Chapter 10: Registered & Unregistered Land
Dealing with Land
We have looked at the rules governing the creation and disposition of interests in land in previous topics. In this section we will consider how these rules operate when parties buy and sell land.
Whenever land is sold, parties to the sale will be concerned to establish:
1. who is able to sell the land;
2. what the seller owns; and
3. what will be acquired by the buyer.
The answers to questions two and three may well not be the same since, as we shall see in the following pages, it is not necessarily the case that the land as used and enjoyed by the seller, will be passed on in identical form to the buyer. Additional rights or obligations may be created on sale, and some may simply not be transferred.
These questions will not only concern the buyer and seller. They will also be of importance to anyone wishing to acquire an interest in the property, for instance prospective lessees, or lenders such as banks and building societies who supply capital for the transaction and wish to secure their loans by means of a mortgage.
What will the Buyer Acquire?
The interests associated with a piece of land that affect the seller, are not always identical to those that affect the buyer to whom it is sold. Some of the interests binding on the seller may for instance be:
1. Personal
Contracts entered into by a seller in a personal capacity will bind him but will not affect the land. A licence for a friend to occupy a part of the house or for a neighbour to use some facility on the land for example, would normally amount only to contractual obligations, not proprietary interests.
2. Protectable
The law has generally taken the attitude that a buyer should be bound by those proprietary interest which they know about or should be able to discover. Some interests may be easy to discover - they are evident from an inspection of the land. But, there are some types of interest which even a thorough buyer might be hard pressed to uncover. It is clearly inappropriate for innocent buyers to be bound by matters of which they could never have known. The law commonly resolves this problem by requiring the existence of the interest to be recorded in a register which a buyer can search. Failure to properly record an interest, then results in it not binding a buyer.
3. Overreachable
In certain types of transaction, it is considered inappropriate for various equitable interests to bind buyers of the property. The law allows these interests to be 'overreached' by the transaction, so that buyers take free of them. Provided that all the legal requirements for overreaching are complied with, the mechanism operates automatically, regardless of the intentions of the parties.
Overreaching
It is not always the case that the primary concern of a land owner is retention of the land. Often, the motivation for land ownership lies in the financial value the interest represents, rather than in the occupational or other user rights. A beneficiary under a trust, for instance, may be more concerned with the investment value the land represents, both by way of the income produced and capital appreciation that will accrue if the land value rises, than with a right to remain in the property. Likewise a beneficiary to a deceased's estate under a will or intestacy is more likely to want to receive the monetary value of their entitlement. Although, the personal representatives may, subject to certain conditions, appropriate specific assets in satisfaction of that entitlement.
The objectives of an individual whose primary concern rests in investment rather than occupation, may be met equally by ownership of different land or even of a different type of asset. Such an individual, provided they are assured of securing an interest in the purchase monies, may not be particularly concerned to enforce their rights of occupation of the property against subsequent purchasers.
These objectives may be accommodated by ensuring that the land or other property is easily saleable by placing the power to sell the land in the holders of the legal estate ie the trustees and providing that the beneficial interests in the trust property can be 'overreached' so that they will not bind the purchaser. The beneficiaries' interests are protected to the extant that any capital monies arising as a result of the transaction (eg the sale proceeds or mortgage advance) must be paid to at least two trustees or a trust corporation to effect overreaching in the case of a trust and to the personal presentative(s) in the case of a deceased estate. Their rights are thus against the trustees or personal representative but not the purchaser. Where no capital monies arise on the transaction (eg on a mortgage to secure an overdraft) the only requirement to effect overreaching is that the beneficial interests are capable of being overreached State Bank of India v Sood [1997] 2 WLR 421.
Mortgagees too, are more concerned with the value of land as a means of securing payment of their loans than they are with any right to use or enjoy property. Overreaching is thus employed to enable mortgagees to realise their security free of the interests of the mortgagor in the mortgaged property.
The concept of overreaching was given statutory form in the Law of Property Act 1925 and was initially applied to trusts for sale, strict settlements and sales by personal representatives and mortgagees. Following the enactment of the Trust of Land and Appointment of Trustees Act 1996, statutory overreaching is extended to all trusts of land, including express and implied trusts, express trusts for sale and bare trusts.
Protectable: Land and Interest Registration
We noted in our section on Rationale that conveyancing had become so complex by the 19th century that reform was imperative. One of the major thrust of reform was land registration.
There had been previous attempts to introduce registration. Henry VIII tried to do so when he forced through the Statute of Uses but his Statute of Enrolments was of limited effect. During the 16th century registration of deeds was introduce in parts of the country eg in Middlesex and Yorkshire and there was also limited registration of some land interests. But the real moves towards introducing land registration did not begin in earnest until the mid-19th century. They led to the Land Registration Act 1925.
This Act has introduced a new system for dealing with land which depends on the primacy of a land register to record land ownership and to protect land interests. Since 1st December 1990 all conveyances on sale of land in England & Wales have had to be registered at the appropriate Land Registry and since 1st April 1998 other transfers and first mortgages of land also have to be registered. However, it would be a mistake to assume that all land in England and Wales is registered. There is still a lot of land which is unregistered merely because there has been no dealing since registration became compulsory. We therefore have to look at two systems of dealing with land:
1. Unregistered land
2. Registered land
Even in unregistered land there is a limited requirement to register certain interests in land, including a number which it may be difficult for a purchaser to otherwise discover. These interests must be registered as land charges under the Land Charges Act 1972.
Unregistered Land: Proving Capacity to Sell
We have seen that land ownership is not absolute. The owner of land is the person that can establish the best right to possession of that land. Title or ownership of property has thus traditionally been established by the production of evidence showing a right to possession.
The period over which the right must be shown has been closely linked to the period of limitation. After all, if a person can establish possession for a period at least as long as the limitation period, they should be able to defeat any claim from a previous owner whose title will have been extinguished by adverse possession. The present title period is at least 15 years, see section 44 of the Law of Property Act 1925.
Given that almost all legal estates in land must be disposed of by deed, and most equitable interests in writing, sellers prove their ownership of land by producing evidence of all the documents showing any dealing with the land for a period of at least 15 years, starting with a good root of title. The seller may choose to produce that evidence either by way of an epitome comprising a schedule and copies of all those documents that must be produced, or by way of an abstract, being a summary of those documents, which is examined as correct against the original documents by a solicitor.
Unregistered Land: Establishing what is for sale
How do interested parties find out what interests exist in a piece of land?
We have already seen that ownership of unregistered land is shown by producing documents showing dealings with the land for at least the last 15 years, beginning with a good root of title.
Since generally, legal estates and interests must be created or disposed of by deed, and equitable interests in writing, these documents of title should, besides providing proof of the seller's right to sell, also reveal most of the legal and equitable interests in the property.
In a typical conveyance, the estates and interests which exist in the land to be sold, will be described in a clause known as the parcels clause.
The following is an extract from the text of a conveyance. Can you highlight the parcels clause?
