An effective land registration law is essential for everyone who owns land, whether it is a home, a business or an investment. In England and Wales, the Land Registration Act 2002 (“the Act”) governs the 86% of land which is now registered, amounting to more than 24m registered titles. The Law Commission is conducting a project to review the Act in light of experience with its operation since it came into force in October 2003. The aim is to update the Act within its existing legal framework, rather than provide a comprehensive reformulation.
The register’s guarantee of title
It is important that those dealing with land can rely on the information contained in the register. This is not always as straightforward as it sounds. Cases of fraudulent transfers or mortgages of land have exposed uncertainties in the provisions of the Act that allow for alteration and rectification of the register when the register is found to be wrong. But the same questions arise outside instances of fraud; such as where the same land is incorrectly registered under two different freehold titles. Ultimately, in such cases, a difficult policy choice must be made: faced with two innocent parties, the law must decide who gets the land and who must claim an indemnity from Land Registry. Our project seeks to identify the principles that should determine how this difficult question is answered.
The provision of an indemnity is an essential part of the land registration system and we are not questioning the fundamental basis of the indemnity scheme. However, payments arising from registered title fraud now consistently make up more than half of the total sum paid in indemnity each year. Prevention is better than cure, and the ultimate aim must be to prevent the fraud from happening in the first place. We explore a range of options to detect and prevent fraud, including whether a duty of care that conveyancers may owe the Land Registry in respect of applications that they make should be enhanced and how the land registration system could include more effective identity checks. We also call for evidence on the significance of the indemnity scheme to lending decisions and consult on how the indemnity scheme should apply to mortgagees.
Notices
One of the ways of ensuring that an interest in land binds a buyer is through the entry of a notice on the title. The Act provides for two kinds of notice: agreed and unilateral. While we conclude that the two-tier system of notices should be retained, we make provisional proposals that would strengthen the position of a registered proprietor whose title is the subject of a unilateral notice, so that evidence of the interest claimed must be produced at an earlier stage than would currently be the case if the interest is disputed.
We also make provisional proposals that would increase the protection offered by the entry of a notice. Currently the priority of interests in land (outside the special provision made in the Act in respect of registered dispositions of registered estates) is based on the “first in time principle”. As a result, it is possible for the person with the benefit of an interest protected by a notice (which could perhaps be an option, or a restrictive covenant) to be subject to prior rights which they cannot discover from looking at the register. We are consulting on whether the entry of a notice on the register should also confer priority over prior unregistered rights, as well as securing priority over later interests.
Registering leases
Currently, leases of more than seven years are compulsorily registrable. We consider whether this threshold should be reduced, so that registration should be mandatory for all leases of over three years. We are not, however, convinced that the practical advantages to a tenant of registering a short lease outweigh the disadvantage of additional regulation and cost to businesses.
Easements
Overriding interests bind a purchaser even though they do not appear on the register. The Act reduced the impact of overriding interests. In particular, easements which are expressly granted out of registered land are not capable of overriding, and must be registered in order to bind a purchaser. This is the case even if the easements benefit a lease that does not itself need to be registered. We provisionally propose that easements which are contained in a lease that does not need to be registered should not themselves need to be registered, and should be capable of operating as overriding interests.
Electronic conveyancing
The Act provides the framework for the creation of an ambitious electronic conveyancing model, which envisages that the creation and registration of interests will take place simultaneously. Although a worthy goal, we consider that it is not practical to move directly to this model from paper-based conveyancing. We make provisional proposals that would open up avenues along which electronic conveyancing can develop.
Other matters
Disputes arising out of applications to Land Registry that cannot be resolved by agreement are referred to the land registration division of the First-tier Tribunal (Property Chamber). We invite views as to whether the tribunal should be given express statutory jurisdiction in a number of specific areas. We also consider whether aspects of the procedure for adverse possession of registered land, introduced by the Act, could be improved or clarified.
How to respond to the consultation
The issues on which we are consulting are technical, but they are important. We look forward to engaging with stakeholders during the consultation period.
The consultation paper can be downloaded from www.lawcom.gov.uk. Responses should be submitted by
30 June 2016 to propertyandtrust@lawcommission.gsi.gov.uk
