Land Registration 1 of 3 (2018-19) Handout (final) PDF

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Michaelmas Term 2018 Amy Goymour

LAND LAW Land Registration 1 (of 3)

Specialist works Cooke, The New Law of Land Registration (2003) Goymour, Watterson and Dixon (eds), New Perspectives on Land Registration (2018) (available online via iDiscover) Ruoff and Roper’s Registered Conveyancing (looseleaf, updated regularly, and available on Westlaw) HM Land Registry website (www.gov.uk/government/organisations/land-registry) Glossary A useful glossary of land registration terminology can be found in Law Commission, Updating the Land Registration Act 2002 (2018, Law Com No 380), pp xi-xviii

Important preliminary note The Law Commission published a Consultation Paper – Updating the Land Registration Act 2002 (Law Com CP No 227) in March 2016, which was followed by the publication of a Report of the same name (Law Com No 380) in July 2018. The publications are available via: http://www.lawcom.gov.uk/project/updating-the-land-registration-act-2002/. As well as containing important proposals for reform, both documents are an excellent source of information on the current operation of the LRA 2002.

A.

INTRODUCTION

1.

Broad aims of land registration

Certainty is the focus – means land becomes more commerciable if we know who owns it (more likely it can be bought/sold and money raised on its security). If we are concerned with land to be consistent with property markets, land registration has to be a major concern of ours. De Soto, The Mystery of Capital (2001) BBC World Service, 50 Things That Made the Modern Economy – No 47: Property Register (2 October 2017, presented by Tim Harford) (available at https://www.bbc.co.uk/programmes/w3csv3gt) “If I want a loan to improve my house or build a business lender will want collateral - and land or buildings make particularly good collateral, because they tend to increase in value, and it is hard to hide them from creditors. But the lender needs to be confident that they could take the house away from me if I don't repay the loan. So I need to prove that the house really is mine. That requires an invisible web of information that the legal system and the banking system can use. For Hernando de Soto, this invisible web is the difference between my house being an asset (something useful that I own); and being capital (an asset recognised by the financial system). … Get [a property register] right, and the results can be impressive. The World Bank has found that … the countries with simpler, quicker property registries also had less corruption, less grey market activity, more credit and more private investment. Meanwhile, the property registry doesn't get much love: it's not a high-speed rail-line or a gleaming new airport; it's an unfashionable invisible piece of infrastructure. But without it, developed economies would go to the dogs.” Law Commission, Updating the Land Registration Act 2002 (2016, Law Com CP No 227), ch 2

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Law Commission, Updating the Land Registration Act 2002 (2018, Law Com No 380), para 1.4 “The broader impact of the land registration system is reflected in the work of the World Bank, which has highlighted the importance of a registration system for the property market, for business and for the wider economy. The World Bank has identified a range of benefits, including transparency, reducing bribery, increasing investment and enabling the proper assessment of taxes. The Bank’s Doing Business 2018 report explained: When parties engage in a property transaction, it is essential that they obtain legally reliable information regarding the actual property involved in the transaction. The availability of information on the property – as well as its owners or creditors – helps to eliminate uncertainty over property rights or obligations that may encumber the property. In the absence of any public records or any related rights to a property, the transaction costs can become overwhelming, risking that ownership becomes untraceable.”

2.

Origins of land registration Andrew Yarronton (mid 17th Century) “This is the judgement of sober men Will be this long desired Registry Upon whose fond none can be cheated when They trade or trust on that security Which if it pass as it is now fitted The just are double blessed, the knaves outwitted.” South Australia 1858 (introduced by Sir Robert Torrens) Land Registry Act 1862 Land Transfer Act 1897 (compulsory registration introduced in inner London in 1899) Land Registration Act (LRA) 1925: governing statute for land registration until the enactment of the LRA 2002

1990: compulsory to register every transfer of land Land Registration Act (LRA) 2002 (in force 13 October 2003) Land Registration Rules (LRR) 2003 (as subsequently amended)

3.

