Экзамен зачет учебный год 2023 / ELC, Land Registration II

5.62This point is however subject to one very important qualification. As we have already

indicated,157 and will explain more fully in Part XI, 158 it is likely that in the comparatively near future, registration will become an essential part of the process by which rights over registered land are expressly created. There will be no right at all unless it is registered. As and when that happens, the only rights that will be capable of being protected by actual occupation will be those that can be created without the need for registration. That is likely to comprise rights that can arise informally (for example, by estoppel or adverse possession), and interests under trusts. This will significantly restrict the ambit of section 70(1)(g) for the future.

Rights under settlements created before 1997

5.63We also readily accept that rights existing under Settled Land Act settlements should be capable of existing as overriding interests under section 70(1)(g) (recommendation (4)), though for the future this is a matter that will be of diminishing importance. This is because, under the provisions of the Trusts of Land and Appointment of Trustees Act 1996, it is no longer possible to create new settlements.159 The rights in question will therefore be those arising under settlements that were created prior to 1997. For the future, trusts of land must be used to create successive interests and such interests will be capable of protection under section 70(1)(g) because they will always be interests in land.160

Rights of those in receipt of rents and profits

BACKGROUND

5.64Recommendation (3) - that the rights of persons in receipt of rents and profits should cease to have overriding status - raises issues that are less clear cut. However, after careful consideration, we have concluded that it is correct in principle, particularly in the light of the future introduction of electronic conveyancing. Because it is a point of some difficulty, we explain the issues very fully. At common law, under the so-called rule in Hunt v Luck161—

(1)A tenant’s occupation is notice of all that tenant’s rights, but not of his lessor’s title or rights; (2) actual knowledge that the rents are paid by the tenants to some person whose receipt is inconsistent with the title of the vendor is notice of that person’s rights.

This rule, which continues to apply to unregistered land,162 is not replicated by section 70(1)(g). A purchaser of registered land will be bound by the persons who are in receipt of the rents and profits of the land whether or not he knows of them. In practice however, the positions in registered and unregistered land may not differ substantially.

157See above, paras 1.2, 4.35.

158See below, paras 11.8 and following.

159Trusts of Land and Appointment of Trustees Act 1996, s 2(1).

160Cf Trusts of Land and Appointment of Trustees Act 1996, s 3(1) (abolishing the doctrine of conversion).

161[1901] 1 Ch 45, 51, per Farwell J; affirmed [1902] 1 Ch 428, 434, CA (emphasis added).

162Though its importance is greatly reduced by the requirements of registration under the Land Charges Act 1972.

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Where unregistered land is subject to a series of legal leases and underleases, any purchaser of any estate in that land will take subject to those leases regardless of any knowledge that he or she may have of them, simply because they are legal estates. We have not been able to ascertain why the rights of those who are in receipt of rents and profits was given overriding status in registered land. However, it may have been to protect leases which were neither overriding interests (because they were granted for more than 21 years163) nor substantively registered (because, at the time when they were granted, they were in an area that was not then subject to compulsory registration).

THE CASE FOR REMOVING OVERRIDING STATUS

5.65There are two principal reasons that can be advanced as to why the rights of those who are in receipt of the rents and profits should cease to enjoy overriding status—

(1)Dispositions of registered land should so far as is possible be completed by

registration.164 That is one of the guiding principles for reform 165 and the overriding status of the interests of those who are in receipt of rents and profits may discourage this objective.166 There is no particular logic in exempting the recipients of rents and profits from this requirement. Although, as we explain in the following paragraph, the removal of overriding status could lead to hard cases, this is simply a concomitant of the fundamental principle of registered conveyancing that an unregistered disposition is void against a purchaser. That rule provides a powerful incentive to register. In any event, as we have already indicated167 and will explain in more detail in Part XI,168 we envisage that, with the introduction of electronic conveyancing, it will become impossible to create most rights over registered land expressly, except by registering them. That will in time necessarily eliminate this particular problem.

(2)To require a purchaser169 to discover the existence of some intermediate landlord may place an unreasonable burden upon him or her, because the existence of such a person may not be readily discoverable and is unlikely to be obvious from an inspection of the land.

THE CASE FOR RETAINING OVERRIDING STATUS

5.66There are three main reasons for retaining the overriding status of the rights of those in receipt of rents and profits—

(1)Its abolition could, as the law presently stands, lead to results that are harsh and

163Land Registration Act 1925, s 70(1)(k); below, para 5.87.

