Proposals for reform of the Land Registration Act 2002

The Law Commission has published a consultation paper on “Updating the Land Registration Act 2002” (Consultation Paper No 227). The announcement states that the paper considers a wide range of issues, including those interests that can be registered at the Land Registry, how interests are protected on the register, how mines and minerals are to be dealt with on first registration, the effect of registration and the powers of disposition given to the proprietor, the extent of the guarantee of title that registration provides, and the development of electronic conveyancing. For those short of early summer reading material, a printing of the consultation paper runs to 496 pages. However, in briefer terms, the Law Commission has considered whether or not to reform the 2002 Act in the following areas:

The registration threshold for leases. Currently, leases are only required to be registered as separate registered estates where the lease term exceeds seven years. At the time of enactment of the 2002 Act, it was contemplated that the registration threshold for leases would eventually be reduced, so that a greater number of interests would be apparent from the register. However, after due consideration, the Law Commission concludes that it is not appropriate to reduce the threshold from 7 years to 3 years. Hence, no change is proposed.

The requirement to register easements in non-registrable leases. Under the 2002 Act, an easement expressly granted or reserved out of a registered title is a registrable disposition. Accordingly, without registration, the easement does not exist at law, and runs the risk of losing its priority on a sale of the affected land (especially given that equitable easements are not capable of amounting to overriding interests). This is a major problem in particular for short term tenants who may ignore registration requirements for easements. Land Registry Practice Guide 62 reminds us that an easement “…is no less a registrable disposition if it happens to be contained in a lease, even if the lease itself cannot be registered or noted.” Hence, easements in leases granted for terms not exceeding seven years, where the lease is not itself registrable (or terms not exceeding three years, where the lease cannot be the subject of a notice) remain as registrable dispositions, and are vulnerable if not registered. To overcome this problem, the Law Commission proposes that such easements in short term leases should cease to be classified as registrable dispositions, but should rank instead as overriding interests – automatically binding, provided they are known rights, obvious to the eye, or rights that have been recently exercised.

The widespread use of restrictions. Thankfully, this is another area where, after consideration of the use of restrictions for the enforcement of mere contractual rights (e.g. enforcing positive covenants against successors; preventing mortgagors from creating second mortgages; requiring assignees of leases to enter into deeds of covenant), and a consideration of whether or not restrictions should continue to be used in this way, the Law Commission concludes that a prohibition on the use of restrictions for such purposes is not necessary. Restrictions will continue to be able to be used for purposes not involving the enforcement of pure property rights.

Agreed and unilateral notices. The Law Commission is considering a change in terminology, and some slight procedural changes in connection with the use of unilateral notices. However, at the heart of these proposals may be a desire to draw out some of the confidential ownership information that property developers hide behind a unilateral notice. Perceived problems with the UN1 system of protecting third party rights are that, while confidentiality is important, very little information needs to be produced for the registration of a unilateral notice, the proprietor is given no procedural opportunity to object to the registration, and even if he/she applies for cancellation of the notice, full evidence of the interest claimed is not required to be produced to the Land Registry. The Law Commission proposes that it should continue to be possible to protect a third party right by one of two kinds of notice: these would be called a full notice and a summary notice. As with unilateral notices, a summary notice should not need to be accompanied by any evidence to support the interest claimed. However, if a registered proprietor applied to cancel a summary notice, it is proposed that the beneficiary of the summary notice will be required to respond within 15 business days (subject to an extension of up to a maximum of 30 business days), and in doing so must demonstrate a case for the retention of the notice which is not groundless. If the beneficiary objects to cancellation of the notice, the beneficiary must produce evidence to satisfy the registrar of the validity of the interest claimed. In that way, more information about the protected right will be drawn out.