Extent of registered land today Land Registry Annual Report and Accounts (2017-18): 85.4% of the land mass in England and Wales is registered

4.

Policy concerns underlying the design of a land registration system

(1)

Some general policy concerns within our system of land registration (a)

Tensions between clarity/certainty and flexibility/fairness

- certain rules re fairness or fairness on individual facts. Registration promises certainty for users of land register, especially for purchasers (can be certain about what going to buy). But certainty can sometimes be intention with flexibility and fairness in individual cases. So need to be aware of that – don’t want so rigid a system Smith ‘Williams & Glyn’s Bank Ltd v Boland ((1980): The Development of a System of Title by Registration’, ch 6 in Gravells, Landmark Cases in Land Law (2013), p 153 “The needs of clarity and certainty in land law (central to the Law Commission’s [land registration] recommendations) are in tension with concepts of flexibility and fairness. This tension is perpetually enduring: it has been the root of most troublesome issues in land law for centuries. Nevertheless, each generation has to establish its own way to resolve this tension and land registration now forms an important aspect of modern thinking on this.” (b)

Is it desirable for the register to be ‘perfect’?

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- what are we aiming for? Comprehensive register such that a property right over land should be registered? Is that what we should be aiming for (comprehensive register)? - Elizabeth Cook: former property commissioner and is now chief judge in the Land Registry Tribunal. Essentially: what says in her book: registration is very good for commerce and certainty and might give you some intellectual satisfaction for those who think of law as a perfect code BUT real life is such that people may not know they even have a right that need to be registered. Systems are designed to be perfect and aim for perfection, but not attainable in real slife so maybe we shouldn’t even be aiming for a perfect land register. Cooke, The New Law of Land Registration (2003), p 12 “Registration is a consumer product. It is immensely good for those whose rights are registered, and for those who have the ability to acquire registered rights. Registration, in whatever form, is an instrument of practical security, making land more marketable, and of intellectual satisfaction – the more so the nearer it approaches the perfect, infallible register that is the aim of title registration. Yet the perfect register should cause us some misgivings. However, satisfying it is in theory, as soon as it is translated into the reality of a human legal system it is seen to have an appalling potential for oppression. It is simply not possible for all dealings with land to be carried out on the register; accordingly, the more complete the register, the less protection is given to people who cannot use it. And there will always be people who, because of ignorance, poverty, or discrimination, cannot use a register of title and who therefore cannot acquire rights, or are deprived of those they hold.” (c)

Should legal outcomes be determined primarily by what is on the register, or by principles of general property law?

Most land registration systems latch onto principles of general property law, to some extent – true of our system. Land reg system will refer to fee simple/easement, but doesn’t define them. Those concepts are defined by general property law. So to some extent, system will never be perfectly self-contained code – will always refer back to conceptions of general property law. - Relationship between general property law and land registration – should rights be determined by land registration or general property rights? Dilemma: take a view: - Imagine A is currently registered owner of property. A fraudster comes along and forges a signature such that it looks like there is a transfer from A-B (forged transfer). B sends off the documents to the land registry and becomes the new registered proprietor of title. B then transfers the land to C. C becomes the new registered proprietor. - Here, we have a dilemma. Any litigation that will ensure will be between A and C (c innocently bought this land). Do we prefer A who originally had title or C who, when bought title, looked at register and saw B was registered title? - If we didn’t have land reg system, A would still have been owner – never given up rights. That would be what general property law would say. But if we buy into core principles of land registration, ight favour C – if we want land reg system to promote certainty for purchasers, when C was looking at buying land saw B was registered proprietor and relied on register when he purchased, if want to buy into everything land reg might offer, want to protect C o General property law will lead to one answer, land reg law might lead to other answer - English law: LRA 2002 was probably designed to protect C. Not exactly clear from leg or Law Comm report, but reading between the lines this was the intention. BUT most engagements with this dilemma have favoured A (so genuine tension between general property law persuading judges to decide for A and what land reg is trying to do in favouring C) Law Commission No 254, para 10.43 “[N]ot a system of registration of title but a system of title by registration.” Lady Hale summarizes this dilemma: she suggests general prop law should be determining answers and land registration to determine procedure (not what LRA was designed to do) Scott v Southern Pacific Mortgages Ltd [2014] UKSC 52, [96] “It is important to bear in mind that the system of land registration is merely conveyancing machinery. … Otherwise we are in danger of letting the land registration tail wag the land ownership dog.” (Lady Hale) Law Commission, Updating the LRA 2002 (2018, Law Com No 380), para 2.10 – said this tension is a source of debate. “The LRA 2002 is the primary statute that governs land registration, but land registration does not exist in a vacuum. It has never been intended that the LRA 2002 or the legislation it succeeded should provide a

