SQE1: PROPERTY PRACTICE

Topic 12. Registration of Title to

Land
Law Training Centre (Kent)

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Learning Content

◗ The System of Land Registration

◗ Dealings with Registered Land

[Link] System of land registration

The underlying principle of a system of land registration is that a person seeking

to acquire an interest in land need only check the register to determine if the
land is subject to any adverse interests. A person possessing an interest in land
needs to take action to protect that interest by entering it on the register.

Generally, a purchaser will take free of any interests not on the register, however
this is not absolute. Determining priority of competing interests in registered land
will vary depending on the type of interest involved.

S.28 Land Registration Act 2002 sets out the basic rule that priority between
interests in registered land are determined by the order of creation. An earlier
interest will prima facie be given priority over a later. However, this basic rule is
subject to s.29 and s.30 Land Registration Act 2002 and thus only comes into play
where these do not apply.

By virtue of s.29 Land Registration Act 2002 a registered disposition for valuable
consideration will take priority over unprotected interests. Protected interests
include a registered charge, or those subject to a notice on the register,
overriding interests or those excepted from the effect of registration (s.29(2)(a)
Land Registration Act 2002).

Requirements for a registered disposition to take priority.

For s.29 to become effective there must be:

1) Valuable consideration
2) A registrable disposition
3) Registration

Let us now take each of these in turn:

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1) Valuable consideration

The disposition must be for valuable consideration in order to take priority. This
excludes for example gifts and succession on death. S. 132(1) Land Registration
Act 2002 excludes marriage consideration and nominal consideration from
valuable consideration, £1 was held to be nominal consideration. Payment of
£500 for a farm worth £40,000 was not considered nominal.

Case example: Midland Bank v Green [1981] 2 WLR 28 House of Lords

In 1961 Walter Green granted an option to purchase Gravel Hill farm to his son
Geoffrey Green. The option, although registrable as a land charge under the Land
Charges Act 1925, was not registered. In 1967 there was a disagreement in the
family and Walter sold the farm to his wife for £500 (it was worth around
£40,000) in a deliberate attempt to defeat the option granted to his son. The wife
then changed her will to leave the farm to all five of her children including
Geoffrey. Geoffrey learnt of the sale and sought to enforce the option. The
question for the court was whether the option was binding on the wife or
whether she took the farm free of the option.

S 13 (2) of the Land Charges Act 1925 provided that a land charge would be void
against a purchaser of the land unless registered and where an estate contract
was under consideration it would only be void against a purchaser of a legal
estate for money or money’s worth. Purchaser was also defined in s.20(8) as a
purchaser who for valuable consideration takes any interest in land. The trial
judge found for the wife and held that the option was not binding on the wife.
This was reversed by the Court of Appeal with Lord Denning MR holding that the
sale was not for money or money’s worth and that the protection of the Act was
not available in cases of fraud where there was a deliberate attempt to defeat an
interest. The wife’s representative appealed to the House of Lords.

Decision: Held

The appeal was allowed. There was no requirement of good faith for a purchaser
under the Land Charges Act 1925. Reference to money or money’s worth
excluded marriage consideration but did not require the consideration to be
adequate.

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Lord Wilberforce:

‘Suppose—and this may not be far from the truth—that the purchaser's motives
were in part to take the farm from Geoffrey, and in part to distribute it between
Geoffrey and his brothers and sisters, but not at all to obtain any benefit for
herself, is this acting in ‘good faith’ or not? Should family feeling be denied a
protection afforded to simple greed? To eliminate the necessity for enquiries of
this kind may well have been part of the legislative intention. Certainly, there is
here no argument for departing—violently—from the wording of the Act.’

