House of Commons - Explanatory Note
Land Registration Bill [HL] - continued          House of Commons

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Final provisions

Clause 129: "Proprietor in possession"

202.     The effect of the provision is that a proprietor is treated as being in possession of land which is physically in the possession of certain other people, for example, the proprietor's tenant or mortgagee. Land is also regarded as being in possession of the proprietor if it is in the possession of a person who is entitled to be registered as proprietor. But a squatter's right to be registered as proprietor does not count for this purpose.

Clause 131: Minor and consequential amendments

203.     This clause gives effect to Schedule 11, which makes minor and consequential amendments to existing enactments.

Clause 132: Transition

204.     This clause empowers the Lord Chancellor by order to make transitional provisions and gives effect to Schedule 12.

SCHEDULE 1: UNREGISTERED INTERESTS WHICH OVERRIDE FIRST REGISTRATION

205.     Interests which do not appear in the register, yet bind the person who acquires any interest in registered land, are considered to be an unsatisfactory feature in registered conveyancing. The Bill seeks to narrow the circumstances in which such interests arise and reduce the number of categories. In doing this, the Bill for the first time separates out those interests that are binding on the proprietor who seeks first registration of title from those interests which bind on a subsequent disposal of registered land, since the considerations to be applied in the two situations are different. When an applicant seeks first registration of title, whether or not he is bound by an existing interest has already been determined under the principles of unregistered conveyancing.

206.     Some of the interests are common to both categories. Where that is so, the notes set out below relating to them are not repeated in the notes on Schedule 3.

207.     Clauses 11(4) and 12(4) list the matters that bind a registered proprietor on first registration of title to an estate in land. They include unregistered interests listed in Schedule 1. Although their priority is protected without the need for registration, clause 71 enables an obligation to be imposed on applicants to disclose known unregistered interests so that they can be recorded in the register. In addition, under clause 90, a new category of interest, which cannot be registered, is created. PPP leases are to be treated as if they had been included in Schedule 1.

Leasehold estates in land

208.     Paragraph 1 has the effect that, subject to three exceptions, a leasehold estate granted for a term not exceeding seven years from the date of grant is an unregistered interest which overrides first registration. Under the present system, leases not exceeding 21 years in length are overriding interests. The reduction in the length of leases which have overriding status reflects the reduction in the length of leases which gives rise to first registration of title in their own right. The grant of a lease exceeding seven years in length will under the Bill trigger first registration. Clause 4 lists the three situations where a lease of shorter duration must be registered in its own right: a right to buy lease; a lease that take effect more than three months after it is made; and certain leases by private sector landlords. These leases will not be capable of overriding first registration, even where they do not exceed seven years.

Interests of persons in actual occupation

209.     The effect of Paragraph 2 is that, subject to one exception, an interest belonging to a person in actual occupation of land overrides first registration. The overriding status of these interests only extends to those parts of the land which the person is actually occupying. This category is considerably narrower in scope than the category existing under the current law, which treats the receipt of rents and profits as occupation of the land. The one exception to the overriding status of occupation rights is an interest under a settlement under the Settled Land Act 1925. Such interests are now, however, relatively uncommon, and since the Trusts of Land and Appointment of Trustees Act 1996 came into force, no new settlements can be created.

Easements and profits ... prendre

210.     Paragraph 3 has the effect that a legal easement or profit ... prendre overrides first registration. Under the present system, equitable easements over unregistered land also have overriding status even if they have not been protected, as they should be, by registration under the Land Charges Act 1972. The position of those easements was therefore improved on first registration of title and this situation will not continue under the Bill.

Customary and public rights

211.     Paragraphs 4 and 5 provide that a customary right or public right will override first registration. Customary rights are rights which have their origins in feudal times and are enjoyed by all or some of the inhabitants of a particular locality. Public rights are rights which are presently exercisable, and are exercisable by anyone, whether he owns land or not, merely by virtue of the general law. These rights are comparatively common and when they come to light on an application for first registration, they are noted in the register. That practice will continue under the Bill.

