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

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Appeals

238.     Paragraph 4 A person who is aggrieved by the registrar's decision in respect of an application for a network access agreement or its termination may appeal to the adjudicator (for the role of the adjudicator see Part 11 and Schedule 9). This would be expected to involve handling disputes as to whether the registrar acted properly when deciding that an applicant did not meet the criteria for the level of access sought or in relation to the termination of an agreement. The adjudicator may substitute his own decision for that of the registrar and give directions to give effect to his determination. There is a further right of appeal on a point of law from the adjudicator's decision (see clause 109). Rules will govern how the appeals procedure works.

Network transaction rules

239.     Paragraph 5 The Lord Chancellor may make rules covering the procedure to be followed throughout a transaction being undertaken through the network, including provisions about the supply of information to the registrar relating to unregistered interests, including overriding interests (compare clause 71 and see paragraph 6 below). These network transaction rules will be of great practical importance as they will specify how electronic conveyancing is to be conducted.

Overriding nature of network access obligations

240.     Paragraph 6 The network transaction rules made under paragraph 5 are likely to require an authorised conveyancer to provide specified information about a dealing, and, in particular, information about interests whose priority is protected without the need for registration. The rules are likely to require the disclosure of other information that a registered proprietor might not wish to have disclosed, such as the fact that a right to determine a registered estate in land has become exercisable. In addition, where the transaction is part of a chain, the conveyancer might have to disclose information about the transaction itself that the client regards as confidential. In these circumstances, the situation may arise where a conveyancer could be required to act contrary to the client's wishes. Where conflicting obligations do arise, paragraph 6 provides that the obligation under the network access agreement prevails and discharges the other obligation to the extent that they conflict.

Do-it-yourself conveyancing

241.     Paragraph 7 puts the registrar under a duty to provide assistance to enable do-it-yourself conveyancers to conduct their own conveyancing notwithstanding the introduction of a land registry network. That duty will only relate to the procedural and practical aspects of the conveyancing transaction. As now, the registrar will not provide legal advice. It is envisaged that the registrar will carry out the electronic transactions on their directions, and that this service will be available from district registries.

Presumption of authority

242.     Paragraph 8 Under the present law, a conveyancer does not have implied authority to sign a contract for the sale or purchase of an interest in land on behalf of his or her client. This means that currently a conveyancer acting for one party to a conveyancing transaction would be entitled to see the written authority from the other party to his conveyancer to sign on his or her behalf. Paragraph 8 has been included to avoid the need for the exchange of paper-based authorities before contracts can be concluded electronically. Where an authorised network user purports to make a disposition or contract on behalf of a client which has been authenticated by the user as agent and contains a statement that the user is acting with the client's authority, this will be deemed to be the case so far as any other party to the document is concerned. It is likely to be a requirement of rules under paragraph 5 that conveyancers should get authority in the appropriate way. The sanction for failure to do so would be the possibility of the network access agreement being terminated for failure to comply with its terms (it being a condition of such an agreement that those who are granted access comply with the rules for the time being in force under paragraph 5).

Management of network transactions

243.     Paragraph 9 The terms of a network access agreement may, as envisaged by paragraph 2, require the network user to provide monitoring information. In relation to a transaction which is part of a chain, this would probably require the user to provide the registrar with details as soon as they were available of the fact that the transaction that the client was intending to enter into was part of a chain. Thereafter, he or she would need to disclose that a particular conveyancing step had occurred, for example that local searches had been completed or a mortgage offer received. Paragraph 9 enables the registrar, or the person to whom he had delegated "chain management" responsibilities, to use the monitoring information to manage network transactions. In particular, he may disclose such information to persons authorised to use the network, for example other conveyancers involved in the chain, and authorise further disclosure if he considers it necessary or desirable to do so. The "chain manager" will not have any direct coercive powers but will be able to identify the link in the chain that is causing delay and will then be able to encourage that party to proceed with due despatch.

