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Land Registration Reform

Law Commission Report - Updating the 2002 Act

The Law Commission’s report Updating the Act (2018) Law Com No 380

Introduction

On 24 July 2018, the Law Commission published its report making recommendations for the updating of the 2002 Act. The report is lengthy (more than 470 pages) and contains numerous invitations for consultees to share their views on (and, in some cases, their experiences of) various registration anomalies and issues.

Main proposals

A large number of provisional proposals are made by the Commission, namely that:
  • The requirement of registration should apply to the grant of a discontinuous lease out of a qualifying estate and that it should be possible to protect a discontinuous lease by notice on the register of title to the reversion, whatever the length of the discontinuous lease and whether or not it was compulsorily registrable;
  • There should be no change to the threshold of the length of lease which is registrable under the LRA 2002 (currently 7+ years – there was a suggestion that it should be changed to 3+ years);
  • It should be made clear that a person with a derivative interest under a trust may apply for a caution against first registration of the legal estate to which the trust relates;
  • Express provision should be made in the LRA 2002 that a person who has a transfer or grant of a registrable estate or charge in his or her favour is “entitled to be registered as the proprietor” of that estate or charge;
  • For the purpose of preventing the title of a disponee being questioned, the exercise of owner’s powers of disposition by both registered proprietors and persons entitled to be registered as the proprietor should not be limited by: (1) the common law principle that no one can convey what he or she does not own (2) other limitations imposed by the common law or equity or under other legislation or (3) any limitation other than those reflected by an entry on the register or imposed under the LRA 2002;
  • If an unregistrable interest is noted on the register, that interest should be subject only to the interests set out in s29(2) of the LRA 2002;
  • A person who takes an interest under a registrable disposition, but who fails to complete that disposition by registration, should not be able to secure priority against prior interests through the noting of that interest on the register;
  • A person who takes an interest under a disposition which is of a type which would have been registrable if all proper formalities for its creation had been observed, but who fails to observe those formalities, should not be able to secure priority against prior interests through the noting of that interest on the register;
  • The priority of unregistrable interests created pre-reform should remain unchanged;
  • The holder of an unregistrable interest which has been noted on the register, whose priority is adversely affected by alteration of the register to correct a mistake, should be able to apply for an indemnity from Land Registry;
  • It should be possible to make an official search with priority in relation to an application to note an unregistrable interest;
  • A priority search should also protect any ancillary applications arising out of the document which effects the registrable disposition which is the subject of the priority search, provided those ancillary applications are specified on the application form for the priority search;
  • The requirement of valuable consideration in s29 of the LRA 2002 should be retained, but should be clarified and that the definition of valuable consideration in s132 of the LRA 2002 be amended so that “a nominal consideration in money” is no longer excluded from the definition of valuable consideration;
  • Where an interest has a negative value, a disposition of that interest is to be regarded as being made for valuable consideration for the purposes of s29 of the LRA 2002;
  • The proposals on reform of the requirement for valuable consideration under s29 (above) should apply both to registrable dispositions and unregistrable interests which are noted on the register in accordance with the earlier proposals;
  • Where a person applies for a unilateral notice in respect of an interest which was formerly overriding until 12 October 2013, and the title indicates that there has been a registered disposition of the title since that date, the applicant should be required to give reasons why the interest still binds the title. The notice will only be entered if the reasons given are not groundless;
  • It should be possible to protect a right by one of two kinds of notice: a full notice and a summary notice (an application for a summary notice should not need to be accompanied by any evidence to support the interest claimed);
  • If a registered proprietor applies to cancel a summary notice, the beneficiary of the summary notice will be required to make an initial response within 15 business days (subject to an extension of up to a maximum of 30 business days). The response must demonstrate a case for the retention of the notice which is not groundless;
  • In the event that the beneficiary submits an initial response objecting to cancellation of the notice, the beneficiary must produce evidence to satisfy the registrar of the validity of the interest claimed. Evidence must be provided within a maximum of 40 business days of the original notification of the application to cancel;
