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LAW COMMISSION
H M LAND REGISTRY
LAND REGISTRATION FOR THE TWENTY-FIRST
CENTURY A Consultative Document
CONTENTS
FOREWORD
PART I: INTRODUCTION
INTRODUCTION
The move to electronic conveyancing
The deficiencies of the present legislation
The need to develop principles appropriate to registered land
BACKGROUND
THE LAND REGISTRATION ACT 1997
THE CRITERIA FOR REFORM
The agreed objectives
CONSULTATION
THE EUROPEAN CONVENTION ON HUMAN RIGHTS
STRUCTURE OF THIS REPORT
ACKNOWLEDGEMENTS
PART II: LAND REGISTRATION TODAY – A CRITICAL OVERVIEW
INTRODUCTION
GENERAL PRINCIPLES: THE CONCEPT OF LAND
REGISTRATION
Conveyancing in unregistered land
Registered land
The move towards total registration
THE LEGAL AND ADMINISTRATIVE FRAMEWORK
H M Land Registry
The register
INTERESTS IN REGISTERED LAND
Registrable interests
Overriding interests
Minor interests
MAKING DISPOSITIONS OF REGISTERED LAND
Introduction
Registered dispositions
Priority searches
Minor interests
RECTIFICATION AND INDEMNITY
Rectification
Indemnity
ADVERSE POSSESSION
Paragraph
Page
1
2
1.1
2
1.2
2
1.3
3
1.5
3
1.7
4
1.10
5
1.11
6
1.12
6
1.15
7
1.16
8
1.17
8
1.19
9
10
2.1
10
2.2
10
2.2
10
2.4
11
2.8
12
2.10
13
2.10
13
2.11
13
2.13
14
2.13
14
2.16
15
2.19
16
2.20
17
2.20
17
2.21
17
2.24
18
2.25
19
2.36
22
2.37
22
2.40
23
2.43
24
v
Paragraph
Page
CONVEYANCING ISSUES
The move to electronic conveyancing
Proof of title
PART III: DEFINITIONS AND CONCEPTS
INTRODUCTION
REGISTERED ESTATES
The present definition
Estates which may be registered
Registered estates: specific issues
Incorporeal rights over land
REGISTERED DISPOSITIONS
RIGHTS OF UNCERTAIN STATUS
Rights of pre-emption
Rights arising by estoppel or acquiescence
Inchoate rights arising under the Prescription Act 1832
“PURCHASERS”
The definition of “Purchaser”
Doctrines of notice and registered land
SUMMARY AND KEY ISSUES
PART IV: OVERRIDING INTERESTS - THE APPROACH TO REFORM
INTRODUCTION
THE RATIONALE OF OVERRIDING INTERESTS
Why do we have overriding interests?
Categories of overriding interests
CRITICISMS OF OVERRIDING INTERESTS
Introduction
Title not absolute
Undiscoverability
Rectification but no indemnity
Unsatisfactory drafting
THE RECOMMENDATIONS IN THE THIRD REPORT
The approach to reform
Two specific proposals
STRATEGIES FOR REFORM
Introduction
Abolition of substantive rights?
Remove the status of overriding interest from certain rights?
Clarify the meaning of the legislation
Redefine the scope of certain overriding interests for the future
Encourage the registration of overriding interests
Electronic conveyancing
RIGHTS AND LIABILITIES UNDER THE GENERAL LAW
ARE NOT OVERRIDING INTERESTS
SUMMARY AND KEY ISSUES
PART V: OVERRIDING INTERESTS -PROPOSALS FOR REFORM
INTRODUCTION
EASEMENTS AND ANALOGOUS RIGHTS
2.45
25
2.45
25
2.49
26
27
3.1
27
3.5
28
3.5
28
3.6
29
3.7
29
3.16
33
3.24
36
3.28
37
3.29
37
3.33
40
3.37
41
3.39
43
3.39
43
3.44
45
3.51
49
51
4.1
51
4.4
52
4.4
52
4.5
53
4.11
55
4.11
55
4.12
56
4.13
56
4.14
57
4.15
57
4.17
58
4.17
58
4.18
58
4.23
60
4.23
60
4.24
61
4.25
61
4.32
65
4.33
66
4.34
66
4.35
66
4.36
66
4.37
67
69
5.1
69
5.2
69
vi
Paragraph Page
Section 70(1)(a)
Introduction
Easements and profits à prendre
Customary rights
Public rights LIABILITIES HAVING THEIR ORIGINS IN TENURE Section 70(1)(b)
Introduction
Tenurial obligations to repair highways
Quit rents, heriots and other charges
Crown rents LIABILITY TO REPAIR THE CHANCEL OF ANY CHURCH Section 70(1)(c)
LIABILITY IN RESPECT OF EMBANKMENTS, AND SEA AND RIVER WALLS Section 70(1)(d)
PAYMENTS IN LIEU OF TITHE, AND CHARGES OR ANNUITIES PAYABLE FOR THE REDEMPTION OF TITHE RENTCHARGES Section 70(1)(e) SQUATTERS’ RIGHTS Section 70(1)(f)
Introduction
Recommendations in the Third Report
The treatment of adverse possession in this Report
Squatters’ rights as overriding interests: two problems
The solution: repeal section 70(1)(f) and protect
only squatters in actual occupation THE RIGHTS OF OCCUPIERS Section 70(1)(g)
Introduction
The background to the paragraph
The recommendations in the Third Report
Retention of the overriding status of occupiers’ rights
Rights under settlements created before 1997
Rights of those in receipt of rents and profits
Provision for fraud or estoppel
Occupation of part
Should the occupier’s actual occupation be apparent?
