The Land Registration Laws - Essay Example

Land law Land law Introduction According to Kevin gray, ‘immunity from pre-existing equitable rights guaranteed only in the case of the purchaser of a legal estate whose conscience was wholly unaffected, such as purchaser was sometimes known simply as Equity’s Darling1. The doctrine of notice has undergone transformation with the enactment of various laws such as law of Property Act 1925 that clarified the status of bona fide purchaser and Law Charges Act 1972 that outlined the charges to land that must be registered2. According to unregistered title to land before 1925, the legal interests bound the whole world regardless whether the third parties had knowledge of existing interests. In addition, equitable interests bound persons other than bona fide purchases of the estate for value without any notice of equitable rights3. However, Law of Property Act 2002 outlines certain legal rights such as leases for more than seven years that require registration and that will bind the purchaser of the land. Covenants, easements and estate contracts need registration; otherwise, the purchaser will not be bound regardless of whether he had knowledge of such interests. However, the right of beneficiaries under trust is overreaching thus is subject to doctrine of notice4. Estates and tenures stem from common law that dominated the early English law system that eventually evolved to Royal courts in terms of common pleas and exchequer. However, writs of the courts led to injustice in certain cases and principles of equity emerged based on conscience. Equity would prevail over common law in cases of conflict. For instance, common law courts refused to recognize the right of beneficiaries under trust land since it is only the trustees who had legal rights to the land unlike courts of equity that fully recognized the right of beneficiaries to the property5. In this case, equitable rights were not enforceable against a bona fide purchaser of a legal estate for value without any notice of any other attached claim to the estate. On the other hand, common law acts in rem and is enforceable against anybody ‘good against the whole world’ on all legal estates and interests6. According to land law, a bona fide purchaser for value is an innocent party who purchases property without any notice of any other party’s claim to the land. The bona fide purchaser must acquire the land for value rather than being a beneficiary to the land. In this case, the purchaser can acquire title to the land despite the competing claim from other interested parties7. A purchaser can acquire legal estate without being subject to equitable rights in case of a bona fide purchaser without notice of the rights. In this case, the purchaser must demonstrate that he acquired the land without any knowledge or notice of any other existing right to the estate. In the case of Pilcher v. Rawlins (1872) 7 App 259, Lord Justice James asserted that establishment of a bona fide purchaser is an absolute, unqualified and unanswerable defense’. The bona fide purchaser is traditionally referred as ‘equity darling’ since courts aimed at ruling favorably to people who had acquired the property for value8. Historically, courts have identified a bona fide purchaser or equity darling as one who acts in good faith, who acquires the property for value and one who has acquired legal estate in the land rather than an equitable estate. Furthermore, the bona fide purchaser must have acted without notice of any other existing claims to the land. The purchaser must act without any actual notice and constructive notice. In this case, it is the duty of the purchaser to make enquiries, inspect the land and land registers to find out whether there are any registered rights that are attached to the land. The law of property Act (LPA) 1925, section 199 requires the purchasers to visit the property since certain rights that can only be known after making physical inspections of the property may bind him9. A case example is Kemmis v Kemmis (1988) 1 WLR 1307 whereby the Lord Justice clarified that ‘knowing something’ that would stimulate inquiry or willful abstinence for inquiry to avoid a notice would interfere with bona fide purchaser status to the estate. In the case of Jones v. Smith (1841) 66 ER 943, Lord Wigram outlined constructive notice as cases when purchaser had knowledge of existing defects or encumbrance pertaining the property that an inquiry in to which would definitely reveal the details of such attaching rights or interests to the land10. The other form of constructive notice is when the purchaser deliberately abstains from such enquiries in order to avoid possible notice of any attached equitable interests. Furthermore, West v. Reid (1843) 2 Hare 249 outlined a third category as when a reasonable purchaser acting on skilled legal advice would have investigated the mater and identify any attached equitable interest11. The above types of notices are summed up under Section 199 of the law of property Act 1925. Accordingly, the purchaser is deemed to have an imputed notice if his or her agent has an actual or constructive knowledge of any equitable interests attached to the land12. The 1925 property legislation and series of UK Acts of parliament that took effect in early 1926 made several changes to common law of property. Some of the legislation include Administration of Estates Act 1925, Settled land Act 1925, Land registration Act 1925 and Land charges Act 192513.The legislation aimed at facilitating land transfer by making it freely alienable and capable of fragmentation of the ownership. The purpose was to create several interests for the benefit of other persons such as business partners and family beneficiaries. At the same time, the more legal rights attached to the land, the more it became difficult for a purchaser to discover such rights or interests before purchasing the land14. Accordingly, a purchaser could be assumed to have a constructive notice of such rights thus a provision was included to have the land title and accompanying equitable rights or interests registered15. Section 1 (1) of the law of property Act 1925 outlines the estates that should subsist or be conveyed as an estate on fee simple absolute in possession and a term of years absolute. The first is commonly referred as the freehold estate while the second is the leasehold estate. Law of