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self-contained legal “code” for land registration. Land registration law developed from, and depends upon, the general law of property. That said, the precise relationship between the LRA 2002 and the general law has often been a source of debate.” Goymour ‘Mistaken Registrations of Land: Exploding the myth of “Title by Registration”’ [2013] CLJ 614

5.

Ambitions of a land registration system

(1)

Theodore Ruoff’s ‘principles and ideals’ (was chief land registrar in England) Ruoff, An Englishman Looks at the Torrens System (1957), p 8 o Looked at Australian Torrens system and thought about what lessons we could learn from it when seeing how best English system should work o Set out 3 ideals and principles which should inform the design of a land registration system o Mirrors, curtains, and insurance: 3 key principles (a)

The mirror principle “The mirror principle involves the proposition that the register of title is a mirror which reflects accurately and completely and beyond all argument the current facts that are material to a man’s title. This mirror does not reveal the history of the title (bc that is irrelevant), for disused facts are obliterated.”  We should be aiming for a mirror – register should mirror title  BUT doesn’t tell us what should be mirroring what. Do rights on the land mirror the register, or the other way around?

(b)

The curtain principle “The curtain principle is one which provides that the register is the sole source of information for proposing purchasers, who need not and, indeed, must not concern themselves with trusts and equities which lie behind the curtain.” - Certain rights shouldn’t be on the register, like trust and equities. That therefore means that they will never affect a purchaser (no on register) so curtain drawn between what rights exist and what purchaser is going to be affected by. And that detracts somewhat from the mirror principle.

(c)

The insurance principle “[T]he mirror that is the register is deemed to give an absolutely correct reflection of the title but if, through human frailty, a flaw appears, anyone who suffers loss must be put in the same position, so far as money can do it, as if the reflection were a true one.” - If you think you have a right, and it’s been deleted off system, important to compensate person who loses out – gives people who use it confidence in the system

He’s not saying we adhere to those principles, but high-level ambitions. (2)

The ambitions of a registration system conceived as ‘three promises’ Watterson and Goymour, ‘A Tale of Three Promises: Setting the Scene’, ch 15 in Goymour, Watterson and Dixon (eds), New Perspectives on Land Registration (2018) (see also chs 16-18, on the specific ‘promises’), p 277 “[T]he aims of the LRA 2002 were intended to be realised via a combination of three fundamental ‘promises’—‘the title promise’, ‘the priority (or ordering) promise’, and ‘the empowerment promise’… [E]ach was intended, in varying degrees, to bring about a departure from the results that would pertain if general property law were the sole driver.”

Promises being made to users of land registration system. Framework re thinking about what our sysem is trying to do See also generally Law Commission, Updating the Land Registration Act 2002 (2018, Law Com No 380) 3 promises made by land registration system: divert from the general law by making these three promises to users of its system.

