The provisions of schedule 4 of the Land Registration Act 2002 permit alterations to the register to rectify mistakes. But if the registered proprietor is in possession of the land, it must first consent, unless it caused or substantially contributed to the mistake through fraud or carelessness, or it would be unjust not to make the correction, in which case the court can dispense with such consent.
Lease extension
The litigation in Rees v 82 Portland Place Investments LLP [2020] EWHC 1177 (Ch); [2020] PLSCS 96 resulted from an error by the Land Registry. It had registered a unilateral notice against an intermediate leasehold title to protect a tenant’s claim for a 90-year lease extension, pursuant to the Leasehold Reform, Housing and Urban Development Act 1993. But the Land Registry refused to register a similar notice against the freeholder (who was the competent landlord), citing section 54 of the 1993 Act.
Section 54 suspends individual claims for lease extensions while a claim for collective enfranchisement is ongoing – and the tenants of the building had made such a claim. But section 54 only suspends the operation of a tenant’s claim for a lease extension, and does not preclude registration of a unilateral notice to protect it. So the Land Registry was mistaken.
Unfortunately, no one challenged the decision. Therefore, although the Land Registry initially migrated the unilateral notice from the intermediate leasehold title to the newly enfranchised freehold title, the combined effect of section 97(1) of the 1993 Act (lease extensions must be registered as estate contracts) and section 29 of the 2002 Act (priority of registered dispositions over unprotected interests) meant that the new freeholder was not bound by the tenant’s claim for a lease extension. Consequently, when the new freehold proprietor merged the intermediate lease, which had 12 years left to run, into the freehold title and granted a new long lease over the tenant’s flat to 82 Portland Place Investments LLP, the LLP also took free from the tenant’s claim.
Was it possible to rectify the Land Registry’s mistake? If not, the tenant would have to begin afresh and was likely to have to pay around £1.8m more for a lease extension.
Rectification
Paragraph 8 of schedule 4 of the 2002 Act states that the power to rectify the register extends to changing “for the future” the priority of any interest affecting the registered estate concerned. Did this prevent the court from changing the priorities between the parties retrospectively, in order to give the tenant’s interest the priority that it should have had, but for the Land Registry’s mistake?
The judge was satisfied that he could make an order placing the parties in the position that they should have been, had the unilateral notice been registered against the freehold title, thanks to MacLeod v Gold Harp Properties Ltd [2014] EWCA Civ 1084; [2014] PLSCS 228. In that case, the Court of Appeal interpreted paragraph 8 to mean that the owners of interests that are restored to the register will be entitled to assert their priority over interests created in the period of mistaken de-registration, although they will not be entitled to hold the owners of interests that are displaced responsible for what has happened in the interim.
Unjust not to rectify
As we have already seen, paragraph 3(2) of schedule 4 of the 2002 Act protects innocent proprietors in possession of land by prohibiting alterations to the register that affect them without their consent. And section 131 of the 2002 Act treats land in the possession of a tenant as being in the possession of the landlord.
So the tenant needed to show that it would be unjust not to rectify the register: paragraph 3(2)(b). This is a high hurdle to clear, as both the Law Commission and the Court of Appeal have indicated recently: see Updating the Land Registration Act 2002 (Law Com 380) and Dhillon v Barclays Bank plc [2020] EWCA Civ 619; [2020] PLSCS 91. The tenant’s arguments that the Land Registry had made a serious mistake, which the freeholder had known about and which would vastly increase the cost of extending her lease, failed to clear that hurdle.
The freeholder was not at fault and did not know why the tenant’s interest was unprotected. And it would introduce risks and complications, and undermine the reliability of the register and the purpose of registration (which is to make conveyancing faster, easier and cheaper), if mere knowledge of the existence of an unprotected interest were to expose prospective buyers to a material risk of rectification (although it would be going too far to suggest that a proprietor’s knowledge of an unprotected interest, no matter how extensive, could never be relevant in cases involving rectification).
The price paid for the freehold was not discounted to reflect the tenant’s claim for a lease extension. It was fixed by reference to the earlier date on which the collective enfranchisement notice had been served. So there was no windfall to consider. And the tenant could still extend her lease, although it would cost considerably more to do so. But both sides stood to win or lose exactly the same amount. So the amount at stake did not tip the scales in the tenant’s favour and the court refused to rectify the register, leaving the tenant to pursue claims for an indemnity from the Land Registry and/or an action in negligence against her solicitors instead.
Key points
- An innocent proprietor’s consent is needed if its title will be adversely affected by an alteration to the register, unless it would be positively unjust not to rectify the mistake
- The Land Registry had wrongly migrated a unilateral notice, protecting a claim for an extended lease from an intermediate leasehold title to a newly enfranchised freehold title and, from there, to a newly granted intermediate leasehold title
Allyson Colby is a property law consultant
