SQE1: LAND LAW

Topic 4. Holding Land

Law Training Centre (Kent)

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Learning Content

◗ An Introduction to the Terms ‘Registered’ and ‘Unregistered’ Land

◗ The Official Register and its Purpose of Registering Title and Subsequent
Interest in Land
◗ When Registration is Required including Compulsory Registration
◗ Holding Land under Class of Title
◗ Interests which Override upon First Registration and Need Protection
◗ The Test of Occupation

Introduction

There exists today two types of land: registered and unregistered, each with its
own rules concerning the transfer of land from one person to another and the
enforcement of third-party proprietary interests affecting the land.
The Land Registration Act 1925, which first introduced the system of registered
land, was reviewed and repealed by the LRA 2002, which came into force on 13
October 2003.
The objective intended to be met by the introduction of a registered land system
was essentially to simplify the process by which land is transferred from one
party to another. With the introduction of registered conveyancing, ownership of
land (or title to land) is registered at the Land Registry on a register which
effectively acts as a public record of land ownership. The state guarantees the
accuracy of the register in terms of who owns the land. This is known as the
insurance principle and indeed the state would compensate anyone who suffered
a loss due to any errors present in the register: s 103 LRA 2002. A purchaser,
therefore, need not be concerned to look any further than the register to be sure
that the vendor is entitled to deal with the land. The purchaser of registered land,
in principle at least, need only search the register itself to discover any third-
party proprietary interests affecting the land that could be binding upon him.
According to the mirror principle, the register should be an accurate reflection
not only of who owns the land, but also of any third-party interests affecting it.

This is somewhat tainted by the existence of overriding interests (technically

known as ‘interests which override registered dispositions’) and therefore, in
practice, a purchaser of registered land must conduct further enquiries beyond
just looking at the register to discover third party interests.

There is a third principle behind title registration, known as the curtain

principle, whereby purchasers are not required to look behind the register. This
particularly relates to trust property and the overreaching process (which we will
look at later). It has always been the intention that all land in England and Wales

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becomes registered land and, indeed since the introduction of

compulsory registration in 1990 which has been further extended by the LRA
2002, a majority of titles are now registered. However, there still remain titles
that are not registered, which is why you need to be familiar with both systems of
land.

The register

The register of title is a largely computerised, public (see s 66 LRA 2002) record
maintained by the registrar at the Land Registry (s 1 LRA 2002). The register is
divided into three parts:

1. The Property Register: this describes the land, the nature of the estate(s)
registered, and any third-party interests benefiting the land, for example a right
of way.
2. The Proprietorship Register: this names the registered proprietor, states the
title that has been registered, and contains any restrictions which limit the way in
which the registered proprietor can deal with the land.
3. The Charges Register: this contains notices relating to any interests that
burden the land, for example restrictive covenants, mortgages etc.

Registration of title

Some estates and interests are ‘substantively registered’ so that they acquire
their own title number and file. These are:

• the freehold estate;

• the leasehold estate where there are more than seven years left to run;
• a rentcharge (the Rentcharges Act 1977 prevents the creation of new
rentcharges);
• a franchise; and
• a profit à prendre in gross (s 2 LRA 2002).

Registration for the first time

Registration of title for the very first time can take place in the following
circumstances:

• A person can voluntarily apply to the registrar to be registered as the

proprietor of any one of the above interests, and financial incentives exist
to encourage this: s 3 LRA 2002.
• In respect of a freehold estate, and a leasehold estate with more than
seven years unexpired, certain events will trigger the need to
compulsorily register title, specified in s 4 LRA 2002.

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Events triggering compulsory registration

• The duty to register title upon the occurrence of one of the above events
generally falls on the transferee or, in the case of the creation of a
protected first legal mortgage, generally the mortgagor: s 6 LRA 2002.
• Registration should be applied for within two months beginning with the
date of the triggering event (subject to any extension granted by the
registrar).
• Upon receiving an application for registration, the registrar will make
various enquiries so as to determine the class of title to register and there
currently appears no direct means for appealing his decision.
• Persons with interests in the land who may be affected by
first registration have the ability, in certain circumstances, to lodge a
caution against first registration. This effectively means that when the
registrar receives an application for first registration, he must notify the
cautioner who then has 15 working days within which to object to the
application. Where objections are made within this time frame that are
not unwarranted, the matter must be referred to an adjudicator: s 71 LRA
2002.
• The consequences of failing to register title when required within the time
frame are laid down in s 7 LRA 2002:
– where the event triggering registration was the transfer of a
freehold, or leasehold with more than seven years unexpired, title
to the legal estate will revert to the transferor, who will hold it on
bare trust for the transferee;
– where the event triggering registration was the grant of a lease or
first legal mortgage, the effect of non-registration is to treat what
has happened as a contract for valuable consideration to grant
that particular interest.
• Late registration will be accepted with costs being the responsibility of the
person who failed to register on time.