164They will have to be once electronic conveyancing is introduced: see below, para 11.10.

165See above, para 1.14.

166As all land is now subject to compulsory registration, all new leases which are not overriding interests by reason of their duration should normally be registered: see Land Registration Act 1925, s 123 (as substituted by Land Registration Act 1997, s 1).

167See above, para 1.2.

168See below, paras 11.08 and following.

169Whether of the freehold reversion or of a leasehold estate.

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capricious, as the following example will demonstrate.170 A Plc, which owns a freehold, sells it to B and a transfer is duly executed. B’s solicitor fails to register the transfer. B goes abroad to work and grants a lease of the house to C for three years. C’s lease is an overriding interest under section 70(1)(k).171

A Plc then transfers all its assets to D Plc. Those assets will of course include the title to B’s land, of which A Plc was still registered proprietor. If B’s rights no longer took effect as an overriding interest, D Plc would take the land free of them.172 Furthermore, because the validity of C’s lease is dependent on B’s interest, it would also be invalidated and would not bind D Plc either, notwithstanding that it had been an overriding interest. Such remedies as B and C might have, would lie only in damages.173 By contrast, under the present law, D Plc takes the land subject to B’s overriding interest and B is therefore entitled to be registered as proprietor. B would recover his land and C’s lease would remain unaffected.174 Although this is a potential trap as the law stands, it will cease to be so when electronic conveyancing is introduced. It will not be possible to transfer a registered estate except by registering it.175

(2)In many cases the rights of such persons will be protected in any event because they will hold under a lease granted for 21 years or less176 that is itself an overriding interest. It follows that any purchaser of any estate or interest in the land must in practice make inquiries of the person in occupation of the land to discover whether they pay rent to someone other than the freeholder.

(3)If the overriding status of such rights were abolished, it would be necessary to make appropriate transitional provisions.177 Not only would the framing of such provisions be difficult, but the existence of them would for many years defeat one of the main objectives of abolishing overriding status, namely the reduction in the range of inquiries that any purchaser would need to make.

5.67Despite these difficulties, we consider that the future introduction of electronic conveyancing tips the balance in favour of abolishing for the future the overriding status of the rights of those who are in receipt of rents and profits. When that system comes in, it is likely to be impossible to create registrable leases except by registering them. Our provisional view is, therefore, that the opportunity should be taken to remove that overriding status as part of the present exercise. We would however be particularly grateful for—

(1)information about any problems that they have encountered with the present law; and

170HM Land Registry has encountered facts of this kind from time to time.

171See below, para 5.87.

172Because they would take effect as an unregistered minor interest.

173B might have claims against A Plc and against his solicitor. C might have a claim against B if the lease contained an express covenant for quiet enjoyment.

174It should be noted that under a land registration system in which failure to register places a right at risk of defeat by a disposition of the land for value, harsh results will inevitably occur.

175See below, paras 11.8 and following.

176Or any lesser period that may be favoured on consultation.

177For possible transitional provisions, see below, para 5.68.

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(2)any difficulties that we have not mentioned that they can foresee if overriding status were removed from those in receipt of rents and profits.

TRANSITIONAL PROVISIONS

5.68If the overriding status of those who were in receipt of rents and profits are abolished as we provisionally recommend, the change will have to be prospective only. It will apply only to estates, rights and interests created after the legislation is brought into force. Existing estates, rights and interests which were overriding interests by reason of this limb of section 70(1)(g) will continue to be so. To remove overriding status from rights that presently enjoy it might contravene the ECHR (in the absence of any provision for compensation), should this result in the right being lost.178 There is a further problem that arises however. If a person has an overriding interest by reason of the receipt of rents and profits at the time when any legislation comes into force, should that overriding status be permanently lost if they cease to be in such receipt? The obvious case is where a tenant has granted a sublease, that sublease expires and the tenant resumes possession. If the tenant then granted a new sublease, would the overriding status that he or she had previously enjoyed revive, or would it become necessary to protect his or her lease by registration?179 If registration is required, the tenant’s interest is inevitably placed at risk. If the landlord disposes of the freehold, the purchaser would not be bound by the tenant’s lease if it had not been registered. The danger is that the tenant may not appreciate that he or she needs to register the lease in those circumstances in order to protect it. This is an issue upon which the Joint Working Group considers it inappropriate to make a recommendation and seeks the views of readers.

