LAW COMMISSION H M LAND REGISTRY LAND REGISTRATION FOR THE TWENTY-FIRST CENTURY A CONSULTATIVE DOCUMENT CONTENTS Paragraph Page FOREWORD 1 PART I: INTRODUCTION 2 INTRODUCTION 1.1 2 The move to electronic conveyancing 1.2 2 The deficiencies of the present legislation 1.3 3 The need to develop principles appropriate to registered land 1.5 3 BACKGROUND 1.7 4 THE LAND REGISTRATION ACT 1997 1.10 5 THE CRITERIA FOR REFORM 1.11 6 The agreed objectives 1.12 6 CONSULTATION 1.15 7 THE EUROPEAN CONVENTION ON HUMAN RIGHTS 1.16 8 STRUCTURE OF THIS REPORT 1.17 8 ACKNOWLEDGEMENTS 1.19 9 PART II: LAND REGISTRATION TODAY – A CRITICAL OVERVIEW 10 INTRODUCTION 2.1 10 GENERAL PRINCIPLES: THE CONCEPT OF LAND REGISTRATION 2.2 10 Conveyancing in unregistered land 2.2 10 Registered land 2.4 11 The move towards total registration 2.8 12 THE LEGAL AND ADMINISTRATIVE FRAMEWORK 2.10 13 H M Land Registry 2.10 13 The register 2.11 13 INTERESTS IN REGISTERED LAND 2.13 14 Registrable interests 2.13 14 Overriding interests 2.16 15 Minor interests 2.19 16 MAKING DISPOSITIONS OF REGISTERED LAND 2.20 17 Introduction 2.20 17 Registered dispositions 2.21 17 Priority searches 2.24 18 Minor interests 2.25 19 RECTIFICATION AND INDEMNITY 2.36 22 Rectification 2.37 22 Indemnity 2.40 23 ADVERSE POSSESSION 2.43 24 v Paragraph Page CONVEYANCING ISSUES 2.45 25 The move to electronic conveyancing 2.45 25 Proof of title 2.49 26 PART III: DEFINITIONS AND CONCEPTS 27 INTRODUCTION 3.1 27 REGISTERED ESTATES 3.5 28 The present definition 3.5 28 Estates which may be registered 3.6 29 Registered estates: specific issues 3.7 29 Incorporeal rights over land 3.16 33 REGISTERED DISPOSITIONS 3.24 36 RIGHTS OF UNCERTAIN STATUS 3.28 37 Rights of pre-emption 3.29 37 Rights arising by estoppel or acquiescence 3.33 40 Inchoate rights arising under the Prescription Act 1832 3.37 41 “PURCHASERS” 3.39 43 The definition of “Purchaser” 3.39 43 Doctrines of notice and registered land 3.44 45 SUMMARY AND KEY ISSUES 3.51 49 PART IV: OVERRIDING INTERESTS - THE APPROACH TO REFORM 51 INTRODUCTION 4.1 51 THE RATIONALE OF OVERRIDING INTERESTS 4.4 52 Why do we have overriding interests? 4.4 52 Categories of overriding interests 4.5 53 CRITICISMS OF OVERRIDING INTERESTS 4.11 55 Introduction 4.11 55 Title not absolute 4.12 56 Undiscoverability 4.13 56 Rectification but no indemnity 4.14 57 Unsatisfactory drafting 4.15 57 THE RECOMMENDATIONS IN THE THIRD REPORT 4.17 58 The approach to reform 4.17 58 Two specific proposals 4.18 58 STRATEGIES FOR REFORM 4.23 60 Introduction 4.23 60 Abolition of substantive rights? 4.24 61 Remove the status of overriding interest from certain rights? 4.25 61 Clarify the meaning of the legislation 4.32 65 Redefine the scope of certain overriding interests for the future 4.33 66 Encourage the registration of overriding interests 4.34 66 Electronic conveyancing 4.35 66 RIGHTS AND LIABILITIES UNDER THE GENERAL LAW ARE NOT OVERRIDING INTERESTS 4.36 66 SUMMARY AND KEY ISSUES 4.37 67 PART V: OVERRIDING INTERESTS - PROPOSALS FOR REFORM 69 INTRODUCTION 5.1 69 EASEMENTS AND ANALOGOUS RIGHTS 5.2 69 vi Paragraph Page Section 70(1)(a) 5.2 69 Introduction 5.2 69 Easements and profits à prendre 5.6 70 Customary