  • Where an application is made to cancel a unilateral notice following implementation of the above reforms, the beneficiary of that notice should (following an objection to cancellation) be required to produce evidence to satisfy the registrar of the validity of the interest claimed;
  • It should be clarified that an insolvency practitioner appointed in respect of an insolvent registered proprietor is able to apply to cancel a unilateral notice on behalf of the registered proprietor;
  • It should be clarified that attorneys acting under a power of attorney may apply to cancel a unilateral notice on behalf of a registered proprietor who is the donor of the power;
  • It should continue to be possible to enter restrictions in Form K in relation to charging orders over beneficial interests; but that the ability to enter restrictions should not be extended to holders of other derivative interests under trusts. Further, that it should be made clear that a court may order the entry of a restriction to protect a charging order relating to an interest under a trust, but that such a restriction must be in Form K;
  • It should continue to be possible for an estate contract to be protected as an overriding interest where the beneficiary of the contract is in actual occupation and that the fact that the benefit of an interest has been registered should not preclude that interest from being an “unregistered interest” (and so overriding) for the purposes of schedules 1 and 3 to the LRA 2002;
  • Express provision should be made to permit the recording of a variation of a lease on either the landlord’s registered title, or the tenant’s registered title, or both;
  • The ability of a person to seek alteration or rectification of the register to correct a mistake should not be capable of being an overriding interest pursuant to paragraph 2 of schedule 3 to the LRA 2002;
  • A chargee who has been registered by mistake, or the chargee of a registered proprietor who has been registered by mistake, should not be able to oppose rectification of the register so as to correct that mistake by removing its charge;
  • Where the proprietor of a registered estate has been removed or omitted from the register by mistake, the proprietor should be restored to the register if he or she is in possession of the land, save in exceptional circumstances;
  • A successor in title to that proprietor should be restored to the register if he or she took over possession of the land, save where there are exceptional circumstances;
  • (1) the protection afforded to the proprietor of a registered estate who has been removed or omitted from the register by mistake should not be confined to when he or she is personally in possession, but should apply where a proprietor would be considered a proprietor in possession within s131 of the LRA 2002. (2) the protection afforded to the proprietor of a registered estate who has been removed or omitted from the register by mistake should not be confined to situations where his or her possession of the land has been continuous, as long as he or she is the proprietor in possession when schedule 4 is applied;
  • The register should not be rectified to correct a mistake so as to prejudice the registered proprietor who is in possession of the land without that proprietor’s consent, except where: (1) the registered proprietor caused or contributed to the mistake by fraud or lack of proper care; or (2) less than ten years have passed since the original mistake and it would be unjust not to rectify the register. After ten years from the mistaken removal of the former registered proprietor from the register, the register should not be rectified to correct the mistake so as to prejudice the new registered proprietor even where that proprietor is not in possession of the land. Exceptions should be provided only for where the new registered proprietor consents to the rectification or where he or she caused or contributed to the mistake by fraud or lack of proper care;
  • The period of time after which the register becomes final should be ten years;
  • Cases of double registration should be resolved through the application of our proposals in respect of indefeasibility. Therefore, in a case of double registration, a claim to adverse possession should not be possible. Where as a result of the operation of the long stop a double registration remains on the register, the party who does not benefit from the long stop should have their title amended accordingly to remove the double registration. The party whose title is amended in such circumstances should be entitled to an indemnity;
  • Section 29 should be subject to schedule 4. This means that where, through a mistake, a derivative interest has been omitted or removed from the register, the holder of the interest should be able to apply for alteration or rectification of the register to have the priority of the interest over the registered proprietor restored. The outcome of the application should be determined by the same principles that apply when the application for alteration or rectification relates to the title to the estate, including the operation of the long stop;
