The ultimate achievemet of the Land Registration Act - Essay Example

?The ultimate achievement of the Land Registration Act 2002 lies in its ruthless maximisation of rational legal order, which is symbolised by the statutory vision of an electronic register of indefeasible titles, transactable by automated dealings and guaranteed by the state. Under this tightly organised regime, estate owners, as constituted by the register record, becomes a heavily protected phenomenon, leaving little room for the operation of “off the record” of some ancient and pragmatic principle based on sustained possession”. Discuss The objective of the Land Registration Act 20021 (LRA) was to reformulate the law pertaining to organisation of registered interests in land under the previous Land Registration Act 19252. This was further highlighted by the Law Commission Report Number 271 “Land Registration for the Twenty First Century3”, which criticised the continued uncertainty posed by the pre-existing system and proposed that an organised compulsory registration system would implement much needed clarity to the organisation of proprietary interests in land in the UK4. As a result, it has been suggested that the implementation of the LRA has now restricted the extent and enforceability of third party proprietary rights due to the implementation of a specific and narrow framework. This perception is further reflected in the above statement that the function and purpose of the LRA has now left “little room for the operation of “off the record” of some ancient and pragmatic principle based on sustained possession”. Indeed, one of the central objectives of the LRA was to reduce the scope of overriding interests; however the extent to which this has been achieved in practice has been questioned by academic commentary on the LRA provisions5. Therefore, it is submitted at the outset that whilst the system under the LRA ostensibly appears to limit the scope of third party rights and “off the record” interests, the extent to which this assertion reflects reality has remained the subject of contentious debate6. This paper critically evaluates the extent to which the LRA 2002 has resulted in a “rational legal order” and fulfilled its objectives of implementing legal certainty to the organisation of proprietary interests in registered title. In analysing the practical ramifications of the LRA 2002, this paper will critically evaluate the procedural and substantive changes in the law on land registration as brought in by the LRA. Moreover, this paper will argue that a central issue in the evaluation of the LRA 2002 is whether property purchase post 2002 has become easier as intended by the extrapolations of the Law Commission Report7. A central issue of concern in contemporary conveyancing is the applicability of any third party “off the record” proprietary rights and to this end I shall undertake a contextual and comparative analysis with the unregistered system for enforceability of third party rights. Moreover, I shall further evaluate the system for enforceability of third party equitable rights under the registered land system post 2002. It is submitted at the outset that such an evaluation is vital to the overall consideration of the substantive and procedural changes brought about by the LRA in order to determine whether or not the LRA has in fact created a “rational legal order” as suggested. In assessing the extent of changes introduced by the LRA 2002, it is further necessary to consider the essential objectives of the Law Commission Report, particularly in terms of its hailing the LRA bill as a revolution for conveyancing practice8. Firstly, the Law Commission argued that the reforms proposed by the LRA were bold particularly in respect of the: “Move from a paper based system of conveyancing to one that is entirely electronic is a very major one and it will transform fundamentally the manner in which the process is conducted9.” Indeed, in the Law Commission Report, in addressing the fundamental objectives of the Bill, it asserts that “dispositions of registered land will have to be registered simultaneously, so that it becomes impossible to make most dispositions of unregistered land except by registering them”10. This was to address the previous problems caused by the “registration gap” between the making of the disposition and subsequent registration, which in turn fuelled uncertainty in property transactions. To this end, the current system under the LRA with the introduction of compulsory registration and electronic conveyancing would appear to support the argument that the LRA has introduced order through the creation and facilitation of indefeasible titles via automated transactions and the electronic register. Moreover, if we comparatively analyse the system for unregistered land, the general legal principle is that legal interests in unregistered land will all prima facie be enforceable against a third party purchaser11. On this basis, this would indicate that the unregistered system provides greater scope for “off the record” third party interests against purchasers and in turn supports the argument that the central achievement of the LRA has been the implementation of certainty and order regarding third party property interests vis-a-vis purchasers. However, this assumption is undermined by the inherently complex legal principles governing enforceability of overriding interests, which has compounded legal certainty for purchasers of registered estates notwithstanding the implementation of the LRA12. Moreover, the system governing registered land arguably encompasses a wider category of enforceable legal and equitable proprietary interests13, which in turn undermines the suggestion that the LRA automatically resulted in rational order and indefeasible titles in registered land. The flaws in this assumption are further reinforced by the wide category of potentially overriding interests and Sexton highlights the potential ramifications for purchasers of registered land under the LRA of overriding interests by commenting that “all third party rights against a registered estate and all short term leases