SCHEDULE 6: REGISTRATION OF ADVERSE POSSESSOR

Right to apply for registration

244.     Paragraph 1 provides that a person (the applicant) who has been in adverse possession (as defined in paragraph 11) for the period of ten years (60 years, where paragraph 13 applies) calculated as provided in the paragraph may apply to be registered. The estate in respect of which the application is made need not have been registered throughout the period of adverse possession. Where an application under paragraph 1 is required to be dealt with under paragraph 5, and where the applicant claims that he or she is entitled to be registered as the new proprietor because the third of the conditions in that paragraph is met, paragraph 5(4)(d) provides a partial exception by requiring the land to have been registered more than a year before the application.

Notification of application

245.     Paragraph 2 provides that the registrar must give notice of the application to specified persons, being those whose interests may be affected by the application.

Treatment of application

246.     Paragraph 3 provides that a recipient of a notice under paragraph 2 may, by notice to the registrar, require the application to be dealt with under paragraph 5. If the recipient does this then he or she is objecting to the application.

247.     Paragraph 4 provides that if there is no such requirement then the applicant must be entered in the register as the new proprietor - paragraph 9 deals with the effect of such registration (and of registrations under paragraph 7).

248.     At present, where a squatter has been in adverse possession for the required period the registered proprietor holds the registered estate on trust for the squatter. When an application for registration is successful, in the case of a squatter in respect of a registered freehold, he or she is registered as proprietor of a new freehold title and the existing freehold title is closed insofar as it relates to the land squatted upon. In the case of a registered leasehold the squatter is registered as proprietor of that leasehold.

249.     Under paragraphs 4 and 7, in all cases the applicant will be registered as proprietor of the existing registered estate.

250.     The present provision (Land Registration Act 1925, section 75) that the registered proprietor holds on trust for a squatter is not carried forward to the Bill because the circumstances where a squatter will be entitled (under paragraph 5) to be registered as proprietor are limited and such a right will be protected against third parties provided that the squatter is in actual occupation of the land in question. His or her proprietary rights will then have overriding status.

251.     Paragraph 5 provides that if the applicant can show that one or more of three conditions applies, the applicant is entitled to be registered as the new proprietor of the estate. If a recipient who has objected disputes that a condition applies, then if the objection is not disposed of by agreement the matter will have to be referred to the adjudicator under the general provision as to objections.

252.     The first condition set out in paragraph 5 is intended to provide statutory recognition for the equitable principles of proprietary estoppel. Examples might be:

  • Where the applicant/squatter has built on the registered proprietor's land in the mistaken belief that he or she was the owner of it and the proprietor has knowingly acquiesced in his or her mistake. The squatter eventually discovers the true facts and applies to be registered after ten years.

  • Where neighbours have entered into an informal sale agreement for valuable consideration by which one agrees to sell the land to the other. The "buyer" pays the purchase price, takes possession of the land and treats it as his own. No steps are taken to perfect his or her title. There is no binding contract because the agreement does not comply with the formal requirements for such a contract. The "buyer" discovers that he or she has no title to the land. If he or she has been in possession of it for ten years he or she can apply to be registered as proprietor.

In each of these cases, an equity arises by estoppel, to which the legislation should be able to give effect by registering the squatter as owner of the registered estate in place of the existing proprietor.

253.     Examples of the second condition (some other right to the land) might be:

  • The squatter is entitled to the land under the will or intestacy of the deceased proprietor.

  • The squatter contracted to buy the land and paid the purchase price, but the legal estate was never transferred to him or her. In a case of this kind the squatter-buyer is a beneficiary under a bare trust, and, as such, can be in adverse possession.

254.     The third condition (reasonable mistake as to the boundary) would cover cases such as:

  • Where the boundaries as they appear on the ground and as they are according to the register do not coincide, for example, because when the estate was laid out the dividing fences or walls were erected in the wrong place and not in accordance with the plan lodged at the Land Registry.

  • Where the registered proprietor leads the squatter to believe that he or she is the owner of certain land on the boundary when in fact it belongs to the registered proprietor. If there has been detrimental reliance, then the first condition (estoppel) might also apply.

