Andrew Wade and Pierre Boitel-Gill explore some of the surprising features of property law in the province
Because of their shared histories, there are many similarities between Northern Ireland property law and that of England and Wales. However, there are also some unexpected differences and it pays to be aware of them. This article outlines some of the main disparities between the jurisdictions.
Examining title
The roots of Northern Ireland property law date back to the 17th century and the Plantation of Ulster, by English and Scottish settlers, under James I. This partly influenced how land in Northern Ireland came to be owned. Although properties in Northern Ireland are often held on conventional freehold and leasehold interests, many titles to land were created by “fee farm grant”, which is a hybrid form of land tenure. A fee farm grant is similar to a fee simple (ie a freehold estate), but subject to payment of an annual rent (“farm”) and covenants, which in turn create a landlord/tenant type relationship.
The titles were typically subdivided over the years, or let on long leases of up to 10,000 years – often creating extensive pyramids of ownership. However, under Article 28 of the Property (Northern Ireland) Order 1997 (“the 1997 Order”), no new fee farm grants can be created.
Unlike in England and Wales, many historic provisions remain in effect. For example, full and limited title guarantee covenants do not apply in Northern Ireland, where the concept of beneficial owner still applies.
However, under the 1997 Order, one area where Northern Ireland law has been modernised is that certain positive covenants (such as to maintain party walls and boundaries) can be made to automatically bind successors to the original party who gave the covenant – in contrast to England and Wales, where this only applies to restrictive covenants.
Land registration
Whilst compulsory registration of title has applied throughout England and Wales for many years, it did not extend to the whole of Northern Ireland until 2003. Indeed, currently only around 70% of titles are registered. The unregistered titles are largely in urban areas. However, even with title registration, much property is still subject to the historic title structures mentioned above, making title investigation a complex and time-consuming affair.
Further, a priority search system is not available for unregistered title in Northern Ireland, so a purchaser cannot gain priority to register the purchase deed at the Land Registry when being submitted for first registration. This may necessitate the vendor procuring that its title is registered at the Land Registry prior to the sale.
The Land Registry in Northern Ireland does not investigate the title on the application for first registration. The solicitor who first submits the title for registration must certify the title – so it may be considered good practice for the unregistered title documents to be retained by the seller and reviewed by the purchaser separately.
The Northern Ireland Law Commission has produced proposals for property law reform, but until these are enacted, the law – and the due diligence process – will remain unnecessarily complex compared with England and Wales.
Leases – what to look out for
The content of institutional-type leases in Northern Ireland is broadly similar to leases of property in England and Wales, however there are important differences.
Registration: In Northern Ireland, leases are registrable only if they are for a term in excess of 21 years – unlike England and Wales, where leases for terms of more than seven years are registrable at the Land Registry.
Assignment: What if the tenant wishes to assign its leasehold interest? In England and Wales, the tenant’s freedom to do so is usually restricted by detailed stipulations and preconditions, in accordance with section 19 of the Landlord and Tenant Act 1927 (as amended). These usually include a requirement for the outgoing tenant to enter into an authorised guarantee agreement (“AGA”), guaranteeing the incoming tenant’s obligations.
There are no analogous provisions in Northern Ireland. The relevant legislation is the Landlord and Tenant Law Amendment (Ireland) Act 1860 (“Deasy’s Act”). This provides for the release of the outgoing tenant, subject to certain conditions. These include the consent in writing of the landlord as an executing party to the assignment, or by an endorsement on it. Successors in title to the original parties to the lease are liable only up to the date of the assignment of that party’s interest to a third party – subject, in the case of the tenant, to notice having been served on the landlord of such an assignment. Otherwise, the procedures for obtaining landlord’s consent broadly mirror those in England and Wales.
Subleases: Unlike in England and Wales, a sublease does not require even a nominal reversion, so it can be granted for the entirety of the headlease term.
Dilapidations: With regard to dilapidations, the statutory cap on damages imposed in England and Wales by the Landlord and Tenant Act 1927 does not apply in Northern Ireland.
Default: In general, there is no remedy of distress available to a landlord in Northern Ireland.