NOW THIS DEED WITNESSETH as follows:-
In pursuance of the said agreement and in consideration of the sum of TEN THOUSAND POUNDS now paid by the Purchaser to the Vendor (the receipt of which the Vendor acknowledges) the Vendor as beneficial owner HEREBY CONVEYS to the Purchaser ALL THAT piece or parcel of land known as 29 George Road Walford Bristol which is for the purposes of identification only shown edged red on a Conveyance dated 23rd September 1936 and made between Bristol Development Company Limited of the one part and Derek Barnes of the other part (hereinafter called "the Conveyance") TOGETHER with the benefit of but SUBJECT to such rights of way and drainage as more particularly set out and described in the Conveyance TO HOLD the same unto the Purchaser in fee simple SUBJECT to the covenants conditions and stipulations contained in the Conveyance so far as the same are still subsisting and capable of taking effect.
IN WITNESS whereof the parties have hereunto set their hands and seals the day and year first before written
Title documents provide a useful source of information about the interests which may exist in property, but they do not tell the whole story. We have also seen that:
1. Equity will give effect to the parties' intentions even though those intentions are not evidenced in writing, where to do so is necessary to avoid fraud or unconscionable conduct. There may for instance, be no written evidence of a resulting or constructive trust, or of interests supported by estoppel.
2. The law gives effect to some de facto situations by recognising interests that have arisen through adverse possession or prescription.
Equitable Estates and Interests
Prior to the 1925 legislation, there were really only two rules which were of importance in deciding whether an equitable estate or interest would bind a purchaser, namely:
1. Equitable interests bind all but the bona fide purchaser for value of the legal estate without notice; and
2. Where the equities are equal, the first in time prevails.
Equity's concern with conscience would not allow the holder of a legal estate to ignore equitable interests of which they had notice. Equally, those who did not purchase the legal estate for value, i.e.people who received property by way of gift or by virtue of being squatters, were regarded as receiving the estate subject to any interests presently affecting it. Only a bona fide purchaser of the legal estate for value without notice, known as "Equity's Darling" was sufficiently meritorious to take free of equitable interests.
Since 1925 the issue has been coloured by the doctrine of overreaching which we have already considered, and the introduction of a system of land charge registration which will be looked at in subsequent pages. Broadly, overreaching renders the presence or absence of notice irrelevant in respect of certain interests, whilst land charges registration ensures notice in respect of others. The doctrine of notice is by no means obsolete however. It is the foundation of much of the more recent law, and there are still some equitable interests which can neither be overreached or registered as a land charge which remain the province of the doctrine of notice.
The Doctrine of Notice
The doctrine dictates that the buyer is not only bound by those interests about which they actually know, but also by those interests about which they should have known if they had conducted reasonable enquiries.
What are reasonable enquiries will depend on the circumstances of the transaction, but in the normal course of events a buyer would expect to have to both investigate the title deeds and documents and inspect the land - see Hunt v Luck [1902] 1 Ch 428. Most proprietary interests must as we have seen be created by deed or in writing. Many others will be revealed by inspection. Evidence of occupation by any person whose right to be present is not disclosed by the deeds should for instance, make a buyer immediately suspicious that that person has an estate or interest in the land. In addition it is common for buyers to ask their seller to reveal what they know about any rights affecting the land - these enquiries are commonly referred to as Preliminary Enquiries or Enquiries before Contract.
Modifications to Notice
It might seem fair to protect interests of which the buyer has or should be deemed to have notice, but that can make it difficult for a buyer to work out what enquiries should be made in the circumstances. For instance in Kingsnorth Finance Co Ltd. v Tizard [1986] 1 WLR 783, a surveyor who inspected the land at a pre-arranged time on a Sunday morning and failed to look behind cupboard doors was deemed not to have made sufficient enquiries when the other circumstances of the transaction should have made him suspicious that the borrower might be married. Equally, the holder of an equitable interest may find it difficult to protect their interest if it is not clearly evident from an inspection of the land.
As we have seen, since 1925 these problems have been tackled in relation to unregistered land by two mechanisms designed to bring about greater certainty
1. Overreaching; and
2. Registration of land charges.
Land Charges
The Land Charges Act 1925 requires certain interests in land to be registered in a Land Charges Register if they are to bind a purchaser of the land. Registration provides a purchaser with actual notice of the interest whilst a failure to register will render the interest void against a purchaser even if the purchaser knows of the interest. The operation of the Act is well illustrated by Midland Bank Trust Company v Green [1981] AC 513. A farmer had granted his son an option to buy a farm. He subsequently regretted his decision however, and in order to defeat the option, which the son had failed to register as a land charge, he sold the farm to his wife for only £500. At the time, the land was worth about £40,000. The Court of Appeal upheld the son's claim. The low price was both inadequate to constitute his mother a purchaser within the meaning of the act and disclosed the fraudulent nature of the parent's design - it is established that the law will not allow a statute to be used as 'an engine of fraud'. However, the House of Lords rejected both these grounds and, reversing the decision of the Court of Appeal, held the son's option void for non-registration.
The leading judgement in the House of Lords was given by Lord Wilberforce. It was his view that the wording of the statute did not require a purchaser to give adequate consideration or to be bona fide. He further observed that a requirement for purchasers to act in good faith would have resulted in a need to examine their motives. This would have involved the courts in making some very fine distinctions, particularly as in many cases the motives of purchasers would be mixed. In the case in question for instance, it was clear that the mother had used the statute to defeat her son's option, but it was not clear that her motives were malicious. She may have been prompted by a desire to benefit all of her children rather than just one. The absence of any requirement of good faith in the drafting of the legislation, may well have been intended to avoid the necessity for enquiries of this kind.
It is worth noting that the court's decision did not necessarily leave the son's estate greatly disadvantaged. The failure of the son's solicitor to register the interest in the first place had left the solicitor liable to him in negligence, and the father had also committed a breach of contract in trying to thwart the option. The son's personal representatives were thus able to recover damages on his behalf even though the land could no longer be acquired.
Lloyds Bank Plc v Carrick [1994] 4 All ER 630 provides another example of the operation of the land charges. Mrs Carrick entered into an agreement with her brother-in-law to buy a flat that he owned. She sold her home, paid him the purchase price and moved into the flat but the legal title to the flat was not conveyed into her name. Her brother-in-law subsequently mortgaged the flat to Lloyds Bank who sought possession from Mrs Carrick when he defaulted on the mortgage.
Interests Requiring Registration
The interests requiring registration as Land Charges are divided into classes as follows:
Class A & B - certain charges arising by statute
Class C(i) - mortgages that are not protected by the deposit of title deeds, known as 'puisne mortgages'
Class C(ii) - limited owner's charges
Class C(iii) - general equitable charges
Class C(iv) - estate contracts
Class D(i) - Inland Revenue charge for inheritance tax
Class D(ii) - restrictive covenants created after 1925, other than those made between lessors and lessees.
Class D(iii) - equitable easements created or arising after 1925.
Class E - pre-1926 annuities not registered until after the Land Registration Act 1925 came into force.
Class F - rights of occupation under the Family Law Act 1996.
Class A,B,C(i),(ii) and (iii) interests are void if not registered against the purchaser of any estate in the land who gives valuable consideration, whilst Class C(iv) and D interests are void against a narrower category of purchasers, namely those who acquire a legal estate for money or money's worth.