  • Where the application for alteration or rectification relates to a derivative interest, the ten year long stop on alteration of the register should run from the time that, as a result of the mistake, the holder of the derivative interest lost priority, not from the time of the mistake;
  • Section 11 should be subject to schedule 4. This means that where, through a mistake, a derivative interest has been omitted from the register, the holder of the interest should be able to apply for alteration or rectification of the register to have the priority of the interest over the registered proprietor restored. The outcome of the application should be determined by the same principles that apply when the application for alteration or rectification relates to the title to the estate, including the operation of the long stop;
  • Where a first registered proprietor was bound by an interest through the operation of priority rules in unregistered land, but obtains priority over the interest on registration as a result of s11, no indemnity should be payable on rectification of the register to include the interest at a time when the estate is still vested in the first registered proprietor;
  • Alteration or rectification of the register should not be possible in respect of an interest that ceased to be overriding on 13 October 2013, where first registration or a registered disposition of the affected estate takes place on or after that date. An exception should be made, however, where on first registration Land Registry omitted a notice in relation to that interest that should have been entered under rule 35 of the LRR 2003, or overlooked a caution against registration;
  • In the case of competing derivative interests, rectification should operate retrospectively;
  • For indemnity claims under schedule 8, paragraph 1(a) and (b) the limitation period should start to run on the date of the decision as to rectification, and that for indemnity claims under schedule 8 paragraph 1(c) to (h) the limitation period should start to run when the claimant knows, or but for their own default would have known of the claim;
  • The registrar’s rights of recourse under schedule 8, paragraph 10(2) ought to be subject to the following statutory limitation periods: (1) In a case within schedule 8, paragraph 10(2)(a), Land Registry should have the longer of (i) the remaining limitation period applicable to any cause of action the indemnity claimant would have had if an indemnity had not been paid; or (ii) 12 months from the date the indemnity is paid. (2) In a case within schedule 8, paragraph 10(2)(b), Land Registry should have the longer of (i) the remaining limitation period applicable to any cause of action the person in whose favour rectification has been made would have had if the rectification had not been made; or (ii) 12 months from the date the register is rectified;
  • Where an indemnity is payable in respect of the loss of an estate, interest or charge following a decision not to rectify, the value of the estate, interest or charge should be regarded as not exceeding the current value of the land in the condition the land was in at the time of the mistake;
  • There should be a non-exhaustive list of factors which may be used to distinguish boundary and property disputes. This list could include factors such as: (1) the relative size of the contested land in comparison to other land clearly within the remainder of the registered proprietor’s title; (2) the importance of the land to the registered proprietor; (3) the application of any of the common law presumptions; and (4) the manner in which the error in the boundaries shown on the title plan came about;
  • Where the grant of a lease is not a registrable disposition, easements which benefit that lease and which are created within the lease itself should not be required to be completed by registration in order to operate at law;
  • All easements granted by or implied in leases which are not required to be created by deed by virtue of s52(2)(d) of the Law of Property Act 1925, including equitable easements, should be capable of being overriding interests;
  • (1) easements benefiting a lease which is not required to be created by deed by virtue of s52(2)(d) of the Law of Property Act 1925, where those easements are created separately from the lease, should be capable of being overriding interests; but (2) the grant of an easement benefiting any other lease which is created outside of the lease document should remain a disposition which must be completed by registration to take effect at law;
  • A claimant to title to land through adverse possession should be prevented from making a second application for registration when an application for registration has been rejected under schedule 6, paragraph 6, unless the conditions in that paragraph under which a second application is currently permitted are fulfilled;
  • Where an applicant relies on the condition in schedule 6, paragraph 5(4), his or her reasonable belief that the land belonged to him or her must not have ended more than six months from the date of the application;
  • Where a person becomes the first registered proprietor of title to land which has in fact been extinguished by an adverse possessor, where (i) the registered proprietor did not have notice of the adverse possessor’s claim and (ii) the adverse possessor is not in actual occupation of the land at the time of registration, an application for alteration of the register should be classed as a rectification;
