“Does the current system of land registration work?”, ask the second and third-place entries in this year’s Property Bar Association student essay prize
Second place: Harrison Fookes, BA Law student at Corpus Christi, Cambridge
The enactment of the Land Registration Act 2002 (LRA) sought to usher in a new era of land registration – “title by registration, not registration of title”. Viewed unilaterally from the perspective of facilitating conveyancing, absolute indefeasibility of title seems appealing – purchaser confidence is intuitively maximised where he knows the register is a perfect “mirror” (in Ruoff’s terminology) reflective of all those interests which his title might be subject to. However, property law is not and must not concern itself solely with facilitating conveyancing – Cooke concedes “it is simply not possible for all dealings with land to be carried out on the register” and “the more complete the register, the less protection is given to people who cannot use it”. With this in mind, the efficacy offered by the LRA’s “indefeasible” title is tempered by a series of caveats protecting unregistered interests. This essay will consider two such caveats – adverse possession under Schedule 6 and the priority rules under sections 28-29 and Schedule 3 – and argue that the underlying normative justification for these exceptions lies in an analysis of comparative fault between the registered proprietor (“RP”) and the holder of the unregistered interest.
Adverse possession
Under the LRA, acquisition of title by adverse possession alone is no longer possible vis-à-vis registered land – as Cooke notes, this signifies a movement away from the historical orthodoxy in English law that title stems from possession, and thankfully renders extinct the artificiality of the “constructive trust” analysis under the LRA 1925. Under Schedule 6, after 10 years of adverse possession a squatter (“S”) may apply to the Land Registry to acquire freehold title, notification of this application being served to the RP. The RP must then serve a counter-notice within 65 days to render S’s application ineffective (unless S makes out one of three exceptions discussed below), before having a grace period of two years to evict S. The scales are clearly weighted in favour of the RP; the primary justification for acquisition of title by adverse possession (facilitating conveyancing by making the legal owner readily identifiable to potential purchasers) is sufficiently satisfied by the register. There are, however, ancillary justifications for an adverse possession regime – the most convincing being ensuring legal entitlement aligns with factual reality and encouraging more effective land use, as discussed in Law Commission No. 254.
Consequently, acquisition by adverse possession remains (exceptionally) available, in circumstances where the comparative fault of the RP exceeds that of S. First, where the RP fails to serve a counter-notice his fault is obvious (though the strictness of application of this rule might be cause for concern – consider Baxter v Mannion [2011] 2 EGLR 29 where only a creative interpretation of “adverse” saved Mr. Mannion after he failed to serve a counter-notice, notwithstanding abysmal legal advice and a series of debilitating physical and mental health issues). Similarly, where the RP fails to take steps to evict S from his land following the counter-notice, his fault is obvious. Of more interest are the exceptions under paragraph 5, notably the “boundary dispute” exception. The salient point is the introduction of a good faith element – where previously the mental state of S was immaterial to his acquisition by adverse possession, under the LRA S only acquires such title where he reasonably believes for 10 years the disputed land belongs to him. Such a belief reflects a shift in the normative position of S vis-à-vis the RP in terms of comparative fault; the law recognises S as being objectively faultless in operating as owner of the land, whereas by comparison the RP failed to evict S from the disputed land for over a decade.
Priority rules
The default position for establishing priority remains “first in time” under section 28. However, by virtue of section 29 and in line with the LRA’s underlying policy of “title by registration”, where a party acquires a registerable (and importantly registered) interest for valuable consideration, he prima facie has priority even if the acquisition of his interest comes second-in-time to some earlier unregistered interest. Section 29(2)(a) caveats this with three exceptions. Notable is the second exception for “overriding interests” under Schedule 3, paragraph 2: first-in-time unregistered proprietary interests may take priority where the holder is in actual possession and the interest was either known to the RP or would have been obvious on a reasonable inspection. These requirements crystallise to a familiar quandary: was it the RP’s fault he did not know of the unregistered interest? If the interest was obvious on an objectively reasonable inspection, the law quite rightly holds that the ignorant RP has no-one but himself to blame, given the holder of the unregistered interest is in many instances equally blameless – consider Mrs Boland in Williams & Glyn’s Bank Ltd v Boland [1979] Ch 312. This notion is mirrored in the statutory defence against overriding interests – the RP retains priority where he asked the relevant party if they held any proprietary interests in the land, and that party failed reasonably to disclose the relevant interest. Moreover, the judiciary has taken an expansionist approach in this area, similarly driven by considerations of comparative fault. Consider the evidential weight of intention vis-à-vis ‘actual occupation’ – in Link Lending Ltd v Bustard [2010] 2 EGLR 55, Mrs Bustard was in “actual occupation” notwithstanding absence of physical presence, on the basis that, inter alia, her absence was involuntary and she retained an intention to return. What is otherwise an artificial construction of the statute must be read as recognition that innocent Mrs Bustard was faultless compared to Link Lending, or at least equally faultless but less capable of internalising the financial repercussions of losing title to the house than the well-financed bank.
Conclusion
A system of absolute “title by registration” pursues a noble aim: facilitating effective conveyance. However, by considering the LRA in light of comparative fault, the Act’s draftsmen and the judiciary have developed an approach to land registration which strikes a fair balance between a default preference towards the RP and recognition of the necessity of carving out exceptions – such as for adverse possession or overriding interests – where justice demands as much.