Other matters INTERESTS EXCLUDED FROM THE EFFECT OF REGISTRATION Section 70(1)(h) LOCAL LAND CHARGES Section 70(1)(i)
MANORIAL RIGHTS AND FRANCHISES Section 70(1)(j)
Seignorial and manorial rights
Franchises
5.2
69
5.2
69
5.6
70
5.25
78
5.30
79
5.32
80
5.32
80
5.32
80
5.33
80
5.34
81
5.35
81
5.37
81
5.37
81
5.38
82
5.38
82
5.40
83
5.40
83
5.42
84
5.42
84
5.42
84
5.43
85
5.44
85
5.45
86
5.49
87
5.56
90
5.56
90
5.56
90
5.57
91
5.59
92
5.61
93
5.63
94
5.64
94
5.69
98
5.70
98
5.71
98
5.74
99
5.78
101
5.78
101
5.80
102
5.80
102
5.84
103
5.84
103
5.84
103
5.86
104
vii
Paragraph Page
LEASES NOT EXCEEDING 21 YEARS Section 70(1)(k)
Introduction
The recommendations in the Third Report
Reduction in length?
Reversionary leases
Time-share leases
Transmission of covenants CERTAIN MINERAL RIGHTS WHERE TITLE WAS REGISTERED PRIOR TO 1926 Section 70(1)(l) RIGHTS TO COAL Section 70(1)(m)
SECTION 70(2) AND (3) OF THE LAND REGISTRATION ACT 1925
GENERAL DEFENCES OF FRAUD AND ESTOPPEL Defences to the assertion of all overriding interests Waivers of priority THE “REGISTRATION GAP” SUMMARY AND KEY ISSUES
5.87
104
5.87
104
5.87
104
5.88
105
5.90
106
5.91
106
5.92
106
5.93
107
5.95
107
5.95
107
5.97
108
5.97
108
5.99
109
5.108
113
5.108
113
5.109
113
5.112
115
5.114
116
PART VI: THE PROTECTION OF MINOR INTERESTS AND RESTRICTIONS ON DEALINGS WITH REGISTERED LAND
INTRODUCTION
THE PRESENT LAW
Notices
Cautions against dealings
Cautions against first registration
Restrictions
Inhibitions
CRITICISMS OF THE PRESENT LAW
Introduction
Unnecessary complexity
Inadequacy of cautions
Miscellaneous defects
THE RECOMMENDATIONS IN THE LAW COMMISSION’S
THIRD REPORT ON LAND REGISTRATION
PROPOSALS FOR REFORM
Introduction
Notices and cautions
Restrictions and Inhibitions
Cautions against first registration
MAKING ENTRIES WITHOUT REASONABLE CAUSE
Introduction
Sanctions against improper registration
Unreasonably resisting the removal of an entry on the register
Power to remove entries
120
6.1
120
6.3
121
6.3
121
6.10
126
6.24
133
6.28
135
6.37
138
6.43
141
6.43
141
6.44
141
6.45
141
6.46
142
6.47
142
6.48
142
6.48
142
6.50
143
6.55
145
6.62
148
6.65
149
6.65
149
6.66
149
6.67
150
6.68
150
viii
Paragraph Page
TRANSITIONAL ARRANGEMENTS SUMMARY AND KEY ISSUES
PART VII: PRIORITIES
INTRODUCTION
THE PRESENT LAW
The priority of registered dispositions
The priority of registered charges
The priority of overriding interests
The priority of minor interests
Priority searches
THE RECOMMENDATIONS IN THE
LAW COMMISSION’S THIRD AND FOURTH
6.69
151
6.70
151
154
7.1
154
7.3
154
7.3
154
7.5
155
7.10
157
7.15
159
7.20
161
REPORTS ON LAND REGISTRATION
7.22
162
Background: the Fourth Working Paper on Land
Registration and the protection of financial charges
The recommendations in the Third Report on Land Registration
The draft bill in the Fourth Report
CRITICISMS OF THE PRESENT LAW
PROPOSALS FOR REFORM
Likely developments in land registration and their implications
The fundamental issue: priority of minor interests
Priority of overriding interests
Other issues
SUMMARY AND KEY ISSUES
PART VIII: RECTIFICATION OF THE REGISTER
INTRODUCTION
THE NATURE OF RECTIFICATION
THE PRESENT LAW
The grounds on which the register may be rectified
Restrictions on the power to rectify
The effect of rectification
THE RECOMMENDATIONS IN THE
LAW COMMISSION’S THIRD AND FOURTH REPORTS
Grounds for rectification
Restrictions on rectification
CRITICISMS OF THE PRESENT LAW
PROPOSALS FOR REFORM
The essentials of an effective scheme of rectification
Grounds for rectification
Rectification against a proprietor who is in possession
Rectification and derivative interests
SUMMARY AND KEY ISSUES
PART IX: MORTGAGES AND CHARGES
INTRODUCTION
REGISTERED CHARGES
Definition of “registered charge”
Registered charges as charges by way of legal mortgage
The powers of a registered chargee
EQUITABLE MORTGAGES AND CHARGES
Liens arising from a deposit of the land certificate
7.22
162
7.24
163
7.26
164
7.27
164
7.28
165
7.28
165
7.31
166
7.35
167
7.36
168
7.40
168
R
171
8.1
171