Priority as between registered and unregistered third party rights. The rules relating to priorities between competing interests affecting registered land are to be found in sections 28 to 30 of the 2002 Act. At present, an anomaly exists where third party rights affect registered land (e.g. competing contracts or options over the same land) in that the so-called “first in time” rule applies. On might have thought that an option or contract that is noted first on the register would take priority over any other options or contracts affecting that land. However, the first in time rule (meaning first in time of creation) means that an option that is not protected by notice in the register has priority over a later option that is protected in the register. The Law Commission proposes to alter this so that, if an unregistrable interest (such as an option, contract for sale etc.) is noted on the register, that interest should enjoy a level of priority so that it is subject only to the interests that are “protected” (as set out in section 29(2) of the 2002 Act).

Electronic conveyancing. A move towards full e-conveyancing, as envisaged at the time of the 2002 Act, is not imminent. The Law Commission says that “at the current time a number of practical barriers stand in the way of a system of electronic conveyancing that provides for simultaneous completion and registration of an interest… We consider that simultaneous completion and registration should remain the goal of electronic conveyancing, but we have concluded that it is not practical to move directly to such a model from paper-based conveyancing.”

Rules relating to adverse possession. A number of minor alterations are considered in relation to adverse possession, including abolishing the first two grounds upon which an opposed Form ADV1 application can proceed. This is on the basis that those grounds have limited relevance to adverse possession claims. (The grounds are that principles of estoppel makes it unconscionable for the registered proprietor to object to the claim, or that the claimant is able to show that it is otherwise entitled to the land, for example by virtue of its being a buyer in possession under a contract). The Law Commission is considering whether the first two grounds continue to serve a purpose in connection with adverse possession claims. The third ground upon which an opposed Form ADV1 application can proceed is the “boundary condition”: that is, that for at least ten years of the period of adverse possession ending on the date of the application, the applicant (or any predecessor in title) reasonably believed that the land to which the application relates belonged to him. For the boundary condition to apply, the applicant’s reasonable belief (or that of the applicant and any predecessor) must have been held for at least ten years, ending on the date of application. A claimant who learns that his/her belief is not reasonable, is advised to apply to register promptly. In Zarb v Parry [2011] EWCA Civ 1306, Lady Justice Arden said: “The moral is that, as soon as the adverse possessor learns facts which might make his belief in his own ownership unreasonable, he should take steps to secure registration as proprietor.” The Law Commission proposes to make it clear that the reasonable belief of the applicant must not have ended more than six months before the date of the application.

Rectification and indemnity rules. Much time is taken up by the Law Commission in a necessary consideration of the rules relating to rectification and indemnity, and to what amounts to a mistake in the register, especially in relation to fraudulent registrations. In relation to fraud, and the increased incidence of registration fraud, the Law Commission considers duties of care owed by conveyancers. In order to counteract registration fraud, the paper asks whether a duty of care that conveyancers may owe to the Land Registry in respect of applications for registration should be enhanced, and whether a statutory duty of care should be introduced. The paper says that “[t]hose who may be better placed [to detect fraud] - such as conveyancers and mortgage lenders - may not be incentivised to develop best practice because they will not necessarily bear the cost.”

There is much more in the Law Commission’s paper than this brief summary covers. There is also at one point a departure from land registration into landlord and tenant law: the Law Commission says that it is taking the opportunity to call for evidence on two other related areas of law that may be in need of reform, in order to see whether there may be sufficient support for a future law reform project on these topics: the law of mortgages, and (separately) the Landlord and Tenant (Covenants) Act 1995. On the latter, the Law Commission says that “we are aware of widespread dissatisfaction with a number of aspects of the 1995 Act.” That is most certainly the case.

The consultation period runs until 30 June 2016. Conveyancers with a keen interest in Land Registry developments would be well advised to have their say.

Comments

Going for full blown electronic conveyancing is the focus but in our experience so much can be done by examining the steps when Clients request a conveyancing quote. Solicitors cannot start on the conveyance until the client has returned the signed client care letter. This can take weeks to get this back. We at http://www.homebuyerconveyancing.com have taken steps to introduce Homebuyers and Investors to a national panel of Solicitors. It is extremely important that potential Solicitor Clients make an informed choice on who to use without any hard sell tactics.

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