Provision for fraud or estoppel

5.69We agree with that part of recommendation (5) in the Third Report that there should be a general provision by which no overriding interest of any category should prevail against a purchaser in cases of fraud or estoppel and we make recommendations to that effect below.180 However, we disagree with the first part of recommendation (5) that the words in section 70(1)(g), “save where enquiry is made of such person and the rights are not disclosed”, perform no useful function. We consider that they provide a clear and certain test by which a purchaser can tell whether a person who is in actual occupation has an overriding interest, and we note that others have made the same point.181 At present, there is no indication in the wording of the paragraph as to the nature of the enquiries that must be made. However, we agree with the assumption that such enquiries must be “appropriate” or “reasonable”182 and we consider that this should be made explicit in the legislation.

Occupation of part

5.70Recommendation (6) in the Third Report is that the legislation should state explicitly

178See above, paras 4.27 - 4.30.

179Obviously there would be no difficulty if the lease was itself an overriding interest having been granted for a term of 21 years or less: Land Registration Act 1925, s 70(1)(k); below, para 5.87.

180See para 5.108.

181See Roger J Smith, “Land Registration Reform - The Law Commission’s Proposals” [1987] Conv 334, 338.

182See Lloyds Bank Plc v Rosset [1989] Ch 350, 403 - 406, per Purchas LJ.

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what is already settled by judicial decision,183 namely that “the rights of every person in actual occupation of the land” included the case where the person was in occupation of part of the land to which his rights related. We agree with this recommendation in principle. However, we consider that some care is needed in drafting the provision. It is important that where someone is in actual occupation of part of the land but they have rights over the whole of the land purchased, their rights protected by actual occupation should be confined to the part which they occupy.

Should the occupier’s actual occupation be apparent?

5.71Recommendation (2) of the Third Report was that actual occupation should not have to be apparent. Any requirement that it should be, it was said, would introduce into land registration the doctrine of notice.184 We do not agree with this recommendation and we consider that, in principle, section 70(1)(g) should be limited to the rights of those whose occupation is apparent. While we entirely agree that the doctrine of notice should not be introduced into registered land,185 we do not agree that limiting actual occupation to cases where it is apparent would have that effect.

5.72Our starting point has been to examine certain principles of the law of conveyancing which, we believe, provide a way forward. Where a seller contracts to sell land, he or she is bound to disclose to the intending purchaser prior to contracting all latent defects in his or her title.186 For these purposes, a defect is latent (as opposed to patent) if, on an inspection of the land, it does not arise “either to the eye, or by necessary implication from something which is visible to the eye”.187 A defect of title may be latent even though the purchaser has constructive notice of it.188 The test is whether the right is apparent on a reasonable inspection of the land, not whether the right would have been discovered if the purchaser had made all the enquiries which ought reasonably to have been made. A seller can exclude liability189 for not disclosing a latent defect in title only if it is one of which he or she neither knew nor ought to have known.190

5.73While there will certainly be dispositions of registered land not preceded by a contract, to which these rules will not therefore apply,191 there will be many others to which the

183“I would have no difficulty in deciding that ‘the land’ refers to ‘the land or any part thereof’”:

Hodgson v Marks [1971] Ch 892, 916, per Ungoed-Thomas J. See too Russell LJ at p 931.

184Law Com No 158, paras 2.60 - 2.62.

185See above, para 3.44.

186See Halsbury’s Laws of England (4th ed), Vol 42, para 61; Reeve v Berridge (1888) 20 QBD 523;

Re White and Smith’s Contract [1896] 1 Ch 637; Re Haedicke and Lipski’s Contract [1901] 2 Ch 666; Peyman v Lanjani [1985] Ch 457, 496 - 498. For the basis of the vendor’s duty, see Charles Harpum, “Selling Without Title: a Vendor’s Duty of Disclosure?” (1992) 108 LQR 280.

187Yandle & Sons v Sutton [1922] 2 Ch 199, 210, per Sargant J. He added that a purchaser was “only liable to take the property subject to those defects which are patent to the eye, including those defects which are a necessary consequence of something which is patent to the eye”: ibid.

188Ibid at p 210; Caballero v Henty (1874) LR 9 Ch App 447, 450.

189By conditions of sale.