Registration on subsequent transactions

Once title has been registered, a subsequent transfer of that registered estate
and the grant of a lease of more than seven years in duration out of a registered
estate must be completed by registration, so that the transferee/grantee is
registered as proprietor: s 27(2) LRA 2002.

Failure to register such transactions means that the transfer will not operate at
law (s 27(1) LRA 2002), the transferor retaining legal title.
The new registered proprietor will take the estate subject only to
those interests entered on the register and interests which override the register,
as defined in Sch 3.

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Classes of title under which land can be held and registered

When title is registered at the Land Registry for the first time, or following
subsequent dealings with the registered estate, it is important to show the
strength of that title, i.e., the validity of the claim to be registered as proprietor.
The register must accurately reflect the state of title (ownership), especially since
it will compensate anyone who suffers a loss due to errors present on the
register. The different classes of title that may be registered are laid down in ss
9 and 10 LRA 2002, with consequences noted in ss 11 and 12. The most
significant of these classes is:

• absolute title: this is the strongest title a person can be registered with. It
indicates that that person has a better right than anyone else to the land
and is usually only registered by the registrar in circumstances where he is
happy that the title is secure and cannot be challenged.
• A person registered with absolute title takes the land subject only to
those interests entered on the register and
those interests that override the register (defined under Sch 1).
Where registration of title is for the first time, i.e., where unregistered
land is being brought into the registered land system,
those interests entered on the register will comprise
those interests protected by registration of land charges under the Land
Charges Act 1972. Where the registered proprietor is a trustee, he will
also take the land subject to the provisions of the trust; where he is a
lessee, he will also take the land subject to the provisions in the lease.
Where the title registered is of a leasehold estate, registration with
absolute title guarantees that the lease has been validly granted.

A person may also be registered with:

• possessory title, where registration is based upon possession of the land,

typically as an adverse possessor, rather than the provision of any
title deeds, which the adverse possessor is unlikely to have. The registrar
merely guarantees title as far as dealings post first registration are
concerned; or
• qualified title, registered where there is a defect with the title, for
example a lost deed, or where the registrar has a reservation about the
title that cannot be ignored; or
• good leasehold title, in respect of leasehold estates, where the registrar is
happy with the title granted to the tenant under the lease but not as to
the title of the lessor.

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Remember - Upgrading title

By virtue of s 62 LRA 2002, there is the possibility of upgrading a less than

absolute title to absolute status, either by the registrar upon his own initiative, or
upon an application typically made by the registered proprietor.

Interests which override the register

These consist of third-party interests affecting a piece of land which will bind a
purchaser despite not appearing anywhere on the register. This category of
interest therefore goes against the fundamental mirror principle, that the register
should accurately reflect not only who owns the land but any third-party interests
affecting it.

Despite this imperfection with the registered land system, the LRA 2002 did not
take the opportunity to rid the registered land system of such interests, although
it has reduced their number. Why allow for their continued existence? Perhaps
because, for many of them, it would be unreasonable to expect the holder of the
interest to take steps to protect that interest by entering it on the register. In
addition, interests falling into this category can often be evidenced in other ways,
for example through common usage ascertainable by making a physical
inspection of the land itself.

A report by the Law Commission, made prior to the introduction of the LRA 2002,
also noted that the wholesale abolition of such interests, without compensation
payments to those affected, might contravene Art 1 First Protocol of the
European Convention on Human Rights 1950, incorporated into English law by s
1 Human Rights Act 1998.

Interests which override upon first registration

When title to land is being registered for the first time, bringing the land into the
registered system, interests listed under Sch 1 will override registration,
including:

• legal leases of seven years or less in duration (para 1);

• interests of persons in actual occupation (para 2)
• legal easements or profits (para 3).

Interests which override subsequent transactions of already registered land

Since the majority of dispositions concern land that is already registered,

interests that override under Sch 3 LRA 2002 are by far the most significant. Such
interests are divided into three categories:

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Sch 3 para 1

This incorporates legal leases of seven years or less. These will automatically bind
a purchaser of the land, without the need for any further conditions to be met.

