Peta Dollar surveys a range of recent cases that expose the flaws in the UK’s land registration system
The fundamental objective behind the Land Registration Act 2002 (the 2002 Act) is that:
“…the register should be a complete and accurate reflection of the state of the title of the land at any given time, so that it is possible to investigate title to land online, with the absolute minimum of additional enquiries and inspections.” (Law Commission report Land Registration for the Twenty-First Century: A Conveyancing Revolution, and the explanatory notes to the 2002 Act).
With this aim, the 2002 Act extended the range of transactions subject to compulsory first registration. The 2002 Act also encourages voluntary registration; there are a number of advantages to having a registered title, such as the fact that it is more difficult for squatters to claim adverse possession of registered land.
But is the register a complete and accurate reflection of the state of the title to any parcel of land at any given time? Over the past few years, more and more cases have shown the fallacy of relying entirely on what the register says – or does not say.
Obviously there are matters relating to title that are not shown on the register – such as overriding interests (including, in particular, the rights of persons in actual occupation of the land), although the list of interests that override has been greatly shortened since 13 October 2013 (chancel repair liability being just one of the many interests that no longer override) – but sometimes it seems as though the infallibility of the register is being challenged on an almost daily basis.
Recent cases that illustrate this phenomenon include:
- EMI Group Ltd v O&H Q1 Ltd [2016] EGLR 26
- Stodday Land Ltd v Pye [2017] EGLR 1
- Baker v Craggs [2016] EWHC 3250 (Ch); [2016] PLSCS 351
- Wood v Waddington [2015] EGLR 48
- Bennett v Winterburn [2016] EGLR 35
- Trevallion v Watmore [2016] EWLandRA 2015_0295
- Mitchell v Watkinson & Williams [2014] EWCA Civ 1472
- Baxter v Mannion [2011] 2 EGLR 29
- E.ON UK plc v Gilesports Ltd [2012] 3 EGLR 23
- Dreamvar (UK) Ltd v Mishcon De Reya [2016] EWHC 3316 (Ch)
Assignment to guarantors
In EMI, the High Court held that under the Landlord and Tenant (Covenants) Act 1995 (the 1995 Act), a tenant may not assign its lease to its guarantor and any agreement that sought to give effect to such an arrangement was void under s 25(1) because it frustrated the purpose of the 1995 Act. As a consequence of this decision, any registered proprietor of a leasehold title which acquired that title through the assignment of the lease from a tenant to its guarantor, whether directly (where the registered proprietor is itself the former guarantor/assignee) or indirectly (where the registered proprietor is a successor in title to the former guarantor/assignee), is liable to have its registration cancelled so the original tenant/assignor can be reinstated as the registered proprietor.
The inconvenience of the decision in EMI to any party considering taking an assignment of a lease is readily apparent, and I understand the Law Commission has been lobbied to change the law in relation to the inability of a tenant to assign its lease to its own guarantor.
The law in this respect is particularly inconvenient given the frequency with which groups of companies wish to rearrange their property holdings, and often this will involve leases being transferred from tenant to guarantor.
The registration gap
In Stodday, the High Court held that only the landlord at law could serve a notice to quit. As a result, the notices to quit that purported to have been served by the joint landlords were, in fact, invalid, as one of the joint landlords had not yet been registered at the Land Registry as proprietor of the land and so was not the landlord at law.
The case follows earlier case law including Brown & Root Technology Ltd v Sun Alliance and London Assurance Co Ltd [2001] Ch 733 (where the tenant remained able to exercise a personal break option because the assignment of the lease had not been registered) and Renshaw v Magnet Properties South East LLP [2008] 1 EGLR 42 (where the new landlord was unable to respond to the tenants’ collective enfranchisement notice because registration of the new landlord as proprietor of the land at the Land Registry had not been completed).
