Property Law and Overriding interests - Essay Example

Property Law Name Course Tutor’s Name Date Overriding interests have been described ‘as a stumbling block on registration of title’. Do you agree? Overriding interests are defined as interests expressed regarding land that does not belong to the person expressing the interests (Dixon 2008, p. 42). In law, overriding interests have priority to the land proprietor’s registered title. In other words, even though the overriding interests are not registered, they are legally considered binding on the land they lay claim to. Under LRA 2002, Dixon (2008, p. 42) notes that overriding interests may be effective against title holders or proprietors who had registered a title either voluntarily or through compulsion. Overriding interests may also become effective against a person who takes up the proprietorship of a piece of land. To decide whether overriding interest is a stumbling block to title registration, it is important to understand the founding principles of title registration, which include: the mirror, the curtain, and the insurance principles. The mirror principle holds that the land register should be a full reflection of the total rights and interests of a specific land which has been registered and issued with a title. However, the same principle makes room for the overriding interest. The argument offered by Stroud (2013, p. 63) is that it is difficult to subject every interest on land to registration. However, under the mirror principle, interested land purchasers are advised to inspect land and its history to ensure that the property does not have any adverse rights over it. The curtain principle is the second fundamental standard of land registration. It argues that particular equitable land interests should not be made known to a person willing to buy a registered land. Instead, the person only needs to know about the land’s legal title. In other words, an interested purchaser should not be concerned about what is ‘behind the curtain’. According to Stroud (2013, p. 55), the curtain principle makes people less worrisome and more trusting about equity of ownership. Additionally, it reinforces the fact that obtaining a title does not mean that one is registering the land; rather, it means that has registered their claim of owning either a freehold or leasehold estate (Stroud 2013, p. 55). On its part, the insurance principle holds that the state guarantees an appropriately registered title. In other words, any mistakes or inaccuracies in the land register will be compensated for by government, if ever they become problematic for the proprietor who holds the land title (Stroud 2013, p. 55). Based on overriding interests’ position in the mirror principle, there could indeed be “a stumbling block on the registration of title” because proprietors arguably do not get the complete picture about what they are buying into. On reading the mirror principle, one gets the impression that its intention was to provide full transparency on any rights or interest to the title. However, paragraph 1 of Schedule 3 of LRA 2002 provides that “a legal lease granted for seven years or less” overrides a registered disposition. According to Stroud (2013, p. 65), it make sense not to register leases that are meant to last seven years or less because they would ‘clog’ the registry (since they are too many such leases). However, every potential land buyer must do due diligence before purchasing in order to identify any existing leases and decide whether he or she still wants to make the purchase. Paragraph 2 of LRA 2002’s Schedule 3 also indicates that the “interests of a person in actual occupation” also override any registered disposition. These interests protect actual occupants who had not registered their rights. However, the actual occupant must have a proprietary interest in the estate and he/she must actually be living on the property at the time it is being disposed (Stroud 2013, p. 66). A case in point is Williams & Glyn’s Bank v Boland (1981), where the presiding judge, Lord Wilberforce, held that Mrs. Boland had an overriding interest through her actual occupation of the house that Williams & Glyn’s Bank was seeking possession of. That was despite the fact that Mr. Boland had defaulted on his mortgage payments. The judge argued that Mrs. Boland had a beneficial interest in the house since she had contributed to the money that her husband used to purchase the house and later to service the mortgage. Arguably, overriding interests create problems for land purchasers upon registration of title since they are bound by potential rights, which are not obvious. Ideally, most people would prefer to purchase and register titles for property which has no hidden rights. However, the reality is that overriding interests are a part of the land laws in the UK and therefore, people will just have to live with that reality in mind. The answer to the question therefore, this paper perceives the