The Law Commission’s recent report, Updating the Land Registration Act 2002, was issued in the middle of July. It is a massive work, containing 21 chapters over 480 pages, 20 pages of recommendations and a draft Land Registration (Amendment) Bill at the end of it.
One can only marvel at the amount of analysis, research and scholarship that went into it. It was preceded, in 2016, by a consultation document, to which no fewer than 70 responses were received. The proposals aim to ensure that the Land Registration Act 2002 (the Act) continues to achieve its goal of making conveyancing faster, easier and cheaper.
The report’s four key recommendations (see text box, below) were set out previously in an article by Professor Nick Hopkins, Elizabeth Welch and Christopher Pulman (“Reforming land registration”, EG, 28 July 2018, p52). They are laudable aims, but they are mainly concerned with sorting out problems after something has gone wrong (or, in the case of electronic conveyancing, setting up a mechanism in readiness for the future).
The purpose of this article is to highlight some less important, but highly practical, proposals to improve the way in which the land registration system operates on a day-to-day basis, and some areas where the Law Commission has decided not to recommend any changes at all.
Overall, the Law Commission explains that it did not seek to reformulate the Act. Instead its aim is “to improve specific aspects of the operation of the legislation within the existing legal framework.” Where an area of law relates to both registered and unregistered land (such as mines and minerals, or chancel repair liability), an analysis of the underlying law was outside the scope of the project.
The Law Commission’s four main proposals
■ Preventing fraud by setting out minimum standards for conveyancers on checking a client’s identify. This would give the Land Registry a right of recourse if it is required to indemnify an innocent party in the event of a fraud where the conveyancer had not kept to those standards. In the past 10 years the Land Registry has paid out £58m in indemnity payments specifically in relation to fraud. It is not clear whether these proposals will actually reduce the amount of fraud, but it might make it easier for the Land Registry to claim against a conveyancer who has not carried out identity checks thoroughly.
■ Reforming the law on when a “mistake” in the register will be corrected. This is a highly technical area that was well covered in the earlier article.
■ Facilitating electronic conveyancing, as the system of simultaneous completion and registration foreseen by the Act has not developed as anticipated. Instead it is proposed that new provisions should be adopted that will allow for separate completion and electronic registration, echoing the current paper system. In addition, the suggestion is that the Land Registry should be given a power to issue notices (following consultation) making electronic conveyancing mandatory for particular types of disposition and therefore “switching off” paper conveyancing to that extent. One imagines that this is looking ahead some distance into the future.
■ Making the system for unilateral notices fairer and more efficient by requiring the beneficiary of the notice to produce evidence earlier in the case of a dispute, potentially leading to a quicker resolution.
Recommendations for change
Bearing in mind the size of the report, and the number of recommendations that it makes, the explanations in this article must be treated as summaries only. The report contains a much fuller explanation of each recommendation and the reason for it.
Mines and minerals – The report accepts that the law relating to mines and minerals is in a confusing state, but that it will need to be the subject of a separate analysis in the future, as part of a future law reform programme when time permits. It is unsatisfactory that mines and minerals titles do not need to be registered, although they can be registered voluntarily. The report proposes that all transfers of mines and minerals held apart from the surface, and leases for over seven years of such mines and minerals, should be events that trigger compulsory registration. Similarly any transfer or lease for over seven years that separates mines and minerals from a title should also be compulsorily registrable. Finally, it recommends that surface owners should be notified of an application to register an estate in mines and minerals beneath their land, which is currently not the Land Registry’s practice.
First registration – The Law Commission comments that it does “not think it is acceptable for the law to be unclear on as fundamental a question as the point in time at which land moves from the unregistered to the registered land regime…”. The report therefore recommends that the Act should be amended to make clear that a dealing with unregistered land after acquisition, but before delivery of the application to the Land Registry, should be dealt with according to the rules relating to unregistered land.
Restrictions – Requisitions concerning restrictions cause a considerable number of delays to applications, particularly those restrictions that protect contractual provisions. The report recommends that it should still be possible for contractual provisions (such as positive covenants and overage) to be protected by restrictions, but that a new rule should allow the registrar to prohibit the use of restrictions for certain purposes, after suitable consultation.