The Characteristics of Land Charges
Most Land Charges are:
1.Equitable
Puisne mortgages are a notable exception to this rule. They include both equitable and legal mortgages which are not protected by the deposit of title deeds. Title deeds play such an important role in unregistered conveyancing that their possession by the lender makes it virtually impossible for the borrower to deal with the land. Thus most first mortgagees will insist upon retaining them.
2.Commercial
It is thus likely that most parties will be legally represented and aware of the need for registration. 'Family equitable interests', (i.e.those held under a trust), tend to be governed by the doctrine of overreaching. The exception is the statutory right of occupation conferred by the Family Law Act 1996. This right was a late edition to the list of land charges.
3.Latent
The majority of land charges would not be apparent from an inspection of the land and thus are just the interests which a buyer may not discover. Class F land charges are an exception, but the anomalous nature of this category has already been noted. Certain Class D(iii) equitable easements may also be apparent from an inspection, e.g. a right of way, but by no means all.
Registration against the Land Owner
Land charges are not registered against the land but against the owner of the land they were created against. Thus a search must be made of all previous owners since 1925 in order to discover what land charges affect a piece of land. Pre-1925 interests are not generally subject to registration and continue to be covered by the doctrine of notice.
The fact that registration is effected against owners rather than land has left the Land Charges system flawed. Buyers of property are only entitled to demand evidence of past owners for the statutory title period, which will usually fall far short of 1925. They are therefore often unable to search against all post-1925 owners and can find themselves subject to registered land charges which they never had an opportunity to discover.
The problem has been partially remedied by the introduction of a system of compensation, payable out of public funds to victims of undiscoverable land charges, under section 25(1) of the Law of Property Act 1969. Eventually of course, the difficulty will remedy itself, as more and more land is added to the Land Register, discussed in the following pages.
Registered land
Where land is registered, the details of ownership etc which would previously have been found in title deeds to the property are instead recorded in the land register. The owner of the property or the lender does receive a Land Certificate or Charge Certificate respectively, showing details of the information held, but it is the register kept at the Land Registry which is the definitive copy. The register is divided into three parts:
1. The Property Register, which gives details of the location and physical dimensions of the land by means of a filed plan and address, and the title number of the registered estate in the land. Only two varieties of estate can be registered, namely legal fee simple absolutes in possession and legal leases of more than 21 years. The benefit of an appurtenant right e.g. an easement or covenant may also be noted in the property register;
2. The Proprietorship Register, giving details of the registered owner and any restriction on their ability to deal with the land; and
3. The Charges Register, giving details of incumbrances to which the property is subject including for instance covenants, easements and registered charges.
Registered Land - Who Can Sell
The Proprietorship Register gives details of the person entitled to deal with the land. The usual way in which registered titles are 'dealt with' is by:
1. the registered proprietor carrying out a transaction, and
2. that transaction being registered by the Land Registry.
The estate or interest created or transferred does not pass at law by the operation of the transfer or other instrument, but by the registration of the dealing. An unregistered dealing however, will be recognised in equity and may give rise to an overriding interest if the transferee goes into occupation.
As we have seen, all transfers and first mortgages of unregistered land taking effect after 1 April 1998 must now culminate in the registration of that land in the name of the purchaser. Such registration must take place within two months of the transaction, or the dealing will be 'void so far as regards the grant or conveyance of the legal estate in the ...land' (Section 123 Land Registration Act 1925).
Overreaching and Restrictions on Sale
The Land Register adopts a 'curtain principle', meaning that a buyer should not have to look beyond the register to establish who can deal with the land.
As we have seen certain interests in land can be overreached by a conveyance on sale subject to compliance with the requirements set out in section 2(1) Law of Property Act 1925. Thus where the land is sold by:
1. Trustees of land with a power of sale who are registered as proprietors of the trust land;
2. The tenant for life under a strict settlement who is registered as proprietor of the settled land;
3. Personal representative(s) in exercise of their statutory powers; or
4. Mortgagees under a registered charge; or
5. Court order;
then the interests of the beneficiaries or the mortgagor may be overreached by the sale provided that any capital monies that arise on the sale are paid in the case of a trust of land either to two trustees or a trust corporation or to the personal representative(s), mortgagee or as directed by the court order as appropriate.
However, a registered proprietor's ability to sell land may be affected by a restriction or inhibition entered in the Proprietorship Register. An inhibition is imposed by the registrar or the court while a restriction is entered with the consent of the registered proprietor (see sections 57 and 58 Land Registration Act 1925).
A registered proprietor's ability to sell land may be affected by a restriction if the registered proprietor agrees to its entry in the Proprietorship Register, or an inhibition imposed by the registrar or a court. In respect of which of the following registered proprietor's do you think the given restriction would be appropriate?
Registered Land - What can the Seller Sell?
The Land Register seeks to adopt a 'mirror principle' whereby the register should reveal all interests in the land in:
1. The Property Register, which comprises a physical description of the land, including a plan, together with details of the registered estate in the land and the rights to which the estate has the benefit; and
2. The Charges Register, which contains details of the incumbrances to which the property is subject. Any registered charges securing loans advanced by a bank, building society or other lender would appear here, as would any 'notices', which, (as is explained further in the following pages), may be used to record and protect a variety of other incumbrances.
Minor Interests
We have already seen that limits may be placed on the ability of a registered proprietor to deal with land by entering either a restriction or an inhibition on the register.
It is also possible to protect an incumbrance by the entry of a notice in the Charges Register. A notice will record the nature of the incumbrance and can be used to protect many of the interests which in unregistered land would require registration as land charges.
Entry of a notice generally depends on the Land Certificate being made available to the Registrar. Statutory rights of occupation under the Family Law Act 1996 are an exception to this rule. No difficulty arises here on first registration or registration of any subsequent dealings, since the necessary documentation will in these instances still be at the Registry. Equally, few problems arise when the property in question is mortgaged as the Land Certificate will have been retained and a Charge Certificate issued to the mortgagee. In other circumstances however, the co-operation of the registered proprietor might be required. If this is not forthcoming, the interested party may instead request the entry of a caution. This requires no co-operation on the part of the proprietor and will prevent any subsequent registration or dealing with the property taking place until notice has been served on the cautioner giving an opportunity to object. Cautions are intended to be used only as a temporary measure until the dispute can be resolved by the parties, or if necessary by the courts. Cautions thus do not give an interest priority as such they merely warn the holder of the interest that they must further action to protect their interest because a dealing with the land is imminent - see Clark v Chief Land Registrar [1994] Ch 370.
Incumbrances which require protection by the entry of a restriction, inhibition, notice or caution are known collectively as minor interests. Failure to protect them by means of some record on the land register will result in their being void as against a purchaser see sections 20, 23 and 59(6) Land Registration Act 1925. Although, perhaps surprisingly, an unprotected minor interest will not lose priority against a subsequent minor interest. The Act fails to make provision for this scenario and so the courts have fallen back on the common law rule that where the equities are equal the first in time prevails - Barclays Bank v Taylor [1974] Ch 137 and Mortgage Corporation Ltd v Nationwide Credit Corporation Ltd [1994] Ch 49.
Investigating Title to Registered Land
Potential purchasers of registered land can obtain copies of the register (including the Proprietorship, Property and Charges registers), known as office copies, to enable them to ascertain the ownership and details of the encumbrances protected as minor interests which affect the property.
