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The Purpose Of Land Registration

The purpose of land registration is that a purchaser can rely on the title register, which should be a complete and accurate reflection of the land, and it should state all the rights and interests that affect it. However, the land Registration Act 2002 (LRA) does not comply entirely with the mirror principle, and there is a category of rights affecting the land, which will be binding on a purchaser despite the fact that they are not registered. They are unregistered interests that override.

The existence of such rights appears contrary to the idea of land registration. However, Dixon argues that there are strong legal, economic and social needs that can justify the existence of interests that override registration because they ensure protection for those who occupy the land but have no formal acknowledgement of their rights. A further argument for the continuance of those rights expressed by Thompson, is that it would be impossible to achieve its complete abolition without contravening Article 1 of the First Protocol of the European Convention on Human Rights 1950 (ECHR), which states that ‘every natural or legal person is entitled to the peaceful enjoyment of his possessions’.

The consultation paper issued by the Law Commission, on which the LRA 2002 is based, stated that overriding interests were an ‘unsatisfactory feature’ of registered conveyancing, which is the ultimate purpose of the LRA. The reason for this is that rights that subsist and operate outside the register will always create tension with a system of land registration. However, due to possible human rights issues, the Law Commission took a cautious approach of limiting overriding interests, rather than abolishing them. The recommendation of the Law Commission was that rights could only be removed if they were obsolete, or alternatively if there were strong policy grounds for their removal. Further conditions were if the people affected by the removal of those right gave their consent and the rights were replaced by transitional agreements. As a consequence, the more obsolete overriding interests had their overriding status removed under s 117(1) LRA, unless protected by a notice in the register. They were subject to a period of transition of ten years ending on 12 October 2013 in which they had to be registered or the right was lost. Examples of those interests are franchises, manorial rights, chancel liability and a right to payment in lieu of tithe.

Other overriding interests were subject to further control than the one existent under the LRA 1925, and this was achieved by dividing them into interests that override a first registration, listed under Schedule 1, and those that override a registered disposition under Schedule 3. The former are binding against the first registered owner and the list of overriding interests in first registration cases is more extensive than those contained in Schedule 3. The reason for this distinction is to prevent a landowner to escape from binding rights through first registration.

One of the interests that override both first registration and subsequent dispositions is actual occupation. However, the operation of actual occupation under Schedule 1 and 3 is different. There are more restrictions under Schedule 3, for instance, the protection does not cover the interests of those in receipt of rents and profits. Furthermore, actual occupation will not bind a purchaser for value if the interest is not obvious on careful inspection of the land at the time of disposition. As such, it is the occupation that has to be obvious, rather than the interest, as stated in Thomas v Clydesdale Bank Plc: it is the ‘visible signs of occupation which have to be obvious on inspection’. Another condition is that the interest is one that the disponee (seller) did not have actual knowledge at the time of disposition. The effect of this condition is that even if the actual occupation is not obvious, it will override a registered disposition if the disponee had actual knowledge of the interest. However, the operation of this condition is confusing because the courts have failed to establish whether the disponee has actual knowledge if he has knowledge of the facts which give rise to the interest, or if the disponee should have real knowledge of the existence of the interest, as stated in Mehra v Mehra. Furthermore, actual occupation will not bind a purchaser for value if an interest is not disclosed before the disposition despite enquiries having been made.

The question remains if actual occupation should continue to be protected as an overriding interest as it clearly goes against the principles of certainty and transparency, which are fundamental in land registration. Dixon argues that there is nothing wrong with protecting an overriding interest such as actual occupation providing that it is ‘well-bounded’ and ‘well-known’. Under the LRA 2002, actual occupation as an interest that overrides has been heavily curtailed from the way it operated under the LRA 1925, where interests in land were divided into minor interests and overriding interests. However, by virtue of 70(1), a minor interest could be upgraded and become an overriding interest if there was actual occupation.

A good example is found in Williams & Glyn’s Bank v Boland, where the interests of the wife were capable of overriding the interests of the mortgagee despite not being registered, simply because through the operation of s 70(1)(g) an equitable right arose because she was physically present on the land. Arguably, Boland could not happen under the LRA 2002, because the occupation has to be obvious on reasonable inspection of the land under Schedule 3. However, Dixon questions the desirability of excluding undiscoverable rights from becoming binding. He points out that there is a difference between undiscoverable rights and undiscovered rights, the latter caused by careless lending practices and conveyances, which were the main reason why so many cases arose under s 70 (1) LRA 1925. He further argues that the restrictions imposed on actual occupation under the 2002 Act are the result of reaction and not of analysis, a way to tackle the fear of the problem rather than the problem itself. He states that the 2002 Act failed to include under Schedule 3 a reference as to why the rights are undiscoverable and that by omitting that, but still denying rights unsupported by undiscoverable occupation, the Act favours purchasers rather than occupiers.

The counter-argument is that land is a valuable commodity and therefore registration is an important part of land marketability and it should reflect the actual status of the land in all its aspects. However, it is questionable whether the 2002 Act resolved the issues concerning actual occupation, despite the limitations imposed. Firstly, because the courts have been reluctant to provide a test for actual occupation, and secondly because in recent cases, the court extended the concept of actual occupation to include intention. An example of this approach can be seen in Link Lending Ltd v Hussain. and Bogusz argues that this is not what the legislation intended.

However, other issues were well resolved by the 2002 Act, for instance the problems linked to the ‘registration gap’, which gave rise to cases such as Abbey National Building Society v Cann. Issues could arise because there is a gap between the completion of the sale and the registration of the transfer. This can no longer happen under the new registration regime because Schedule 3 para 3 of the 2002 Act refers to the person being in actual occupation at the time of disposition.