are either overriding or minor interests”14. Additionally, Sexton highlights that under the registered title system, if a third party interest constitutes a minor interest as opposed to an overriding interest, it will be enforceable against a purchaser if registered, which Sexton suggests is “roughly comparable to a registrable land charge in respect of unregistered land”15. Moreover, it is submitted that this distinction undermines the assertion that the LRA 2002 has now eliminated the scope for off the record interests as a result of indefeasible titles due to the distinctions and scope for a wide category of third party rights. Additionally, this position further appears to undermine the Law Commission’s assertions that the: “fundamental objective of the Bill is that, under the system of electronic dealing with land that it seeks to create, the register should be a complete and accurate reflection of the state of the title of the land at any given time,”16. Nevertheless, the objectives of the LRA in increasing certainty cannot be completely overlooked as the Law Commission Report acknowledged that there were substantial plots of unregistered land, which will now automatically trigger first registration requirement under the LRA provisions17. Therefore, it is submitted that notwithstanding the objectives of the LRA to introduce a rational order and reduce the uncertainty caused to purchasers by third party rights; ultimately the enforceability of the “off the record” rights is intrinsically dependent on the nature of the right, which is reinforced by the position regarding enforceability of overriding interests18. Overriding interests have often been problematic for purchasers of legal title in registered estates and the LRA specifically sought to reduce the range of overriding interests that could impact purchasers in order to introduce rational order to registered land19. However, commentators have highlighted that in reality the LRA provisions have resulted in the creation of two different lists of overriding interests, thereby perpetuating uncertainty for purchasers with registered land20. For example, Schedule 1 of the LRA refers to “unregistered interests which override first registration21”, and Schedule 3 of the LRA lists “unregistered interests which override registered dispositions22”. Therefore, the categorisation under the LRA effectively culminates in enforceability of third party interests in registered land being dependent on whether the transaction constitutes a compulsory first registration or alternatively a disposition of pre-existing registered title23. This would appear to undermine any notion of a narrow rational order to the registered land system by maintaining uncertainty for purchasers; which is perpetuated by the transitional provisions implemented by the LRA pertaining to certain categories of overriding and minor interests after 200324. For example, the LRA overturns the provisions of section 70(1) (f) of the Land Registration Act 192525, which referred to rights acquired or in the course of being acquired under the limitation acts”26. In relation to easements, section 70(1) of the 1925 Act provided that legal easements were overriding interests27 However, the general principle is that legal easements are binding in respect of unregistered title, which is arguably comparable to the registered system whereby easements constitute overriding interests under the 1925 Act28. Therefore, on this basis it is arguable that the purchaser’s position regarding the protection or creation of third party rights that are not registered remains the same whether the land is registered or unregistered. As a result this again undermines the assumptions regarding the LRA removing off the record interests and the register being the full and accurate record regarding the extent of proprietary interests in registered title. Moreover, this position would appear to support Smith’s argument that the protection of unregistered rights post the LRA ultimately depends on the type of right being enforced whether legal or equitable29. This argument is further reinforced by reference to the legal position regarding equitable easements. For example, whilst the unregistered system requires registration of equitable easements as a land charge; the decision in Thatcher v Douglas30 determined that equitable easements constituted overriding interests under section 70(1) (a) of the 1925 Act in respect of registered land31. Therefore, this would suggest that the unregistered system provides more certainty to the purchaser as the decision in Thatcher clearly widened the scope of third party rights for registered titles under the 1925 Act. Moreover, whilst the LRA sought to alleviate the uncertainty regarding registered titles, Sexton’s observation that “perhaps the most difficult feature of the whole 2002 Act is its treatment of easements and profits32”further supports the argument in this paper that the extent of third party rights that can be enforced in registered land post the LRA ultimately depends on the nature of the right. For example, Schedule 3 of the LRA 2002 provides that all pre-existing easements and profits in existing registered title will continue to be governed by section 70(1)(a) of the 1925 Act. Therefore, in conjunction with the Thatcher decision, it is submitted that all pre-existing easements whether equitable or legal continue to constitute potentially overriding interests irrespective of the objectives of the LRA. These intrinsic complexities in enforceability of third party rights in registered land is further perpetuated by the fact that the LRA applies specific rules to easements post 2006 whereby easements can lose overriding status33. To this end, it has been questioned by commentators as to how effective these obscure rules have been in practice to actually reduce overriding interests34. Moreover, this complex legal position is further compounded by the LRA’s distinction between easements in pre-existing registered title and easements in registered title created after the LRA35. The result of this is that rather than eliminating the scope for off the record interests