The Statutory Provisions in the Land Registration Act - Case Study Example

Overriding interests in property are interests, which effect registered title notwithstanding lack of registration and are imperative to the position of bona fide purchaser in land transactions. Moreover, the ad hoc judicial interpretation of third party interests in land on policy grounds has fuelled debate as to the parameters of overriding interests in practice, with some arguing that they undermine reliability of the Land Register and the fundamental purpose of land registration. The focus of this analysis is to critically evaluate the extent to which overriding interests undermine the reliability of the land register. It is submitted at the outset that it is vital to undertake a contextual analysis in light of the implementation of the Land Registration Act 2002 (LRA), which undertook a significant overhaul of the registration system. The LRA came into force in 2002 and the Law Commission Report Number 271 “Land Registration for the Twenty First Century1” asserted the overriding purpose of the LRA 2002 being the implementation of a novel framework of land registration, which would in turn demonstrate a more complete and up to date state of title. Additionally, one of the central objectives of the LRA 2002 was “to reduce the number of overriding interests which are binding upon a purchaser of a registered title”2. Conversely, Sexton comments that the “2002 Act achieves this purpose only to a very limited degree”3. Accordingly, whilst central driver of the LRA 2002 of the 2002 Act is to limit the scope of third party overriding interests, it the degree to which this objective has been achieved remains questionable, which lends itself to the argument that overriding interests prima facie render the Land Register unreliable particularly as a central issue of concern in contemporary conveyancing is the applicability of any third party proprietary rights. If we firstly consider the line of argument that overriding interests render the land register unreliable, this would appear to be supported by the wide category of overriding interests4 and Sexton comments that under the registered title system the general principle is that “all third party rights against a registered estate and all short term leases are either overriding or minor interests”5. The pre-2002 system was governed by the Land Registration Act 1925, which listed overriding interests in section 70(1). Accordingly, whilst the objective of the LRA 2002 was to significantly reduce the number of overriding interests binding a purchaser of registered title, Cooke argues that the provisions of the LRA 2002 have paradoxically perpetuated uncertainty by effectively creating two different sets of overriding interests6. Firstly, Schedule 1 of the LRA provides for “unregistered interests which override first registration7”, and Schedule 3 of the LRA sets out “unregistered interests which override registered dispositions”8. As such, the protection of third party interests in registered title depends on whether the sale is a first compulsory registration or a disposition of a pre-existing registered title, which compounds uncertainty from the purchaser’s perspective particularly in light of the LRA transitional provisions9. With regard to easements, under the previous 1925 Land Registration Act, section 70(1) (a) provided the following: “a) A legal profit was an overriding interest. b) An equitable profit was an overriding interest. c) A legal easement was an overriding interest.10” As regards the unregistered title position, legal easements are enforceable under the general rule however this is clearly similar to the registered system, with the status of the easement as an overriding interest. Accordingly, this clearly undermines the LRA 2002’s purpose of “simplification” as asserted by the Law Commission11. Moreover, with regard to equitable easements, in Thatcher v Douglas12 the Court of Appeal “by some rather strained logic”13 held that equitable easements were overriding interests within the definition of section 70(1) (a) of the 1925 Land Registration Act14. Accordingly, the result of the Thatcher case clearly extended the range of protection for third party rights for registered titles under the pre-2002 position. Additionally, Sexton comments that “perhaps the most difficult feature of the whole 2002 Act is its treatment of easements and profits”15. Firstly, the LRA 2002 provides that all easements and profits already existing against a registered title continue to be governed by Section 70(1) (a) of the 1925 Act16. Moreover, in line with the Thatcher decision, all pre-existing easements at the date of 2002 Act’s implementation will continue to be overriding post 2002 irrespective of whether they are legal or equitable. Nevertheless after 12 October 2006, the LRA 2002 under transitional provisions easements can lose overriding status17. However, these rules are inherently complex and obscure and it is questionable how effective these rules have been to reduce overriding interests binding on a purchaser18. Moreover, the distinction between easements existing in registered titles at the date of enactment and those created after the LRA 2002 further complicates the system by