However, as is well known, the same problem exists in registered land, yet the 1964 Act does not apply where title is registered under (now) the Land Registration Act 2002.
The Purchaser of Registered Land from the Survivor of Beneficial Joint Tenants
The purchaser of registered land may well be in exactly the same difficulty. Mrs A may have severed by any of the usual methods, which may be as undiscoverable, in a particular instance, in registered land as they may be in unregistered land. Any dealing with her equitable interest inter vivos, for example, is no concern of the registrar and there is no way to record such an event on the register; and nothing would prompt the non-lawyer to ensure that on the severing event or conduct a restriction was placed on the register to prevent the registration of a dealing with a sole survivor. [FN5] Thus there is nothing to prevent a purchaser buying registered land from such a sole survivor, in circumstances where a third party had a beneficial interest in the land; such an interest could bind a purchaser, not by notice of course, but in the event that the third party is in actual occupation of the land. [FN6]
If that sounds a little far-fetched, consider Mr and Mrs A again. They have a son, X, who lives with them; shortly before her death, Mrs A gives or sells her half share in the house to X. This is an alienation inter vivos and severs the beneficial joint tenancy. After Mrs A's death, Mr A wants to raise some capital and mortgages the house to the B Building Society. As is the way with such purchasers, the B Building Society has not inspected the property; but it does carry out the usual anti-Boland precautions [FN7] of enquiring whether or not there are any other adult occupiers of the property and seeking their consent to the disposition. Mr A, for whatever reason, [FN8] does not disclose his son's presence. Later, the son claims his half of the pre-mortgage equity in the property, free from the interest of the B Building Society. The mortgage by Mr A cannot have overreached his interest, [FN9] and therefore the mortgagee loses a substantial part of its security. It will have a personal remedy against Mr A, for misrepresentation, but that may be worthless.
Why was this problem not addressed in the 1964 Act? Two reasons may be suggested. One is that the legislators did not realise that severance might be effected, in registered land, without the entry of a restriction on the proprietorship register. The other, and perhaps more likely reason, is that it was not appreciated, so long before Boland, [FN10] that an interest under (then) a trust for sale of land was an interest in land and therefore might be an overriding interest under para.70(1)(g) of the Land Registration Act 1925. [FN11] And after Boland, no one thought to remedy the omission.
Why Protect the Purchaser?
Why should the purchaser be protected in these circumstances? That is actually a very large question, and depends upon considerations of economics which are outside the scope of this note; for those who frame land law legislation must make a decision about what is going to bind a purchaser, and that involves a decision about the virtues of marketability versus stability. One of the evils of nineteenth-century conveyancing was the scope of the doctrine of notice and the possibility of a purchaser being bound by an interest because he was held to have constructive notice of something he did not know about. The rigours of the doctrine of notice have to a considerable extent been tempered since then, but cases such as Kingsnorth Finance Co Ltd v Tizard [FN12] demonstrate just how unreasonable it could be. [FN13] The draftsmen of the 1925 legislation had to decide what level of protection, if any, should be given to purchasers so as to make land more marketable; their eventual policy, [FN14] embodied in the legislation, was extremely pro-purchaser. They effected this by means of two devices; the first of general application, the second relevant only to registered titles.
As is well known, of general application was the development [FN15] of the existing doctrine of overreaching so as to provide a way for a purchaser to be sure that he took a title clean of unexpected equitable interests. All he needed to do was to insist on a conveyance to him by two trustees; any equitable interests would then be transferred to the sale proceeds. The draftsmen envisaged that a conveyance by two trustees would become the norm [FN16]; and he could not have anticipated at that stage the rise of informally created equitable interests and the possibility that a purchaser (and indeed a vendor) might be unaware that the land was held upon trust. [FN17]
So far as registered titles were concerned, the 1925 draftsman was able to go further in protecting purchasers, because a title registration statute provides the opportunity to state what interests will bind a purchaser following a registered disposition. [FN18] The Land Registration Act 1925 stated that such a purchaser took the registered estate subject only to overriding interests and to matters actually noted on the register. This specification was then exploited by the draftsman so as to ensure that a purchaser could almost, but not quite, never be bound by a trust interest existing before his purchase.
In order to understand why this was so, consider the types of trust available in 1925. There was the strict settlement, now regulated by the Settled Land Act 1925, and at that date still the usual means of settling land across generations; there was the trust for sale, originally a means of holding land as a monetary investment, but employed in the 1925 legislation as the normal means of concurrent co-ownership. Finally there was the bare trust. Now, s.49(2) of the Land Registration Act 1925 provided that an interest under a strict settlement or a trust for sale could not be protected by notice on the register. [FN19] And s.86(2) of the Land Registration Act provides that an interest under a strict settlement cannot be an overriding interest. [FN20] That seems asymmetrical without a corresponding provision for an interest under a trust for sale; but such a provision would have made no sense in 1925 when such interests were regarded as solely monetary, pursuant to the doctrine of conversion.