Local land charges

212.     Paragraph 6 has the effect that a local land charge overrides first registration. Local land charges usually relate to the costs of repairing a property or amenities in the immediate vicinity of the property and are governed by the Local Land Charges Act 1975. Under that Act, provision is made for a local authority to register local land charges, for those charges to be binding even if not registered and for compensation to be paid for any loss suffered by a person as a consequence of non-registration. The overriding status of local land charges recognises that they are governed by a parallel regime. However, clause 55 provides that a local land charge that secures the payment of money must be registered at the Land Registry before that money can be realised.

Mines and Minerals

213.     Paragraphs 7 to 9 preserves the overriding status of a limited class of mineral rights. They are mineral rights in relation to land, the title to which was registered before 1926. The reason for this exception is that rights to minerals were not recorded prior to 1926. Overriding status is also continued for interests and rights in coal. Coal rights were excepted from registration because of the difficulty in registering them given their extent and complexity. In present or former coal mining areas, coal mining searches are available that are likely to provide detailed information about coal mining activities.

Miscellaneous

214.     The five categories of interests set out in paragraphs 10 to 14 are of ancient origin, and of unusual character so that a buyer would not normally expect to see them. They can be very difficult to discover and can be exceptionally onerous. The overriding status of these rights will be phased out after ten years of this Schedule coming into force. The transitional period will give persons with such interests time to apply free of charge for their interest to be noted in the register. Franchises and manorial rights are the categories of interests most commonly found. Franchises originate in a royal grant, such as a right to hold a fair. Manorial rights are a very specific category of rights granted before 1926 and include a tenant's right of common and a lord's sporting rights. A Crown rent is a right to rent which was reserved to the Crown on the granting of a freehold estate, whether or not the right still belongs to the Crown. The right in respect of an embankment or sea or river wall is a liability falling on a person whose property fronts the sea or a river. It can arise in a number of ways, such as on grant or by custom. The only right to payment in lieu of tithe that still exists is a corn rent, although it is the rarest of all the categories listed and not all corn rents fall within it.

SCHEDULE 2: REGISTRABLE DISPOSITIONS: REGISTRATION REQUIREMENTS

PART 1: REGISTERED ESTATES

Introductory

215.     Paragraph 1 explains that this Part of the Schedule sets out the registration requirements for those dispositions of registered estates required to be completed by registration under clause 27(2). Until these requirements are met, legal title does not pass. These disposition requirements also apply to dispositions by operation of law apart from those that occur on the death or bankruptcy of an individual, the dissolution of a company or the creation of a legal charge which is a local land charge (clause 27(5)). The requirements as set out are in accordance with the Land Registry's current procedures for recording dispositions.

Transfer

216.     Paragraph 2 provides that on a transfer of the whole of the registered estate, the transferee (or any person who has acquired the estate from him) must be entered in the register as proprietor. There are no other registration requirements as details of the new owner simply replace those of the old. Where the transfer is of part only, a new section of the register is created for the part transferred which shows the transferee or his successor as proprietor. In addition, an entry must be recorded in the register relating to the original proprietor's estate to show that part of the land has been removed. Rules will cover the way in which this is recorded.

Lease of estate in land

217.     Paragraph 3 provides that when a lease is granted by the owner of a registered estate in land, the person to whom the lease was granted (or any person who has acquired the estate from him) must be shown in the register as proprietor. In addition, a notice is inserted in the register of the landlord's title to show that the land is now subject to the newly created lease. Leases of more than seven years, (and certain other leases as specified in clause 27), will be registered in their own right rather than just recorded in the register relating to the landlord's title.

Lease of franchise or manor

218.     Paragraph 4 applies when a lease of more than seven years is granted out of a franchise or a manor and paragraph 5 to any shorter lease of such property. For a lease of more than seven years, the register must show the person to whom the lease was granted (or any person who has acquired the estate from him) as proprietor of the lease. In addition, and whatever the length of the lease, the register relating to the landlord's estate must contain a notice that the registered estate is now subject to the lease.