8.3
171
8.4
172
8.4
172
8.23
179
8.32
185
8.34
186
8.34
186
8.35
186
8.36
187
8.40
187
8.40
187
8.41
188
8.47
190
8.54
193
8.56
194
196
9.1
196
9.2
196
9.2
196
9.4
197
9.6
198
9.8
199
9.8
199
ix
Paragraph Page
SUMMARY AND KEY ISSUES
9.12
200
PART X: ADVERSE POSSESSION AND PRESCRIPTION
INTRODUCTION
ADVERSE POSSESSION
The nature and function of adverse possession
Adverse possession and registered land: the present law
ADVERSE POSSESSION: PROPOSALS FOR REFORM
Introduction
Adverse possession of registered land: a new scheme of
substantive law
Summary of provisional recommendations
The machinery for giving effect to adverse possession
where title to land is registered
The machinery for giving effect to adverse possession:
summary of recommendations
PRESCRIPTION
Introduction
Prescription at common law
Prescription under the Prescription Act 1832
Prescription by lost modern grant
Why the present law needs to be changed to accommodate
reform of the land registration system
Proposals for reform
SUMMARY AND KEY ISSUES
PART XI: CONVEYANCING ISSUES
INTRODUCTION
THE CREATION AND TRANSFER OF ESTATES, RIGHTS
AND INTERESTS IN OR OVER REGISTERED LAND
Introduction: the move to electronic conveyancing
A brief summary of the present system
The defects in the present system
The proposed system
What will be the likely benefits of the system proposed?
Are there possible drawbacks?
What has happened to date?
What legislation will be required to enable electronic
conveyancing to be introduced?
A specific problem: the assignment of leases
THE OBLIGATIONS OF A VENDOR IN DEDUCING TITLE
WHEN MAKING A DISPOSITION OF REGISTERED LAND
Introduction
The obligation to disclose latent defects in title prior to contracting
The obligation to convey to the buyer on completion a title that is
in accordance with the contract
A seller’s obligation to prove that he or she has a title that accords
with the contract
Converting good leasehold title to absolute title
OTHER CONVEYANCING ISSUES
SUMMARY AND KEY ISSUES
202
10.1
202
10.4
203
10.4
203
10.20
209
10.43
221
10.43
221
10.44
222
10.65
230
10.70
233
10.78
236
10.79
236
10.79
236
10.81
237
10.82
237
10.84
239
10.87
240
10.90
241
10.95
243
250
11.1
250
11.2
250
11.2
250
11.3
251
11.5
252
11.8
253
11.14
256
11.15
256
11.17
258
11.18
259
11.26
261
11.30
263
11.30
263
11.32
264
11.34
265
11.35
266
11.49
272
11.51
273
11.52
273
x
Paragraph Page
PART XII: SUMMARY OF ISSUES FOR CONSULTATION
INTRODUCTION
DEFINITIONS AND CONCEPTS
Leases
Incorporeal rights over land
Registered dispositions
Rights of uncertain status
“Purchasers”
OVERRIDING INTERESTS
General issues
The specific categories of overriding interests
Noting overriding interests on the register: Land Registration
Act 1925, s 70(2) and (3)
General defences of fraud and estoppel
The “registration gap”
THE PROTECTION OF MINOR INTERESTS AND
RESTRICTIONS ON DEALINGS WITH REGISTERED LAND
Notices and cautions
Restrictions and inhibitions
Cautions against first registration
Making entries without reasonable cause
Power to remove entries
Transitional arrangements
PRIORITIES
Priority of minor interests
Priority of overriding interests
Other issues
RECTIFICATION OF THE REGISTER
Grounds for rectification
Rectification against a proprietor who is in possession
MORTGAGES AND CHARGES
Registered charges
Equitable mortgages and charges
ADVERSE POSSESSION AND PRESCRIPTION
Adverse possession
The fundamental issue of principle
The proposed scheme of adverse possession for registered land
The machinery for giving effect to adverse possession where
title is registered Prescription
CONVEYANCING ISSUES
The creation and transfer of estates, rights and interests in or over registered land
The obligations of a vendor in deducing title when making a disposition of registered land Other conveyancing issues
278
12.1
278
12.2
278
12.2
278
12.4
279
12.7
279
12.8
279
12.12
280
12.13
280
12.13
280
12.15
281
12.33
286
12.35
287
12.37
287
12.38
288
12.38
288
12.40
289
12.43
290
12.44
290
12.46
291
12.47
291
12.48
291
12.48
291
12.50
291
12.51