creating two systems of protection for enforceability of overriding interests19. Alternatively, easements that are created after the commencement of the LRA 2002 must be registered and failure to register an easement will only bind a purchaser if registered as a Notice20. However, whilst this creates a simpler system for easements creates after the LRA, the dichotomy with the position regarding easements created before the LRA fails to address the central issues of concern facing purchasers in relation to third party rights in registered land. With regard to legal easements, these were only binding as overriding interests until 2006. Under Schedule 3, paragraph 3of the LRA 2002, 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 inspection21”. However, these rules are clearly complex and Cooke argues that “only very few easements and profits will be excluded from being overriding interests222. Furthermore, Sexton comments 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”23. Additionally, if we consider leases, pre-2002 legal leases not exceeding 21 years constituted overriding interests24. However, under the LRA 2002, Schedule 3, paragraph 1 renders all legal leases not exceeding term of 7 years overriding. Accordingly, whilst the period is shorter than the position under the 1925 Act, the lease interest remains overriding. Additionally, leases not exceeding 21 years, which are already in existence, remain overriding. However, if the lease does not qualify as a legal lease, the lease may still be an equitable lease and overriding under Schedule 3, paragraph 2, (rights of person in actual occupation). Not only does this highlight that the LRA 2002 has not in fact resulted in a less complicated system, it further highlights the heightened vulnerability of a third party purchaser in relation to registered title. Furthermore, in relation to the LRA 2002 provisions regarding rights of persons in actual occupation, it has been commented that the previous section 70(1) (g) provision of the LRA 1925 should have been repealed without replacement25. Nevertheless the legislators opted for what the termed as “simplification” of the law, which is set out in Schedule 3, paragraph 2 which Gray argues is similar to the previous system yet more complex; again obfuscating the inherent uncertainties facing purchasers regarding enforceability of third party rights26. The new rules on actual occupation under Schedule 3 paragraph 2 are applicable to all cases where land transfer is executed after 200327. Furthermore, Schedule 3, paragraph 2 of the LRA 2002 appears to preserve the essence of section 70(1)(g) in that potentially every type of proprietary interest can potentially be overriding on grounds of actual occupation, which is not only wider than the enforceability of third party rights in unregistered title but further undermines the purpose of the LRA 2002. Additionally, Schedule 3 of the LRA 2002 has been criticised for failing to clarify the definition of actual occupation. Moreover, Schedule 3 excludes overriding interests of those in actual occupation where the person failed to disclose the right when it “was reasonable to have done so”28. However, the requirement of “reasonableness” clearly perpetuates uncertainty in a complicated system of third party rights. It further remains ambiguous as to the exact nature circumstances that will satisfy the “reasonable” test to have and Sexton argues that this is likely to lead to costly litigation29. In conclusion, the system for protection of overriding interests in registered land remains inherently complex for purchasers, which supports the argument pertaining to the inherent uncertainty of the land register. Furthermore, the analysis in this paper highlights the weaknesses in the theoretical ideal of a simplified system of land registration by virtue of the LRA 2002. 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 protection of overriding interests. To this end the reality of the LRA provisions highlights a missed opportunity in relation to addressing the “crack in the mirror” caused by overriding interests in registered land. BIBLIOGRAPHY Robert M. Abbey (2002). Blackstone’s Guide to the Land Registration Act 2002. Oxford University Press. Blackstone’s Statutes on Property Law (2007-2008) 15th Edition Oxford University Press. Elizabeth Cooke, (2006). Land Law. Oxford University Press. Elizabeth Cooke, (2003). The New Law of Land Registration. Hart Publishing. M Dixon., (2005). Principles of Land Law. 5th Edition Routledge-Cavendish Publishing. K. Gray & S. F. Gray (2007). Elements of Land Law. 5th Edition Oxford University Press. Law Commission report no.271 (2001). Land Registration for the Twenty First Century. July 2001. Available at www.landregistry.gov.uk J MacKenzie& M Phillips (2005). Land Law. 10th Edition Oxford University Press. Megarry and Wade., (2007) The Law of Real Property. 7th Edition Sweet & Maxwell R J Smith (2003) Property Law 4th Edition, Longman R J Smith (2003) Property Law Cases & Materials 2nd Edition, Longman R Sexton (2006). Land Law. 2nd Revised Edition. Oxford University Press. Todd and Wilsons., (2007). Textbook on Trusts.8TH Edition. Oxford University Press. Land Registration Act 2002 Land Registration Act 1925. Read More