was unaware that the defendant was shooting fowl on his land. Interestingly, the combined effect of Section 75 LRA 1925 and the Limitation Act 1980 was held to be incompatible with Article 1 of the First P rotocol of the Convention for the Protection of Human Rights and Fundamental Freedoms. The legislation should not have allowed the removal of the landownerà ¢Ã¢â€š ¬Ã¢â€ž ¢s property rights without payment of compensation, thus the Court had to reinterpret the statutory provisions in accordance with section 3 of the Human Rights Act 1998 to enable the landowner to retain title to the land[12]. A further area that arguably caused the most litigation and consequently, desperately required readdressing was the issue of overriding interests. Under the LRA 1925, these included à ¢Ã¢â€š ¬Ã…“incumbrances, interests, rights and powers which are not entered on the register, but override registered dispositions under the Actà ¢Ã¢â€š ¬Ã‚ . These might include, for example, equitable interests that are openly exercised and enjoyed[13] (but may not be apparent from a single inspection prior to purchase of the property!). Of particular concern, s.70(1)(g) protected the rights of persons in actual occupation of the land or in receipt of rents, save where enquiry had been made of them and their interest had not been disclosed[14]. These rights were usually discoverable from inspection of the property but this has not always been the case, and it was not sufficient just to make enquiries of the Vendor, but necessary to make enquiries of the person benefiting from the overriding interest[15]. Further, any overriding interests existing at the time of registration bound the purchaser, with the exception of those arising under s.70(1)(g) which depended on the date of actual occupation[16]. Such interests as easements and short leases could, in theory, have been created between completion and registration which bind a purchaser, thus resulting in the problem of the so called à ¢Ã¢â€š ¬Ã‹Å"registration gapà ¢Ã¢â€š ¬Ã¢â€ž ¢. The LRA 2002 came into force on 13 October 2003, although the e-conveyancing sections will not be fully operational for several years. The primary objective of the new legislation, according to the Law Commission Report, is for the Register to be à ¢Ã¢â€š ¬Ã…“a complete and accurate reflection of the state of the title of the land at any given time, so that it is possible to investigate title to land online, with the absolute minimum of additional inquiries and inspections.à ¢Ã¢â€š ¬Ã‚ [17] This appears to be a rewording of the mirror principle which has been one of the fundamental aims of a system of registration, as discussed. Indeed, in pursuit of this objective, the 2002 Act brings in a number of significant changes which have had great impact on the problems identified with the 1925 legislation. Most importantly to that objective, the Act extends the type of transactions that are subject to compulsory first registration. These include leases granted for a term of more than seven years and assignments of leases that have more than seven years left to run. As well as providing greater certainty and transparency o f title, this will catch far more valuable commercial leases (whilst not affecting shorter, low value residential leases) and make the Register far more useful to those trading in commercial property. Indeed, the ultimate aim of the Law Commission is that all leases granted for more than 3 years will be subject to compulsory registration, and the LRA 2002 reserves power for statutory instruments to be made reducing the period after consultation[18]. Until such a time, leases of a period of less than seven years (with exceptions) take effect as overriding interests[19]. This is unfortunate as it may result in leases being reduced in length to avoid registration requirements and it again allows for a category of interests that may not appear on the Register, albeit a reduced one. The Act also catches leases granted to take effect in possession more than 3 months in advance (of any length), thus reducing the possibility of a purchaser taking subject to a lease where the tenant has n ot yet gone into occupation and whose interest will not be apparent from an inspection of the property. In addition, the Act now allows registration of valuable rights which were not capable of registration under the 1925 legislation, including franchises, profits ÃÆ'   prendre in gross, leases with more than 7 years left to run, discontinuous