‘This conclusion makes it unnecessary to determine whether £500 is a nominal

sum of money or not. But I must say that for my part I should have great difficulty
in so holding. ‘Nominal consideration’ and a ‘nominal sum’ in the law appear to
me, as terms of art, to refer to a sum or consideration which can be mentioned as
consideration but is not necessarily paid. To equate ‘nominal’ with ‘inadequate’ or
even ‘grossly inadequate’ would embark the law upon enquiries which I cannot
think were contemplated by Parliament.’

2) Registrable disposition

The disposition must be registrable. Registrable dispositions are set out in s.27
Land Registration Act 2002. This excludes equitable mortgages. There are
special provisions for leases under s.29(4). A forged transfer does not qualify as
a disposition:

3) Registration

Priority is only given once the disposition has been registered. The transaction
must be completed using the required formality (s.25 Land Registration Act
2002) prior to registration.

Notice of unprotected interests

Notice is generally considered irrelevant in relation to unprotected interests,

however, obiter comments in Peffer v Rigg [1977] 1 WLR 285 suggested a
requirement of good faith could be imported to the Land Registration Act 1925.
This was never followed and was criticised for undermining the philosophy of
registration and such an interpretation is not possible under the Land
Registration Act 2002.

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Equitable interests behind a trust

In many instances the question of priority will not arise in relation to equitable
interests behind a trust since overreaching will operate to transfer the interest to
the proceeds of sale. It is only where the capital moneys are paid to a single
trustee that the issue of priority will arise. Where this is the case the beneficial
interest may rank as an overriding interest if the occupational requirements are
satisfied.

2. Dealings with registered land

Land rights in and over registered land under the Land Registration Act 2002,
including all estates and interests, fall into four categories. They are:

• Registered estates and interests

• Registered charges
• Registrable interests
• Unregistered interests which override a registered disposition

Registered estates and interests

Under the statutes, registered estates are those land interests that are registered
under a unique title number and they include the fee simple absolute in
possession, the term of years (over seven years), a rentcharge, a franchise and a
profit à prendre. This is substantive registration. A disposition (sale or other
transfer) of a registered estate must be completed by registration under section
27. If it is not so completed, and until it is completed by registration, it will not
‘operate at law’.

The effect of section 27(1) is that a purchaser of a fee simple estate, for example,
whose name is not registered, for whatever reason, may find that his title (now
deemed to be equitable under section 27) may be defeated or affected (bound)
by some interest or estate that arises later in time but which is completed by
registration.

Interests that also fall into this category were those that were capable of being
legal under the Law of Property Act 1925 section 1(1) and 1(2). An example is a
legal easement.

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A legal easement expressly created over registered land must be completed by

registration under section 27, it will not have its own title number. It will be
noted on the two relevant titles, in one as part of the property and in the other as
a burden in the charges register.

Registered charges

Registered charges mean mortgages. Registered charges will not have their own
title number but will be noted in the title against which they arise, and the lender
will be registered as the proprietor of the charge. This allows the lender to sell
the land so charged in the event of a default by the mortgagor and give a good
receipt to a new purchaser.

Registrable interests

Interests under this head are burdens on land that used to be called minor
interests under the Land Registration Act 1925 which can be protected by means
of a notice and interests which can be protected by means of a restriction.

Unregistered interests which override a registered disposition

Interests under this head are, by definition, not on the register. They are listed in
Schedule 3 which has been referred to above. It has already been explained that
a ‘registered disposition’ in this context means a disposition of registered land
while ‘override’ means that a purchaser is bound by such interests.

The position of a purchaser of a registered estate

The relevant section that sets out the position of a purchaser or mortgagee is
section 29 Land Registration Act 1925. Section 29 provides that a purchaser for
valuable consideration of a registered estate takes the land free of all interests
except for those noted on the register, that is, registered charges, interests
protected in the register by an entry and overriding interests under Schedule 3.

Transfer and creation of property interests

Land is property but it is of a special kind and so special formalities are needed in
order to create and transfer land interests. This has always been so. The transfer
of personality by one person to another is straightforward and requires no
writing: the property in question and money, if the property is being sold, are
merely handed over.