within a rational framework, the LRA has in fact results in the creation of two different frameworks for the enforceability of overriding interests. As such, this not only creates wider scope for equitable third party rights in registered title, the complex distinctions and rules have served to undermine the overriding objectives of the LRA reforms to the registered land system. For example, in contrast to easements in pre-existing registered title, the LRA requires easements created after the Act to be registered36. Failure to register the easement results in an equitable easement, which the LRA provides can only be binding on a purchaser if the dominant owner has entered a Notice on the register protecting his right”37. Therefore, the different rules applicable to easements further undermine the dogmatic assertions regarding the LRA’s achievements regarding rational order in the regulation of registered titles. Moreover, under the LRA legal easements were only binding as overriding interests until 2006 and Schedule 3, paragraph 3of the LRA 2002 now provides that a legal easement or profit is only binding if (a) purchaser had “actual knowledge” of the easement or profit on the date of the land and transfer in his favour or evidence of the easement or profit is (b)“apparent on reasonable inspection”38. On the other hand it is arguable that Schedule 3 of the LRA has sought to address the imbalance between third party rights and purchasers with registered estates. However, the complex rules and distinctions implemented by the LRA have led some commentators to suggest that in reality most easements will likely constitute overriding interests. For example, Sexton argues that “the new rules exclude from being overriding only an (undiscovered) legal easement or profit which has neither left physical evidence on the land of its existence; nor been exercised at least once in the year before the land transfer”39. On this basis it would appear that notwithstanding the objectives of the LRA, the practical effect of the provisions still place purchasers in a precarious position under the registered land system. Moreover, Sexton’s arguments would suggest that this uncertainty for purchasers remains applicable regardless of whether the third party right is legal or equitable40. For example under the Land Registration Act 192541, legal leases under 21 years constituted overriding interests irrespective of actual occupation and notice, which was in distinct contrast to the position with unregistered land. Under Schedule 3 paragraph 1 of the LRA, the length has been reduced whereby all leases under 7 years are overriding in the same manner as the 1925 Act. Additionally, Schedule 3, paragraph 2 of the LRA provides that equitable leases may be overriding if in actual occupation. As such, this further serves to undermine the argument that the LRA has left “little room” for “off the record” proprietary interests in registered estates. Indeed, retaining the rights of persons in actual occupation of the 1925 Act has been criticised by commentators for leaving the same problems for purchasers42 under the LRA; particularly as a result of the complex new rules of actual occupation under Schedule 343. For example, in practice it would appear that Schedule 3, paragraph 2 has retained a significant core of Section 70(1)(g) of the 1925 Land Registration Act44, whereby every property right could potentially be overriding on grounds of actual occupation. Moreover, Schedule 3 omits any specific definition of actual occupation and as a result, the pre-LRA case law would appear to remain applicable with regard to determining actual occupation. Therefore, this leaves the position being subject to ad hoc judicial decisions based on specific factual circumstances, which is further compounded by the fact that Schedule 3 of the LRA excludes rights of persons in actual occupation where failure to disclose the right was not reasonable. What constitutes “unreasonable” remains unclear and Schedule 3 has also introduced concepts of notice similar to the unregistered system under the LRA45 and Sexton suggests that this uncertainty will most likely fuel litigation46, which in turn serves to negate the overriding objective of the LRA. In conclusion, the system for protection of third party interests appears to remain intrinsically complex for purchasers notwithstanding the objectives of the LRA. Moreover, the above analysis demonstrates that it is incorrect to argue that the changes brought introduced by the LRA have automatically culminated in a rationale and simplified system of land registration with limited scope for off the record interests. Indeed, the complex rules of the LRA highlight that in reality the extent to which a purchaser can be subject to third party interests will ultimately depend on the nature of the right. Additionally, the drafting of the LRA 2002 retains some the core provisions of the 1925 Land Registration Act, which effectively creates a dual system of protection47. To this end, it is submitted that it is questionable whether the LRA 2002 has met the objectives extrapolated by the Law Commission, which is arguably a significant opportunity missed. Bibliography E. Cooke, (2003). The New Law of Land Registration. Hart Publishing. M. Dixon (2010). Modern Land Law, 7th Edition Routledge: London. K. Gray & S. F. Gray (2009). Elements of Land Law. 5th Edition, Oxford University Press: Oxford. J. MacKenzie & M. Phillip, (2008). Land Law12th Edition, Oxford University Press: Oxford. R. Sexton (2006) Land Law, 2nd Revised Edition, Oxford University: Oxford R. Smith, (2009). Property Law: Cases and Materials. 4th Edition, Longman: London. M. Thompson, (2009) Modern Land Law 4th Edition, Oxford University Press: Oxford Law Commission report no.271 (2001). Land Registration for the Twenty First Century. July 2001. Available at www.landregistry.gov.uk accessed March 2011 Legislation & Websites Land Registration Act 1925 available at www.opsi.gov.uk accessed March 2011. Land Registration Act 2002 available at www.opsi.gov.uk accessed March 2011. All Legislation available at www.opsi.gov.uk accessed March 2011. Read More