190Becker v Partridge [1966] 2 QB 155; Rignall Developments Ltd v Halil [1988] Ch 190. See Charles Harpum, “Exclusion Clauses and Contracts for the Sale of Land” [1992] CLJ 263, 294 et seq.

191Eg, a gift of land, where the land is mortgaged, or where there is an exchange of lease and counterpart without any prior agreement for a lease.

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rules will be applicable. We consider that, as any purchaser of registered land will in practice need to determine whether the land is subject to patent defects in title, it is this test that should be adopted in relation to the rights of occupiers. In other words, a person would be in actual occupation for the purposes of the paragraph, only if that occupation was apparent on a reasonable inspection of the land.192 It would not suffice that a purchaser might have constructive notice of that occupation193 if it was not patent. The corpus of authority that exists on the distinction between latent and patent defects in title would provide guidance in cases of uncertainty or dispute.

Other matters

5.74We have not commented on every aspect of section 70(1)(g). To the extent that we have not, it is because we are satisfied with workings of the paragraph. It may be that readers will take a different view and will consider that we should address some other aspects of it. We shall be glad to learn of any such matters, particularly if they are the cause of some practical difficulty.

5.75We therefore provisionally recommend that—

(1)subject to the qualifications set out below, the rights of persons in actual occupation should continue to enjoy protection as overriding interests;

(2)for the purposes of this paragraph, persons would be in actual occupation of land only if they were physically present on the land and their occupation was patent, that is, apparent on a reasonable inspection of the land;

(3)section 86(2) of the Land Registration Act 1925 should be amended so that the rights of beneficiaries under a settlement (whether it was created under the provisions of the Settled Land Act 1925 or any other statute) should be capable of existing as overriding interests;

(4)the present exception by which rights that would otherwise be binding under section 70(1)(g) are not because they are not disclosed on inquiry, should be retained, and it should be made clear that the inquiry that is required is that which is reasonable in the circumstances; and

(5)where a person is in occupation of part only of the property in or over which he or she has rights, his or she rights should be an overriding interest within the paragraph, but only as regards the land which he occupies.

5.76We ask readers whether they think that the rights of persons who are in receipt of the rents and profits of land—

192We do of course intend that this rule should apply even in cases where there is no contract preceding the transfer and therefore no obligation of disclosure on the part of the transferor or grantor.

193Which was the test considered in the Third Report: see Law Com No 158, para 2.62.

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(1)should continue to be overriding interests; or

(2)should—

(a)continue to be overriding interests only if they were so at the time when the legislation came into force; but

(b)cease to have the status of overriding interests where those rights arose or were created after the legislation was brought into force.

If readers favour (2) (which we provisionally recommend), we ask whether in relation to those rights that remain overriding interests under (a), that status should permanently cease when the person is no longer in receipt of rents and profits, or whether it should revive if the person starts to receive them once more.

5.77Are there any other aspects of section 70(1)(g) that operate unsatisfactorily and which readers consider should be reviewed?

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INTERESTS EXCLUDED FROM THE EFFECT OF REGISTRATION

Section 70(1)(h)

5.78Most titles to registered land are absolute. However, there are other gradations of title, namely good leasehold title, possessory title and qualified title. Registration with one of these three titles has the same effect as registration with absolute title but subject to the following exclusions—

(1)good leasehold title: to any estate, right or interest which affects the lessor’s title to grant the lease;194

(2)possessory title: to any estate, right or interest affecting the land at the time of registration;195 and

(3)qualified title: where title can only be established for a limited period, to any estate, right or interest arising before a specified date or under a specified instrument.196

5.79Section 70(1)(h) declares to be overriding interests—

In the case of a possessory, qualified, or good leasehold title, all estates, rights, interests, and powers excepted from the effect of registration.

Thus, for example, where a squatter is registered with possessory title after twelve years’ adverse possession, his title is subject to any estates, rights or interests adverse to those of the squatter that were in existence at the time of first registration, and these take effect as overriding interests. We agree with the conclusion which the Law Commission reached in the Third Report that the need for this provision is not apparent.197 On any disposition of property with such a title, the Act expressly provides that the transferee takes subject to these estates, rights and interests in any event.198

They operate outside the register and it is unnecessary to confer upon them the status of overriding interests.199 Where the registrar amends the register to give effect to rights which are excluded from the effect of registration of land with a qualified or possessory title, this does not amount to “rectification” of the register, because it does not involve the correction of any error or omission. It follows that such an amendment to the register can never trigger the payment of an indemnity.200 We therefore provisionally recommend that the estates, rights, interests, and powers excepted from the effect of registration in cases of titles less than absolute should cease to be overriding interests. Do readers agree?