Norris J in Stodday, commenting on the argument of counsel that this was an overly formalistic approach which magnified the risk arising from the “registration gap”, said (at paragraph 41): “The time will come when every completion pack for the sale of a reversion includes a document in appropriate form constituting the transferee the agent of the transferor in respect of all matters concerning the estate transferred pending registration, a copy of which will be provided by the landlord to the tenant along with notice of the assignment.”
The issue in relation to landlords and tenants at law is made particularly problematic by the current delays in registration at the Land Registry. I frequently hear of cases where there is a delay of anything up to a year between application for registration being made and being completed. It seems particularly unreasonable that a tenant cannot rely on a rent authority letter to inform him conclusively who his landlord is, since a new landlord may actually be receiving rents and behaving as the landlord for many months before registration of the transfer of the reversion is actually completed.
Another point that does not seem to have been considered in any of the cases dealing with the registration gap is the fact that, when the Land Registry finally completes the registration of the new landlord or tenant as proprietor of the transferred title, the date when that registration becomes effective is backdated to the date on which the application for registration was received at the Land Registry.
If, however, the application for registration is cancelled – and this is likely to become a more frequent occurrence in view of the Land Registry’s intention simply to cancel an incomplete application without first raising requisitions – then a new application will need to be made, and the date when the registration becomes effective will be backdated to the date of receipt of the second application at the Land Registry, not the date of receipt of the first application. This means that even the applicant (and its solicitors) cannot be entirely sure when it will become the landlord/tenant at law until the register is finally updated. The inevitable result of this uncertainty will be a plethora of notices, served by (or on) both the old and the new landlord/tenant, which seems unnecessarily cumbersome.
Baker v Craggs illustrates the difficulties that may be caused by the registration gap. In this case, a purchaser of land was forced to accept its purchase subject to a right of way that had been granted by the former owner after completion of the sale to the purchaser had taken place. The former owner remained the owner at law at the time of the grant of the right of way as a result of the registration gap, and the purchaser’s first application for registration was cancelled, so that the purchaser’s priority search did not assist.
Easements
Wood is simply an example of the well-known rule that easements created by section 62 of the Law of Property Act 1925 and/or the rule in Wheeldon v Burrows (1879) 12 Ch D 31 may take effect as legal easements despite not being noted at the Land Registry.
In Wood, express detailed rights of way over specified routes were granted and reserved when a large estate was split between two owners, but additional vehicular and equestrian rights of way were held by the Court of Appeal to have been created by virtue of section 62.
Paragraph 4.72 of the Law Commission’s Consultation Paper No. 186: Easements, Covenants and Profits à Prendre contains an interesting example of the effect of section 62:
“L allows T, her tenant, to park her car anywhere on the forecourt owned by L in front of the demised property, although there is no express term to this effect in the tenancy agreement. Subsequently, T purchases the freehold of the property she had leased (but not the forecourt) from L. The conveyance of the house is silent on parking rights, but it does not expressly exclude the operation of section 62. T will acquire an easement to park on the forecourt retained by L. That easement will be for the same duration as the freehold estate which T has obtained. It is irrelevant that neither L nor T contemplated that L allowing T to park during the tenancy would result in T obtaining a legal easement to the same effect on purchasing the freehold.”
Bennett also deals with the acquisition of easements, in this case a right to walk across a private car park in order to gain access to a fish and chip shop, which had been acquired by prescription (long usage). As with easements acquired by section 62 and the rule in Wheeldon v Burrows, easements acquired by prescription may take effect as legal easements without being registered at the Land Registry. The Court of Appeal held, however, that signs stating “Private car park. For use of club patrons only. By order of the committee” had prevented the acquisition by prescription of parking rights, since the parking use was not “as of right”.
Unusual cases
Trevallion is an unusual case where recent purchasers of a registered freehold title were forced to accept the subsequent registration of a leasehold title to a triangle of land at the bottom of their garden because the leaseholder had been in actual occupation of the garden triangle since 1968 and the leaseholder’s interest in the garden triangle would have been obvious on a reasonably close inspection when the recent purchasers acquired their land (the failure of one of the purchasers to move the branches of a fuchsia bush was conclusive).
