Impact of the Land Registration Act 2002

Impact of the Land Registration Act 2002 A registration scheme far more comprehensive than land charges is found today in the Land Registration Act 2002. The principle significance of this is that the register tells the purchaser who owns the legal estate. The system moreover is not limited to legal estates. Subject to some exceptions (overriding interest), all legal and equitable interest must be entered on the register if they are to bind a purchaser.[1] The first thing to ascertain when dealing with any piece of land is which system of conveyancing is to be applied. And it is clear in the scenario that the land is registered.[2]The purchaser will want to know whether any third parties have rights to the land which might interfere with the intended use of it. Concern about these matters will lead the purchaser to make extensive enquiries before the purchase of the estate is finally concluded.[3] A. Legal leases not exceeding seven years constitute overriding interest and this falls under schedule 3, Para 1 of LRA 2002. Short legal leases are specifically excluded by Para 1 from the category of short leases which override registered disposition. That includes leases which are to take effect in possession more than three months after the date of grant.[4] Polly comes to the cottage after Alisha brought it but Polly was given the lease the previous year. And since Alisha didn’t find any belongings in the cottage before buying we can assume that Polly returned after a year to take possession. In that case Sec.4 (1) (d) applies which makes the lease not an overriding interest. Because such leases mean that there is a real risk that the purchaser might buy the estate without discovering that it is subjected to a lease when the tenant is not necessarily in possession of the land. In such scenarios we can conclude that only the facts matters. And if Polly wants her legal lease to be protected knowing that she won’t be in possession of the cottage for some time she should have made a notice[5] in the register about her lease. But certain interests cannot be protected by notice[6] , one such case is when the lease doesn’t exceed more than three years, interest under a trust of land or restrictive covenants. Since Polly’s lease is for four years it can be entered into the charges register. The fact that an interest is the subject of a notice doesn’t mean that the interest is valid. However, if the interest is valid, the notice ensures both that it binds any purchaser for valuable consideration[7] , and he knows about it before he takes the estate.[8] It is therefore much safer to protect such interests by notice. Once such an entry has been made the interest losses its overriding status[9] , but of course binds a disponee for valuable consideration. B. It is essential to remember that, it is the rights of the occupiers that bind purchasers and not the occupation itself. The claimant must always prove two elements: actual occupation and an interest in land. In National Provincial Bank v Ainsworth[10] it was held that deserted wife’s equity to be a mere personal right against her husband; her occupation made no difference.[11] Judges have regularly emphasized that the question of whether a party is in actual occupation is essentially a question of fact. Lord Wilberforce stated that[12], ‘It is the fact that matters and what is required is physical presence on the land and not some entitlement in law’ this was stated in Abbey National v Cann. In LRA 2002 Schedule 3 , Para 2 if occupation is established but the interest claimed was not known to the purchaser , the question will then be whether the occupation was obvious on reasonable inspection of the land.[13] Wilma daily comes home even for a short while and it is very much unclear whether Alisha didn’t notice that. And the wedding photograph is good evidence to the fact that Wilma may have a share in the land. A thorough search should have taken place in such risky matters which Alisha didn’t. The question is Wilma not being present permanently in the cottage because she was looking after her sick mother which was clearly defined by the case of Chhokar v Chhokar[14]in relation to LRA 1925 were a similar situation has being dealt with. The court of appeal said that it had no difficulty in holding that she was in occupation at the date, and went on to describe her right in the property as an overriding interest. The effect of temporary absence is now being considered by the courts in Link Lending Ltd v Bustard.[15] Occupation of Wilma was obvious enough through the inspection even if Alisha didn’t know about it. This means that provided the occupation is discoverable, the disponee may still be bound by an interest of which she doesn’t know ( Malory Enterprises Ltd v Cheshire [2002] )[16]Nevertheless in Kingsnorth Finance Co Ltd v Tizard[17] provide that there was actual occupation even when the wife was divorced she visited every day to look after her children. Although she was not living there her daily activities might be regarded as sufficient to justify the result. The facts are all important in such a case.