Registration of land

The next principle is the curtain principle, which states certain rights such as equitable interest should remain hidden behind a special type of trust. Hence when an individual decides to purchase a land which is under a trust of land, he only needs to be concerned with the legal and registered title of the land which can be seen on the register and is in the possession of the trustee. One does not have to worry about any equitable interest regarding ownership which might be attached to the land. The reason this principle is observed and commonly followed is because if proper procedure is followed, any equitable rights will be overreached. This is stated under section 2 and section 27 of Land Property Act 1925. Hence, when the purchaser pays for his land, the equitable rights of ownership will not affect him. However, ‘overreaching’ does not destroy or demolish the rights of the true owners, meaning the trustee whom hold it in trust, will hold the money received from sale in trust for the equitable owner. Hence, this simplifies the process of conveyancing as the purchaser does not have to worry about communicating with the equitable owners of the land. However, this principle does have it flaws as well, as for example when the preconditions for overreaching based on statutes can’t be met, the purchaser will be dealt with a lot of hassle. The leading case for this is Williams and Glyn’s Bank v Boland where the bank whom failed to identify that the borrower’s wife’s rights weighed greater priority over the bank’s mortgage. There wasn’t much changes made by LRA 2002 regarding the doctrine of overreaching, ergo, problems which arose due to the fact ‘overreaching’ could not occur, were not resolved. However, the act states that a purchaser is only bound by those equitable interests who were discoverable on a physical inspection and protects the rights of the purchasers by defining interest that may override and exclude those which are undiscoverable. This is also governed by the Law Property Act 1969 which addresses the above problem under section 25.  Hence, this provides for cover for the rights of purchasers. A case to read on this was the case of Oak Co-Operative Builiding Society v Blackburn where the purchaser was mistaken of the details of the equitable owner and registered against the wrong name. However, section 23 of the act states that the trustees have absolute power as an owner but will be restricted if there is some sort of restriction on the title of the property. 

The third principle known as the insurance principle or the indemnity principle was firstly raised in the LRA 1925 and remains in LRA 2002 stated under Schedule 4 and 8 of LRA 2002. The principle is that if a title is registered and guaranteed by the state, there will be monetary compensation for any losses suffered by the purchaser if it was caused by a mistake in the register. Hence, in this manner, the State is willing to accept claims if it was an error made by the office. This would protect innocent parties of their rights because of mistake in the system or the way the system is ran. Even though many might under estimate the importance of this principle, but in fact, it is of the utmost importance as it gives the confidence to the citizens to rely on the system of registration in the country. Ergo, the citizens would not fear to use the system.

The new legislation made some changes to improve the older one, they can mainly be divided into 5; events that trigger registration, charges, notices and restrictions, overriding interest and e-conveyancing.

The scope of interest which can be registered have been extended with the inclusion of profits a prendre in gross and franchises. This can be seen under section 2 whilst under section 3 and 4, raises matters which are to be voluntarily registered and compelled under compulsory registration. Voluntary registration under the statute is encouraged but however, not all rights can be registered. To further encourage voluntary registration, the act provides fee-incentives for it. For compulsory registration on the other hand, it is stated under section 4 that when a ‘qualifying estate’ goes under a transfer of ownership, there is and obligation to register that estate. Other situations that lead to compulsory registration are;

1. the grant out of a qualifying estate of a lease with more than 7 years to run from the date of grant for valuable or other consideration or by way of gift or in pursuance of an order of the court
2. the grant of an estate that qualify of a lease which will take effect in possession after the end of three month period starting from the date of a grant of the lease
3. when a protected legal mortgage is created for a ‘qualifying estate’
4. some transfer of land in accordance with the Housing Act 1985

Hence, as it can be clearly and concussively said that the events that require compulsory registration have lower standards in the newer act hence requiring more details to be registration giving a clearly picture to the purchasers and public for viewing. One very common example is the fact that the newer act will detect leases of more than 7 years which use to be 21 years and above in the older act. Hence, most commercial leases which are usually for an average of 15 years to be registered. Therefore, the act increases situations where unregistered land must be registered. To add to this, Lord Chancellor is given statutory power to amend events that raise compulsory first registration under section 4 of LRA 2002. The older act which provided cautions against first registration in a manner where if an individual having some interest in the land would be notified if an application has been made for the land’s first registration. 