Before finalising their purchase, buyers can also confirm and update their knowledge of the register by carrying out a further search to reveal whether any entries have been made since the date of their office copies. This search is not only of benefit in ensuring that the buyer does not fall foul of last minute entries made prior to the search. It also confers on the buyer a thirty day priority period which freezes the register and, provided the buyer registers his dealing with the land within the period, prevents the buyer becoming subject to entries made after the search.
Overriding Interests
The mirror principle adopted by the Land Registration Act 1925 has a chink in it, created by the concept of overriding interests, which has been growing ever wider.
Overriding interests do not have to be recorded on the Land Register, but should be evident from an inspection of the land or from enquiry of those in occupation. Their scope is defined by section 70 of the Land Registration Act 1925, the most significant of them being:
1. easements, other than equitable easements that are not openly exercised and enjoyed, (s. 70(1)(a) and Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204);
2. rights acquired or in the course of being acquired under the Limitation Acts, (s.70(1)(f));
3. the rights of every person in occupation of land or in receipt of rents and profits in respect of it, save where enquiry is made of those persons and the rights are not disclosed, (s.70(1)(g));
4. legal leases granted for a term not exceeding 21 years, (s.70(1)(k)).
Section 70(1)(g) of the Land Registration Act 1925
Section 70(1)(g) has proved a particularly difficult group of overriding interests to identify.
Problems arise in identifying firstly what will constitute a 'right', and secondly, what will amount to 'occupation'.
Time of Occupation
The basic principle of land registration is the primacy of the register. It is the time of registration, as opposed to the time of the disposition, which governs what and when the buyer acquires. If you remember the buyer, before he completes his purchase, can freeze the register for 30 days so that, provided he registers his disposition within that time, the buyer can be sure that he will not be bound by an adverse interest which he cannot discover from inspecting the register.
But overriding interests take effect off the register. If the time of registration rule prevailed there would be a danger of a buyer being bound by an overriding interest which he could not discover. An inspection of the land at the time of completing his disposition may reveal no adverse occupation. But occupation could be taken up between the time of the disposition and the time it is registered. The House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56 avoided this "conveyancing absurdity" in respect of overriding interest arising under s70(1)g by holding that rights protected by occupation under this subsection were governed by a different rule - the "interest" and its protective "occupation" must subsist at the time of the disposition as well as the time of registration if the buyer is to be bound.
However, the High Court in Barclays Bank Plc v Zaroovabli [1997] 2 WLR 729 held that the primacy of registration rule applied to other overriding interests. The case concerned a tenancy of under 21 years which would qualify as an overriding interest under section 70(1)k, if it had been subsisting at the date of registration of the competing interest - a legal charge. The danger for buyers of other overriding interest arising between the date of completion and registration thus remains.
Minor & Overriding Interests & Overreaching
We have seen that buyers are bound by:
- minor interests that are protected by registration;
- overriding interests; and
- interest that are not overreached
and we have looked at what are minor interests, overriding interest and what is overreaching. But how do these concepts fit together?
Minor v Overriding Interests
Interests under a trust for land, whether express or implied, may qualify as both a minor interest and an overriding interest under section 70(1)g if the beneficiary is in occupation of the land. If the beneficial interest is to bind a buyer must it, as a minor interest, be protected by an entry on the register or can it rely on protection as an overriding interest?
This issue arose in William & Glynns Bank v Boland [1981] AC 487 when the House of Lords had to consider the nature of a wife's equitable co-ownership interest in the matrimonial home under an implied trust for sale. Look at this extract from the judgement of Lord Wilberforce at 507E and select his answer.
How then are these rights to be fitting into the scheme of the Land Registration Act 1925? It is clear that the interests of the co-owners under the statutory trusts are minor interests - this fits well with the definition in section 3(xv). But I can see no reason why, if these interests, or that of any one of them, are or is protected by "actual occupation" they should remain merely as "minor interest." On the contrary, I see every reason why, in that event, they should acquire the status of overriding interests. And moreover, I find it easy to accept that they satisfy the opening and governing words of section 70, namely, interests subsisting in reference to the land. As Lord Denning MR points out, to describe the interests of spouses in a house jointly bought to be lived in as a matrimonial home as merely interest in the proceeds of sale is just a little unreal.
Overriding interests under section 70(1)(g) of the Land Registration Act 1925 do not just require an appropriate right. Occupation of the property or the receipt of rent or profits from it is also necessary. Occupation is a question of fact. What constitutes occupation will vary depending not only upon the quality of the occupation but also on the nature of the property eg the occupation of a shop will differ from occupation of a house.
Overriding Interests v Overreaching
The question of whether an overriding interest could be overreached arose in City of London Building Society v Flegg [1988] 1 AC 54. Mr & Mrs Flegg contributed to the cost of the house in which they lived with their daughter and son-in-law. The house was registered in the daughter and son-in-law's names, who thus held it on implied trust for themselves and the Fleggs as equitable tenants in common. To relieve financial problems, the daughter and son-in-law mortgaged the house. Subsequently, the Building Society sought possession claiming the Flegg's overriding interests had been overreached by their mortgage.
Rectification
The land register may be rectified:
1.By the court where
(a) someone is entitled to an interest or charge which is not on the register,
(b) an interest has been wrongly excluded or entered on first registration;
2.By a court or the registrar where
(a) all interested parties consent,
(b) an entry was obtained by fraud,
(c) there has been double registration,
(d) a chargee has been wrongly registered as proprietor,
(e) the legal estate is registered in the name of someone who, if the land was unregistered, would not be the estate owner, e.g. where title has been extinguished through adverse possession,
(f) by reason of an error or omission in the register, or an entry made as a result of a mistake, rectification may be deemed just;
Rectification may not be carried out if to do so would prejudice a registered proprietor in possession of the property, unless:
(i) it is to give effect to an overriding interest or order of the court; or
(ii) the registered proprietor contributed to the problem through fraud, lack of care or omission; or
(iii) it would, for any other reason, be unjust not to rectify.
Section 82 of the Land Registration Act 1925
Indemnity: The Insurance Principle
It is said that a registered title is 'guaranteed' in that:
1. any person suffering loss by reason of any rectification of the register; and
2. any person suffering loss as a result of an error or omission which is not rectified;
is prima facie entitled to be indemnified for their loss.
There are exceptions to this general rule. Those who have wholly or partly caused the loss error by their own fraud will not be compensated. Nor will those who have wholly caused their loss as a result of their own lack of proper care. Those that have just contributed to their loss by their lack of care will have their compensation reduced accordingly. Somewhat unreasonably, compensation is also denied where a title is rectified to give effect to an overriding interest. The philosophy behind this exclusion is that the land concerned will always have been subject to the overriding interest, albeit without the knowledge of the title holder. Rectifying the register merely involves properly recording the position as it was at the time of registration. The title holder is therefore not regarded as having suffered any actual loss.
Despite the exceptions, the indemnity system at first sight appears generous. The financing of the system has however, come in for considerable criticism. Income from the fees which are charged to applicants for registration has in the past vastly exceeded the value of indemnities paid out, to such an extent that the difference has been described as "almost on embarrassment", ([1988] The Conveyancer 73, 74).
