Property Law: Overriding Rights in LRA 2002 - Essay Example

Name Tutor Course Date Property Law: Overriding Rights in LRA 2002 Dixon’s view that overriding interests “are not intended to be a general safety net for a right holder who fails to register but a necessary evil in a system of the title registration whose main concern is transactional certainty” (Dixon “Protecting Third Party” 21) is arguably valid. The author arguably draws attention to the intent of the overriding interests in the Land Registration Act (LRA) 2002. The author also draws the reader’s attention to what seems as the system of title registration’s concern. According to the author, the system of title registration appears more concerned about the transactional certainty of property than anything else (“Protecting Third Party” 21). This essay argues that indeed, overriding interests are a necessary evil in LRA 2002. It also observes that the system appears more concerned about the transactional security of property. The typical justification for the inclusion of overriding interests in land laws (i.e. LRA 1925 and LRA 2002) is that they serve a social and legal need, which needs to be more prominent than absolute certainty of title deeds or registered titles (Harrison and Proddow par. 3). According to Stroud, the social need catered for by overriding interests pertains to the relative fact that not all interests to land can be registered (63). The mirror principle1, specifically makes some leeway for overriding interests, but as Stroud indicates, buyers of land must exercise due diligence in order to ensure that every right on the property that interests them either for lease or buying is known to them (63). When interpreted alongside the insurance principle, which is one of the three founding principles of title registration, the overriding interests that the title owner may not know about are insured by the government. As such, the State seems to have guaranteed all registered titles, hence giving new lease holders or title holders some degree of certainty. The foregoing observation discredits Dixon’s assertion that overriding interests are not meant to be a safety net for rights holders because the insurance principle arguably provides that safety net (“Protecting Third Party” 21). It is important to understand that overriding interests are not obvious from inspecting the registry. Leases that are less than seven years old cannot for example be obvious from the registry because they are not registered. Actual occupation may not also be obvious from the land registry as was evident from Abbey National Building Society v Cann2. Schedule 3 paragraph 2 of LRA 2002 however casts doubt on the real meaning of actual occupation as argued in Thomas v Foy3. Paragraph 2 of Schedule 3 also introduces the concept of obvious occupation, which was demonstrated in Thomas v Clydesdale Bank, where the appellant argued that although she had not moved into the contested property, her occupation could be proven by her regular visits to inspect workers who were conducting renovations in the house. From the aforementioned cases, it can be said that the overriding interests provide some kind of safety net to right holders who had not registered their interests, since they did not necessarily lose their properties without a legal fight. However, in LRA 2002, it is noteworthy that the registration of third party rights is encouraged for purposes of making them more discoverable at the registry by an interested purchaser. Reading the provisions of LRA Schedule 3, one would argue that third party interests are unprotected, especially if they are not properly registered and do not fall within the ambit of overriding interests. Consequently, such interests do not get as much consideration (if any) when compared to properly registered dispositions. Therefore, it can be argued that LRA 2002 made a deliberate effort to encourage people to register as many third-party rights, hence making them more discoverable to interested parties. Dixon’s assertion that the system was more interested in transactional certainty arguably has merit (“Protecting Third Party” 21). As Dixon notes, the main goal of LRA 2002 framers was to make the land laws more appropriate for electronic conveyancing (e-conveyancing) (21). On its part, electronic conveyancing was meant to enhance the efficiency and certainty of land-related transactions. Further evidence that LRA 2002 was enacted to enforce certainty in land-related transactions is provided by Cowan, O’Mahony and Cobb, who indicate that the Act infuses better rationalities for dealing with land leases and title transfers (93). LRA 2002 further intensifies the need to record property rights in the land registry hence, reducing the risks related to dealing with strangers when conducting land transactions and reducing the threat posed to mortgagees or land transferees (Gray and Gray 48). The necessary evil argument by Dixon is also arguably valid (“Protecting Third Party” 21). In its most literal meaning, a necessary evil is something that a person dislikes but has to put up with anyway. This leads to the question of whether overriding rights are disliked by the rights holder. The most obvious answer to this question would be in the affirmative based on the observation made elsewhere in this paper that some rights may not be completely clear to the rights holder. However, registering such rights places the registering party in a tight position because he or she may not be able to refute that such a right existed, even if he had erred when registering it. By requiring the disclosure of third party rights, LRA 2002 also places the burden of proof on the person who is interested in registering either the title or the disposition of the land. Notably, LRA 2002 has reduced