leases, demesne land and land covered by internal waters adjacent to England and Wales. It is however no longer possible to register a manor. These additional categories will ensure that the Register provides a more accurate account of all interests affecting the land. Further, all legal easements which are expressly created are ineffective unless completed by registration against the title of the servient tenement22, although provision is made for legal easements or profits made by implied grant or by prescription, of which the purchaser knows or could have been discovered from a reasonably careful inspection of the land, or which ha ve been exercised within one year of purchase22. Equitable interests are not included but these are instead minor interests binding only if protected by a notice on the Register. This reverses the decision of Celsteel[20] mentioned above. It also provides incentive for registration and again pushes towards a more complete and accurate register. However, despite the significant reforms, not all rights and interests will appear on the title. As was the case under the 1925 legislation, Public-Private Partnership leases and mines/minerals are not subject to compulsory first registration. Assignments or surrenders of leases to an immediate landlord where the lease merges, nor the assignment of mortgage terms are not caught by the new provisions[21], neither are transfers of property by operation of law (for example, the vesting of title in personal representatives[22]). Mortgages by way of demise or sub-demise are also excluded, although these are rare[23]. Arguably, the exclusion of these various rights and interests is incompatible with the main objective of the legislation, to provide an accurate mirror of the title. Further, overriding interests, although modified and reduced under the new legislation, remain an issue although some will lose their overriding status after ten years. Interests that override on first registration are contained in Schedule 1 to the Act whereas interests that override on a registered disposition are contained in Schedule 3. The most contentious provision of the LRA 1925, section 70(1)(g) is now far more specific and restricted. It is now necessary for the person to be in actual occupation of the land (reversing the decision in Ferrishust)[24] and receipt of rent or profits alone will not suffice as occupation. As before, inquiry must be made of the person who has the overriding interest although provision is made for persons who could not reasonably have been expected to disclose it. Importantly, under Paragraph 2(1)(c), a pur chaser takes free of the rights of an occupier whose presence would not have been revealed by a reasonably careful inspection of the property, where the purchaser does not have actual knowledge. Significantly, there is no equivalent of s.70(1)(f) in the new Act as it was decided that the system of adverse possession was not consistent with a system of registered title[25]. The new scheme of adverse possession reflects the fact that the basis of title to registered land is the fact of registration, not possession. Part 9 and Schedule 6 of the 2002 Act provide that Limitation Acts shall not apply to a registered title. Instead, a person who has adversely possessed the land for ten years can apply to the Registry for registration as proprietor. The present proprietor will then be notified of his application and has two years in which to recover possession of the land, after which the adverse possessor may apply for registration once those two years have expired. The effect of these changes are to make registered property virtually à ¢Ã¢â€š ¬Ã‹Å"squatter-proofà ¢Ã¢â€š ¬Ã¢â€ž ¢ and they offer a good reason for unregistered landowners to consider voluntary first registration to take the benefits of them. Besides offering a greater security to registered landowners, they also solve one of the significant flaws identified earlier in the 1925 legislation in relation to potential purchasers who have no way of discovering a squatter has taken adverse possession. To further ensure that the Register is a complete record, an applicant for registration now has a duty under the new legislation to provide information to the registrar about any unregistered interests affecting the land which override first registration that are within the applicants actual knowledge[26] although unfortunately there are no sanctions for failing to comply with this provision. In conclusion, the provisions