The next change is the introduction of notices and restrictions. After the implementation of the new act, the only manner of protecting the interest in a registered land will be by use of notices and/or a restriction as seen appropriate. Notices can be easily used in the protection of encumbrances on a particular land which are meant to bind 3rd parties. Some examples are easements, restrictive covenants or burden of leases. A restriction on the other hand governs situations in where the nature of an estate which is registered or charge may be forced upon entry on the register. Hence, if a trustee has a limitation placed upon his powers, this must be recorded and shown on the register. Hence, this would provide a clearer picture to the purchaser about the land he is about to purchase which would further push the use of mirror principle.

Another change is regarding charges. There were a number of alterations made by the new act concerning charges regarding registered land. For example, it has prospectively abolished charges by way of sub-demise and demise. Furthermore, it has also changed the set of rules in regards to the importance of further advances if in any case the property is subsequently charged. The main change effected by this act is to apply the current practice whereby lenders take it on themselves to inform prior chargees of any further and subsequent charge made based on the land, hence, this would hinder the prior charge from giving out any future advances on the security of his earlier charge. Furthermore, a registered chargee can make future advances on his security of a charge ranking in priority if by any chance the parties involved have agreed to an amount for which the charge is security and that amount would be added to the register. This would provide for clarity and further prove the push towards the mirror principle as even charges could be included.

The next change is regarding overriding principle which has been the centre of the bone of contention regarding registered land. Overriding principles have always been seen as a clear breach of the mirror principle as it is almost impossible of a register to show the true nature of the land but however, it was not abolished and removed in the LRA 2002 and the reason was stated as below;

‘most overriding interests do appear to have one shared characteristic, however, that is related to the orthodox explanation of them, namely that it is unreasonable to expect the person who has the benefit of the right to register t as a means of securing its protection’.

Schedule 1 of the act draws a list of interest which are overriding on first registration whilst Schedule 3 for those which override the disposition of already registered estate. There will be no overriding interest if it is not listed as an interest in the first place, given principle by Llyods Bank Plc. v Rosset. The rights which override under the new act is clearly more confined compared to the older one. The LRA 2002 acted to reduce the number of overriding interest in a bid to provide as much transparency on a register as possible particularly regarding those that affect registered dispositions. To add to this, overriding interest regarding actual occupation has also been given a clearer picture. Hence, for an overriding interest to be binding, the claimant must have been in actual occupation at the date of the disposition as stated in Abbey National Building Society v Cann.  This was also seen in Bristol Building Society v Henning and Paddington Building Society v Mendelsohn. However, it could not at the same time completely remove it all together as well because of those rights which were created on land informally. Hence, all in all, there needed to be a balance between justice and certainty. Steps have been taken to encourage registration of these interests as provided by under section 71(a). 

The next change would probably be the biggest change being introduced by the LRA 2002 which is to transform United Kingdom registration into e-conveyancing. The details on how the system would operate is rather vague by simply looking at the act as it only provides a pathway for the creation of the Land Registry Network and for network access agreements to be met between the HM Land Registry and the conveyancers. The results are still awaited.

On the other hand, would practitioners be forced to move from a previous paper-based system to a newer more efficient electronically based system of conveyancing? To further add to the distress, if so, when would this change take place? It has been a good 7 years since the act was created but yet, no signs of it taking place. To answer the first question, the act does have the power to force the use of electronic conveyancing but it is not likely that such stern powers would be used, well at least not anytime soon. Furthermore, the Land Registry is not prepared to undertake such a major shift. But then again, the Law Commission has stated vigour sly in various articles recommending that the period when transition takes place between the two systems should be kept to a minimum in order to avoid any disruption. Before being too critical of the new system, would be a wise idea to view what the final outcome would be when it is used. Law Commission stated in their Reports No. 254 and 271 that this is more than achievable. Hence, the aim of the LRA 2002 to paint a clear picture of a land on the register might still be accomplished and looking at it from the big picture, e-conveyancing would definitely provide for that as the details, rights and interest attached to a piece of land would clear and open for the viewing of the public. 

To conclude, the statement in the question above isn’t wrote but not wholly accurate as well. There are certain situations which are clearly against the concept of the mirror principle but the LRA 2002 has minimized this to an almost nil providing for the fullest and almost complete coverage of protection for the purchaser and the individuals whom might have interest in the land. Hence, it can be said yes, the principle might not be followed at full but it is still very much applicable and once the e-conveyancing system is up and running, the principle would be almost certainly followed at full.

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