292
12.53
292
12.53
292
12.57
293
12.62
294
12.62
294
12.65
295
12.66
295
12.66
295
12.66
295
12.67
295
12.73
298
12.74
299
12.75
299
12.75
12.81 12.83
299
301 301
APPENDIX
302
xi
LAND REGISTRATION FOR THE
TWENTY-FIRST CENTURY:
A CONSULTATIVE DOCUMENT
THESECONDREPORTOFAJOINTWORKINGGROUP
ONTHEIMPLEMENTATIONOFTHELAWCOMMISSION’S
THIRDANDFOURTHREPORTSONLANDREGISTRATION
To the Right Honourable the Lord Irvine of Lairg, Lord High Chancellor of Great Britain
FOREWORD
In our First Report, the recommendations in which have since been enacted by the Land Registration Act 1997, we promised that we would publish a Second Report, which would “seek views on much more extensive reforms to the land registration system with a view to the complete replacement of the Land Registration Act 1925”. We now fulfil that promise.
We seek views on a wide range of proposals which will have the effect of making dealings in land much simpler, quicker and cheaper. At the same time, our proposals, if accepted, will mean that both title to registered land and the rights in and over it will be more secure. Underlying our proposals is the likely move to electronic conveyancing over the coming decade - the most revolutionary change ever to take place in conveyancing practice. It is important that there should be in place in the near future the necessary legislative framework to enable this change to happen. The principles of law which govern registered land must reflect the move to electronic conveyancing and this has prompted many of our recommendations.
When such important changes are to come about, it is very important that the proposals should be fully and widely considered. We therefore urge those with any interest in the conveyancing system to read and respond to this Report.
1
PART I INTRODUCTION
Introduction
1.1     In this, its Second Report, the Joint Working Group makes proposals for the replacement of the Land Registration Act 1925.1 The Report is in the form of a Consultation Paper. It is intended that draft legislation will be prepared in the light of the responses to it. A draft Bill, together with Notes on Clauses and an introduction, setting out the results of the present consultation, is likely to be published in the summer of 1999. This will enable the Bill to be scrutinised in advance of any possible legislation. On any basis, the wholesale replacement of the Land Registration Act 1925 is a major undertaking. In the following paragraphs we set out our principal reasons for doing so.
The move to electronic conveyancing
1.2     The most important single reason for new legislation has in fact emerged during the course of preparing this Report, and it is the progressive move to electronic conveyancing. This is likely to be the most revolutionary reform to the conveyancing system in England and Wales that has yet taken place. A number of fundamental changes have already occurred over the last few years—
(1)     the whole of England and Wales has been subject to compulsory registration of title since December 1990, which means that most conveyances of unregistered land now have to be completed by registration;2
(2)     the register is now open and can be searched without the authority of the registered proprietor;3
(3)     the register is already computerised and most titles have been entered on the computer; and
(4)     a system of direct access to the computerised register, introduced in January 1995, enables those who are connected to it to inspect the register almost
instantly.4
However, the most significant change is the likely introduction of the electronic transfer of land and creation of property rights in the course of the coming decade or so. Indeed the publication of this Report coincides with the first step towards electronic conveyancing. HM Land Registry has just commenced a trial with a lending institution of a system of electronic requests for the discharge of mortgages.5 The probable outcome of these developments will be a system under which registration becomes an