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Land must be transferred normally by deed and the transfer form that is used in
relation to registered land is a deed and the conveyance used for unregistered
land is also a deed. The main reason that formality is required for transactions
involving land is the need for certainty.

The three stages to the transaction of transfer are the contract stage, the
transfer or conveyance (‘completion’) and registration. Each of these will now be
examined in turn. The focus in this section is generally upon the transfer of land
by sale but some of what is said will apply also to the creation of new rights in
and over land.

Before the contract, however, there is the bargaining or negotiation between

vendor and (would- be) purchaser. The purchaser views the property, expresses
an interest in it and there follow negotiations as to price and other matters if
relevant. At this stage these are negotiations only and of no binding impact on
either party.

During this pre- contract stage the principle of caveat emptor generally applies
although there has been a gradual move away from this principle through the
Law Society’s National Conveyancing Protocol. But the vendor does have a duty
to disclose defects and must answer such questions truthfully.

The purchaser must investigate title, meaning that he must satisfy himself that
the vendor is entitled to sell the land. In the case of registered land, the
purchaser will investigate title by examining the office copy of the relevant
entries in the register at the Land Registry. The purchaser of unregistered land
must look for ‘good root of title’ through to the vendor in the title deeds or
documents of title.

Originally under the common law, good root of title meant a duty to look back 60
years, but the time was gradually reduced and now the vendor merely has to
show 15 years.

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The contract stage

The contract of sale is normally in standard form, but its terms can be varied by
the parties.

The Law of Property (Miscellaneous Provisions) Act 1989 provides in section 2(1)
that any contract ‘for the sale or other disposition of an interest in land’ must be
in writing, must contain all the terms of the contract and must be signed by each
party to the contract. This provision applies to contracts involving land interests
made on or after 27th September 1989. A contract which does not comply with
these requirements is void.

The purpose of the provisions of section 2 is to bring about clarity so as to avoid

disputes through the stricter formality requirements which were envisaged as
being straightforward.

(For contracts involving land entered before 27th September 1989 the old law
applies. The old law is contained in section 40 Law of Property Act 1925 under
which a contract merely had to be evidenced in writing. Section 40 is otherwise
repealed.)

Section 2(2) Law of Property (Miscellaneous Provisions) Act 1989 provides that
the terms of the contract may be either incorporated in the contract itself or
incorporated “by reference to some other document”. And section 2(3) allows for
the normal practice of having two copies of the same document and the vendor
signing one and the purchaser the other.

There has been some case law on the provisions of section 2 about the scope of
the term ‘contract’. Some agreements may be classed as collateral to the main
contract and, if so, they do not need to comply with the statutory provisions. In
Record v Bell [1991], for example, there was found to be a collateral contract
where the vendor made a promise to the purchaser about title. (The case was a
claim for specific performance by the vendor of the contract of sale and the
hearing was for summary judgment. The purchaser did not wish to buy the
property at that time and therefore argued that the requirements of section 2
were not satisfied but he failed and specific performance was ordered.)

In Spiro v Glencrown Properties Ltd [1991] there was litigation about an option.
An option to purchase land is a contract which must comply with the statutory
provisions because it is an “other disposition of an interest in land” but the court
held that the notice given by the purchaser to exercise the option is a unilateral
act and so does not need to comply with section 2(1).

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One exception to the requirements in section 2(1) is provided for by section 2(5)
which exempts the creation or operation of resulting or constructive trusts from
the writing requirement. Sometimes in a commercial context, parties negotiate a
deal orally and/or make what is called ‘a gentlemen’s agreement’ or an
agreement in honour only. They do this orally, not putting the terms into a
contract on purpose because there might be a speculative aspect to the deal or
because they consider that it will be cheaper. No doubt many such deals are
successfully concluded. When they are not, then the situation could lead to
complex and costly litigation in which there might be a claim on the basis of some
kind of constructive trust or estoppel.