Whenever land is sold, parties to the sale will be concerned to establish:
1. who is able to sell the land;
2. what the seller owns; and
3. what will be acquired by the buyer.
The answers to questions two and three may well not be the same since, as we shall see in the following pages, it is not necessarily the case that the land as used and enjoyed by the seller, will be passed on in identical form to the buyer. Additional rights or obligations may be created on sale, and some may simply not be transferred.
These questions will not only concern the buyer and seller. They will also be of importance to anyone wishing to acquire an interest in the property, for instance prospective lessees, or lenders such as banks and building societies who supply capital for the transaction and wish to secure their loans by means of a mortgage.
What will the Buyer Acquire?
The interests associated with a piece of land that affect the seller, are not always identical to those that affect the buyer to whom it is sold. Some of the interests binding on the seller may for instance be:
1. Personal
Contracts entered into by a seller in a personal capacity will bind him but will not affect the land. A licence for a friend to occupy a part of the house or for a neighbour to use some facility on the land for example, would normally amount only to contractual obligations, not proprietary interests.
2. Protectable
The law has generally taken the attitude that a buyer should be bound by those proprietary interest which they know about or should be able to discover. Some interests may be easy to discover - they are evident from an inspection of the land. But, there are some types of interest which even a thorough buyer might be hard pressed to uncover. It is clearly inappropriate for innocent buyers to be bound by matters of which they could never have known. The law commonly resolves this problem by requiring the existence of the interest to be recorded in a register which a buyer can search. Failure to properly record an interest, then results in it not binding a buyer.
3. Overreachable
In certain types of transaction, it is considered inappropriate for various equitable interests to bind buyers of the property. The law allows these interests to be 'overreached' by the transaction, so that buyers take free of them. Provided that all the legal requirements for overreaching are complied with, the mechanism operates automatically, regardless of the intentions of the parties.
Overreaching
It is not always the case that the primary concern of a land owner is retention of the land. Often, the motivation for land ownership lies in the financial value the interest represents, rather than in the occupational or other user rights. A beneficiary under a trust, for instance, may be more concerned with the investment value the land represents, both by way of the income produced and capital appreciation that will accrue if the land value rises, than with a right to remain in the property. Likewise a beneficiary to a deceased's estate under a will or intestacy is more likely to want to receive the monetary value of their entitlement. Although, the personal representatives may, subject to certain conditions, appropriate specific assets in satisfaction of that entitlement.
The objectives of an individual whose primary concern rests in investment rather than occupation, may be met equally by ownership of different land or even of a different type of asset. Such an individual, provided they are assured of securing an interest in the purchase monies, may not be particularly concerned to enforce their rights of occupation of the property against subsequent purchasers.
These objectives may be accommodated by ensuring that the land or other property is easily saleable by placing the power to sell the land in the holders of the legal estate ie the trustees and providing that the beneficial interests in the trust property can be 'overreached' so that they will not bind the purchaser. The beneficiaries' interests are protected to the extant that any capital monies arising as a result of the transaction (eg the sale proceeds or mortgage advance) must be paid to at least two trustees or a trust corporation to effect overreaching in the case of a trust and to the personal presentative(s) in the case of a deceased estate. Their rights are thus against the trustees or personal representative but not the purchaser. Where no capital monies arise on the transaction (eg on a mortgage to secure an overdraft) the only requirement to effect overreaching is that the beneficial interests are capable of being overreached State Bank of India v Sood [1997] 2 WLR 421.
Mortgagees too, are more concerned with the value of land as a means of securing payment of their loans than they are with any right to use or enjoy property. Overreaching is thus employed to enable mortgagees to realise their security free of the interests of the mortgagor in the mortgaged property.
The concept of overreaching was given statutory form in the Law of Property Act 1925 and was initially applied to trusts for sale, strict settlements and sales by personal representatives and mortgagees. Following the enactment of the Trust of Land and Appointment of Trustees Act 1996, statutory overreaching is extended to all trusts of land, including express and implied trusts, express trusts for sale and bare trusts.
Protectable: Land and Interest Registration
We noted in our section on Rationale that conveyancing had become so complex by the 19th century that reform was imperative. One of the major thrust of reform was land registration.
There had been previous attempts to introduce registration. Henry VIII tried to do so when he forced through the Statute of Uses but his Statute of Enrolments was of limited effect. During the 16th century registration of deeds was introduce in parts of the country eg in Middlesex and Yorkshire and there was also limited registration of some land interests. But the real moves towards introducing land registration did not begin in earnest until the mid-19th century. They led to the Land Registration Act 1925.
This Act has introduced a new system for dealing with land which depends on the primacy of a land register to record land ownership and to protect land interests. Since 1st December 1990 all conveyances on sale of land in England & Wales have had to be registered at the appropriate Land Registry and since 1st April 1998 other transfers and first mortgages of land also have to be registered. However, it would be a mistake to assume that all land in England and Wales is registered. There is still a lot of land which is unregistered merely because there has been no dealing since registration became compulsory. We therefore have to look at two systems of dealing with land:
1. Unregistered land
2. Registered land
Even in unregistered land there is a limited requirement to register certain interests in land, including a number which it may be difficult for a purchaser to otherwise discover. These interests must be registered as land charges under the Land Charges Act 1972.
Unregistered Land: Proving Capacity to Sell
We have seen that land ownership is not absolute. The owner of land is the person that can establish the best right to possession of that land. Title or ownership of property has thus traditionally been established by the production of evidence showing a right to possession.
The period over which the right must be shown has been closely linked to the period of limitation. After all, if a person can establish possession for a period at least as long as the limitation period, they should be able to defeat any claim from a previous owner whose title will have been extinguished by adverse possession. The present title period is at least 15 years, see section 44 of the Law of Property Act 1925.
Given that almost all legal estates in land must be disposed of by deed, and most equitable interests in writing, sellers prove their ownership of land by producing evidence of all the documents showing any dealing with the land for a period of at least 15 years, starting with a good root of title. The seller may choose to produce that evidence either by way of an epitome comprising a schedule and copies of all those documents that must be produced, or by way of an abstract, being a summary of those documents, which is examined as correct against the original documents by a solicitor.
Unregistered Land: Establishing what is for sale
How do interested parties find out what interests exist in a piece of land?
We have already seen that ownership of unregistered land is shown by producing documents showing dealings with the land for at least the last 15 years, beginning with a good root of title.
Since generally, legal estates and interests must be created or disposed of by deed, and equitable interests in writing, these documents of title should, besides providing proof of the seller's right to sell, also reveal most of the legal and equitable interests in the property.
In a typical conveyance, the estates and interests which exist in the land to be sold, will be described in a clause known as the parcels clause.
The following is an extract from the text of a conveyance. Can you highlight the parcels clause?
