The Land Registration Act 2002 - Essay Example

Introduction The Land Registration Act 2002 aims at allowing prospective buyers of land know the existence ofany equitable interests that may be attached to the land1. The basic assumption of the law is that prospective buyers should not take the burden of verifying the adverse interests attached on the land, but should rely on the land register that reflects any equitable interests attached to the land2. The Main objective of the Act was to ensure that the land register reflects accurate and complete state of the title of at any given time with minimum inspections and enquiries. The Act provides for electronic conveyance of land, and registration of minor dispositions. The Act also eliminates most of overriding interests in land by ensuring the duty of disclosure and reasonable inspection of interests attached to land3. This paper will mainly focus on the main provisions of the Act that has ensured accurate and timely reflection of the status of title of land. The enactment of the act provided a new breakthrough in the land title registration and verification since it changed the mechanism of sale and purchase of registered land from paper based transactions to electronic transactions. The Act followed the three principles articulated by Thoedore Ruoff, a former Land registrar of England. The principles are ‘mirror principle, curtain principle and insurance principle. For unregistered land, the title of the land must be inspected under the old rules and seller must prove 15 years unbroken chain of the title from the root of the title. The purchaser has the duty to register his title to the register within the stipulated time, failure to which he or she will lose his legal estate in the land. The Land registry provides a description of the piece of land, the legal owner and any other interests that may affect the value and ownership of the land. However, there are certain interests that may not appear in the register that may override the first registration or a registered disposition according to Act4. The Land Registration Act 2002 coincides with the mirror principle since it empowered the Land registrar to implement a ‘land registry network’ that enables sellers and purchasers of land to electronically execute all property transactions. The electronic network capturers all transactions related to the land including the registration of the title by the parties. The Act has laid down formalities relating to electronic conveyance such as time and date when the electronic dispositions should take effect. All the electronic signatures must be authenticated and such electronic documents must be signed by all involved parties. Section 4 (1) (g) of the Act requires registration on the creation of a protected first legal mortgage that is protected by the deposit of title deeds and also registration of leases with a term remaining of more than seven years. The Act also grants the land registrar powers to use transaction information on the network in order to monitor and disclose such appropriate information to other parties in electronic conveyance chain5. The Act also facilitates electronic settlement by granting the Land registrar the powers to form or assist in formation of a company or invest in a company with this system of electronic settlement. In the case of Abbey National Building society v, Cann, the main concern was the registration gap that occurs when an interest is created at the point of registration but before completion6. However, The House of Lords ruled that a party must have actual occupation of the land at the date of completion of registration of any interest to land in order to attain an overriding status to the land. In practical basis, the purchase of the land is not completed on the day the purchaser makes official search, but after few days has lapsed. Provided the purchaser lodges a registration within the stipulated period, he or she is not bound by notices or restrictions that may be made within the intervening period7. Section 7 (1) of the Act makes it clear that purchasers must register their land within a period of two months, otherwise the title will revert to the transferor while in the case of mortgages the disposition will take effect while the contract of valuable consideration is made. The buyer should initiate the registration; otherwise section 8 will require such purchaser to bear the costs of remedying, recreating and retransferring the legal estate and also indemnifying the other party for failure to register the land. In this regard, the unregistered lease, transfer and the mortgage is assumed to be an equitable estate thus such transactions lose priority to subsequent transactions that create interests over the estate in the interim8. In addition, the Act allows occupiers of land to register dispositions in order to protect their minor interests in the land. Prior to the enactment of Land Registration Act 1925, it was not a must for one to register an estate, and such interests operated on the principle that equitable interests took a priority to all subsequent created interests except those of the bona fide owner of the land9. In this regard, if one purchased land in good faith and for a valuable consideration, he could get a legal title to the land despite the non-disclosure of attached equitable interests at the time of purchase. According to the ‘curtain principle’, the purchaser’s rights after the purchase are limited and hidden behind the curtain of land registration, including the equitable interests. For instance, the beneficiaries’ interests under any trust will be hidden behind the ‘curtain’ since they do not appear on the register. Additionally, the purchaser will be aware of such trust, but the most crucial thing is to overreach the equitable interests since the details of the trust need not to be disclosed10. The third principle of the Land Registration Act 2002 is the insurance or indemnity principle that is contained in Sec 58 (1) of the Act. According to this principle, the registrar of land guarantees the accuracy of the register and any person suffering losses from the inaccuracy of the land titles is usually compensated11. Schedule 4, paragraph 1 grants the purchaser a right to apply for rectification of the register if it has errors or mistakes are made during the land registration process. Schedule 8 (paragraph 1), is clear that a person suffering losses due to rectification of the register or errors whose correction involve the rectification of the register should be compensated. In this case, family rights do not have to worry the purchaser of the land since an equivalent amount of money can replace the equitable interest in the land for the beneficiaries of the land. The Act also prohibits the purchasers from constructive trusts or interests that have been fraudulently created. In the case of Creelman v. Hudsan Bay Insurance Co, the Lord concluded that the register accurately reflects the rights and interests attached to land thus allowing all purchasers to verify equitable trusts attached to any land. According to the Act, interests have overriding status when protection against the buyers is involved, but where it is not sensible to require any entry in to