Third place: Daniel Petrides, Graduate Diploma in Law student at City Law School
The Land Registration Act 2002 (LRA) represents a rare attempt in English law to codify a complex area into a principled and organised system. The Act was, of course, directed at the specific aim of facilitating the introduction of e-conveyancing. Fundamental to the success of this goal was the ability of the Act to transform the land registry from a mere record of existing titles into the source of title. However in both regards the Act has, thus far, failed. We still await the advent of e-conveyancing, and meanwhile the courts’ interpretation of the Act’s provisions relating to the question of indefeasibility has undermined the extent to which the register serves to guarantee title. It is true that the “qualified indefeasibility” of the English system seeks to temper the harshness found in many Torrens systems, but there nevertheless exists a gap between the intentions underpinning the Act as evidenced by the Law Commission’s “A Conveyancing Revolution: Land Registration for the 21st Century”, and the manner in which it is being applied in practice. This disparity has generally been criticised by academic commentators. However, it will be suggested here that the flexibility which the common law has imported into the Act has served the important purpose of protecting vulnerable parties, to which more stringent readings of the Act are less well suited.
Case law
The decisions of the Court of Appeal in Walker v Burton [2013] 3 EGLR 129 and the (reluctant) Supreme Court in Southern Pacific Mortgages Ltd v Scott [2014] UKSC 52; [2015] EGLR 3 perhaps represent the high-water mark of the orthodox view that the LRA produces a strong version of registration by title, as per section 58. While it is true that the outcome of the latter case was unhappy for Mrs Scott, the courts have in fact been able frequently to interpret the LRA in a way which protects such victims.
The vehicle for doing so is provided by the Act itself, which does not leave behind all those who suffer as a result of the muscularity of section 58. It provides for a concept of “mistake” which, under Schedule 4, permits any party to apply for the register to be altered, and under Schedule 8 provides compensation to parties who suffer as a result of the register being thus rectified. This is further complicated by the fact that rectification can only be ordered against a proprietor in “actual possession” if he consents, or if he contributed to the mistake by his own careless/fraudulent behaviour, or if it would be unjust not to rectify. Whether it is “unjust” is an open question which has been left largely to the discretion of the courts, and in applying the Act, the courts have frequently favoured the original owner over the innocent purchaser. This was the case in Chhokar v Chhokar [1983] EWCA Civ 7 and in Ajibade v Bank of Scotland Plc [2008] EWLandRA 2006_0163, which was followed in Knights Construction (March) Ltd v Roberto Mac Ltd [2011] EWLandRA 2009_1459. Most notably, in Link Lending Ltd v Bustard [2010] 2 EGLR 55, the Court of Appeal exploited the flexibility of the concept of actual occupation to achieve what it considered a just result.
It is arguable that the discretion afforded to the courts by the Act to assess whether rectification would be “unjust” lends itself to this sort of interpretation in favour of vulnerable homeowners, and thus the decisions mentioned above are entirely consistent with the Act. However, as a number of commentators (Bogusz, Bevan et al) have pointed out, such extensions of qualified indefeasibility are anathema to the stated goal of facilitating conveyancing by providing an almost complete guarantee of title. Nevertheless, this approach has also received some support from commentators such as Simon Cooper, who is critical of the notion that title vests by the sole fact of registration, on the basis that it precludes any contextual appraisal of the merits of different outcomes. The present writer agrees, and accordingly welcomes the fact that the Law Commission in updating the LRA has modified its approach and (largely) welcomed the flexible and fact-sensitive interpretations of the courts.
Nevertheless, a corollary of affirming this discretion is that its exercise must been confined within the four corners of the LRA – even if this means that occasionally fact patterns such as Scott will result in a seemingly unjust result. This is because even though the malleability of the common law has been a great asset in preventing, as Lady Hale warned, “the land registration tail from wagging the land ownership dog”, it has also occasionally risked unravelling the whole system. For example, the much maligned decision of Malory Enterprises Ltd v Cheshire Homes (UK) Ltd [2002] EWCA Civ 151; [2002] 10 EGCS 155 gave rise to the possibility of indefeasibility questions being determined by external factors. Nor was this entirely resolved in Swift 1st Ltd v Chief Land Registrar [2015] EGLR 42, which only disposed of part of the ratio from Malory, and risked limiting the circumstances in which indemnities could be paid. It is therefore important that while the courts must be permitted the discretion to allow just and fair outcomes in what are often financially and emotionally high-value cases, this must be balanced with the need not to undermine the crucial mechanisms underpinning the functioning of the Act. As such, the present writer is also pleased to note that the Law Commission has now proposed that the right to seek rectification should no longer be an overriding interest. Not only does it bring much needed clarity, but it will also protect innocent transferees several steps removed from an initial mistake whose title, following the analogy with priorities provided by Gold Harp Properties Ltd v McLeod [2014] EWCA Civ 532, may be tainted by the initial mistake and subject to a rectification claim.
Conclusion
Subject to limitations such as these, it seems clear that judicial discretion is, on the whole, better capable of coping with the vicissitudes of reality than the blunt instrument of title guarantee. As with much English law, the question is not whether the Act works, but whether the courts can make it work. The greatest potential failing of the LRA was the danger of its inflexibility causing manifest injustices, and its saviour has been the common law.