NOW THIS DEED WITNESSETH as follows:-
In pursuance of the said agreement and in consideration of the sum of TEN THOUSAND POUNDS now paid by the Purchaser to the Vendor (the receipt of which the Vendor acknowledges) the Vendor as beneficial owner HEREBY CONVEYS to the Purchaser ALL THAT piece or parcel of land known as 29 George Road Walford Bristol which is for the purposes of identification only shown edged red on a Conveyance dated 23rd September 1936 and made between Bristol Development Company Limited of the one part and Derek Barnes of the other part (hereinafter called "the Conveyance") TOGETHER with the benefit of but SUBJECT to such rights of way and drainage as more particularly set out and described in the Conveyance TO HOLD the same unto the Purchaser in fee simple SUBJECT to the covenants conditions and stipulations contained in the Conveyance so far as the same are still subsisting and capable of taking effect.
IN WITNESS whereof the parties have hereunto set their hands and seals the day and year first before written
Title documents provide a useful source of information about the interests which may exist in property, but they do not tell the whole story. We have also seen that:
1. Equity will give effect to the parties' intentions even though those intentions are not evidenced in writing, where to do so is necessary to avoid fraud or unconscionable conduct. There may for instance, be no written evidence of a resulting or constructive trust, or of interests supported by estoppel.
2. The law gives effect to some de facto situations by recognising interests that have arisen through adverse possession or prescription.
Equitable Estates and Interests
Prior to the 1925 legislation, there were really only two rules which were of importance in deciding whether an equitable estate or interest would bind a purchaser, namely:
1. Equitable interests bind all but the bona fide purchaser for value of the legal estate without notice; and
2. Where the equities are equal, the first in time prevails.
Equity's concern with conscience would not allow the holder of a legal estate to ignore equitable interests of which they had notice. Equally, those who did not purchase the legal estate for value, i.e.people who received property by way of gift or by virtue of being squatters, were regarded as receiving the estate subject to any interests presently affecting it. Only a bona fide purchaser of the legal estate for value without notice, known as "Equity's Darling" was sufficiently meritorious to take free of equitable interests.
Since 1925 the issue has been coloured by the doctrine of overreaching which we have already considered, and the introduction of a system of land charge registration which will be looked at in subsequent pages. Broadly, overreaching renders the presence or absence of notice irrelevant in respect of certain interests, whilst land charges registration ensures notice in respect of others. The doctrine of notice is by no means obsolete however. It is the foundation of much of the more recent law, and there are still some equitable interests which can neither be overreached or registered as a land charge which remain the province of the doctrine of notice.
The Doctrine of Notice
The doctrine dictates that the buyer is not only bound by those interests about which they actually know, but also by those interests about which they should have known if they had conducted reasonable enquiries.
What are reasonable enquiries will depend on the circumstances of the transaction, but in the normal course of events a buyer would expect to have to both investigate the title deeds and documents and inspect the land - see Hunt v Luck [1902] 1 Ch 428. Most proprietary interests must as we have seen be created by deed or in writing. Many others will be revealed by inspection. Evidence of occupation by any person whose right to be present is not disclosed by the deeds should for instance, make a buyer immediately suspicious that that person has an estate or interest in the land. In addition it is common for buyers to ask their seller to reveal what they know about any rights affecting the land - these enquiries are commonly referred to as Preliminary Enquiries or Enquiries before Contract.
Modifications to Notice
It might seem fair to protect interests of which the buyer has or should be deemed to have notice, but that can make it difficult for a buyer to work out what enquiries should be made in the circumstances. For instance in Kingsnorth Finance Co Ltd. v Tizard [1986] 1 WLR 783, a surveyor who inspected the land at a pre-arranged time on a Sunday morning and failed to look behind cupboard doors was deemed not to have made sufficient enquiries when the other circumstances of the transaction should have made him suspicious that the borrower might be married. Equally, the holder of an equitable interest may find it difficult to protect their interest if it is not clearly evident from an inspection of the land.
As we have seen, since 1925 these problems have been tackled in relation to unregistered land by two mechanisms designed to bring about greater certainty
1. Overreaching; and
2. Registration of land charges.
Land Charges
The Land Charges Act 1925 requires certain interests in land to be registered in a Land Charges Register if they are to bind a purchaser of the land. Registration provides a purchaser with actual notice of the interest whilst a failure to register will render the interest void against a purchaser even if the purchaser knows of the interest. The operation of the Act is well illustrated by Midland Bank Trust Company v Green [1981] AC 513. A farmer had granted his son an option to buy a farm. He subsequently regretted his decision however, and in order to defeat the option, which the son had failed to register as a land charge, he sold the farm to his wife for only £500. At the time, the land was worth about £40,000. The Court of Appeal upheld the son's claim. The low price was both inadequate to constitute his mother a purchaser within the meaning of the act and disclosed the fraudulent nature of the parent's design - it is established that the law will not allow a statute to be used as 'an engine of fraud'. However, the House of Lords rejected both these grounds and, reversing the decision of the Court of Appeal, held the son's option void for non-registration.
The leading judgement in the House of Lords was given by Lord Wilberforce. It was his view that the wording of the statute did not require a purchaser to give adequate consideration or to be bona fide. He further observed that a requirement for purchasers to act in good faith would have resulted in a need to examine their motives. This would have involved the courts in making some very fine distinctions, particularly as in many cases the motives of purchasers would be mixed. In the case in question for instance, it was clear that the mother had used the statute to defeat her son's option, but it was not clear that her motives were malicious. She may have been prompted by a desire to benefit all of her children rather than just one. The absence of any requirement of good faith in the drafting of the legislation, may well have been intended to avoid the necessity for enquiries of this kind.
It is worth noting that the court's decision did not necessarily leave the son's estate greatly disadvantaged. The failure of the son's solicitor to register the interest in the first place had left the solicitor liable to him in negligence, and the father had also committed a breach of contract in trying to thwart the option. The son's personal representatives were thus able to recover damages on his behalf even though the land could no longer be acquired.
Lloyds Bank Plc v Carrick [1994] 4 All ER 630 provides another example of the operation of the land charges. Mrs Carrick entered into an agreement with her brother-in-law to buy a flat that he owned. She sold her home, paid him the purchase price and moved into the flat but the legal title to the flat was not conveyed into her name. Her brother-in-law subsequently mortgaged the flat to Lloyds Bank who sought possession from Mrs Carrick when he defaulted on the mortgage.
Interests Requiring Registration
The interests requiring registration as Land Charges are divided into classes as follows:
Class A & B - certain charges arising by statute
Class C(i) - mortgages that are not protected by the deposit of title deeds, known as 'puisne mortgages'
Class C(ii) - limited owner's charges
Class C(iii) - general equitable charges
Class C(iv) - estate contracts
Class D(i) - Inland Revenue charge for inheritance tax
Class D(ii) - restrictive covenants created after 1925, other than those made between lessors and lessees.
Class D(iii) - equitable easements created or arising after 1925.
Class E - pre-1926 annuities not registered until after the Land Registration Act 1925 came into force.
Class F - rights of occupation under the Family Law Act 1996.
Class A,B,C(i),(ii) and (iii) interests are void if not registered against the purchaser of any estate in the land who gives valuable consideration, whilst Class C(iv) and D interests are void against a narrower category of purchasers, namely those who acquire a legal estate for money or money's worth.
The Characteristics of Land Charges
Most Land Charges are:
1.Equitable
Puisne mortgages are a notable exception to this rule. They include both equitable and legal mortgages which are not protected by the deposit of title deeds. Title deeds play such an important role in unregistered conveyancing that their possession by the lender makes it virtually impossible for the borrower to deal with the land. Thus most first mortgagees will insist upon retaining them.