register. The Act also provides that overriding interests should bind both the registered owner and persons who acquire an interest in the land. Overriding interests covered by the Act operate in several methods depending on whether it is the first registration of the title or disposition of an already existing title. The Act protects the third party interests through either restriction or notice. Section 34 provides the formalities for making an agreed notice while section 35 covers the unilateral notice that is made to register without the consent of the land proprietor12. The other option of protection the third party interests is through a restriction that prevents the land proprietor in dealing in such as manner other than outlined in the terms of restriction13. The overriding interests lose their overriding status after ten years in which registration applicants are required to disclose all overriding interests attached to the land being registered, so that they can be included in the register. Examples of such overriding interests include the leases with a term of less than seven years, interests of persons in actual occupation of the land, local land charges and easements and profits prendre on first registration14. In the first registration, the overriding interests are registered in Schedule 1 of the Act since the since the registered owner should not escape any adverse right by registering the title of the land. There are also some preconditions that have to be present before Schedule 3 interests can override a registered disposition. For instance, the overriding interest must subsist immediately before the relevant date of disposition and must be in existence at the date of registration. In this regard, the Act provides some automatically binding overriding interests on the purchasers that include easements and profits that were already existing from 12th October, 2013, the legal leases for a duration not more than seven years, land charges and property rights that were upgraded by paragraph 2 of Schedule 3 of the Act. However, the Act endeavors to protect the minor interests by a way of notice to the register of lands such as the matrimonial home rights, options to purchase the land, proprietary estoppels, restrictive covenants and also equitable leases. However, with the exception of the matrimonial home rights, Schedule 3, paragraph 2 can upgrade al other interests to overriding interests through restriction on the register of land, such interests include equitable interests that are occasioned by strict settlement and constructive trust interests15. Additionally, a person with any interest in unregistered land has the opportunity of lodging a caution to the registrar against such registration. Section 15 of the Act requires the person lodging the caution to be the owner of the estate in land, franchise, profit a prendre or rent charge. In case of lease extending more than seven years, the person lodging the caution should protect his or her interest through personally making an application for the first registration. However, the Land Registry can alter the caution correct an error or adhere to a court order, but caution for first registration must be made with duty of care since a person who suffers damage due to unreasonable caution must be compensated16. A case example is the case of William and Glyns Bank Ltd v. Boland, whereby the bank wanted to reposes the house, but the wife had some interest. The court held that financial contributions of the wife towards the construction of the house amounted to actual occupation thus the wife had an overriding interest in the house17. However, the Land Registration Act 2002 resolves such problems by requiring the individuals in actual occupation to disclose their overriding interests according to Schedule 3 failure to which such interest would not be protected. However, some critics have argued that these reforms create some problems since some individuals may not be aware of the need to disclose their interests especially when such disclosure will be to his or her detriment. It can be argued that the Act has not provided a reasonable guideline on what purchasers should look for while inspecting the title of the land thus creating a floodgate of more litigation and indemnities18. Although some lawyers have criticized the Act, purchasers have the opportunity to verify equitable interests attached to the land. It is impractical to register all minor interests attached to land thus the Act has attained its objective of providing accurate and complete information on the status of land titles. In summary, the Act sought to limit the number of overriding interests by replacing a majority of them with register entries especially the unregistered interests. There are some overriding interests that are expected to lose their status on 12th October, 2013. Some of the overriding interests that will lose their status include a repair of a church chancel, manorial rights, franchise rights and non-statutory rights in connection with an embankment or sea wall. The Act also makes it difficult for adverse possession of registered land. For instance, squatters can occupy land for more than 10 years yet on the application, the proprietor may object thus leading to rejection of the application. The ten years of adverse possession will not extinguish the proprietor’s estate in the land19. Conclusion Land Registration Act 2002 provides an accurate mirror of the status of land titles. The concept of overriding interests existing to defeat the registered interests has been eliminated by the Act. The Act encourages the registration of interests and grants the registrar the powers to enter any interests and ask for clarifications. The methods of protecting burdens to land titles have been reduced to only restrictions and notices. Mortgages by way of demise cannot be granted over registered land while the overriding interests have been limited. Some overriding interests such as equitable easements were abolished. The Act makes clear the duty of the registered proprietor to disclose any overriding interest when registering the land while adverse possession rights of land are no longer overriding. In addition, all legal easements will be overriding on the initial registration of land, but the implied legal easements cannot be overriding on subsequent registration of the land. The electronic conveyancing of land ensures that registration and completion takes place simultaneously thus eliminating any registration gap. Bibliography: Burn, E.H and Cartwright, J. Cheshire and Burn’s modern law of real property. (17th edn). Oxford: Oxford University Press. 2006. Clarke, A and Kohler, P. Property law: commentary and materials. (1st ed). Cambridge: Cambridge University Press. 2005. Clarke, S and Greer, S. Land law directions. Oxford: Oxford University Press. 2012. Dixon, M. Modern land law. (7th Ed). New York: Routledge. 2010. Royale, R. Briefcase on Land law. (4th edn). New York: Routledge. 2003. Sexton, R. Land law. (2nd edn). Oxford: Oxford University Press. 2006. Cases Abbey National Building Society v. Cann (1991). A.C. 56. William and Glyn’s Bank v. Boland (1981) A.C. 487. Legislation Land Registration Act 2002. Land Registration Act 1925. Read More