255.     One of the requirements of the third condition is that estate to which the land relates was registered more than one year prior to the date of the application. This requirement is imposed because title to unregistered land can normally be acquired after twelve years' adverse possession while under the third condition title to registered land may be acquired after ten years' adverse possession. There might be a case where the squatter had been in adverse possession of unregistered land for more than ten but less than twelve years, the title was then registered and the other requirements of the third condition are met. The squatter would not have barred the title of the landowner prior to registration of the title but if this provision was not made he or she would be entitled to apply to be registered as proprietor as soon as the owner was registered. In other words, the owner would have no opportunity to evict the squatter.

256.     Where an application does not rely upon the third condition there is no minimum period during which the estate must have been registered - all that is required is that the estate is registered when the application is made (paragraph 1(4)).

Right to make further application for registration

257.     Paragraph 6 provides that if the applicant's application for registration is refused but the applicant remains in adverse possession for a further two years, he or she is entitled (subject to the three exceptions in paragraph 6(2) and the two restrictions in paragraph 8) to apply once again to be registered. The two year period is to enable the registered proprietor or registered chargee to take reasonable steps either to evict the squatter (or at least to start proceedings to do so) or to regularise the squatter's possession by negotiating a bilateral agreement under which he or she can stay as the proprietor's tenant or licensee.

258.     Transitional arrangements will be needed to cover the case of certain squatters who mistakenly believed themselves to be the owner of the land under paragraph 5(4). The provisions of the Bill involve a move from a position where there is (generally) a 12 year limitation period to where there is no limitation period as such, but where it is possible for a squatter to be registered as proprietor after 10 years' adverse possession. In most cases, the fact that the squatter might acquire title after only 10 years rather than 12 does not matter. The registered proprietor can stop the squatter from acquiring title by objecting to his or her application for registration.

259.     Where a squatter is entitled to be registered because he or she reasonably but mistakenly believed themselves to be the owner of the land under paragraph 5(4), they might find that they were entitled to be registered as proprietor of the land on this basis on the day that the legislation is brought into force, even though they have only been in adverse possession for 10 years and, the day before, the registered proprietor could have successfully initiated possession proceedings against them.

260.     This case will be dealt with by timed implementation. The provisions of the Bill are to be brought into force by order. It is therefore proposed to bring paragraph 5(4) into force one year after the rest of Schedule 6. This means that registered proprietors will have one year from the coming into force of the rest of the Bill to take proceedings against any squatter who might fall within paragraph 5(4) or otherwise regularise his or her position so that he or she is no longer in adverse possession.

261.     Paragraph 7 provides that this time the applicant will be registered as proprietor whether or not the registered proprietor objects.

Restriction on applications

262.     Paragraph 8 Sub-paragraph (1) is intended to ensure that the protection against adverse possession conferred by the Limitation (Enemies and War Prisoners) Act 1945 continues to apply.

263.     Under the Limitation Act 1980, section 28 a person under a disability must be suffering it when adverse possession commences. Under sub-paragraph (2) the relevant time will be when the applicant applies to be registered, as that is when the registered proprietor needs to be able to protect his or her position by objecting to the application. The sub-paragraph is wider than section 28 as it protects not only those suffering mental disability but also those who are so physically impaired that they cannot communicate their decision.

Effect of registration

264.     Under paragraph 9, the applicant will, upon registration, take the land subject to the same estates, rights, and interests that bound the previous proprietor except that (subject to the case mentioned below) he or she will take free of any registered charge which affected the estate immediately before his or her registration.

265.     The case referred to above is where an applicant is registered because his or her application was determined by reference to one of the three conditions. In that case, the estate is vested in him or her subject to any registered charge.

Apportionment and discharge of charges

266.     Paragraph 10 applies where an applicant is registered subject to a such a registered charge and the charge affects other property. In such circumstances, the applicant may require the chargee to apportion the amount secured by the charge and is entitled to a discharge of his estate from the charge upon making the payments mentioned in sub-paragraph (2).