2.Commercial
It is thus likely that most parties will be legally represented and aware of the need for registration. 'Family equitable interests', (i.e.those held under a trust), tend to be governed by the doctrine of overreaching. The exception is the statutory right of occupation conferred by the Family Law Act 1996. This right was a late edition to the list of land charges.
3.Latent
The majority of land charges would not be apparent from an inspection of the land and thus are just the interests which a buyer may not discover. Class F land charges are an exception, but the anomalous nature of this category has already been noted. Certain Class D(iii) equitable easements may also be apparent from an inspection, e.g. a right of way, but by no means all.
Registration against the Land Owner
Land charges are not registered against the land but against the owner of the land they were created against. Thus a search must be made of all previous owners since 1925 in order to discover what land charges affect a piece of land. Pre-1925 interests are not generally subject to registration and continue to be covered by the doctrine of notice.
The fact that registration is effected against owners rather than land has left the Land Charges system flawed. Buyers of property are only entitled to demand evidence of past owners for the statutory title period, which will usually fall far short of 1925. They are therefore often unable to search against all post-1925 owners and can find themselves subject to registered land charges which they never had an opportunity to discover.
The problem has been partially remedied by the introduction of a system of compensation, payable out of public funds to victims of undiscoverable land charges, under section 25(1) of the Law of Property Act 1969. Eventually of course, the difficulty will remedy itself, as more and more land is added to the Land Register, discussed in the following pages.
Registered land
Where land is registered, the details of ownership etc which would previously have been found in title deeds to the property are instead recorded in the land register. The owner of the property or the lender does receive a Land Certificate or Charge Certificate respectively, showing details of the information held, but it is the register kept at the Land Registry which is the definitive copy. The register is divided into three parts:
1. The Property Register, which gives details of the location and physical dimensions of the land by means of a filed plan and address, and the title number of the registered estate in the land. Only two varieties of estate can be registered, namely legal fee simple absolutes in possession and legal leases of more than 21 years. The benefit of an appurtenant right e.g. an easement or covenant may also be noted in the property register;
2. The Proprietorship Register, giving details of the registered owner and any restriction on their ability to deal with the land; and
3. The Charges Register, giving details of incumbrances to which the property is subject including for instance covenants, easements and registered charges.
Registered Land - Who Can Sell
The Proprietorship Register gives details of the person entitled to deal with the land. The usual way in which registered titles are 'dealt with' is by:
1. the registered proprietor carrying out a transaction, and
2. that transaction being registered by the Land Registry.
The estate or interest created or transferred does not pass at law by the operation of the transfer or other instrument, but by the registration of the dealing. An unregistered dealing however, will be recognised in equity and may give rise to an overriding interest if the transferee goes into occupation.
As we have seen, all transfers and first mortgages of unregistered land taking effect after 1 April 1998 must now culminate in the registration of that land in the name of the purchaser. Such registration must take place within two months of the transaction, or the dealing will be 'void so far as regards the grant or conveyance of the legal estate in the ...land' (Section 123 Land Registration Act 1925).
Overreaching and Restrictions on Sale
The Land Register adopts a 'curtain principle', meaning that a buyer should not have to look beyond the register to establish who can deal with the land.
As we have seen certain interests in land can be overreached by a conveyance on sale subject to compliance with the requirements set out in section 2(1) Law of Property Act 1925. Thus where the land is sold by:
1. Trustees of land with a power of sale who are registered as proprietors of the trust land;
2. The tenant for life under a strict settlement who is registered as proprietor of the settled land;
3. Personal representative(s) in exercise of their statutory powers; or
4. Mortgagees under a registered charge; or
5. Court order;
then the interests of the beneficiaries or the mortgagor may be overreached by the sale provided that any capital monies that arise on the sale are paid in the case of a trust of land either to two trustees or a trust corporation or to the personal representative(s), mortgagee or as directed by the court order as appropriate.
However, a registered proprietor's ability to sell land may be affected by a restriction or inhibition entered in the Proprietorship Register. An inhibition is imposed by the registrar or the court while a restriction is entered with the consent of the registered proprietor (see sections 57 and 58 Land Registration Act 1925).
A registered proprietor's ability to sell land may be affected by a restriction if the registered proprietor agrees to its entry in the Proprietorship Register, or an inhibition imposed by the registrar or a court. In respect of which of the following registered proprietor's do you think the given restriction would be appropriate?
Registered Land - What can the Seller Sell?
The Land Register seeks to adopt a 'mirror principle' whereby the register should reveal all interests in the land in:
1. The Property Register, which comprises a physical description of the land, including a plan, together with details of the registered estate in the land and the rights to which the estate has the benefit; and
2. The Charges Register, which contains details of the incumbrances to which the property is subject. Any registered charges securing loans advanced by a bank, building society or other lender would appear here, as would any 'notices', which, (as is explained further in the following pages), may be used to record and protect a variety of other incumbrances.
Minor Interests
We have already seen that limits may be placed on the ability of a registered proprietor to deal with land by entering either a restriction or an inhibition on the register.
It is also possible to protect an incumbrance by the entry of a notice in the Charges Register. A notice will record the nature of the incumbrance and can be used to protect many of the interests which in unregistered land would require registration as land charges.
Entry of a notice generally depends on the Land Certificate being made available to the Registrar. Statutory rights of occupation under the Family Law Act 1996 are an exception to this rule. No difficulty arises here on first registration or registration of any subsequent dealings, since the necessary documentation will in these instances still be at the Registry. Equally, few problems arise when the property in question is mortgaged as the Land Certificate will have been retained and a Charge Certificate issued to the mortgagee. In other circumstances however, the co-operation of the registered proprietor might be required. If this is not forthcoming, the interested party may instead request the entry of a caution. This requires no co-operation on the part of the proprietor and will prevent any subsequent registration or dealing with the property taking place until notice has been served on the cautioner giving an opportunity to object. Cautions are intended to be used only as a temporary measure until the dispute can be resolved by the parties, or if necessary by the courts. Cautions thus do not give an interest priority as such they merely warn the holder of the interest that they must further action to protect their interest because a dealing with the land is imminent - see Clark v Chief Land Registrar [1994] Ch 370.
Incumbrances which require protection by the entry of a restriction, inhibition, notice or caution are known collectively as minor interests. Failure to protect them by means of some record on the land register will result in their being void as against a purchaser see sections 20, 23 and 59(6) Land Registration Act 1925. Although, perhaps surprisingly, an unprotected minor interest will not lose priority against a subsequent minor interest. The Act fails to make provision for this scenario and so the courts have fallen back on the common law rule that where the equities are equal the first in time prevails - Barclays Bank v Taylor [1974] Ch 137 and Mortgage Corporation Ltd v Nationwide Credit Corporation Ltd [1994] Ch 49.
Investigating Title to Registered Land
Potential purchasers of registered land can obtain copies of the register (including the Proprietorship, Property and Charges registers), known as office copies, to enable them to ascertain the ownership and details of the encumbrances protected as minor interests which affect the property.