194Land Registration Act 1925, s 10.

195Ibid, ss 6, 11.

196Ibid, ss 7, 12.

197Law Com No 158, paras 2.103 - 2.104.

198Land Registration Act 1925, ss 20(2), (3); 23(2), (3), (4).

199“[O]nce a matter has been expressly excepted by a class of title less than absolute, it stands and takes effect outside the register of title”: Law Com No 158, para 2.104.

200For rectification, see below, Part VIII.

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LOCAL LAND CHARGES

Section 70(1)(i)

5.80Section 70(1)(i) provides that—

Rights under local land charges unless and until registered or protected on the register in the prescribed manner

are to take effect as overriding interests. A local land charge is registrable at the local land charges register for the area in which the land in question is situated.201 Such a land charge is however enforceable even if it has not been registered, though a purchaser who has made a proper search will be entitled to compensation in such circumstances.202

5.81The function of section 70(1)(i) is two-fold—

(1)By making all local land charges overriding interests, it ensures that they are binding on any purchaser of the land affected.

(2)It recognises that some local land charges, although binding on any purchaser of registered land, will not be enforceable against him unless and until the charge is registered as a registered charge on the Land Register under the Land Registration Act 1925. The common factor that connects these charges is that they are charges on land to secure the payment of money. They include—

(a)a charge by a street works authority for the cost of executing street works;203 and

(b)a charge to recover expenses incurred by a local authority because of non-compliance with a repair notice.204

5.82In its Third Report, the Law Commission made two recommendations.205 First, local land charges should cease to be overriding interests and should instead become general burdens. We have already explained why we do not support the creation of a category of general burdens.206 Secondly, where a right was registrable as a local land charge, it should no longer be necessary to register it under the provisions of the Land Registration Act 1925. This proposal does at first sight appear attractive: a double registration requirement is both expensive and troublesome. However, we consider that it is necessary. The Land Registration Act 1925 confers on the proprietor of a registered charge “all the powers conferred by law on the owner of a legal mortgage”.207

Under a system of land registration it is desirable that if any person is to have a

201Local Land Charges Act 1975, s 4.

202Local Land Charges Act 1975, s 10.

203Highways Act 1980, s 212.

204Housing Act 1985, s 193; Schedule 10.

205Law Com No 158, para 2.94.

206See above, para 4.21.

207Section 34(1).

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dispositive power over registered land, that fact should be apparent on the face of the register. The register must be as complete a statement of the title as is possible, particularly when there is a financial charge affecting the property. It should not be necessary to deduce such a fundamental matter from an entry on the local land charges register. Although the double registration requirement may be burdensome to registering authorities, we consider that it is the lesser of two evils.

5.83We therefore believe that the substance of the present paragraph should be retained. However, we consider that as presently drafted, its effect is both unclear and misleading. We therefore provisionally recommend that paragraph (i) should be recast in the following way—

(1)local land charges should take effect as overriding interests, whether or not they are registered under the Local Land Charges Act 1975; but

(2)a local land charge that is also a charge over registered land to secure the payment of any sum of money should not be capable of being enforced until it is registered as a registered charge on the Land Register.

Do readers agree?

MANORIAL RIGHTS AND FRANCHISES

Section 70(1)(j)

Seignorial and manorial rights

5.84When copyholds were enfranchised under the 1925 property legislation, certain siegnorial and manorial rights were preserved. These take effect as overriding interests in registered land (unless and until they are noted on the register) and are listed in section 70(1)(j) of the Land Registration Act 1925—

Rights of fishing and sporting, seignorial and manorial rights of all descriptions (until extinguished)...208

A more precise list of such manorial rights is found in the Law of Property Act 1922,209 and its effect is summarised in the Law Commission’s Third Report.210 They include—

(1)the lord’s sporting rights;

(2)the lord’s or tenant’s rights to mines and minerals;

(3)the lord’s right to hold fairs and markets;

(4)the tenant’s rights of common; and

(5)the lord’s or tenant’s liability for the construction, maintenance and repair of

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