of the LRA 2002 have successfully clarified and uncomplicated what was accepted t o be a poorly drafted and out of date body of legislation. Whilst not ensuring every interest is included on the title to a registered property, the provisions have greatly widened and extended the scope of the system of registration, offering greater security for landowners, increased transparency and certainty. The number of rights that cannot be or do not have to be registered has been greatly reduced, and a significant number of steps have been taken to ensure that the Register is an accurate, reliable reflection of all matters affecting the land. Not all problems have been dealt with and whilst matters such as overriding interests continue to exist, the Register will never be complete enough for a purchaser to rely on without making additional extensive enquiries. Further, the registration gap issue will not be resolved until there is simultaneous completion and registration, which will occur when the e-conveyancing sections are brought into force. There are however proposal s in place for continued reform, including reducing the requirement for registration of leases from 7 years to 3 years. These must strike a balance between the objective of achieving a complete Register of title, and the protection of the rights of persons having an interest in the land who cannot register them or do not know to[27]. Burn, E H (2004) Land Law: Cases and Materials (8th Edition), Oxford University Press, Oxford (for cases/statutes) Carter, E, Jones, R, Morgan, G and Paltridge, S (2003) Law: Ownership Trusteeship à ¢Ã¢â€š ¬Ã¢â‚¬Å" Rights Responsibilities, Oxford University Press, Oxford Cracknell, D G (2005) Land: The Law of Real Property (6th Edition), Old Bailey Press, London (for cases/statutes) Department of Constitutional Affairs Website: Land Registration Bill Regulatory Impact Assessment, June 2001 https://www.dca.gov.uk/risk/landria.htm [Accessed: 27 December 2005] Gray, K Gray, S F (2005) Elements of Land Law (4th Edition), Oxford University Press, Oxford Law Commission Website: Law Commission report: Land Registration for the Twenty First Century: A Conveyancing Revolution www.lawcom.gov.uk/docs/lc271.pdf [Accessed: 27 December 2005] Office of Public Sector Information Website: Land Registration Act 2002: Explanatory Notes Chapter 9 https://www.opsi.gov.uk/acts/en2002/2002en09.htm [Accessed: 27 December 2005] PracticalLaw.com Website: https://www.practicallaw.com [Accessed: 27 December 2005] Wilkie, M, Luxton, P Malcolm, R (2005/6) Land Law (5th Edition), Oxford University Press, Oxford 1 Footnotes [1] Land Registration Bill Regulatory Impact Assessment, June 2001 [2] British American Cattle Co v Caribe Farm Industries Ltd [1998] 1 WLR 1529 at 1533E-F per Lord Browne Wilkinson [3] Gray, K Gray, S F (2005) Elements of Land Law (4th Edition), Oxford University Press, Oxford [4] Carter, E et al (2003) Law: Ownership Trusteeship à ¢Ã¢â€š ¬Ã¢â‚¬Å" Rights Responsibilities, Oxford University Press, Oxford [5] Overseas Investments Ltd v Simcobuild Construction Limited (1995) 70 P CR 322 at 327, as per Peter Gibson LJ [6] Study by Nelson Bakewell and the Occupiers Property Databank, March 2003 [7] Section 70(1) Land Registration Act 1925 [8] Carter, E et al (2003) Law: Ownership Trusteeship à ¢Ã¢â€š ¬Ã¢â‚¬Å" Rights Responsibilities, Oxford University Press, Oxford [9] Section 17, Limitation Act 1980 [10] Section 75(1) Land Registration Act 1925 [11] Red House Farms (Thorndon) Ltd v Catchpole [1977] 2 EGLR 125 [12] Beaulane Properties Ltd v Pal mer, 23 March 2005 (High Court). [13] Celsteel Ltd v Alton House Holdings Ltd [1985] 2 All ER 562 [14] S.70(1)(g) Land Registration Act 1925 [15] Hodgson v Marks [1971] Ch 892 [16] Abbey National Building Society v Cann [1991] 1 AC 56 [17] Law Commission report: Land Registration for the Twenty First Century: A Conveyancing Revolution, para 1.5 [18] Land Registration Act 2002 Section 118(1) [19] Land Registration Act 2002 Schedule 3 Paragraph 1 [20] Celsteel Ltd v Alton House Holdings Ltd [1985] 2 All ER 562 [21] Land Registration Act 2002 Section 4(4) [22] Land Registration Act 2002, Section 4(3) [23] Land Registration Act 2002, Section 4(5) [24] Ferrishust Ltd v Wallcite Ltd [1999] 1 All ER 977 [25] Wilkie, M et al (2005/6) Land Law (5th Edition), Oxford University Press, Oxford [26] Land Registration Act 2002 Section 71(a) and rule 28, Land Registration Rules 2003 [27] Hypo Mortgage Services Ltd v Robinson [1997] 2 FLR 71