argument that overriding rights are a stumbling block to the registration of title as true. Notably, the operative word in the above argument is ‘stumbling’, thus meaning that the overriding rights pose a challenge, but do not prevent people from registering titles altogether. To what extent, if at all, has the Land Registration Act 2002 tried to reduce their effect? The reforms made to the LRA 2002 have minimised the impact of overriding interests on land. Compared to LRA 1925, the 2002 Act reduces the scope of unregistered interests. Specifically, LRA 2002 discontinued five overriding interests from LRA 1925 and allowed 15 such interests to continue (Bray 2014, p. 78). According to Dixon (2008, p. 48), the reduction of scope was done for purposes of ensuring that only overriding interests that were practical or necessary in policy were retained. Such rights are also likely to be discovered by a person interested in registering a title if he/she takes time to enquire about the land. Notably, LRA 2002 did not lose an opportunity of getting rid of overriding interests. As Bray (2010, p. 71) notes, the mirror principle is idealistic, but realistically, not every interest on land can be registered. Additionally, it would not be appropriate to register all interests, as that would lead to excess baggage for the land register. In LRA 2002, Schedule 1 and Schedule 3 deal with overriding interests. However, Schedule 1 deals overriding rights for a first disposition and is thus more detailed. On its part, Schedule 3 deals with registered dispositions or property transfer, and is not as detailed as Schedule 1. Bray (2014, p. 78) notes that the law gives more weight to Schedule 1 in recognition that even though the title for a particular land was not registered, it does not give anyone the right to prejudice the owner of such a land by placing it on the register. One gets the impression that Schedule 1 wants to create limits to interests that bind; in that what did not bind before the first registration should not bind afterwards. Dixon (2003, p. 6) notes that under Schedule 1, legal easements not entered in the register are permissible since first registration is not meant to restrict or enhance proprietary rights. However, in Schedule 3, only rights that are discoverable and which are frequently used are overriding. LRA 2002 has also made changes to section 70(1) of the LRA 1925. Consequently, recipients of profits and rents are no longer entitled to interests that override. In Ferrihurst v Wallcite, it was decided that the actual occupation on one part of the land would not legally be interpreted to mean that the claimant had interests on an entire property. Previously, it was indicated that whether the buyer was aware of the claimant’s rights before purchase, such rights would still be overriding. However, in Schedule 3 of LRA 2002, two instances where actual occupation rights would fail to override have been indicated. In the first instance, the rights would fail to override if the claimant fails to disclose his or her interest in a property when it would have been reasonable to do so. The second instance would involve undiscoverable interests. In LRA 2002, one gets the impression that undiscoverable interests are quite different from the undiscovered rights. Undiscoverable rights are reasonably almost undiscoverable upon the inspection of a title. However, not all undiscovered interests are undiscoverable; some just remain so because the buyer was not keen enough. Williams & Glyns Bank v Boland is a case in point, where it would appear that the bank was too eager to offer mortgage and as such, did not take time to understand the actual occupants of the property. In Ferrihurst v Wallcite however, it would appear that it was indeed hard for the buyer to discover interests that had not been registered in the title regardless of any attempts to meticulously inspect the same title. Overall, it is evident that LRA 2002 has tried to reduce the effects of overriding interests. A reduction of the applicability of overriding interests for leases from 21 to seven years was specifically a big improvement. Additionally, LRA 2002 reduced the effect of undiscoverable interests especially where a squatter was granted rights to claim a property under LRA 1925 s70 (1) (f). In the present Act, such a squatter would only have an overriding right if he or she was in actual occupation when the land was acquired by the new owner. Bibliography Cases Ferrishurst Ltd v Wallcite Ltd [1998] All ER (D) 656 Williams & Glyns Bank v Boland [1981] AC 487 House of Lords. Journal Articles Dixon, M 2003, ‘The reform of property law and the land registration Act 2002: a risk assessment’, Conveyancer and property lawyer, March/April, pp. 136-156 Books Bray, J 2010, Unlocking land law, 3rd edn, Hodder Education, Oxon. Dixon, M 2014, Modern law, 9th edn, Routledge, London, New York. Stroud, A 2013, Making sense of land law, 4th edn, Palgrave Macmillan, New York. Read More