Right of pre-emption – Restriction – Appellants being granted right of pre-emption – Appellants applying for entry of restriction on register – Respondent registered proprietor objecting to restriction – First-tier Tribunal upholding objection – Whether appellants entitled to enter restriction in relation to pre-emption rights – Appeal allowed
The appellants owned Narborough House in Narborough, King’s Lynn, Norfolk purchased in 2001, and a wall which separated their property from neighbouring land owned by the respondents which included a large area known as the Park. A boundary dispute arose between the parties. After a mediation, the county court made an order which provided for the respondents to sell the Park to the appellants and for the appellants to transfer the wall to the respondents who entered into a covenant to maintain the wall. The covenant was to be binding on the respondents’ successors in title.
Paragraph 4 of the schedule provided: “In the event of the [respondents] or their estates selling all or any of the remaining land [the land] they shall give the [appellants] the first option to purchase that land”. Two unilateral notices were registered in respect of the land on the appellants’ application as intended purchasers under the order of the county court.
The appellants subsequently applied to enter a restriction in relation to the land stating that they had a sufficient interest in the restriction by virtue of the county court’s order. The respondents objected and the matter was referred to the First-tier Tribunal (FTT) pursuant to section 73(7) of the Land Registration Act 2002. The FTT concluded, among other things, that the right of pre-emption was not capable of being protected by a restriction. Ordinarily, rights of pre-emption would be protected as to priority by way of notice. In special circumstances, further protection might also be given by way of a restriction, including where the grantor expressly agreed to the entry of a restriction or agreed not to effect a disposition. Neither of those applied in the present case.
The appellants appealed. An issue arose, among other things, whether the appellants should be able to enter a restriction in relation to their rights under paragraph 4; and the terms of any such restriction
Held: The appeal was allowed.
(1) Section 42(1)(a) provided that the registrar might enter a restriction if it appeared to him that such a restriction was necessary or desirable for the purpose of preventing invalidity or unlawfulness in relation to dispositions of a registered estate or charge. Some rights of pre-emption expressly stated that the grantor would not dispose of the relevant land without offering it to the grantee. Other rights of pre-emption were drafted so that they identified a trigger event leading to the grantor coming under an obligation to offer the land to the grantee, as in the present case. Where a restriction would prevent unlawfulness which could otherwise occur then the restriction was necessary to prevent unlawfulness. The difference between the two types of rights of pre-emption should not matter when one applied the test as to whether the entry of a restriction was “necessary or desirable”. In such a case, the registrar might, but was not obliged to, enter a restriction.
Section 42 did not spell out the considerations which the registrar might properly take into account when determining whether to exercise the power to enter a restriction. Section 43(3) provided that where the registrar was asked to enter a non-standard restriction, he had to consider whether the terms of the proposed restriction were reasonable and whether applying the proposed restriction would be straightforward and would not place an unreasonable burden on him. The registrar’s decision under section 43(3) would affect his decision under section 42(1) as to whether the entry of a restriction was appropriate.
By its very nature, a right of pre-emption imposed a negative obligation on the grantor requiring him to refrain from disposing of his land without first complying with his obligations to the grantee. It followed that the entry of a suitably worded restriction, giving effect to that negative obligation, would prevent an unlawful disposition to a third party. The application of section 42 was not limited to agreements containing terms expressly limiting the registered proprietor’s powers to make dispositions or expressly permitting the registration of a restriction.
(2) The FTT’s reasoning that there had to be special circumstances before the registrar entered a restriction, in addition to a notice, was not based on anything in section 42. There was no reason why the generality of the statutory power to enter a restriction should be cut down in that way. On the basis of the submissions made to the FTT, the appellants had shown that the entry of a restriction was necessary or desirable to prevent a disposition in breach of paragraph 4 and there were no reasons identified before the FTT why the power to enter a restriction should not be exercised.
(3) Prima facie, the restriction should follow the wording of paragraph 4 and say something like: “no sale of the registered estate or any part of it by the proprietor of the registered estate is to be registered”. There was no implied term preventing the respondents making a gift of the land. Furthermore, the grant of a lease would not be a trigger event for the purposes of the right of pre-emption. The words of the provision had to be given a meaning which was sufficiently clear for the parties to know where they stood. The only way of doing that was to hold that no lease granted out of freehold land was to be equated with a sale of that land.
Andrew Gore (instructed by Direct Access) appeared for the appellants; Patrick Rolfe (instructed by Kenneth Bush Solicitors LLP) appeared for the respondent.
Eileen O’Grady, barrister