Before finalising their purchase, buyers can also confirm and update their knowledge of the register by carrying out a further search to reveal whether any entries have been made since the date of their office copies. This search is not only of benefit in ensuring that the buyer does not fall foul of last minute entries made prior to the search. It also confers on the buyer a thirty day priority period which freezes the register and, provided the buyer registers his dealing with the land within the period, prevents the buyer becoming subject to entries made after the search.
Overriding Interests
The mirror principle adopted by the Land Registration Act 1925 has a chink in it, created by the concept of overriding interests, which has been growing ever wider.
Overriding interests do not have to be recorded on the Land Register, but should be evident from an inspection of the land or from enquiry of those in occupation. Their scope is defined by section 70 of the Land Registration Act 1925, the most significant of them being:
1. easements, other than equitable easements that are not openly exercised and enjoyed, (s. 70(1)(a) and Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204);
2. rights acquired or in the course of being acquired under the Limitation Acts, (s.70(1)(f));
3. the rights of every person in occupation of land or in receipt of rents and profits in respect of it, save where enquiry is made of those persons and the rights are not disclosed, (s.70(1)(g));
4. legal leases granted for a term not exceeding 21 years, (s.70(1)(k)).
Section 70(1)(g) of the Land Registration Act 1925
Section 70(1)(g) has proved a particularly difficult group of overriding interests to identify.
Problems arise in identifying firstly what will constitute a 'right', and secondly, what will amount to 'occupation'.
Time of Occupation
The basic principle of land registration is the primacy of the register. It is the time of registration, as opposed to the time of the disposition, which governs what and when the buyer acquires. If you remember the buyer, before he completes his purchase, can freeze the register for 30 days so that, provided he registers his disposition within that time, the buyer can be sure that he will not be bound by an adverse interest which he cannot discover from inspecting the register.
But overriding interests take effect off the register. If the time of registration rule prevailed there would be a danger of a buyer being bound by an overriding interest which he could not discover. An inspection of the land at the time of completing his disposition may reveal no adverse occupation. But occupation could be taken up between the time of the disposition and the time it is registered. The House of Lords in Abbey National Building Society v Cann [1991] 1 AC 56 avoided this "conveyancing absurdity" in respect of overriding interest arising under s70(1)g by holding that rights protected by occupation under this subsection were governed by a different rule - the "interest" and its protective "occupation" must subsist at the time of the disposition as well as the time of registration if the buyer is to be bound.
However, the High Court in Barclays Bank Plc v Zaroovabli [1997] 2 WLR 729 held that the primacy of registration rule applied to other overriding interests. The case concerned a tenancy of under 21 years which would qualify as an overriding interest under section 70(1)k, if it had been subsisting at the date of registration of the competing interest - a legal charge. The danger for buyers of other overriding interest arising between the date of completion and registration thus remains.
Minor & Overriding Interests & Overreaching
We have seen that buyers are bound by:
- minor interests that are protected by registration;
- overriding interests; and
- interest that are not overreached
and we have looked at what are minor interests, overriding interest and what is overreaching. But how do these concepts fit together?
Minor v Overriding Interests
Interests under a trust for land, whether express or implied, may qualify as both a minor interest and an overriding interest under section 70(1)g if the beneficiary is in occupation of the land. If the beneficial interest is to bind a buyer must it, as a minor interest, be protected by an entry on the register or can it rely on protection as an overriding interest?
This issue arose in William & Glynns Bank v Boland [1981] AC 487 when the House of Lords had to consider the nature of a wife's equitable co-ownership interest in the matrimonial home under an implied trust for sale. Look at this extract from the judgement of Lord Wilberforce at 507E and select his answer.
How then are these rights to be fitting into the scheme of the Land Registration Act 1925? It is clear that the interests of the co-owners under the statutory trusts are minor interests - this fits well with the definition in section 3(xv). But I can see no reason why, if these interests, or that of any one of them, are or is protected by "actual occupation" they should remain merely as "minor interest." On the contrary, I see every reason why, in that event, they should acquire the status of overriding interests. And moreover, I find it easy to accept that they satisfy the opening and governing words of section 70, namely, interests subsisting in reference to the land. As Lord Denning MR points out, to describe the interests of spouses in a house jointly bought to be lived in as a matrimonial home as merely interest in the proceeds of sale is just a little unreal.
Overriding interests under section 70(1)(g) of the Land Registration Act 1925 do not just require an appropriate right. Occupation of the property or the receipt of rent or profits from it is also necessary. Occupation is a question of fact. What constitutes occupation will vary depending not only upon the quality of the occupation but also on the nature of the property eg the occupation of a shop will differ from occupation of a house.
Overriding Interests v Overreaching
The question of whether an overriding interest could be overreached arose in City of London Building Society v Flegg [1988] 1 AC 54. Mr & Mrs Flegg contributed to the cost of the house in which they lived with their daughter and son-in-law. The house was registered in the daughter and son-in-law's names, who thus held it on implied trust for themselves and the Fleggs as equitable tenants in common. To relieve financial problems, the daughter and son-in-law mortgaged the house. Subsequently, the Building Society sought possession claiming the Flegg's overriding interests had been overreached by their mortgage.
Rectification
The land register may be rectified:
1.By the court where
(a) someone is entitled to an interest or charge which is not on the register,
(b) an interest has been wrongly excluded or entered on first registration;
2.By a court or the registrar where
(a) all interested parties consent,
(b) an entry was obtained by fraud,
(c) there has been double registration,
(d) a chargee has been wrongly registered as proprietor,
(e) the legal estate is registered in the name of someone who, if the land was unregistered, would not be the estate owner, e.g. where title has been extinguished through adverse possession,
(f) by reason of an error or omission in the register, or an entry made as a result of a mistake, rectification may be deemed just;
Rectification may not be carried out if to do so would prejudice a registered proprietor in possession of the property, unless:
(i) it is to give effect to an overriding interest or order of the court; or
(ii) the registered proprietor contributed to the problem through fraud, lack of care or omission; or
(iii) it would, for any other reason, be unjust not to rectify.
Section 82 of the Land Registration Act 1925
Indemnity: The Insurance Principle
It is said that a registered title is 'guaranteed' in that:
1. any person suffering loss by reason of any rectification of the register; and
2. any person suffering loss as a result of an error or omission which is not rectified;
is prima facie entitled to be indemnified for their loss.
There are exceptions to this general rule. Those who have wholly or partly caused the loss error by their own fraud will not be compensated. Nor will those who have wholly caused their loss as a result of their own lack of proper care. Those that have just contributed to their loss by their lack of care will have their compensation reduced accordingly. Somewhat unreasonably, compensation is also denied where a title is rectified to give effect to an overriding interest. The philosophy behind this exclusion is that the land concerned will always have been subject to the overriding interest, albeit without the knowledge of the title holder. Rectifying the register merely involves properly recording the position as it was at the time of registration. The title holder is therefore not regarded as having suffered any actual loss.
Despite the exceptions, the indemnity system at first sight appears generous. The financing of the system has however, come in for considerable criticism. Income from the fees which are charged to applicants for registration has in the past vastly exceeded the value of indemnities paid out, to such an extent that the difference has been described as "almost on embarrassment", ([1988] The Conveyancer 73, 74).
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