property Act 1925, section 1 (2) outlines the charges or interests over land that are capable of creation by law or subsisting include easement, right or interest equivalent to an estate in fee simple absolute in possession or leasehold. The other include rent charge, legal mortgage charges, rights of entry exercised in a legal manner and finally similar charge on land that is not created by an instrument. Any other interests that are not identified by Section 1 (2) of the LPA 1925 are equitable interests, but not legal rights. Section 1 (3) outlines the proprietary rights that are equitable as rights of beneficiaries to the trust land, the interest created by contracts, restrictive covenants and interests that become equitable due to various statutory reforms16. The land registration Act 1925, implemented the compulsory registration of land titles including all interests and estates attached to the land. The Act also ensured the registration of land charges that aimed at providing a solution to the doctrine notice unfairness. The registration of land charges is temporal and ensures that equitable interests in land in order to safeguard the owners of such interests from incurring unfairness in case of transfer of land. The purchaser is expected to inspect the land register to confirm whether such interests exist, but this imputed or constructive notice is exempted from such interests17. Such land is referred as unregistered land since titles can only be proved by documentary evidence or the title deeds of the land18. The registration of land solved partial problems of doctrine of notice. The current land registration is covered by Land charges Act 1972 that outlines the interests that are capable of registration. The other interests that are not covered by the Act still rely on the traditional doctrine of notice. According to Land charges Act 1972, the land charges can be classified in to six classes with class A consisting of the charges that are created by statutes such as landlord’s right to receive rent. Class B consists of charges that are created automatically by statutes in order to ensure repayment of expenses attached to the land such as legal costs19. The third class is Class C charges that entail four sub-groups with the first being the puisne mortgage that is second mortgage in unregistered land. The second Class C sub-group is the limited owner’s charge that is an equity that can be registered against the estate while the third sub-group is the general equitable owner’s charge that covers rights that are not registered under any other provision. The fourth Class C sub-group is the estate contracts that involve any contract to convey or create legal estate in the piece of land or any option for the purchase of the land. Accordingly, Class D charges are subdivide in to sub-groups with the first being the inland revenue charges in relation to accrued inheritance tax. The second is the restrictive covenant that comprises of agreements to refrain from doing something on the land while the third is the easements that entail the rights of benefit of a piece of land over another piece of land such as the right of way. Class E comprise all annuities created before January 1926 that are not registered in the annuities register while Class F comprises of charges affecting the land in accordance with Family law Act 1996 such as the spouse’s statutory right to occupancy of the matrimonial home regardless of not being the owner20. Class C charges such as estate contracts such as contract or option to purchase that need to be registered since they increase the future price of the land. On the other hand, family interests are not registered since they do not bind the purchaser after the sale since the interests can be settled through sharing of the proceeds of the sale among the family members who had equitable interest in the land. Registration of charges is essential since it is assumed to constitute actual notice to the purchaser under Section 198 (1) of LPA 1925. Registration is necessary and sufficient proof that the purchaser had actual knowledge of the charged attached to the land and thus not a bona fide purchaser who has acquired the property in good faith21. The inevitable consequence of non-registration is that such interests may be lost if such land is acquired by new owner for value. Section 4 of Land Charges Act 174 outlines that registrable interests that fail to be registered will become void thus implying that such charges or interests that are not registered as Class A, B, C (i), (ii) and (iii), and F will have no legal effect against the purchaser of the land or any of interest in such land. According, unregistered interests under class C (iv) and D will have zero effect against a purchaser for value of the legal estate charged with such interests22. The above clauses protect the purchaser for value thus individuals who receive such land as inheritance are still bound by the unregistered equitable trusts attached to the land. From this analysis, one would argue that such legislation does not entirely reject any conscience elements of registration and creates a fear of entrenching constructive notice in the back door. Surprisingly, the actual notice of the purchaser will not be sufficient to protect unregistered interests affecting the land. This analysis was demonstrated in the case of Midland Bank v. Green (1981) AC 513 where an estate contract that should have been registered as class C (iv) land charge had not been registered on family farm by George, the son of Walter Green23. Walter felt out with Geoffrey and later sold the land to his wife in order to defeat the option. The sale was in breach of the contract to sale and Walter’s wife definitely was in a position to know the existence of the option. Section 4 (6) of Land charges Act 1972 outline that unregistered estate contract are void against a purchaser for money or money worth of the legal estate in land charged. In this case, the purchaser must act in ‘good faith’ and ‘money’s worth’ must exclude inadequate consideration. Lord Wilberforce rejected the above arguments and outlined that the act must be interpreted in its simple and undesirable system of title protection. Therefore, the Lord used the plain meaning and equitable doctrine of notice and awarded Geoffrey damages against his father for breach of contract. However, Geoffrey could not enforce the option