rights 5.25 78 Public rights 5.30 79 LIABILITIES HAVING THEIR ORIGINS IN TENURE 5.32 80 Section 70(1)(b) 5.32 80 Introduction 5.32 80 Tenurial obligations to repair highways 5.33 80 Quit rents, heriots and other charges 5.34 81 Crown rents 5.35 81 LIABILITY TO REPAIR THE CHANCEL OF ANY CHURCH 5.37 81 Section 70(1)(c) 5.37 81 LIABILITY IN RESPECT OF EMBANKMENTS, AND SEA AND RIVER WALLS 5.38 82 Section 70(1)(d) 5.38 82 PAYMENTS IN LIEU OF TITHE, AND CHARGES OR ANNUITIES PAYABLE FOR THE REDEMPTION OF TITHE RENTCHARGES 5.40 83 Section 70(1)(e) 5.40 83 SQUATTERS’ RIGHTS 5.42 84 Section 70(1)(f) 5.42 84 Introduction 5.42 84 Recommendations in the Third Report 5.43 85 The treatment of adverse possession in this Report 5.44 85 Squatters’ rights as overriding interests: two problems 5.45 86 The solution: repeal section 70(1)(f) and protect only squatters in actual occupation 5.49 87 THE RIGHTS OF OCCUPIERS 5.56 90 Section 70(1)(g) 5.56 90 Introduction 5.56 90 The background to the paragraph 5.57 91 The recommendations in the Third Report 5.59 92 Retention of the overriding status of occupiers’ rights 5.61 93 Rights under settlements created before 1997 5.63 94 Rights of those in receipt of rents and profits 5.64 94 Provision for fraud or estoppel 5.69 98 Occupation of part 5.70 98 Should the occupier’s actual occupation be apparent? 5.71 98 Other matters 5.74 99 INTERESTS EXCLUDED FROM THE EFFECT OF REGISTRATION 5.78 101 Section 70(1)(h) 5.78 101 LOCAL LAND CHARGES 5.80 102 Section 70(1)(i) 5.80 102 MANORIAL RIGHTS AND FRANCHISES 5.84 103 Section 70(1)(j) 5.84 103 Seignorial and manorial rights 5.84 103 Franchises 5.86 104 vii Paragraph Page LEASES NOT EXCEEDING 21 YEARS 5.87 104 Section 70(1)(k) 5.87 104 Introduction 5.87 104 The recommendations in the Third Report 5.88 105 Reduction in length? 5.90 106 Reversionary leases 5.91 106 Time-share leases 5.92 106 Transmission of covenants 5.93 107 CERTAIN MINERAL RIGHTS WHERE TITLE WAS REGISTERED PRIOR TO 1926 5.95 107 Section 70(1)(l) 5.95 107 RIGHTS TO COAL 5.97 108 Section 70(1)(m) 5.97 108 SECTION 70(2) AND (3) OF THE LAND REGISTRATION ACT 1925 5.99 109 GENERAL DEFENCES OF FRAUD AND ESTOPPEL 5.108 113 Defences to the assertion of all overriding interests 5.108 113 Waivers of priority 5.109 113 THE “REGISTRATION GAP” 5.112 115 SUMMARY AND KEY ISSUES 5.114 116 PART VI: THE PROTECTION OF MINOR INTERESTS AND RESTRICTIONS ON DEALINGS WITH REGISTERED LAND 120 INTRODUCTION 6.1 120 THE PRESENT LAW 6.3 121 Notices 6.3 121 Cautions against dealings 6.10 126 Cautions against first registration 6.24 133 Restrictions 6.28 135 Inhibitions 6.37 138 CRITICISMS OF THE PRESENT LAW 6.43 141 Introduction 6.43 141 Unnecessary complexity 6.44 141 Inadequacy of cautions 6.45 141 Miscellaneous defects 6.46 142 THE RECOMMENDATIONS IN THE LAW COMMISSION’S THIRD REPORT ON LAND REGISTRATION 6.47 142 PROPOSALS FOR REFORM 6.48 142 Introduction 6.48 142 Notices and cautions 6.50 143 Restrictions and Inhibitions 6.55 145 Cautions against first registration 6.62 148 MAKING ENTRIES WITHOUT REASONABLE CAUSE 6.65 149 Introduction 6.65 149 Sanctions against improper registration 6.66 149 Unreasonably resisting the removal of an entry