1     The background to this Report is explained below, para 1.7.
2     See Land Registration Act 1925, s 123 (as substituted by Land Registration Act 1997, s 1).
3     See Land Registration Act 1925, s 112 (as substituted by Land Registration Act 1988, s 1).
4     For details, see Ruoff & Roper, Registered Conveyancing, 30-06; Appendix F-08 - F-12; and below, para 11.17.
5     See below, para 11.17.
2
essential element for the creation and transfer of estates, rights and interests in land, performing a similar function to the formal requirements that exist under the present law,6 and which it would replace.7 The implications of these changes are considerable and underlie much of the thinking in this Report. The legislative structure must be such as to enable them to happen in an orderly manner, and it must also reflect their
likely implications.8
The deficiencies of the present legislation
1.3     The present legislation is widely acknowledged to be both badly drafted and lacking in clarity. It is also very complicated. Not only are there the 148 sections of the Act, but there are also several hundred rules made under it.9 There is no clear division between what is in the Act and what is found in the rules. The land registration system has been made to work very effectively, but this has often been in spite of rather than because of its legislative structure. There is an obvious need for clear modern legislation, particularly as most dealings now involve land which either is, or will (as a result of the transaction) become, registered.10
1.4     Furthermore, after nearly three-quarters of a century on the statute book, a number of practical difficulties have arisen with the present legislation that need to be remedied. Some of these require significant changes to the legislation.
The need to develop principles appropriate to registered land
1.5     Largely because of the rather tortuous history of the Land Registration Act 1925,11 it has always been accepted that the principles of registered land should, so far as possible, be the same as they are where title is unregistered. The Land Registration Act 1925 has been perceived as mere machinery for translating those principles into a registered format. However, this perception has never been wholly true, and there are in fact some striking differences between registered and unregistered land. Examples can be found in relation to the protection of the rights of occupiers,12 the priority of equitable interests,13 and the rights of adverse possessors.14
1.6     In most legal systems within the Commonwealth that have adopted a system of title registration, it has been recognised that the registered and unregistered systems are
6     See Law of Property Act 1925, s 52.
7     Instead of the three-stage process that presently exists of executing an instrument which effects the disposition, lodging it with the Registry, and then having it registered, there would be just one step: registration. See below, paras 2.45 and following, and 11.3 - 11.7.
8     As we explain later in this Report, the introduction of electronic conveyancing will not prevent those who wish to undertake their own conveyancing from doing so: see paras 2.48, 11.11.
9     Principally the Land Registration Rules 1925 (as amended).
10    For criticisms of the land registration system, see, eg Clark v Chief Land Registrar [1994] Ch 370, 382; Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed, 1984), p 196; Roger J Smith, Property Law (2nd ed 1998), pp 257 - 259.
11    For an admirable account, see J Stuart Anderson, Lawyers and the Making of English Land Law 1832 - 1940 (1992).
12    See below, para 5.56.
13    See below, para 7.19.
14    See below, paras 10.28 and following.
3
different. At its most fundamental level, the basis of title to unregistered land is possession, whereas the basis of registered title is the fact of registration. This is reflected in the fact that many jurisdictions have adopted very different regimes for their registered and unregistered systems in relation to adverse possession.15 The Joint Working Group has accepted that it is now highly desirable that land registration in England and Wales should develop according to principles that reflect both the nature and the potential of land registration. With more than 80 per cent of the estimated number of titles to land in England and Wales now registered, there seems little point in inhibiting the rational development of the principles of property law by reference to a system that is rapidly disappearing, and in relation to which there is diminishing expertise amongst the legal profession.16 As we explain in the course of this Report, both the computerisation of the register and the move to electronic conveyancing make possible many improvements in the law that cannot be achieved with an unregistered system.
Background
1.7     Between 1983 and 1988, the Law Commission published four Reports on Land Registration.17 Of these, the First and Second were implemented,18 but the Third and Fourth were not. Early in 1994, the Joint Working Group was set up with the approval of the Lord Chancellor to consider ways in which any parts of the Third and Fourth Reports19 might be implemented, with or without modification. That Joint Working Group consisted of representatives from the Law Commission, the Land Registry and the Lord Chancellor’s Department.
1.8     In its First Report, which was published in September 199520 together with a draft Land Registration Bill to implement its recommendations,21 the Joint Working Group considered three reforms of the land registration system which could be immediately implemented—
(1)     the new triggers for registration;
(2)     fee concessions to promote voluntary registration; and
(3)     amendments to the provisions of the Land Registration Act 1925 on indemnity.
15    See below, para 10.17.
16    “Increasingly, and increasingly quickly, we are losing the skill and experience to deal with unregistered land”: Trevor Aldridge QC, “The Loose Ends” (1997) 141 SJ 250.
17    Property Law: Land Registration (1983) Law Com No 125; Property Law: Second Report on Land Registration (1985) Law Com No 148; Property Law: Third Report on Land Registration (1987) Law Com No 158; and Property Law: Fourth Report on Land Registration (1988) Law Com No 173.
18    By the Land Registration Acts 1986 and 1988 respectively.
19    Above. We refer to these throughout this Report as “the Third Report” and “the Fourth Report” respectively.
20    Transfer of Land: Land Registration. First Report of a Joint Working Group on the Implementation of the Law Commission’s Third and Fourth Reports on Land Registration (1995) Law Com No 235. We refer to this throughout this Report as “the First Report”
21    Which we refer to throughout as “the First Report Bill”.
4
Only the third of these derived from the Law Commission’s Third Report on Land Registration.22 That Report also considered—
(1)     Overriding interests;
(2)     Minor Interests; and
(3)     Rectification.