[18] The result in Chhokar seems clear, but what if the seller had removed all evidence of the wife. Like in the scenario it is unclear whether Alisha sees possessions of Wilma other than the wedding photograph before sale. And since Bob lies about a divorce Wilma’s claim might be stronger in such a circumstance. The purchaser has a statutory defence to an overriding interest if inquiry is made of the occupier, but the rights are not disclosed.[19] This is a clear hint to a purchaser as to what should be done. Those in actual occupation must be discovered and then asked what their interests are. In practice and in the scenario they tend to rely on the seller’s information. This might be convenient but gives no protection. And when Alisha identified the wedding photograph she should have been careful enough to ask the occupier what their interests are rather than whether she is present or not. This is because there is no need for overriding interest to be the source of the actual occupation.[20] The scenario doesn’t state that Wilma and Bob are divorced so this matter can be taken under Family Law Act 1996, s31 (10), that where one spouse or civil partner owns the family home, the other spouse has a right not to be evicted if already in occupation and a right with a leave of the court to enter and occupy if not already in occupation. And this lasts as long as the marriage continues. Under Sec.31 Wilma’s home rights constitute a charge on the estate or interest of Bob and will bind Alisha in the property for valuable consideration if they are protected by a notice on the register of the title. This acts as an exception to overriding interests and thus binds Alisha. C. Easements and profits can be created expressly or impliedly by granting another person a right over one’s land or by reserving a right over land which one is transferring to another person.[21]Only legal easements are now capable of overriding the register. The LRA 2002 effectively reversed the controversial case of Celsteel Ltd v Alton House Holdings Ltd[22] which held that both legal and equitable easements were overriding within 1925 scheme. But if somehow the deed is registered it loses its overriding status. We can assume that Maxwell’s claim satisfy the requirement for a valid easement as laid down in Re Ellenborough Park.[23]A valid easement can be created by prescription which is long use of land and under Sec 2 of the Prescription Act 1832. The use for many years of a right which is capable of being an easement can create a legal easement by prescription.[24] Prescription arises if an easement has been used openly, as of right, without permission and continuously by one fee simple owner against another, provided that the right could have legitimately been granted by the landowner.[25] Maxwell does use the path openly and even notify Alisha of his right and say he has been using it for any years. It is somewhat unclear whether the prescription is by lost modern grant. Finally, we can come to a conclusion which interests bind Alisha and which does not. The legal lease of Polly doesn’t bind Alisha since there’s lack of physical presence and notice as explained. But the share of Wilma does bind Alisha since she has some equitable rights towards her share of the property. And finally the easement will also bind Alisha through the Prescription Act 1832. Critically examine the rationale for the continued existence of interests which override. â€Å"Overriding interests are important and controversial because they contravene the most basic registration principle: they bind purchasers despite not being entered on the Register† Roger Smith, Elements of Land Law (Pearson Longman 2007) In a sense overriding interests are rather like ‘trump cards’ of the registered land system, taking automatic priority to any rights which are subsequently acquired by a person in the land. Not only that, but they can also lead to alteration of the register with no compensation being payable to the purchase. Little wonder then that a former Chief Land Register referred to them as ‘a stumbling block’.[26] When compulsory title registration was introduced, the aim of its creators was to simplify conveyance by placing all the essential information about an estate in land on a register. Thereafter a purchaser intending to buy the land will only have to look up at the register in order to discover all what he needed to know about the property.[27] A major difficulty arose from the category of ‘overriding interest’. The original notion of land registration was that the register would provide a complete record of the title, so that the purchaser will be able to buy it with minimum or other enquiries or inspections.