on the register 6.67 150 Power to remove entries 6.68 150 viii Paragraph Page TRANSITIONAL ARRANGEMENTS 6.69 151 SUMMARY AND KEY ISSUES 6.70 151 PART VII: PRIORITIES 154 INTRODUCTION 7.1 154 THE PRESENT LAW 7.3 154 The priority of registered dispositions 7.3 154 The priority of registered charges 7.5 155 The priority of overriding interests 7.10 157 The priority of minor interests 7.15 159 Priority searches 7.20 161 THE RECOMMENDATIONS IN THE LAW COMMISSION’S THIRD AND FOURTH REPORTS ON LAND REGISTRATION 7.22 162 Background: the Fourth Working Paper on Land Registration and the protection of financial charges 7.22 162 The recommendations in the Third Report on Land Registration 7.24 163 The draft bill in the Fourth Report 7.26 164 CRITICISMS OF THE PRESENT LAW 7.27 164 PROPOSALS FOR REFORM 7.28 165 Likely developments in land registration and their implications 7.28 165 The fundamental issue: priority of minor interests 7.31 166 Priority of overriding interests 7.35 167 Other issues 7.36 168 SUMMARY AND KEY ISSUES 7.40 168 PART VIII: RECTIFICATION OF THE REGISTER 171 INTRODUCTION 8.1 171 THE NATURE OF RECTIFICATION 8.3 171 THE PRESENT LAW 8.4 172 The grounds on which the register may be rectified 8.4 172 Restrictions on the power to rectify 8.23 179 The effect of rectification 8.32 185 THE RECOMMENDATIONS IN THE LAW COMMISSION’S THIRD AND FOURTH REPORTS 8.34 186 Grounds for rectification 8.34 186 Restrictions on rectification 8.35 186 CRITICISMS OF THE PRESENT LAW 8.36 187 PROPOSALS FOR REFORM 8.40 187 The essentials of an effective scheme of rectification 8.40 187 Grounds for rectification 8.41 188 Rectification against a proprietor who is in possession 8.47 190 Rectification and derivative interests 8.54 193 SUMMARY AND KEY ISSUES 8.56 194 PART IX: MORTGAGES AND CHARGES 196 INTRODUCTION 9.1 196 REGISTERED CHARGES 9.2 196 Definition of “registered charge” 9.2 196 Registered charges as charges by way of legal mortgage 9.4 197 The powers of a registered chargee 9.6 198 EQUITABLE MORTGAGES AND CHARGES 9.8 199 Liens arising from a deposit of the land certificate 9.8 199 ix Paragraph Page SUMMARY AND KEY ISSUES 9.12 200 PART X: ADVERSE POSSESSION AND PRESCRIPTION 202 INTRODUCTION 10.1 202 ADVERSE POSSESSION 10.4 203 The nature and function of adverse possession 10.4 203 Adverse possession and registered land: the present law 10.20 209 ADVERSE POSSESSION: PROPOSALS FOR REFORM 10.43 221 Introduction 10.43 221 Adverse possession of registered land: a new scheme of substantive law 10.44 222 Summary of provisional recommendations 10.65 230 The machinery for giving effect to adverse possession where title to land is registered 10.70 233 The machinery for giving effect to adverse possession: summary of recommendations 10.78 236 PRESCRIPTION 10.79 236 Introduction 10.79 236 Prescription at common law 10.81 237 Prescription under the Prescription Act 1832 10.82 237 Prescription by lost modern grant 10.84 239 Why the present law needs to be changed to accommodate reform of the land registration system 10.87 240 Proposals for reform 10.90 241 SUMMARY AND KEY ISSUES 10.95 243 PART XI: CONVEYANCING ISSUES 250 INTRODUCTION 11.1 250 THE CREATION AND TRANSFER OF