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(a)

The title promise “According to the ‘title promise’, registration is a necessary—and constitutive—step in the acquisition of title to major interests in land. Once registered, the registered proprietor becomes the owner of that title … whether or not he would have been so entitled under the general law. This registration-constituted title is ‘guaranteed’, such that even if it is subsequently removed or qualified in favour of a prior entitlement, the disappointed owner is ordinarily entitled to be indemnified from a Registry fund. As such, a disponee can obtain a title even when he might not under the general law, and even if that title is not impregnable, any deprivation of that title will prima facie be compensated.” (p 279) - Fraudster takes land from A (X). B, as a result, pays fraudster and becomes new proprietor. A and B both innocent - Title promise means: upon becoming registered, B is promised he has a good title. If you’re on the register, you’re promised you have a good title. Good not only for B who is promised good title, but more importantly for the rest of the world that might think about buying from B o Perspective of potential purchaser: if look at land register, see B is registered and if B is promised he has a good title, then potential purchasers will have confidence buying from him - Gives users confidence in using the register, and diverges from what the general law would say (general law would say that A is still the owner). Title promise is forcing departure from what general law would say.

(b)

The priority promise “The ‘priority promise’ … offers preferential treatment, in terms of taking priority over others’ prior entitlements, to those acquiring a registered interest.” (p 279) -

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(c)

Imagine that A is current registered proprietor of a fee simple. He holds that land/title subject to right in X’s favour. That right that X has could be of any kind of nature – might be easement, lease, mortgage, trust… any kind of property right. A, without discussing things with X, transfers via valid transfer to a purchaser B. B becomes the new registered proprietor, and the Q arises whether X (who had interest first before B) or whether B takes priority. This is priority dispute Priority promise: in certain circumstanes, because B gets registered, the land registration Act confers some special privileged priority protection on B against former rights. Only works in certain conditions, but that is what the priority promise is. In certain conditions, B (because registered) gets priority over X. So another ambition of LRA – protecting someone like B, not only against forged dispositions made to him, but also against third parties’ rights.

The empowerment promise “The ‘empowerment promise’ … assures a disponee that he can proceed on the basis that a registered disponor has all of the powers of disposition characteristic of an unencumbered owner. Even if the disponor’s dispositional powers are in fact limited, the disponee should not be affected by any limitation —which might otherwise render the disposition ultra vires, and potentially invalid, under the general law —which is not reflected by the entry of a restriction in the Register.” (p 280) - Once have title, empowered by empowerment promise to deal with that land - Why this matters: some owners limited in what they are doing with land, others not restricted by general law. - A is registered proprietor. A company that, under general law and articles of association, company is not allowed to alienate any of its land. So the company, under general law, CANNOT dispose of that property. A becomes registered, meaning becomes empowered to deal with land in way any free owner can (so can ignore restriction on power to deal with property in favour of purchaser). So if B buys property from A, B knows A is empowered to sell property despite internal company limitations and B can become proper owner of property. A still in trouble with shareholders, but point is: empowerment promise protecting purchasers like B who can rely on fact that seller is registered and seller is empowered despite general law limitations on their powers. Seller empowered to deliver title to B

(d)

Some key questions (i)

Should the ‘promises’ be fulfilled by rights to the land itself, or via monetary compensation? 5

(ii) Is the LRA 2002 fulfilling the three promises in practice? Not all of them (courts trying to eat into the promises, perhaps influenced by what general law would want to do)

6.

General features of land registration under the LRA 2002

(1)

Accessibility LRA 2002, s 66: principle of LRA that it is an accessible register. Transparency, accesisbilty are very important.

(2)

Compulsory and voluntary first registration of title (NB first registration of title is not on the syllabus) LRA 2002, s 4 provides that certain dealings with unregistered titles trigger compulsory first registration of title, eg the transfer of a fee simple, or the grant of lease with a term exceeding 7 years. LRA 2002, s 3 provides for voluntary first registration of title (incentives for voluntary first registration include a reduced registration fee and the protection against squatters provided by Sched 6). - 85% of land is registered. How does it go up? Triggers for registered land. If unregistered land is dealt with, that triggers cumpolsory first registration of title. You don’t need to k...