The situation regarding easements as overriding interests under the 2002 Act protects only legal easements, subject to actual knowledge and obvious on a reasonably careful inspection of the land under Schedule 3. However, equitable easements are totally ignored by the Act. As such, an equitable easement will not override first registration. Equitable easements such as those granted by deed remain equitable until the registration requirements are met, and the requirements are listed under Schedule 2. This means that an easement granted by deed can only stop being equitable if protected by entry by way of a notice in the register. Furthermore, easement acquired by prescription may or may not be overriding interest.

The real danger is not to the purchaser but to the owner of the dominant tenement who can lose a valuable or convenient right when the servient tenement is sold. The main areas of easements are light, drainage and right of way. The problem is that it is not always possible to detect an easement of light, and it is possible for a right of way not to be apparent on careful inspection if it has not been used recently but it is still valid. The Law Commission stated in their report that it was possible that some easements would not survive land registration. It is questionable whether some interests in land should simply disappear for the sake of registration, and perhaps the way to resolve the issue is that all easements should become legal. As it stands, losing invisible easements such as rights of drainage and water supply is problematic and the definition of overriding interests in Schedule 3 is unsatisfactory to protect those easements.

Another overriding interest that has been heavily qualified under the LRA 2002 is adverse possession. This is a contentious issue. Adverse possession is an overriding interest based on trespass, which allows the trespasser to acquire better title to the land than the original legal owner. The judiciary itself has been critical of adverse possession. In J A Pye (Oxford) Ltd v Graham, Lord Neuberger stated that it was hard to find a principle of justice that entitles a trespasser to acquire ownership of the land through staying in the land long enough but not paying for the land. He further stated that allowing this is not in accordance with justice, nor can it be justified for practical considerations. He argued that adverse possession represents a windfall for the squatter by imposing a ‘draconian’ measure on the landowner.

Advocates of adverse possession as an overriding interest such as Dockray, argue that it is in the public interest to encourage the use of resources that have either been neglected, abandoned, or under-exploited, and he further argues that an occupant who has worked the land should not be barred from acquiring it. This reflects the principles of unilateral appropriation advocated by Locke. His argument is based on the fact that although natural resources belong to all mankind, people can end up having unequal property rights for various reasons and as such, a person who works the land can appropriate it through its labour. The consequence will be to have a re-distribution of property that is non-contractual.

If the land affected by adverse possession is unregistered, the applicable rules are those under the LRA 1925. As such, under the Limitation Act 1980 s 15, an adverse possessor must establish a period of 12 years of possession to acquire title. After that time, no one can bring a claim against him. Adverse possession contains two elements: Dispossession of the owner’s rights and possession by the adverse possessor.

Under the LRA 2002, adverse possession has been greatly diminished. A registered proprietor cannot lose title simply because a person has occupied the land for a period of time. Even if factual possession plus intention to possess can be proved, the period of possession is no longer important. Instead, the process under the LRA 2002 is based on an application procedure. The possessor must apply to the Registrar for registration of the title, and the application acts as a trigger for the statutory regime under Schedule 6. This cannot happen before the adverse possessor has been in the land for ten years. However, this is not a period of limitation, but a point to reach before the application can be made. If the Registrar considers that the possessor has a claim under substantive law, a notice will be sent to the registered owner, who can either consent to the application and then the adverse possessor will be registered as the legal owner, or the registered owner can object to the application. If this is the case, the application for registration cannot go ahead until the objection is dealt with, either through a negotiated settlement or alternatively, through a decision of the Property Chamber of the First Tier Tribunal.

Finally, the registered owner can issue a counter-notice, which has the effect of the Registrar dealing with the issue under paragraph 5 Schedule 6. This means that regardless of the possessor making a factual basis for registration, he cannot be entered into the register unless he falls within three exceptions. They are:

(i) estoppel, unconscionability and ‘ought to be registered’. In practice, the assurance has to be either express or implied by agreement or acquiescence, plus detriment. However, even establishing this, the possessor must prove that he ought to be registered because Schedule 6 paragraph 5 does not state that the possessor should be registered. (ii) the possessor is for some reason entitled to be registered as the proprietor, for instance an entitlement to the land under a will or through intestacy, or where the possessor contracted to buy the land and paid for it but the legal estate was not transferred. In this case, the possessor becomes a beneficiary under a bare trust. (iii) the boundary exception, which happens when boundaries between adjacent land are uncertain or have been altered over time without formal transfer or registration.

Arguably, it is a positive improvement that the rights of an adverse possessor have been curtailed. Morally, the argument is that the responsibility lies with the landowner because he failed to make proper use of the land, for instance, in the case of urban squatting, by leaving a property vacant, and therefore the property has become a wasted resource. Local authorities have pressing housing needs, and a landlord who leaves a property empty and deteriorating is not a victim of squatters but plainly at fault. However, this is not an argument that English law accepts because a squatter or an adverse possessor is basically a wrongdoer under the law.

In conclusion, although it is necessary to keep overriding interests alive because they protect the interests of people who are in actual occupation, it is also necessary to limit the circumstances in which overriding interests can be used against the registered owner of the land. Overriding interests run contrary to land registration. However, the lender and the purchaser should investigate the property. As Dixon points out, some of the cases under the LRA 1925 came about through sloppy lending practices and poor conveyance. This is curtailed by the preservation of some overriding interests and that is a positive step towards avoiding a fallback. It is right that the interests of an adverse possessor have been heavily qualified because they represent a stab in the back. Arguably, they should continue to exist to encourage landowners to keep the land productive and to protect those who have paid for the land but the estate has not been transferred properly. It is important that overriding interests continue to exist even if they are contrary to land registration.