against the new owner who in this case was the mother24. Land Charges Act 1972 presents problems since purchaser was required to search the register for entries made against the name of the estate owner since the land itself was not registered thus making it difficult to search for equitable interests. Some instances that arose are difficulties in knowing the correct name of estate owners for the people who needed to protect their interests and many names against which the bland charges were registered in the past few years due to numerous conveyances to different people25. In this case, Section 25 of the law of property Act 1969 provides for damages to persons who incur losses for purchase land with non-registered land charge if; the completion of the purchase was after the commencement of this Act or on date of purchase had no actual knowledge of the existence of the charge. In addition, the purchaser is entitled to damages if charge is registered in another name other than real owner of the property. Land registration principles include the mirror principle that identifies the estates and interests affecting the property, the curtain principle that ensures trusts are kept off the title and indemnity principle that compensates the purchasers for errors in the land registers26. Land Registration Act (LRA) 2002 amended certain provisions of LRA 1925 and ensured compulsory land registration in certain scenarios. The Act requires registration in cases of estate in land, rent charge, franchise or profit prendre in gross. Registration must occur when transferring a qualifying interest for consideration, when transferring unregistered legal estate as per Section 171 A of Housing Act 1985 or on grant of leasehold of not more than seven years. Section 6 of the Act has made it clear that estate owner or successor has a duty to apply for registration if the estate is charged by mortgage in accordance with Section 4 (1) (g) and the registration period is usually two months from the occurrence of the relevant event27. Section 7 is clear on certain effects of non-compliance such as voidance of the transfer or creation of legal estate if such registration requirement has not been complied with. In case Section 7 (1) is applied and the case in question falls under Section 4 (1) (a) or (b), the legal estate will revert back to the transferor who is supposed to hold it in trust for transferee. The clause further clarifies that such cases falling under section 4 (1) (c) to (g) will have the effect of contract that is made for a valuable consideration. However, in the case of such cases falling under Section 6 (5) where subsection (1) has already been applied, the application of the subsection is deemed not to have occurred28. Section 8 of LRA 2002, provides certain legal liabilities for making good void transfers if the legal estate is recreated, regranted or retransferred because of failure to comply with duty of registration. In this case, the mortgagor is liable to the other party for all incidental costs or incurred and indemnity to the other party for liabilities reasonably incurred due to the failure of adhering to the registration requirement29. However, residual interests legally bind the whole world except for equity darling since they are not capable of overreaching or registration. The interests are attached on the property value unlike the property itself. Unilateral notices entered without informing the registered proprietor, the legal leases less than seven years, interests under trusts, estate contracts, equitable easements and estate contracts are usually protected by entry of a notice30. However, other parties with a claim to the property still have a right to sue the party who made such fraudulent conveyance of the land. Therefore, it is notable to conclude that failure to register all the registrable interest will lead the purchaser to take free of any interest regardless that he had actual express knowledge of such interest. A case example is ER Ives Investment Ltd v. High (1967) 2 QB 379 whereby the interest holder actually occupied the property but was denied the ownership by the purchaser. According to Markfaith Investment ltd v. Chiap Hua Flahslights Ltd (1991) 1 AC 43, the unregistered interests cannot be revived by use of the traditional doctrine of notice, good faith and conscience31. Conclusion The equitable interests have been classified as registrable equitable interests as per Section 2 of the LCA 1972, the overreaching general equitable interests and equitable interests whereby the doctrine of notice will apply. The doctrine of notice will apply in cases of equitable interests of the beneficiaries under particular trusts and restrictive covenants agreed upon before 1926. From the above analysis, the land registration laws outlines clear protection of the equitable interest since estate holders are expected to comply with specific requirements as outlined by Land charges Act 1972. The LCA 1972 modified the historical doctrine of notice by requiring formal registration of land titles and charges to land thus deeming such registration to constitute valid notice to all persons that may be interested in purchasing the land. The registered charges remains the form of notice that will bind third parties and such charges must remain binding to the land once registered. The legal consequence for non-compliance with registration provision depends on the nature of the charge. Failure to registers charges or interests under Class B, C (i) to (iii), and F will render such interest void against the purchaser of the land. Accordingly, failure to register Class C (iv) and D will render the interest void against a purchaser for money’s worth or money of a legal estate in the charged land. Bibliography: Bray, Judith. Unlocking land law. London: Routledge. 2013. Clarke, Sandra and Greer, Sarah. Land law directions. Oxford: Oxford University Press. 2012. Dixon, Martin and Griffiths, Gerwyn. Land law 2009-2010. London: Taylor & Francis. 2009. Dixon, Martin. Modern land law. New York: Routledge. 2013. Harpum, Charles., Megarry, Robert and Wade, William. The law of real property. London: Sweet & Maxwell. 2011. McFarlane, Ben., Hopkins, Nicholas and Nield, Sarah. Land law: text, cases and materials. Oxford: Oxford University Press. 2012. Land Registration Act 2002 Land charges Act 1972 Law of Property Act 1925 Land Registration Act 1925 Read More