That leaves only interests under bare trusts. These could not, it seems, be protected by notice on the register; s.49(2) would appear to eliminate them. They could, however, be overriding interests. The full potential of s.70(1)(g) was certainly not appreciated in 1925; its original purpose was largely to protect the Land Registry indemnity fund against matters such as drainage easements, and periodic tenancies which did not appear on the documentary title but would be obvious on inspection. [FN21] Gradually it became clear that the provision would give overriding force to more dynamic and threatening interests such as estate contracts [FN22]; and then Boland's case changed the world. The ensuing panic [FN23] died down as the legal profession realised that it could very nearly eliminate the problem by enquiring about the occupation of the property, and obtaining consent to the disposition of any adult occupiers. [FN24] Thus the anticipated threat to the pro-purchaser policy of the 1925 legislation has been largely eliminated, at the cost of some conveyancing inconvenience.
The Land Registration Act 2002
However, the elimination of that threat is not complete. It fails when an incorrect answer is made by the vendor to the purchaser's inquiry, as in our example above [FN25]; the only thing that can protect a purchaser completely in registered land is the appointment of a second trustee of the legal estate to ensure that any unexpected beneficial interests are safely overreached.
The purchaser of unregistered land from the survivor of beneficial joint tenants does not need to do this provided he checks that the requirements of the 1964 Act are met. He has no such protection in registered land, and must either insist on the appointment of another trustee of the legal estate or check rigorously for occupiers, probably without relying upon the word of the vendor. Neither is a huge hardship; but why not simply remove the problem by something corresponding to the 1964 Act for registered land? And what better place to do so than in the Land Registration Act 2002 ("the 2002 Act")?
Given that the problem with the asymmetry of the 1964 Act has been well known for some time, it is perhaps surprising that the 2002 Act does not address it. And it does not. It might be supposed that s.26 would have the required effect; for s.26 deals with a situation where a restriction should have been entered upon the register but has not been. It ensures that a vendor who transfers land in excess of his authority to do so [FN26] (for example, under the terms of a trust [FN27]) will not jeopardise the purchaser's position. Ideally, a limitation on the vendor's authority to sell--for example, a prohibition in the trust deed on his selling without the consent of a named person--would be reflected in the terms of a restriction placed on the proprietorship register. In the absence of such a restriction, an ultra vires disposition could go ahead and would be disastrous for a purchaser because an ultra vires disposition will not overreach the interests of beneficiaries, even if the technical requirement for overreaching--a sale or mortgage by two trustees or a trust corporation-- has been met. [FN28]
But this provision will not assist the purchaser from Mr A. For there is nothing ultra vires about a sale by Mr A in circumstances where a beneficiary's interest will not be overreached; he has the legal power to sell, of course, but equally there is no equitable restriction upon his authority to sell without overreaching. [FN29] He will commit a breach of trust if, having done so, he fails to give X his share of the proceeds; but if X is in occupation of the land X will be able to choose between his remedy against Mr A and his claim on the land itself. But there is nothing ultra vires about the sale itself; and s.26, however hard it tries, cannot enable a sole trustee to overreach. [FN30]
The Solution: A Small Amendment
What is the solution? The problem itself is a small one, in the sense that it does not yet seem to have arisen and can only do so in quite restricted circumstances [FN31]; but the solution is simple, and could usefully be effected at some stage by amendment to the 2002 Act.
Obviously a simple extension of the 1964 Act to registered land by repealing s.3 will not work; there is no way of making a memorandum of severance on the conveyance or transfer to the vendor and the deceased joint tenant, nor could the purchaser see that memorandum, since he has access only to the register and not to previous title deeds. All that is needed is a corresponding provision to the effect that the surviving joint tenant vendor will be deemed to be solely and beneficially entitled if:
(a) the transfer states that the vendor is solely and beneficially interested in the land;
(b) the purchaser obtains a clean bankruptcy search, exactly as in the 1964 Act [FN32];
(c) there is no restriction on the register preventing a disposition by the survivor of the two trustees.
The requirement of the absence of a memorandum of severance is thus matched by the requirement of the absence of a restriction. Neither is in fact conclusive; in unregistered land, severance could have been effected without the making of a memorandum, just as in registered land there could be a severance without the entry of a restriction. In both cases something inconclusive is deemed, for the protection of a purchaser, to be conclusive. And this only applies, of course, where the vendor is the survivor of two beneficial joint tenants; it does not effect any general undermining of the two trustee rule for overreaching.