The Fourth Report consisted of a draft Land Registration Bill which was intended to replace the Land Registration Act 1925. Not only did this Bill incorporate the amendments proposed in the Third Report, but it also contained a number of very material changes to the existing legislation that arose from the process of redrafting.
1.9 The four Reports that the Law Commission published on land registration,23 had their genesis in four Working Papers published by the Commission during the course of the 1970s.24 However, many of the recommendations in the Third Report differed very substantially from the provisional proposals that were made in those earlier Working Papers (which were consultation documents).25 Nor, so far as we have been able to ascertain, do those changes in every case reflect the responses to the Working Papers. There was a further limited consultation on certain aspects of overriding interests which was taken into account in the Third Report.26
The land registration act 1997
1.10 The First Report of the Joint Working Group was in the nature of a final report because it dealt only with matters on which there had already been at least some public consultation.27 The draft Land Registration Bill attached to the Repor2t8 was introduced into Parliament by Lord Browne-Wilkinson as a Private Peers’ Bill in November 1996.29 It passed all its stages without amendment and received the Royal Assent as the Land Registration Act 1997 on 27 February 1997. The amendments to the provisions of the Land Registration Act 1925 on indemnity came into force on 27
22    The first two matters derived from the Land Registry’s own consultation, Completing the Land Register for England and Wales, 1992.
23    See above, para 1.7.
24    Transfer of Land: Land Registration, (1970) Working Paper No 32; Transfer of Land: Land Registration (Second Paper), (1971) Working Paper No 37; Transfer of Land: Land Registration (Third Paper), (1972) Working Paper No 45; Transfer of Land: Land Registration (Fourth Paper), (1976) Working Paper No 67.
25    We refer to a number of examples of this in the course of this Report.
26    These consultations took the form of a discussion document that had a limited circulation and a seminar as a follow up: Third Report, para 2.7.
27    For the extent to which the Third and Fourth Reports were based upon public consultation, see above, para 1.9. For the Land Registry’s consultation that formed the basis for part of the First Report, see above, para 1.8.
28    With one or two minor amendments.
29    It enjoyed all party support. Mr Michael Stephen MP took the Bill through the House of Commons.
5
April 1997, and the new triggers for compulsory registration on 1 April 1998.30
The criteria for reform
1.11     Since completing its First Report, the Joint Working Group has reviewed and reconsidered the proposals on overriding interests, minor interests and rectification that were contained in the Law Commission’s Third and Fourth Reports. However, we did not consider that our remit could be restricted to those issues. This is because the Law Commission had proposed the complete replacement of the Land Registration Act 1925 in its Fourth Report. The Joint Working Group has therefore examined more widely both the provisions of the Land Registration Act 1925 and the rules made under it. Its objective has been to make proposals for the replacement of the existing legislation with a modern statute that sets out the principles of land registration in a clear and coherent manner and that simplifies the existing law. In so doing it has applied a series of agreed objectives which take account of the changed circumstances that have arisen since the Third and Fourth Reports were published. We have already outlined the main features of those changes.31 There have also been a number of important judicial decisions since the publication of the Fourth Report which have clarified the interpretation of the Land Registration Act 1925.32
The agreed objectives
1.12     Against that background, there were a number of practical and realistic objectives which guided the approach of the Joint Working Group—
(1)     It was essential that any reforms should simplify the existing system and establish a clear, workable and coherent body of law. The principles upon which land registration is based should be clearly articulated in the primary legislation. Any rules made pursuant to that legislation should merely provide the detailed working out of those principles.33
(2)     Such reforms had to be of a kind that could be readily integrated into the present system of registered title without undue disruption or expense. At the same time, they would have to be flexible enough to allow for the introduction of electronic conveyancing.
(3)     Any reform had to take account of resource implications. However desirable changes might be in principle, they could not be realistically considered if the cost of them was potentially open-ended and unquantifiable.
1.13     The consequence of applying these objectives is that many of the recommendations of the Joint Working Group differ significantly from, and go much further than, the
30    The enabling power to introduce fee concessions for voluntary first registrations made pursuant to the new powers contained in s 145(3) and (3A) took effect on 1 April 1998. This was because the definition of voluntary first registration was made by reference to the new triggers for compulsory registration. It is likely that such fee concessions will introduced in the next Fee Order.
31    See above, para 1.2.
32    See particularly Abbey National Building Society v Cann [1991] 1 AC 56 (considered in Part V); Clark v Chief Land Registrar [1994] Ch 370 (considered in Part VI); Norwich and Peterborough Building Society v Steed [1993] Ch 116 (considered in Part VIII).
