Contracts to sell registered land can be protected by the entry of a notice in the charges register. Registration of a notice does not guarantee that the interest that it protects is valid, but protects its priority in the event of any subsequent dealings with the land.
However, a party that registers a notice without reasonable cause commits the tort of breach of statutory duty under section 77 of the Land Registration Act 2002. There have been relatively few cases under this section since the legislation was enacted. Consequently, practitioners will be interested in the judge’s analysis in Fitzroy Development Ltd v Fitzrovia Properties Ltd [2011] EWHC 1849 (Ch); [2011] PLSCS 184.
The buyer registered a unilateral notice to protect a contract for sale, which was conditional on the grant of planning permission. When it did so, it had the benefit of the contract and was entitled to act as it did. The seller subsequently rescinded the contract on the ground that planning permission had not been obtained before the deadline specified in the agreement. It asked the buyer for the unilateral notice to be removed from its title, but the buyer refused to do so pending the outcome of proceedings in which it claimed that the contract was still in force. The judge ruled that the seller had validly rescinded the contract, but refused an award of damages under section 77.
The judge drew attention to the wording used in section 77 which, if read literally, is limited in its application because the duty would appear to apply only when the application for registration is made. Can the section be interpreted more widely to render a person liable for damages for unreasonably retaining the benefit of a notice where circumstances have changed?
It was unnecessary for the judge to decide this point because he took the view that the buyer had acted reasonably when it refused to withdraw its notice, since it could be reasonably argued that the contract was still alive. Consequently, practitioners will have to wait for another case in which the buyer insists – unreasonably – on the retention of a notice to understand the full scope and effect of section 77.
Alternatively, sellers can put paid to doubts about the scope of the statutory duty by including provisions in contracts for sale requiring the buyer to cancel any registrations made to protect the agreement if either party rescinds. The seller would be entitled to damages for any breach of this contractual obligation.
If the contract is silent, or the buyer has qualified the obligation to permit the retention of a registration in the event of a dispute, the seller can ask the court to exercise its jurisdiction to vacate the entry from the register. The jurisdiction can be exercised in the course of an interim application and, if the court dismisses the seller’s application, it will usually do so on condition that the buyer undertakes to pay the seller damages if, at trial, it is held that the registration was wrongly made: Tucker v Hutchinson (1987) 54 P&CR 106.
Allyson Colby is a property law consultant