• legal leases over seven years must have been substantively registered to
make them legal. Consequently, they will automatically be entered on the
register of the freehold land to which they relate (s 38 LRA 2002), so a
purchaser of that land will be bound by them;
• equitable leases must have been entered on the register as a notice by
the holder of the interest in order to be binding upon a purchaser (s 32
LRA 2002’, although where the holder has failed to do so, he may be able
to enforce the interest against the purchaser where he can establish the
requirements under Sch 3 para 2).

Sch 3 para 2

An interest will be binding upon a purchaser under this provision where the
holder of the interest can establish:

• the interest he holds is a proprietary one (not excluded from this

provision by the LRA 2002), be it legal or equitable (including a mere
equity under s 116 LRA 2002—Mortgage Express v Lambert [2016]); and
• the interest existed at the time of the disposition; and
• they were in actual occupation of the land to which the interest relates
and either:
– the occupation would be obvious upon a reasonably careful inspection of the
land; or
– even if not obvious, the purchaser had actual knowledge of the interest.
This is provided they did not fail to disclose the interest if enquiry had been made
of them.
On this last point, a purchaser should make enquiry of the actual holder of the
interest; it is not enough to make enquiries of the registered owner: Hodgson v
Marks [1971].

Where the holder can establish the above requirements, the interest he holds
will only be binding to the extent of the land he actually occupies and no more
(reversing the decision of Ferrishurst Ltd v Wallcite Ltd [1999]).
The adequacy of any enquiry will be judged in accordance with the circumstances
in which it was made: Begum v Issa [2014]. Where enquiries are made of the
interest holder and there is a failure to disclose, this will only prevent that
interest holder from enforcing his interest under Sch 3 para 2, where it would
have been reasonable to expect disclosure. It may not, for example, be deemed
reasonable to disclose where the interest holder is unaware that they have an
interest in the land (e.g., a beneficial interest under an implied trust arising

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through contribution to the purchase price).

What is meant by the term ‘actual occupation’?

• Some physical presence on the land which itself has a degree of

permanence and continuity.
• Temporary absences, even at the exact time of the disposition, may not
prevent a finding of actual occupation, so long as the reason for such
absence can be justified and is not too long, for example absence due to
giving birth in hospital (Chhokar v Chhokar [1984]). Contrast Stockholm
Finance Ltd v Garden Holdings Inc [1995] where absence from the
property for over a year (combined with never having resided in the
property for any lengthy period, using it just when visiting London from
abroad) led the court to find no actual occupation.
• A persistent intention to return to the property may prove significant in a
finding of actual occupation, such as in Linklending v Bustard [2010],
where absence was due to being in a mental institution.
• The nature and condition of the land which is being claimed as occupied
may be significant in determining the meaning of actual occupation—
see Lloyds Bank v Rosset [1991].

Actual occupation may be established through an agent (e.g., a caretaker

occupying on behalf of his employer). This will depend upon the facts of
individual cases: see Strand Securities v Caswell [1965] and Lloyds Bank plc v
Rosset [1991]. A minor cannot be in actual occupation on behalf of their
parents: Hypo-Mortgage Services Ltd v Robinson (1997).

When must actual occupation be established?

It must exist at the time of the transfer of the land, i.e., when the transfer deed is
executed.

Abbey National BS v Cann [1991] 1 AC 56, HL

A property was purchased with the aid of a mortgage by Cann, who was going to
occupy it along with his mother. On the day of purchase, and thus when the
charge in favour of the building society was being created, the mother was out of
the country, although 35 minutes before completion, removal men started
moving her belongings into the property. The charge was not completed by
registration until a month later, by which time the mother was in physical
occupation of the property. When her son defaulted on the mortgage payments,
and the building society sought possession, it was held that the mother was
unable to enforce her interest in the property as an overriding interest under
the Sch 3 para 2 equivalent that existed under the LRA 1925, which was in force
at the time. Despite her being in actual occupation at the time of registration, the
relevant time was held to be the date of transfer. To allow otherwise would be

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unfair to a purchaser who, having inspected the land and finding no one present,
would then be held bound by an interest held by someone who took occupation
of the land between transfer and registration. Her acts of moving in at the date of
transfer were deemed merely preparatory steps towards actual occupation; not
actual occupation itself.
Thompson v Foy [2010] has questioned whether actual occupation must also
exist at the date of registration.
The question of whether the Cann principle extends to the contract for sale, so
that all elements of a property transaction—exchange of contracts, transfer, and
mortgage—are indivisible was answered in Scott v Southern Pacific Mortgages
Ltd [2014]. It would be worthwhile to read this case.