One such case was Cobbe v Yeoman’s Row Management Ltd [2008] which ended
up in the House of Lords. The claimant was eventually unsuccessful. A more
recent case is Herbert v Doyle & Talati [2010]. After outlining the enormous costs
that the litigation engendered Arden LJ said in the Court of Appeal that the policy
of section 2(1) was “to protect the public by preventing parties from being bound
by a contract for the disposition of an interest in land unless it has been fully
documented in writing.”

It needs to be repeated loud and clear that that is the rule which Parliament had
laid down in section 2 of the 1989 Act, and that that is a rule admitting of few
exceptions under section 2.

In a normal case, however, contracts are written and comply with the statutory
provisions. Exchange of contracts until recently has usually been by post. This
method was overtaken by telephonic exchange and the future is universal
exchange by email.

Once copies of the contract have been exchanged, it becomes a binding contract
and is specifically enforceable. As specific performance is an equitable remedy it
will be available to either party as a matter of judicial discretion which, as has
been explained elsewhere, requires the application of rules to ensure that no
hardship or prejudice is caused by its award. If the court decides that an order of
specific performance is not available, then it will order the payment of damages
instead.

If there has been an error in the contract terms, then there could be a claim for
rectification to put the terms right. Again, this is a discretionary remedy.
Rescission may also be available.

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The contract is an estate contract and is an interest in land in itself. It is an

equitable interest that can be protected by the entry of a notice in the charges
section of the register of title or, in the case of unregistered land, by the
registration of a class C(iv) land charge against the name of the vendor.

The legal position has always been that once a valid enforceable contract exists,
whilst the vendor remains the legal owner, he holds the land on trust for the
purchaser. What follows from this rule is that the risk passes to the equitable
owner, meaning that the purchaser is responsible for insuring the land in the
interim between the contract stage and transfer/conveyance and registration.

The idea under the Land Registration Act 2002 is that when electronic
conveyancing is under way, contracts for the sale of land will be electronic in
form. There will be no exchange as such but a consensual transmission of the
agreement to the registrar whereupon the registrar will enter a notice on the
register of title.

The transfer or conveyance stage (completion) and registration

The exchange of contract stage denotes a legal commitment by the parties to

proceed to completion of the transaction. Completion will be on a date fixed in
the contract.

Shortly before completion, the purchaser must apply for an official search ‘with
priority’ of the vendor’s title in order to ensure that the land remains as it was in
the official copy supplied earlier by the vendor. If any new adverse entries are
revealed, the purchaser is entitled to withdraw from the transaction.

It is the purchaser who draws up the transfer form or the draft conveyance if the
land is unregistered. The transfer or creation of a legal estate must be by deed as
provided by section 52(1) Law of Property Act 1925.

Under section 1 Law of Property (Miscellaneous Provisions) Act 1989 which

came into force on 30th July 1990 a document is a deed if is it clear on its face
that it is a deed and if it has been validly executed. It no longer has to be sealed
but it must be signed, attested, and delivered.

A conveyance is a deed. In unregistered land the conveyance acts to vest the

legal estate in the purchaser who will receive all the documents of title. The
purchaser then has two months in which to register the land and his title at the
Land Registry which, if not done, will mean that he will be deemed to have an
equitable estate only. The sale of a legal estate in unregistered is a trigger for
registration of title.

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In registered land the transfer form takes effect as a deed. On receipt of the
purchase price, the vendor’s conveyancer will send the transfer form (signed and
witnessed) to the purchaser’s conveyancer. By contrast with unregistered land,
the legal title does not pass to the purchaser upon completion. The legal estate
will pass to the purchaser when he is registered as the new proprietor.

Thus, in registered land there is the registration gap, already mentioned in the
context of Abbey National Building Society v Cann. This can be the space of a few
weeks between completion and the registration of the new proprietor. There will
be no gap once electronic conveyancing becomes the norm.

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