Meaning of "adverse possession"

267.     Under paragraph 11 an applicant, X, does not have to show that she has been in adverse possession for the ten year period provided that sub-paragraph (2) applies. It would thus suffice if:

  • X is the successor in title of an earlier squatter from whom he or she acquired the land, and, taken together, the two periods of adverse possession amount to ten years; or

  • X has been in adverse possession, has herself been dispossessed by a second squatter, Y, and has then recovered the land from Y. In these circumstances, he or she can add Y's period of adverse possession to his or her own to make up the necessary ten-year period.

Trusts

268.     The purpose of paragraph 12 is that where there are successive interests, adverse possession by a squatter should not prejudice the rights of beneficiaries who are not yet entitled in possession.

269.     The operation of paragraph 12 can best be illustrated by an example:

  • Land is held on trust for A for life, thereafter for B for life, thereafter for C absolutely. S, a squatter, goes into adverse possession of the land during A's lifetime and remains there. For as long as either A or B is alive, S will be unable to apply to be registered as proprietor of the land under paragraph 1. Indeed, it is only ten years after C's interest has fallen into possession that S can make such an application. This is because S is not regarded as being in adverse possession until C, the remainderman, becomes entitled to the land.

Crown foreshore

270.     Paragraph 13 provides, amongst other things, for a 60 year period (rather than ten years) where an application is made under paragraph 1, and relates to foreshore belonging to Her Majesty or to one of the Royal Duchies. This adapts the longer limitation period provided for the recovery of foreshore in the Limitation Act 1980 to the scheme of the Bill.

Rentcharges

271.     Under paragraph 14 rules must be made to apply the provisions of this Schedule to registered rentcharges. Such rules are likely to be technical and of a length more suited for subordinate legislation.

SCHEDULE 7: THE LAND REGISTRY

Holding of office by Chief Land Registrar, Remuneration etc. of Chief Land Registrar, and Parliamentary disqualification

272.     Paragraphs 1,2 and 7 The Chief Land Registrar will hold the office on the terms determined by the Lord Chancellor, including pay, expenses and allowances, and the provision of a pension. The Chief Land Registrar may resign or be removed from office if he is unable or unfit to act, but otherwise shall continue in office until the term of his appointment ends. When the appointment ends, he is eligible for reappointment. If there are special circumstances on the termination of the appointment, the Lord Chancellor has power to pay compensation. For the first time, the office of Chief Land Registrar becomes a disqualifying office for the purpose of membership of the House of Commons or the Northern Ireland Assembly.

Staff, and Indemnity for members

273.     Paragraphs 3 and 4 The registrar may choose his staff and appoint them on such terms and conditions as he, with the approval of the Minister for the Civil Service, sees fit. Following the model of the Land Registration Act 1925, the Bill protects any member of the land registry from a claim in damages for anything done or omitted to be done in relation to land registration, unless it is shown that they acted in bad faith.

Seal, and Documentary evidence

274.     Paragraphs 5 and 6 Paragraph 5 continues the effect of the existing legislation which allows documents sealed with the Land Registry seal to be admissible in evidence without further proof. Additionally paragraph 6 provides that the forms and directions made by the Chief Land Registrar are admissible in evidence under the Documentary Evidence Act 1868.

SCHEDULE 8: INDEMNITIES

Entitlement

275.     Paragraph 1 sets out eight circumstances in which a person who suffers loss is entitled to be indemnified. Five of the grounds arise from a mistake of some description, either in the content of an official copy, a copy document referred to in the register, an official search, the register (the correction of which would result in that register being rectified) or the cautions register. In this context a mistake includes anything mistakenly omitted or included. The other three grounds relate to the rectification of the register (rectification is a correction which causes loss), the loss of a document lodged at the registry (which could include an electronic document that has been corrupted), or the failure to serve notice of an entry of a statutory charge (see clause 50).

276.     Paragraph 1 contains three statements to assist with the interpretation of the listed circumstances. Firstly, until a decision has been made about the correction of a register by rectification, no entitlement to indemnity arises in respect of a mistake in a register. Once a decision is made, however, the right to indemnity arises whether or not the decision was made to rectify the register. It is possible for a person in whose favour rectification is made to suffer loss as the alteration is not retrospective and losses may have occurred before rectification is effected. Secondly, anyone suffering loss because of the upgrading of a class of title (see clause 62) will be entitled to indemnity as if there had been a rectification of the register. This ensures that a person who suffered loss because the title was upgraded on application after the passage of twelve years could claim indemnity even though the registrar was not required to be satisfied as to the title before upgrading. Lastly, if the proprietor of a registered estate or a charge acted in good faith but relied on a forged document, then he shall be treated as if he had suffered loss because the register was rectified so as to be entitled to indemnity. Otherwise it could be argued that no loss had been suffered as legal title did not pass to him as a result of the forged document.