  • An adverse possessor of unregistered land should not be able to apply for registration with possessory title until title has been extinguished under the Limitation Act 1980;
  • An adverse possessor of registered land should not be able to apply for registration except through the procedure in schedule 6;
  • Where an adverse possessor in unregistered land is registered with possessory title in the reasonable (but incorrect) belief that the prior title has been extinguished, the period of adverse possession should continue to run while the possessory title is open;
  • Where a tenant is in adverse possession of land (other than land belonging to the landlord) and the presumption that the tenant is acting on behalf of his or her landlord is not rebutted, the landlord should be able to make an application under schedule 6 based on the tenant’s adverse possession;
  • Section 53 of the LRA 2002 should be clarified to ensure that its effect is to confer powers on a sub-chargee, not remove them from the sub-chargor. It would be open to the parties to a sub-charge to agree otherwise;
  • Unless there is an appropriate restriction on the register, the powers of the sub-chargor shall be taken to be free from any limitation contained in the sub-charge. This would not affect the lawfulness of the disposition as between the sub-chargor and the sub-chargee;
  • (1) simultaneous completion and registration should no longer be required in a system of electronic conveyancing implemented under the LRA 2002; and (2) equitable interests should be capable of arising in the interim period between completion and registration;
  • (1) the decision to enable electronic conveyancing and the subsequent decision to end paper-based conveyancing should be vested in the Secretary of State, to be enacted through secondary legislation; (2) following the enactment of such secondary legislation, the timetable for the introduction of electronic conveyancing and for ending paper-based conveyancing, in each case on a disposition by disposition basis, should be delegated to the Chief Land Registrar; and (3) the Secretary of State and the Chief Land Registrar should be required to consult with stakeholders before exercising their powers in respect of electronic conveyancing;
  • The following propositions of law should be confirmed: (1) trustees may collectively delegate their power to sign an electronic conveyance and give receipt for capital monies to a single conveyancer under s11 of the Trustee Act 2000; (2) a beneficiary’s interest in a trust of land will be overreached when trustees collectively delegate their power to a single conveyancer to sign an electronic conveyance and give receipt for capital monies; and 469 (3) a beneficiary’s interest in a trust of land will be overreached when two or more trustees, by power of attorney, grant to a single conveyancer the power to sign an electronic conveyance and give receipt for capital monies. For overreaching to take place it will remain necessary for the disposition that follows the delegation to be one with overreaching effect;
  • The Land Registration Division of the First-tier Tribunal (Property Chamber) should be given an express statutory power to determine where a boundary lies when an application is referred to it under s60(3) of the LRA 2002.
Some of the above are proposed in order to correct anomilies under the present legislation (such as the inability of attorneys to cancel a unilateral notice on behalf of a registered proprietor who is the donor of the power, and doubt as to the jurisdiction of the First-tier Tribunal in relation to boundary disputes), whilst others deal with relatively esoteric situations.

The proposals that have given rise to most comment relate to the ability of the Land Registry to pursue conveyancers who have not properly checked their client’s identity, where fraud has occurred, and recover sums from them (it has been suggested that a duty of care should be imposed on conveyancers in relation to checking a client’s identity and where this is breached, the Land Registry should be able to recover any sums that it has to pay out from the negligent conveyancer).

Other proposals

Other proposals are also significant, in particular:
  • The attempt to make the register final after 10 years (i.e. unable to be rectified, except in very exceptional cases);
  • The proposal that easements contained in an unregistrable lease should not need to be registered in order to operate at law (the need to register such easements under very short leases has been very inconvenient in practice);
  • The proposal that leases for more than 3 years would not need to be registered, the threshold remaining at 7+ years as now;
  • The proposal that electronic conveyancing should not require simultaneous completion and registration;
  • The proposal that sub-surface mines and minerals should be subject to compulsory first registration on a dealing for value and also that the Land Registry should be required to notify the surface owner(s) if an application to register sub-surface mines and minerals is made (landowners have regularly reported problems with unregistered mines and minerals under their land, particularly when carrying out development involving the digging of deep foundations).



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