Security of tenure
The equivalent of the Landlord and Tenant Act 1954, in this context, is the Business Tenancies (Northern Ireland) Order 1996. There are detailed technical differences in the lease termination and renewal procedures, but one important point to note is that, in Northern Ireland, proposed demolition alone is not a sufficient ground for opposition to the grant of a new tenancy, and a substantial development must be intended.
Under the 1996 Order, compensation for disturbance follows a graduated (and less generous) scale than in England and Wales, with a maximum sum equal to 1.6 times the net annual value of the property payable where the qualifying occupancy exceeded 15 years.
In Northern Ireland, unlike England and Wales, it is not possible to contract out of security of tenure. Any scheme or provision designed to circumvent the security of tenure provisions, or to deprive a business tenant of its statutory renewal right, is likely to be void.
However, under the 1996 Order, a landlord can grant a temporary tenancy of up to nine months (renewable for a further nine months) without security of tenure – longer than in England and Wales, where the equivalent maximum periods are six months.
There are no provisions in Northern Ireland for interim rents on renewal.
Terrorism
Although the prevalence of terrorist acts in Northern Ireland has waned, the Criminal Damage (Compensation) (Northern Ireland) Order 1977 remains in effect. This provides for compensation to be paid for property damage caused by acts of terrorism.
The claims procedure usually commences with a certificate from the chief constable that, in their opinion, such acts of terrorism apply. A claim may also cover property stolen during the incident, subject to certain conditions. The amount of any compensation is in the discretion of the secretary of state, subject to appeal to the county court.
There is a detailed procedure and timetable for making claims and the compensation process is in many ways akin to making an insurance claim. In broad terms, insurance policies in Northern Ireland exclude losses arising from terrorism.
It is important to note that “betterment” or “new for old” is not included in a compensation claim – a significant issue with regard to older buildings. Compensation may also be calculated on the diminution in the market value rather than the reinstatement value, if lower.
Property finance
In the case of unregistered title, security is by way of a “mortgage by demise”. The owner of the property effectively demises the property to the secured lender for a term of years. For freehold land, the term is usually 3,000 years. For leasehold land, the term is usually the unexpired lease term, less the last day.
In the case of registered title, security is by way of a “charge”. A mortgage involves right of ownership, whereas a charge involves a right over the property as security only. A mortgage is registered at the Registry of Deeds. A charge is registered at the Land Registry.
Why this matters
The potential time involved in acquiring title may be materially higher in Northern Ireland than for a similar property in England and Wales, due to the extent of unregistered land and the complexities of land tenure. Land registration has not resolved this issue.
The potential need to register an unregistered title prior to sale needs to be factored into any timescale, otherwise it may cause delays once a deal is agreed.
The potential need to investigate pre-registration deeds and documents on a purchase (possibly long after title has been registered at the Northern Ireland Land Registry), may well have cost implications.
As regards the alienation of leases, the lack in Northern Ireland of an AGA provision may require more careful consideration of the covenant strength of the incoming tenant, although a separate guarantor may in any event be required.
On lease termination, although the assessment of damages for dilapidations on a common law basis applies, the fact that the statutory cap under the Landlord and Tenant Act 1927 does not apply will be a significant consideration, and can lead to much higher awards than for similar property in England and Wales.
The lack of a remedy of distress, in most circumstances, makes the enforcement of lease provisions in Northern Ireland that much more difficult – depriving the landlord of what can be a valuable remedy.
As the security of tenure provisions provide that the tenant’s protection may not be circumvented, provisions which may be utilised in alienation clauses in English and Welsh leases (such as an offer back provision) cannot be utilised with any certainty. The same applies to a landlord’s break option, such as for redevelopment purposes. The lease cannot be “contracted out” to ensure vacant possession can be obtained, and the landlord must seek to determine the lease under the security of tenure provisions. This adds an extra element of uncertainty to the development process.
With regard to acts such as terrorism, the fact that there is unlikely to be recovery in respect of costs pursuant to the criminal damage legislation to the same extent as in the case of insured risk damage means that the impact on the party bearing repairing/reinstatement obligations will need to be carefully considered.
Further reading
Northern Ireland Law Commission Report on Land Law Reform – NILC 8 (2010)
Andrew Wade is a consultant at Farrer & Co LLP and Pierre Boitel-Gill is a partner at Elliott Duffy Garrett