Mines and minerals

277.     Paragraph 2 There is one qualification to the right of indemnity set out in paragraph 1. Paragraph 2 provides that no indemnity is payable on account of any mines or minerals, or the existence of any right to work or get mines or minerals, unless it is noted in the register of title that the registered estate includes mines and minerals. This replicates the existing position, which arose because of the difficulty of establishing on first registration if the mines or minerals were included in a title. Indemnity is only available when there is an entry in the register confirming that the mines and minerals are included. The existence of the entry indicates that the registrar was satisfied after careful investigation that the mines and minerals were not disposed of at an earlier date, or that the lord of the manor's rights to mines and minerals was not preserved in relation to land that was formerly copyhold.

Costs

278.     Paragraphs 3 and 4 Paragraph 3 sets out the general principle that a claimant is entitled to recover by way of indemnity costs or expenses in relation to the matter only if they were reasonably incurred by him or her with the consent of the registrar. An insurer cannot be expected to settle a claim for costs incurred without his prior consent. That principle is not applied in three cases: (1) where the costs or expenses must be incurred urgently and it is not reasonably practicable to apply for consent in advance; (2) where the registrar subsequently consents to costs which have already been incurred; and (3) where the claimant incurs costs of going to court for a determination of their entitlement to indemnity or to determine the amount of indemnity due (in relation to court applications, see paragraph 7(2)). Even if indemnity is not awarded, the registrar can, for the first time, pay costs and expenses incurred with his consent. If his consent was not obtained in advance he may still award costs if those costs and expenses were incurred urgently (so that it was not possible to get his consent) or where the costs and expenses were subsequently approved by him. This new provision enables a person to recover their costs if there appears to have been a mistake by the registrar but after expending money on further investigations, this proves not to be the case.

Claimant's fraud or lack of care

279.     Paragraph 5 replicates the principle of contributory negligence introduced by the Land Registration Act 1997. No indemnity is payable if the loss was suffered as a result wholly or partly of the claimant's own fraud. If however the loss was suffered as a result of the claimant's lack of proper care, then the indemnity payable is reduced to the extent that it is fair having regard to the claimant's share of the responsibility for the loss. Indemnity will not be payable when the claimant's lack of proper care is solely responsible for the loss. Additionally, the paragraph provides that, unless the claimant paid for the interest noted in the register or the registered estate in respect of which the loss was suffered, the claimant will be treated as if the loss caused by the fraud or lack of proper care of a person from whom the claimant has acquired the interest was his own fraudulent act or careless action.

Valuation of estates etc.

280.     Paragraph 6 There is no restriction on the type of loss that is recoverable by a claimant. This means that a claimant can recover any loss flowing from the particular circumstance whether that loss is direct (for example, the value of land lost) or consequential (the loss of a valuable contract). If indemnity is sought for the loss of an estate, interest or charge, however, paragraph 6 puts a maximum value on the figure for that indemnity. This provision replicates the current position, which sets out two different bases for assessing the maximum sum allowed. If indemnity is payable because the claimant has suffered the loss by reason of rectification, the maximum sum is the value of the estate, charge or interest immediately before rectification of the register of title, but as if there were to be no rectification. By contrast, if the claimant has suffered the loss because of a mistake but where the register was not rectified, the maximum sum is the value of the estate, interest or charge at the time when the mistake which caused the loss was made. Where the valuation is taken at the date that the mistake was made, however, it will be possible for interest to be paid from the date of the mistake (see paragraph 9). The payment of the maximum sum permitted for the direct cost of the interest lost does not prevent the claimant recovering consequential loss.

 
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Prepared: 9 November 2001