the impact of the overriding rights, reduced the number of rights, redefined their scope and has encouraged those interested in first registration of titles or dispositions to enter the rights into the registry (Dixon “Modern Land Law” 43). Therefore, Dixon’s argument that overriding rights “are not supposed to be a safety net for a rights holder who fails to register” is seemingly true (“Protecting Third Party” 21). It is apparent that the right holders have been encouraged to register and this means that LRA 2002 was deliberate in making such rights discoverable to anyone who had an interest in the land. Moreover, the reduction of overriding rights when compared to LRA 1925 could be interpreted to mean that under the new law, the safety provided by such rights has significantly reduced. Seemingly, the framers of LRA 2002, wanted to reduce overriding interests to the bare minimum. As Dixon observes, the new law creates the impression that interests should override only when they cannot be entered into the register for practical or reasonable reasons (“Protecting Third Party” 21). In the new law for example, the mere existence of an interest does not guarantee the third party that such an interest would be considered overriding. The new law also makes a distinction between the interests that override at first registration and others which override when there is a disposition of a registered title. Interests which override at first registration are indicated in Schedule 1 of LRA 2002, while interests that override at disposition of a registered title are indicated in Schedule 3. Interestingly, Schedule 1 seems more generous when compared to Schedule 3, hence implying that unregistered interests would be prioritised when a title is first registered as opposed to when a registered title is changing ownership. As Dixon notes, the 2002 Act is premised on the assumption that e-conveyancing will be the norm in future land transactions (“Protecting Third Party” 21). As a result, the Act prioritises the purchase over other unregistered interests or any other interests that are discoverable. Arguably, this enhances transactional certainty in land. Section 19 of LRA 20024 further obligates people applying to register a title or those applying to register a disposition to disclose all third-party overriding interests on their properties. Such rights are then entered into the register, making any transactions on that land more certain. Moreover, disclosure of overriding rights on a property makes the register a comprehensive record of the property title. As well, the register can now be perceived a true reflection of the title and purchasers of the land can use it confidently. Interestingly, people seeking registration will want to ensure that all disclosed rights are accurate, because as Section 32(3) LRA 2002 implies, disputing the validity of a disclosed right would be a difficult undertaking. Overall, it is somewhat clear that LRA 2002 seeks to ensure that a purchaser can be certain about any existing overriding rights by inspecting the land register. Moreover, LRA creates the impression that by making the necessary sensible enquiries, a party interested in a specific property can discover the overriding interests indicated in Schedule 3. Consequently, the person who makes all possible sensible enquiries about the land is not supposed to be affected by any rights that were neither registered nor easy to find out through reasonable enquiries. Notably, transactional certainty is a fundamental tenet in LRA 2002 and as such, Dixon was right in claiming the exact same position (“Protecting Third Party” 21). Schedule 3 is an apparent reduction of the scope that overriding interests had in the earlier law5 and is seemingly, therefore, a reduction of the threats that previously hounded conveyancing and the security of titles. It is however worth noting that implementing schedule 3 in order to support transactional certainty might be problematic as is aptly noted by Dixon (“Protecting Third Party” 27). In conclusion, this essay has shown the extent to which Dixon’s observation regarding overriding interests is reflected in LRA 2002. Based on several provisions in LRA 2002 Schedules 1 and 3, the essay notes that it is indeed true that the overriding interests do not provide a safety net for rights holders who do not register them. If anything, LRA 2002 seems to have reduced the rights considerably when compared to LRA 1925. Where the rights are still relevant, the rights owners have been encouraged to register them in the land registrar to make them more obvious to parties that may be interested in the land. Arguably, the reduction in range and scope of overriding interests, as well as the requirement to register them, makes Dixon’s claim that transactional security is the main concern of the title registration system even more plausible. Bibliography Cases Abbey National Building Society v Cann [1991] 1 AC 56 Thomas v Clydesdale Bank [2010] EWHC 2755 Thompson v Foy [2009] EWHC 1076 Books Cowan, David, Lorna Fox O’Mahony, and Neil Cobb. Great Debates in Property Law. Palgrave Macmillan. Dixon, Martin. “Protecting Third Party Interests under the Land Registration Act 2002. To Worry or Not to Worry: That is the Question”. In Dixon Martin and Gerwyn Griffiths, Contemporary Perspectives on Property, Equity and Trusts Law, Oxford: Oxford University Press, 2007. 19-38. Print. Dixon Martin. Modern Land Law. 9th ed. Routledge: New York, 2014. Print. Gray Kevin J. and Susan Francis Gray. Elements of Land Law. 4th ed. Oxford: Oxford University Press, 2005. Print. Stroud, April. Making Sense of Land Law. 4th ed. New York: Palgrave Macmillan, 2013. Print. Web Harrison, Charlotte and Charlie Proddow. “Still an Overriding Concern?” Nov. 2014. Web. 28 Oct. 2015. Read More