Mitchell is another unusual case where a registered proprietor lost her registered freehold title to a cricket club as a result of an extraordinary series of circumstances, including (a) the fact that the original lease of the land to the cricket club purported to be granted by a party who no longer owned the freehold at that time and, as a result, the cricket club’s lease was in fact an oral tenancy; (b) the fact that rent had ceased to be paid by the cricket club under the oral tenancy in 1974; and (c) the effect of Part 1 Schedule 1 to the Limitation Act 1980. Despite the fact that these circumstances may seem extraordinary, I am aware of at least one other case where similar circumstances may cause the loss of a registered freehold title.
Squatter’s rights
Baxter illustrates that, despite the 2002 Act appearing to provide conclusively that a registered proprietor will lose its title where a squatter applies for registration of land, on the grounds that the squatter has been in possession for at least 10 years and the registered proprietor fails to object within 65 business days of being notified of the application, nonetheless the registered proprietor can recover its title where it can be shown that the squatter was not in fact in adverse possession of the relevant land. This Court of Appeal decision caused widespread surprise, since it had been generally understood that the 65 business days created an absolute deadline and the registered proprietor could do nothing to recover its title once that time limit had expired.
In E.ON UK, a lease was assigned. Although not registrable when granted, at the date of the assignment the lease fell within the registration provisions of section 6 of the 2002 Act, but no registration of the lease took place. As a result, after two months, the assignment became void and the legal estate reverted pursuant to section 7. Ultimately, the court held, this meant that a reversion of the legal estate was an assignment by operation of law and the tenant became once more bound by the tenant’s covenants in the lease. This raises the spectre of a series of facts where the legal title to the lease “boomerangs” backwards and forwards between assignor and assignee – each time the Land Registry is asked to extend the period for registration of the lease, legal title will vest in the assignee for a period of two months after which, if no application for registration has then been made, legal title will revert again to the assignor.
Fraud
Dreamvar is the latest in a series of cases where a fraudster pretends to be the registered proprietor of a property and “sells” it to an unsuspecting “buyer”. In this particular case, the fraud was discovered before the registered proprietor’s name could be removed from the register, and the “buyer” was never registered as proprietor but was given recourse against its solicitors, despite the fact they had done nothing wrong and had no duty to check the identity of the purported seller.
In a similar case, P & P Property Ltd v Owen White and Catlin LLP [2016] EWHC 2276 (Ch); [2016] PLSCS 261, the buyer’s claim against the seller’s solicitors and estate agents was unsuccessful. Both cases are to be heard by the Court of Appeal as conjoined appeals in February 2018.
The insurance solution
In view of the long list of recent cases where the register was not able to be conclusively relied upon, it is hardly surprising that many solicitors have begun, as a matter of course, to offer their clients title indemnity insurance to protect against such issues as fraud on the part of the purported seller or the existence of easements that are not noted on the title.
Such insurance has long been standard practice in the US, where the recorder of deeds generally does not guarantee indefeasible title to those recorded titles. The first title insurance company, the Law Property Assurance and Trust Society, was formed in Pennsylvania in 1853.
Typically, the real property interests insured are fee-simple ownership or a mortgage, although title insurance can be purchased to insure any interest in real property, including an easement, lease or life estate. American title insurance will defend against a lawsuit attacking the title, or reimburse the insured for the actual monetary loss incurred up to the amount of insurance provided by the policy. Indeed, lawyers have in many cases become virtually redundant in the US when it comes to checking title, since title insurance has replaced the need for due diligence.
But the whole system of land registration in this country was supposed to avoid these kinds of issues – is this the way that we want our legal system to go? If not, it would appear a more radical review of land registration may be necessary than that currently being undertaken by the Law Commission.
Peta Dollar is a freelance lecturer, trainer and writer