[28] The fundamental principle behind registered land is the mirror principle, which is to reflect accurately and completely and beyond all argument the current facts that are material to a mans title. Overriding interests represents the greatest breach in the mirror principle. They were not accidentally created but rather deliberately done by the legislature and given automatic effect precisely because they should be obvious to any prospective purchaser or their enforcement is too important to depend on registration.[29] On the other hand the curtain principle is perhaps the most ambitious motive behind the origin 1925 Act and it remains a key principle under 2002 Act. The aim is to keep certain types of equitable interests off the register completely. As Williams and Glyn’s Bank v Boland shows, if the curtain is not raised the purchaser can easily be bound by such equitable interests. This problem clearly involves striking a balance between protection of the purchaser and protection for the occupier of land and it arose largely due to social and judicial changes.[30] Paragraphs 1 to 3 of Schedule 3 cover three types of interests which were overriding under LRA 1925. They are short leases, rights of persons in actual occupation and easements and profits. Schedule 3, Para 1 shortens the length of a lease from not exceeding 21 years to not exceeding 7 years. And in the future it can reduce to 3 years with the effect of e-conveyancing[31]. The reason why these leases override is that it would be unreasonable to expect short leases to be registered and if they were the register would be cluttered up by them. Under the 1925 Act anyone with proprietary right in property and also in actual occupation could claim an overriding interest. In Williams Glyn’s Bank v Boland in 1981 defined actual occupation as â€Å"It is the fact of occupation that matters and what is required is the physical presence in the land and not some entitlement in law†. However, Schedule 3 of LRA 2002 has reduced the extent to which these interests can bind a purchaser on subsequent registration of title so that a purchaser will not be bound if the occupation would not have been obvious on a reasonable inspection of the land at the time of the disposition. Under LRA 1925 s.70 (1) (a) all legal easements and profits and certain equitable easements[32] were overriding. But this wide category was reduced by LRA 2002 under Schedule 3, Para 3 where only legal easements by prescription or implied easements and profits were overriding. The LRA 2002 effectively reversed the controversial case of Celsteel Ltd v Alton House Holdings Ltd[33] which held that both legal and equitable easements were overriding interests within the 1925 scheme. Under LRA 1925 Sec. 70 (1) (f) a squatter could obtain title after 12 years adverse possession.[34] The new rules introduced by LRA 2002 apply to any squatter who had not completed the 12 year imitation period before the Act came into force on 13th October 2003. The rules are designed to protect the rights of the registered proprietor, and as a result the squatter’s chances of acquiring title to land are greatly reduced by the new scheme.[35] Finally local land charges override but they should be discovered by a local land charges search carried out before purchase. Moreover other interests, such as chancel repair liability will cease to override on 13 October 2013. Thus the ‘snap shot’ is becoming more accurate.[36] Why do we have them? At one time it was argued that the register replaces the title deeds and that the registration system should not protect purchasers in respect of interests not generally found in title deeds. Although this seems correct as historical explanation[37], the law commission has rejected it as an approach fit for the modern law. Their view is that, â€Å"In the interest of certainty and of simplifying conveyancing, the class of right which may bind a purchaser otherwise than as the result of an entry in the register should be as narrow as possible but †¦ interests should be overriding where protection against purchasers is needed, yet it is either not reasonable to expect or not sensible to require any entry on the register.†[38] They are also difficult to discover on an inspection of the land.[39] Not surprisingly the 2002 Act is working towards either minimizing or abolishing some overriding interests but has not yet worked out a strategy to eradicate them once and for all.[40] To make them lose their rights would contravene Article 1 of the First Protocol of ECHR. Active promotion of the advantages of registering interests could work in favor of both the purchaser and the beneficiaries of these rights. Times have changed and the importance of moving on cannot be underestimated.