The Supreme Court dismissed the appeals in the case of Scott v Southern Pacific
Mortgages Ltd [2014] UKSC 52.

Scott is the final instalment of the North East Property Buyers Litigation, a group
of test cases concerning sale and rent back transactions. In sale and rent back
transactions, an owner-occupier sells their house to an investor who then rents it
back to them. The issue in the test cases was whether a bank which lent money
to fund such a purchase, not knowing that the former owner would continue in
residence as a tenant, was bound by interests arising under proprietary estoppel
or constructive trusts from promises made before the purchase by the purchaser
to the vendor.

In nine test cases arising out of sale and rent back purchases made by a firm
named North East Property Buyers, the High Court held that mortgagee banks
were not bound by any interests in the properties arising from such promises
(see Re North East Property Buyers Litigation [2010] EWHC 2991 (Ch)). The
occupiers in four of the test cases appealed to the Court of Appeal which
dismissed their appeals (see Cook v The Mortgage Business plc, sub nom The
Mortgage Business plc v O’Shaughnessy [2012] EWCA Civ 17, [2012] 1 WLR
1521]). The occupiers were granted permission to appeal by the Supreme Court
but by the time of the hearing in March this year, only one of the appeals was still
live, the case of Scott v Southern Pacific Mortgages Ltd. The Mortgage Business
plc and Mortgage Express were both represented in the Supreme Court because
of their interests in other such transactions.

The difficulty facing the occupiers was that the House of Lords had held in Abbey
National v Cann that where a property is purchased with the aid of a mortgage,
the purchase and the mortgage are indivisible and complete simultaneously; the
purchaser only obtains an equity of redemption in the property and so cannot
create rights binding on his lender which are not permitted by his mortgage. The
lenders’ case was that any interest in the properties that sale and rent back
occupiers obtained arising from the purchasers’ promises must have been purely
personal until after completion of the mortgages, by which point it was too late
for the occupiers’ interests to obtain priority over the mortgages.

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Mrs Scott’s main argument before the Supreme Court was that she had obtained
a proprietary interest in the property arising out of the purchaser’s alleged
promises as soon as contracts for sale were exchanged, and hence before
completion of the mortgage that funded the purchase. Because she had been
living in the property throughout, she claimed that this interest was an overriding
one which bound the lender. She contended that between exchange of contracts
and completion the purchaser had an interest in the property out of which her
proprietary interest could be carved.

In interesting judgments addressing fundamental land law issues, the Justices

unanimously accepted the lenders’ argument that promises made by a sale and
rent back purchaser could not give rise to proprietary interests in the property
being sold until after completion of the purchase. Lord Collins gave the leading
judgment. He held that between exchange of contracts and completion a
purchaser cannot confer proprietary interests in the property he is purchasing on
third parties (or the vendor in a different capacity).

When the purchaser acquires the legal estate, an estoppel is fed and previously
personal interests become proprietary, but by then it is too late for the interests
to bind the lender who funded the purchase.

The outcome of the appeal has been eagerly awaited, especially by mortgage
lenders, many of which will have lent on what turned out to be sale and rent back
transactions, and by those acting for individuals in comparable positions to the
unfortunate Mrs Scott.

Sch 3 para 3
Impliedly created legal easements will bind a purchaser under this provision
provided either:

• the person to whom the disposition is made actually knows about their
existence; or
• the interest would be obvious upon reasonably careful inspection of the
land; or
• the interest has been exercised in the year immediately preceding the
disposition.

Remember, expressly created legal easements and profits require registration to

complete their creation. Consequently, they will automatically be entered on the
register of the land which they burden, so will bind purchasers: s 38 LRA 2002.
Equitable easements and profits must be entered on the register by the holder of
the interest in order to be enforceable against purchasers: s 32 LRA 2002.
Be sure you understand how to identify different types of interests and the
formalities for their creation.

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Transitional provisions

These provisions relate to interests created before the LRA 2002 came into force
and which had overriding status under the old LRA 1925 rules. According to Sch
12 LRA 2002, some of these maintain their overriding status, in particular:

• legal leases of 21 years or less;

• legal easements and profits;
• rights of persons in actual occupation or in receipt of rent and profits from
the land.

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