33    At present there is no clear separation of function between the Act and the rules made under it.
6
proposals in the Third and Fourth Reports. This Report also addresses a number of issues, such as adverse possession and prescription, which were not considered at all in the Third and Fourth Reports, but where the application of the principles of unregistered land to registered title is illogical.
1.14     A number of principles have guided the Joint Working Group in making proposals for reform. Our starting point has been the statement in the Third Report that “the register should be as complete and accurate a record of information relevant to the title to a particular estate in the land as is possible”.34 The move towards electronic conveyancing will be the fulfilment of this objective, because it will mean that most transactions involving registered land will have to be registered for them to have any effect at all.35 We therefore wish to create a “culture” of registration in advance of its introduction, by which registration is perceived to be an integral part of creating rights in or over registered land. We consider that there are three important steps that can be taken to encourage this. First, registration should provide better protection for rights and interests than it does at present. Two of our provisional recommendations are intended to meet this, namely that—
(1)     registration should of itself protect the title of the proprietor against
squatters;36 and
(2)     encumbrances over registered land should enjoy greater protection as a result of their registration than is at present the case.37
Secondly, the process of registration should be made simpler and easier.38 Thirdly, the range of rights that can be protected outside the register - overriding interests - should be confined so far as that is possible.39
Consultation
1.15     We have explained above that the extent to which the Third and Fourth Reports were based upon public consultation was limited.40 The replacement of the Land Registration Act 1925 is a step that should not be undertaken lightly, and we are very anxious to consult widely to ensure that our proposals command support before draft legislation is prepared. We therefore invite comments on all the recommendations that we make. We shall also be grateful for comments on points arising out of the Land Registration Act 1925 or the rules made under it which we have not addressed but which have caused difficulty in practice. Readers are encouraged to respond to all or any part of this Paper.
The european convention on human rights
34    Law Com No 158, para 4.13.
35    See paras 11.8 and following.
36    See Part X of this Report. There are other examples in the Report where the effect of our provisional recommendations will be to confer particular protection on a right by virtue of its registration: see, eg paras 5.22, 5.23.
37    See Part VI of this Report.
38    See Parts VI and XI of this Report.
39    See Parts IV and V of this Report.
40    See para 1.9.
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1.16     In this Report we raise a number of issues which touch upon the European Convention for the Protection of Human Rights and Fundamental Freedoms.41 That Convention will become part of domestic law if, as seems likely, the Human Rights Bill, presently before Parliament, is enacted. The Joint Working Group is satisfied that the provisional recommendations which are made in this Report comply with the Convention.
Structure of this report
1.17     The structure of this Report is as follows—
(1)     Part II: an overview of the land registration system in England and Wales;
(2)     Part III: definitions and the fundamental concepts of land registration;
(3)     Parts IV & V: overriding interests;
(4)     Part VI: protection of minor interests and restrictions on dealings with registered land;
(5)     Part VII: priorities;
(6)     Part VIII: rectification of the register;
(7)     Part IX: mortgages and charges;
(8)     Part X: adverse possession and prescription;
(9)     Part XI: conveyancing issues;
(10)   Part XII: summary of recommendations for consultation.
Because of the necessarily technical nature of much of this Report we have added at the end of each of Parts III - XI a passage headed “Summary and key issues” to assist readers to obtain a brief overview of that Part.
1.18     It should be emphasised that we are concerned in this Report only with changes in the substantive law, where consultation is therefore appropriate. We envisage that when legislation comes to be drafted many of the existing provisions of the Land Registration Act 1925 and the rules made under it will be recast in a simpler and clearer form. It is also our intention that there should be a more principled division between matters that are governed by any Land Registration Act and those which are contained in the rules made under it.42
41    See below, paras 4.27 and following, 5.20, 5.22, 5.53 and 5.68.
42    As we have indicated above, para 1.1, a draft Bill will be published in advance of any legislation.
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Acknowledgements
1.19 We are grateful to a number of persons and bodies who kindly assisted us in the preparation of this Report. We acknowledge a number of them individually at relevant points in the text. However, we would particularly like to express our gratitude to those who kindly responded to our inquiries about potentially obsolete overriding interests. We set out their names in the Appendix to this Report.
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PART II
LAND REGISTRATION TODAY: A
CRITICAL OVERVIEW
Introduction
2.1     In this Part we provide an overview of the land registration system in England and Wales as it now stands under the present governing legislation, the Land Registration Act 1925 (as amended) and the Land Registration Rules 1925.1 The purpose of this Part is to provide an introduction to the subject before we embark on the detailed consideration of the law that follows in the remaining Parts. During the course of it, we outline a number of the difficulties that exist in the present law, which are considered in greater detail later in the Report, together with options for reform. This will enable readers to understand at the outset why we have undertaken this major review of the law on land registration.