Creation of independently registrable legal interest

219.     Paragraph 6 relates to the creation of a rentcharge or profit ... prendre which is for seven years or more and so therefore capable of registration in its own right. The title to the benefit of the interest must be entered in the register. In addition, the register relating to the landlord's estate must contain a notice that the registered estate is now subject to the interest.

Creation of other legal interest

220.     Paragraph 7 specifies the registration requirements for those dispositions falling within clause 27 (2) (d) or (e) which are not dealt with by paragraph 4, 5 or 6. In any of these cases, a notice must be entered in the register relating to the registered estate out of which it was granted which shows that the registered estate is now subject to that interest. If the interest also benefits another registered estate, then it should be recorded in the register relating to that other estate, showing the proprietor as proprietor of that interest. For example if a right of way is granted by a deed of grant over land to a neighbouring landowner, the easement will be noted in the register as being something that burdens that land. Additionally, the register relating to the adjoining title will be amended to show that the owner of that land has the benefit of the right of way contained in the deed of grant. Power is given to the Lord Chancellor to amend the registration requirements applying to a right of entry contained in a lease. At present the benefit of a right of way contained in a lease is not recorded in the landlord's title. The purpose of this power is to enable the current practice to continue for now, whilst leaving open the possibility that the practice might be changed in future.

Creation of legal charge

221.     Paragraph 8 relates to a newly created charge over a registered estate or a registered rentcharge. The charge must be recorded in the register relating to the registered estate and show the chargee (typically the lender) as proprietor of that charge.

PART 2: REGISTERED CHARGES

Introductory; Transfer; and Creation of a sub-charge

222.     This Part of the Schedule sets out the registration requirements for those dispositions of registered charges required to be completed by registration under clause 27 (3). The requirements reflect the way in which transfers of charges and the creation of sub-charges are currently recorded. Under paragraph 10, if the benefit of a registered charge is transferred than the transferee, or any person who acquired the benefit from him, must be entered in the register as proprietor of the charge. In practice this means that the entries relating to the charge are altered by the insertion of the new owner's details. Under paragraph 11, if a sub-charge is created, then the person who acquired the benefit of the sub-charge (or any person who has acquired the benefit of the sub-charge from him) must be entered in the register as proprietor of the sub-charge. This in practice results in an additional entry. The details of the original chargee remain in the register.

SCHEDULE 3: UNREGISTERED INTERESTS WHICH OVERRIDE REGISTERED DISPOSITIONS

223.     The Bill separates out those interests which are binding on the first registered proprietor from those interests which bind the person to whom a disposition is made on a subsequent disposal of registered land. The interests binding on first registration are set out in Schedule 1. Some of the interests are common to both categories (see the notes to Schedule 1). The notes below only deal with the extent to which to the interests listed in Schedule 3 differ in nature from those that bind on a first registration.

Leasehold estates in land

224.     Paragraph 1 provides that a leasehold estate granted for a term not exceeding seven years from the date of grant overrides registered dispositions, subject to seven exceptions. The first three exceptions are the same as those that apply on first registration. The other four apply in respect of a lease granted by the proprietor of a registered estate or charge where that grant constitutes a registrable disposition required to be completed by registration. They are:

i)     a lease which is granted to take effect in possession more than three months into the future;

ii)     a discontinuous lease (commonly thought of as a time-share where the lease grants exclusive possession for periods which are not consecutive);

iii)     a right to buy lease under Part 5 of the Housing Act 1985; and

iv)     a lease granted by a private sector landlord to a person who was formerly a secured tenant and has a preserved right to buy.

Interests of persons in actual occupation

225.     Paragraph 2 provides that, an interest belonging to a person in actual occupation of land overrides registered dispositions, subject to four exceptions. The first exception is the same as the exception that applies on first registration. That is, where the interest arises under a settlement under the Settled Land Act 1925. The second exception adopts one of the principles under the current law. If the person with the interest is asked before the disposition occurs and he or she fails to disclose the interest when that could reasonably have been expected, then overriding status is lost. A new exception relates to the rights of a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition and which the person acquiring the interest did not know about at that time. To fail the test as formulated in the Bill, it is the occupation that has to be obvious not the interest. Lastly, there is excepted from overriding status a leasehold estate granted to take effect in possession more than three months from the date of grant but which has not taken effect in possession at the time of the disposition. This exception will not often apply and will only occur when the lease in question has not been registered and the person to whom the lease was granted was for some other reason already in occupation.