[41] This surely illustrates the deepening of the crack in the mirror principle of registered land. In order to narrow the crack, the class of overriding interests may be made more certain by narrowing the class. On the grounds of public policy, there will perhaps always be interests which will need protection against the purchaser, where it will be unreasonable to register the interests. Therefore, the extent of the crack can never really get away from third- party interests, which is just as important as having quicker and cheaper conveyancing. Until legislation makes clear specifications on what particular interests can qualify, the concerns of overriding interests will remain. Bibliography Textbooks Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) Roger J Smith,Property Law(7th, Pearson Education Limited, 2011) Martin Dixon , Gerwyn LL H Griffiths and Emma Lees, QA Land Law (8th, Routledge, 2013) Journal Articles Matthew Roach, the end is nigh for Overriding interests -Or is it? [Summer 2013 ] 2 Stewart-Wallace , principles of land registration, p 32 Online resources Mangala Murali, Overriding Interests –a conundrum of English Land Law (Law Brief Update October 10, 2012 ) http://www.lawbriefupdate.com/2012/10/10/overriding-interests-a-conundrum-of-english-land-law/> accessed 1/12/2015 Statues Land Registration Act 1925 Land Registration Act 2002 Prescription Act 1832 Limitation Act 1980 Cases Bakewell Management Ltd v Brandwood Celsteel Ltd v Alton House Holdings [1985] Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204 Dewan v Lewis [2010] EWCA Civ 1382 Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783 (Ch D) Link Lending Ltd v Bustard [2010] EWCA Civ 424 Malory Enterprises Ltd v Cheshire [2002] National Provincial Bank v Ainsworth [1965] AC 1175 Re Ellenborough Park [1955] 3 All ER 667 Williams Glyn’s Bank Ltd v Boland [1981] 1 [1] Roger J Smith,Property Law(7th, Pearson Education Limited, 2011) 53 [2]If one is not sure whether a registration has been made it can be found out by making an ‘index map search’ which will tell you whether the estate has been registered. Further details may be obtained by making a full search of the register, which since 3 December 1990, can be done without the consent of the estate owner. [3] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 38 [4] S.4 (1) (d) [5] The Act defines a notice as ‘ an entry in the register in respect of the burden of an interest affecting a registered estate or charge’ S.32(1) [6] S.33 [7] S 32(3) [8] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 106 [9] S 29(3) [10][1965] AC 1175 [11] Roger J Smith,Property Law(7th, Pearson Education Limited, 2011) 254 [12] Williams Glyn’s Bank Ltd v Boland [1981] [13] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 118-119 [14] [15] [2010] EWCA Civ 424 [16] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 115 [17] [1986] 1 WLR 783 (Ch D) [18] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 115 [19] Sch3 Para 2b [20] Roger J Smith,Property Law(7th, Pearson Education Limited, 2011) 264 [21] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 111 [22] [1985] 1 WLR 204 [23] [1955] 3 All ER 667 [24] The role of this doctrine was summarized in Dewan v Lewis [2010] EWCA Civ 1382 [25] Bakewell Management Ltd v Brandwood [26] Roger J Smith,Property Law(7th, Pearson Education Limited, 2011) 251 [27] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 86 [28] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 86 [29] Martin Dixon , Gerwyn LL H Griffiths and Emma Lees, QA Land Law (8th, Routledge, 2013) 10 [30] ibid [31] The introduction of e-conveyancing will have tremendous significance for the operation of the registered title system. It will only remove the gap between execution and registration which , as we have seen , can cause problems , but will also reduce very considerably the number of interests which can be created ‘off the register’. [32] Celsteel ltd v Alton House Holdings [1985] [33] [1986] 1 WLR 512 [34] Even if the squatter is no longer in possession at the date of disposition. [35] Judith-Anne MacKenzie,Textbook on Land Law(15th, Oxford University Press, 2014) 141 [36] Martin Dixon , Gerwyn LL H Griffiths and Emma Lees, QA Land Law (8th, Routledge, 2013) 21 [37] Stewart-Wallace , principles of land registration, p 32 [38] Another important factor permeating the changes introduced by LRA 2002 is the extent to which a purchaser may be expected to discover these interests without making extensive inquiries. â€Å"Because overriding interests bind transferees of the land even though they are by definition, not protected on the register, they are widely acknowledged to be potential source of difficulty in registered conveyancing† The law commission report no254 1998 [39] Examples include rights of an occupier of land, a lease for a term of less than seven years, profits a prendre (fishing rights or shooting or hunting rights). [40] The rights of persons in actual occupation present formidable challenges for reformists and it is this area of law that professionals must work on to find a conducive solution. [41] Mangala Murali, Overriding Interests –a conundrum of English Land Law (Law Brief Update October 10, 2012 ) http://www.lawbriefupdate.com/2012/10/10/overriding-interests-a-conundrum-of-english-land-law/> accessed 1/12/2015