Property – Legal charge — Registration – Claimant providing advance secured by charge over property – Charge being noted on land register but not registered — Whether claimant’s disposition by conveyance conferring registrable legal estate — Whether claimant having full power of sale over property without registered charge – Declaration granted
The claimant company provided an advance secured by a charge against a property to its registered freehold proprietors (R). The claimant agreed to R granting a second charge to the third defendant. When R defaulted on their various loans, the claimant enforced its charge, took possession of the property and sold it to the first and second defendants for £375,000.
Completion took place in October 2009 and the claimant executed a transfer in the TR2 form to the first and second defendants. However, the Land Registry refused to register their title because the claimant’s charge had been noted on the register but had not been substantially registered.
In January 2010, R were still registered as proprietors of the property when the fourth defendant company obtained an interim charging order over the property in respect of a judgment debt owed by R of £6,655. The claimant sought to enforce the registration of the property in the names of the first and second defendants. It applied for a declaration that the executed form TR2 transfer to the first and second defendants conferred a registrable legal estate that overreached that of the third and fourth defendants. The defendants had not opposed the application but an issue arose as to whether the claimant’s disposition by conveyance in form TR2 could confer a registrable legal estate on the first and second defendants. The claimant submitted that its mortgage had been made by deed in the standard form so that it was entitled to exercise the power of sale conferred by sections 101 and 104 of the Law of Property Act 1925.
Held: The declaration was granted.
Since the mortgage was by deed, sections 101 and 104 of the 1925 Act applied. The claimant had full power of sale over the property notwithstanding that it had not substantially registered the charge. The power of sale derived from the 1925 Act. All that was required was a mortgage by deed. Section 88 of the 1925 Act required only a charge by legal mortgage. The fact that the charge was unregistered was irrelevant. It was a charge within the meaning of section 88. The Land Registry had erroneously taken the view that the power of sale did not arise because there was only an equitable charge. The power of sale under section 101 merely required a mortgage by deed. The power of sale included a power by a donee to dispose of property that it did not own. The mortgaged property in section 101 meant the property over which the mortgage deed purported to extend and operate and was not limited to an equitable interest in that property: Re White Rose Cottage [1965] Ch 940 applied. Re Hodson and Howes’ Contract (1887) LR 35 Ch D 668 considered.
The claimant was entitled to the declaration sought that form TR2 transferred the legal estate in the property to the first and second defendants and that their interests overreached those of the other defendants. The power of sale had not come from the Land Registry but from legislation, all that was required was a charge by way of legal mortgage. The fact that the charge was unregistered was irrelevant.
Furthermore, the chief land registrar would be directed to register the first and second defendants as free from the interests of the third and fourth defendants in order to give effect to that declaration.
Josephine Hayes (instructed by the legal department of Swift Group) appeared for the claimant; the defendants did not appear and were not represented.
Eileen O’Grady, barrister