Easements and profits ... prendre

226.     Paragraph 3 provides that the priority of a legal easement or profit ... prendre is protected without the need for registration, but, unlike the situation on first registration, there are exceptions which give this provision a much more limited scope. Any person who acquires an interest for valuable consideration under a registered disposition will only be bound by an easement or profit that is an overriding interest if:

i)     it is registered under the Commons Registration Act 1965;

ii)     he or she actually knows of it;

iii)     it is patent; (in other words, it is obvious on a reasonably careful inspection of the land over which the easement or profit is exercisable, so that no seller of land would be obliged to disclose it); or

iv)     it has been exercised within the period of one year before the disposition.

SCHEDULE 4: ALTERATION OF THE REGISTER

227.     The provisions of this Schedule bear no relation to the existing provisions in the Land Registration Act 1925. They have been recast to reflect the present practice in relation to rectification and amendment of the register.

Introductory

Paragraph 1 sets out a narrower definition of "rectification" than under the current law. Rectification is limited to the situation where a mistake is to be corrected, and where the correction also prejudicially affects the title of the registered proprietor. Rectification is just one particular form of alteration. When rectification under this definition occurs, the proprietor may be entitled to indemnity as he or she will have been prejudicially affected by the amendment made.

Alteration pursuant to a court order

228.     Paragraph 2 enables the court to order the alteration of the register in three situations:

    (i)     first, to correct a mistake;
    (ii)     secondly, to bring the register up to date; (if, for example, a court decided that a claimant in proceedings had established his or her entitlement to an easement by prescription over a parcel of registered land, it could order that the benefit and burden of the easement be recorded in the registers of the affected titles); and
    (iii)     thirdly, to give effect to any estate, right or interest excepted from the effect of registration.

229.     Where land is registered with good leasehold, possessory or qualified title, rights are excepted from the effect of registration (for details of the different classes of title see clauses 9 and 10). It is these rights that may be the subject of court proceedings which ultimately give rise to an alteration in the register. When the court order is served on the registrar, it places him under a duty to give effect to it in the register of title. Rules may specify the circumstances in which the court is under a duty to order the alteration of the register in situations where the alteration does not prejudicially affect the title of the registered proprietor, i.e. when rectification is not involved. Rules will also make provision about the form of court orders and their service.

230.     Paragraph 3 relates to rectification cases only. The paragraph reproduces the existing principle that the register should not be rectified against a registered proprietor who is in possession of the land without his consent, unless either he or she has by fraud or lack of proper care caused or substantially contributed to the mistake in the register, or there is some other reason why it would be unjust not to make the alteration. The court is also obliged to make an order which it has power to make, unless there are exceptional circumstances which justify it in not making the order. Sub-paragraph (4) widens the meaning of "a registered estate in land" for the purpose of this clause to make it clear that it includes any registered estate which exists for the benefit of the proprietor's estate in land, such as an easement.

Alteration otherwise than pursuant to a court order

231.     Paragraph 5 gives the registrar power to alter the register without the need for the matter to be considered by a court. The registrar may alter the register for the same purposes as the court can under paragraph 2 and additionally, he can remove a superfluous entry. The ability to remove superfluous entries is likely to be important with the advent of electronic conveyancing to enable conveyancers to make changes to the register without the inconvenience of dealing with entries which are no longer current. Rules may specify the circumstances in which the registrar is under a duty to alter the register in situations where the alteration does not prejudicially affect the title of the registered proprietor, i.e. when rectification is not involved. Rules may deal with how the register is to be altered, about applications for alteration (including imposing a requirement for an application to be made) and the procedure to be adopted in making alterations (including whether or not an application is required).