Easements in short leases – Currently, leases for terms of seven years or less do not need to be registered. However, any easements granted in such leases do need to be registered. Consultees believe that in many cases such easements are not being registered. Typically this would include rights of way and rights to run services over common areas in a multi-let office building or shopping centre. The recommendation is that such easements – so long as they are granted in the same deed – should no longer require registration. Instead, they should become overriding interests, binding the grantor’s title without the need to appear on the register. Slightly different rules would apply where a lease is granted orally.
Lease variations – There is currently no power to note lease variations that do not create a proprietary interest (and such variations are effective without the need for registration). The recommendation is that a power should be introduced in the rules, so that the parties are aware that there has been a variation. However, this should not extend to such documents as licences to assign and rent review memoranda. As several consultees responded, this is a land registry, not a deeds registry.
Adverse possession – Several technical recommendations are made in chapter 17 of the report to tidy up some loose ends and uncertainties relating to the new adverse possession regime introduced by the Act.
Jurisdiction of the First-tier Tribunal – Some suggestions are made for extending the jurisdiction of the Land Registration Division of the First-tier Tribunal (Property Chamber). There is currently uncertainty in some areas regarding the Tribunal’s powers in relation to applications to determine a boundary and to quantify the extent of a beneficial interest under a trust.
Recommendations for no change
Leases that require registration – Currently, only leases for terms exceeding seven years need to be registered. The report proposes that this should be kept the same. The practical advantages of registration are less significant for short leases, and there would be additional costs, both in registering shorter leases and in removing entries from the register at the end of the term.
Enlargement of leasehold into freehold – The report recommends no change to the Land Registry’s practice of creating a second freehold title on the enlargement of a lease into a freehold under section 153 of the Law of Property Act 1925. Although the concept of two concurrent freehold titles is seen by some commentators as anomalous, the legal effect of section 153 is uncertain. This is not a question that is peculiar to registered land and a separate project would be required to resolve it. The report recommends retaining the status quo for now.
Registration gap – This is the term given to the period between a transaction being completed and the application for registration being completed. Currently a buyer does not obtain a legal title until registration is complete (although ownership is back-dated to the date on which the application was received at the Land Registry). During this period only the seller is able to exercise the rights of a legal owner (such as the right to exercise a break right in a lease). The report proposes that there should be no change to the manner in which the “registration gap” operates, saying “the only way to solve the registration gap is to close it”, which is not thought practicable.
Rules of priority – It is not thought necessary to make any changes to the rules of priority to make it clear that the concept of “postponement” of an interest in accordance with section 29 means that the postponed interest is (with certain exceptions) effectively lost for good. This confirmation is particularly welcome in the context of notices to protect chancel repair liability registered after a transaction for value. The report recommends that an applicant registering a notice in such circumstances should be required to give reasons why the interest still binds the title. Separately, a project to consider the scope of chancel repair liability is to be undertaken as part of the current law reform programme.
Priority for unregistrable interests – The original consultation paper contained a proposed scheme for protecting the priority of unregistrable interests between themselves. This would have been time-consuming and costly to introduce and would have required complex transitional provisions. Consultees did not feel this was needed, and the idea has been dropped.
Defining “valuable consideration” – The special priority rule in section 29 applies to transactions for valuable consideration, leading the Law Commission to consult on whether a definition is needed of that term. The conclusion is that this is not needed, as it is sufficiently covered by the general law.
Combining two different types of notice into one type – The suggestion in the original consultation document to amalgamate the two different types of notice into one was not well received by consultees and will not be taken forward. However, proposals to make the system for unilateral notices fairer and more efficient are recommended, as explained in the earlier article.
Overriding interests – The report recommends that the types of interest that can be protected by actual occupation should not be cut down.
General boundaries rule – This should remain unchanged.
What happens next?
The Law Commission has delivered its report to the government and awaits a response. Some reports from the Law Commission are implemented more quickly than others. It is not unknown for reports to be shelved for many years, and some are never implemented. The report that led to the Act being passed, however, was acted on extremely quickly. Given that the Law Commission’s accompanying impact assessment suggests that its recommendations will benefit the economy by approximately £40m, we might expect the government to react relatively speedily on this occasion.
Peter Williams is a professional support lawyer in the real estate division of Shoosmiths LLP