The point made in this Article is a very small one; and a very small amendment to the 2002 Act would put it right.
FN Professor of Law, University of Reading.
FN1. Burgess v Rawnsley [1975] Ch. 429.
FN2. Law of Property Act 1925, s.36(2).
FN3. C. Harpum, Megarry and Wade, the Law of Real Property (6th ed, Sweet & Maxwell, London, 2000), paras 9-036 ff.
FN4. Presumably; this is the view expressed in Megarry and Wade (above, n.3) at 9-059, adding that a court might not allow a purchaser to take advantage of the Act if he "knew of or was a party to the vendor's inequitable conduct".
FN5. The wording of standard forms of restriction is set out in Sch.4 of the draft Land Registration Rules 2003. The appropriate one in this case would be Form A: "No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court."
FN6. Land Registration Act 1925, s.70(1)(g); now, Land Registration Act 2002, Sch.3, para.2.
FN7. Williams & Glyn's Bank Ltd v Boland [1981] A.C. 487.
FN8. He might not want X to know about the mortgage.
FN9. If it had done, overreaching would trump overriding: City of London Building Society v Flegg [1988] A.C. 73.
FN10. Above, n.7.
FN11. This is the reason suggested in Megarry and Wade, (above, n.3) para.9- 060.
FN12. [1986] 1 W.L.R. 783.
FN13. In Tizard, the purchaser was held to have constructive notice of a beneficiary's occupation because he had inspected the property at a time pre- arranged with the vendor; Judge John Finlay Q.C. at pp.794-795 took the view that he should have turned up unannounced so that the vendor did not have the opportunity to hide the evidence of occupation.
FN14. After some more extreme ideas had been rejected; for example, the proposal that nothing at all should bind a purchaser unless protected by registration: see S. Anderson, Lawyers and the Making of English Land Law 1832- 1940 (Clarendon Press, Oxford, 1992), 93-95.
FN15. See C. Harpum, "Overreaching, Trustees' Powers and the Reform of the 1925 Legislation" [1990] C.L.J. 277.
FN16. Law of Property Act 1925, s.27.
FN17. This is explained in Harpum's article, above, n.15, at 290 ff.
FN18. The Australian "Torrens" statutes were not wholly clear about this, but it does seem that the original intention may have been to enact that any unregistered interests, including therefore all trust interests, should have no proprietary effect, although the courts did not interpret them in this way; S. Cooper, "Equity and Unregistered Land Rights in Commonwealth Registration Systems" (2003) Oxford Journal of Commonwealth Law (forthcoming). Compare the flirtation with this idea in England in the nineteenth century; n.14, above.
FN19. As does s.33 of the Land Registration Act 2002.
FN20. As does Sch.3, para.2(a) of the Land Registration Act 2002.
FN21. See S. Anderson, Lawyers and the Making of English Land Law 1832-1940 (above, n.14) 277-289.
FN22. Bridges v Mees [1957] Ch. 475.
FN23. See the Law Commission report, Property Law: The implications of William and Glyn's Bank Ltd v Boland, Law Com No.158 (London, HMSO, 1982).
FN24. Children apparently do not have overriding interests by virtue of actual occupation: Hypo-Mortgage Services Ltd v Robinson [1997] 2 F.C.R. 422, CA, at 426. The fact that children's interests cannot override in this way is a further illustration of the strongly propurchaser policy of English land law.
FN25. It clearly failed in Flegg, too (above, n.9); the issue in that case would not have arisen if the lender had known about the beneficiaries and made the usual request for their consent; we do not know whether the Building Society failed to ask, or the mortgagors failed to tell.
FN26. See G. Ferris and G. Battersby, "Overreaching, Trustees' Powers and the Reform of the 1925 Legislation" [1990] C.L.J. 277.
FN27. For example, pursuant to s.8 of the Trusts of Land and Appointment of Trustees Act 1996.
FN28. See C. Harpum, above, n.15.
FN29. Although he will of course be liable to the purchaser for breach of contract if he does not give vacant possession, where the purchaser is a buyer, or does not give an unencumbered security, where the purchaser is a mortgagee.
FN30. There is no suggestion in the wording of the section that it can do so; and the effects of reading the section as enabling this would be to reverse Boland and create conveyancing chaos.
FN31. It depends upon the standard anti-Boland conveyancing enquiries failing to elicit the truth about occupation, as a result of concealment, for whatever reason, by the vendor; see n.8, above.
FN32. Note that although the purchaser of registered land does not, of course, effect a full search under the Land Charges Acts, he still does a bankruptcy search in the Land Charges Register.
CONVPL 2004, Jan/Feb, 41-48
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