232.     Paragraph 6 relates only to rectification cases, that is where the alteration to the register prejudicially affects the title of the registered proprietor. The same principles applied to court proceedings for rectification apply to proceedings before the registrar. Rectification can only be ordered by the registrar against a proprietor of land in possession in the limited cases explained in the notes to paragraph 2. The meaning of "a registered estate in land" is the same and the registrar is placed under a duty to make an order for rectification, where he has power to do so, unless exceptional circumstances exist. If there is an objection to an application to rectify the register, however, the registrar is under a duty to refer the matter to the adjudicator for determination (see clause 73(7)). Any contested application for rectification will therefore be resolved by the adjudicator.

Rectification and derivative interests

233.     Paragraph 8 makes it clear that the register may be altered so as to change permanently the priority of any interest affecting the registered estate or charge.

Costs in non-rectification cases

234.     Paragraph 9 gives the registrar power to pay such costs as he sees fit in cases where the register is altered by him, whether that alteration occurs through his own initiative or as a result of a court order served on him. The registrar can pay those costs if he consented to the costs being incurred in advance or one of two other situations have arisen. The first is that he has given retrospective consent to those costs. The second is when those costs were incurred urgently and it was not reasonably practical for his consent to be sought.

SCHEDULE 5: LAND REGISTRY NETWORK

Access to network

235.     Paragraph 1 Amendment of entries in the register simultaneously with the execution of conveyancing documents is likely to be a feature of electronic conveyancing. Electronic conveyancers will therefore need to be given appropriately regulated access to the land registry network. Paragraph 1 therefore provides for a person who is not a member of the land registry to have access to the land registry network but only by means of a network access agreement made with the registrar. If, however, an applicant meets the criteria laid down in rules, the registrar must enter into an agreement with him (and paragraph 4 provides for appeals against refusal of access). That agreement may allow him to communicate with other users of the network and with the registrar; and post and retrieve information. It may allow him to input information into the system to make changes to the register or cautions register, and to issue official copy documents and search results. The network may also be used for such other purposes as the registrar sees fit. Rules may regulate how the network access agreements are used to confer authority to carry out the functions of the registrar. It is envisaged that different levels of access could be given to different categories of users depending on the role they play in the conveyancing process, e.g. different levels of access for estate agents, mortgage lenders or conveyancers. Rules made under this paragraph are subject to greater Parliamentary scrutiny than land registration rules are generally (see clause 125) and the Lord Chancellor must also consult before making the rules. Under paragraph 11, the Lord Chancellor must have specific regard to confidentiality of information held on the network, competence of the users and the adequacy of insurance arrangements for potential liabilities.

Terms of access

236.     Paragraph 2 The network access agreement referred to in paragraph 1 will define the nature of the transactions that a particular user may undertake through the network and such other terms as the registrar sees fit, including charging for access. Rules may regulate the terms on which access is authorised under paragraph 2. These rules are subject to greater Parliamentary scrutiny than land registration rules generally and the Lord Chancellor must also consult before making the rules. Rules may require that a user use the system for the transactions for which he is authorised to use it. The rules may also enable network transactions to be monitored (e.g. for chain management) or for such other purpose as has been specified in rules. The rules may specify terms for the regulation of the use of the network.

Termination of access

237.     Paragraph 3 deals with two situations, the termination of the network access agreement by the user and the termination by the registrar. The user can terminate the agreement at any time by notice. Rules may make provision about the termination of the agreement by the registrar covering the grounds of termination, the procedure to be adopted when termination occurs and a system of suspension of termination pending an appeal (the right of appeal is dealt with in paragraph 4). The paragraph indicates that the basis for termination might include failure to comply with the terms of the agreement, failure to meet conditions laid down in rules made under this paragraph or ceasing to meet the qualifying criteria specified in rules made under paragraph 1. The registrar may have contractual remedies against a party to a network access agreement which he can pursue without terminating the agreement itself. He will be also able to provide education and training in the use of the network, to assist in developing standards. Rules made under paragraph 3 are subject to greater Parliamentary scrutiny than land registration rules generally and the Lord Chancellor must also consult before making the rules. In making rules about the termination of network access agreements, the Lord Chancellor must have specific regard to confidentiality of information held on the network, the competence of the users and the adequacy of insurance arrangements for potential liabilities.

 
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Prepared: 9 November 2001