General principles: the concept of land registration
Conveyancing in unregistered land
2.2     Where title to land is unregistered and the owner agrees to sell it, he or she will be required to prove to the buyer that he or she has the title to the land that accords with the contract of sale. The way title to unregistered land is deduced is to show that the seller and his or her predecessors in title have enjoyed lawful possession of the estate in land in accordance with the title back to a good root of title that is at least 15 years old.2 A good root of title will usually be a conveyance of the estate.3 The logic of this is that title to unregistered land is based upon possession, and the Limitation Act 1980 will bar most adverse claims after 12 years. It follows that if the land has been lawfully enjoyed according to the title for at least 15 years, there is a high probability - but not a certainty - that the seller’s title to the land is sound. In addition to examining the chain of conveyances and other instruments that make up the seller’s title, the buyer’s solicitor will also search the land charges register4 for any land charges registered against the names of estate owners.5 These include matters such as restrictive covenants, equitable easements and estate contracts.6 There may be other rights and
1     For a clear overview of registration of title, see Roger J Smith, Property Law (2nd ed 1998) Ch 11.
2     See Law of Property Act 1925, s 44(1); Law of Property Act 1969, s 23.
3     The classic definition of a good root of title, given in T C Williams and J M Lightwood, A Treatise on the Law of Vendor and Purchaser (4th ed 1936) p 47, is an instrument of disposition which “must deal with or prove on the face of it, without the aid of extrinsic evidence, the ownership of the whole legal and equitable estate and interest in the property; contain a description by which the property can be identified; and show nothing to cast any doubt on the title of the disposing parties”.
4     See Land Charges Act 1972, s 1.
5     Registration is against the “name of the estate owner whose estate is intended to be affected”: ibid, s 3(1). In theory this creates a serious problem. The land charges system was introduced in 1925 and there can, therefore, be many names that are undiscoverable because they are hidden behind the root of title. In practice, it is not a significant problem, because copies of searches are carried forward with the title deeds. As a result, the compensation system that was introduced to cover this problem (see Law of Property Act 1969, s 25) has been little used.
6     See Land Charges Act 1972, s 2.
10
interests in or over unregistered land which do not appear from either the documents of title or from the land charges register, such as easements acquired by prescription.
2.3     A purchaser of a legal estate in unregistered land takes it subject to all other legal estates, rights and interests,7 and to those equitable interests of which he or she has knowledge or notice (actual, constructive or imputed). In practice, the reforms of 1925 have severely restricted the doctrine of notice.
Registered land
2.4     Where title to land is registered, the register takes the place of the title deeds and of the matters that would be recorded in the land charges register were the title unregistered. It has been said that “[t]he governing principle of the [Land Registration Act 1925] is that the title to land is to be regulated by and ascertainable from the register alone”,8 though this is subject to the significant exception of overriding interests.9 Overriding interests comprise a range of rights that are not protected on the register but which nonetheless bind any purchaser of registered land.10 When a proprietor of registered land contracts to sell it, his or her title is deduced primarily from the register. Overriding interests or matters excepted from the effect of registration are proved separately.
2.5     There are four major differences between unregistered and registered land—
(1)     The investigation of title to registered land is very much simpler and quicker than it is where title is unregistered.11
(2)     The doctrine of notice has no application to registered land.12 A purchaser of registered land takes it subject to estates, rights and interests which are protected by an entry on the register and to overriding interests, but to nothing else.
(3)     Where a person is registered as the proprietor of an estate in registered land, HM Land Registry guarantees that title.13 This means that if it is necessary to rectify the register to correct some mistake that has occurred, any person suffering loss as a result is entitled to payment of an indemnity from the
Registry.14
2.6     The basis of title to registered land is not possession, but the register itself. Even if an
7     Subject to a least one minor exception.
8     Abbey National Building Society v Cann [1991] 1 AC 56, 78, per Lord Oliver.
9     As Lord Oliver went on to explain: ibid.
10    See below, paras 2.16 and following; and Parts IV and V of this Report.
11    This is particularly so now that the register has been computerised and can be searched without the authority of the registered proprietor.
12    There are in fact two minor statutory exceptions to this.
13    It also guarantees certain other transactions, called, “registered dispositions” which are explained below, para 2.21.
14    For rectification, see below, para 2.36; and Part VIII.
11
entry on the register is obtained by fraud,15 the disposition will be effective on registration.16 To date this fundamental principle has not been reflected in the rules which govern adverse possession.17 The same rules apply - at least ostensibly - to unregistered and registered land alike. In practice, the mechanism by which those rules are made to apply to registered land means that the law is not in fact identical.18 In Part X of this Report, we put forward for consideration a possible new system governing adverse possession which would apply only to registered land and which would reflect the principles which underlie it.19
2.7     When a person wishes to transfer or create estates, rights or interests over registered land, he or she will execute a transfer or other document in the form prescribed by the Land Registration Rules 1925, and will then lodge them for registration with HM Land Registry.20 Whereas estates, rights and interests in unregistered land arise and take effect upon creation, dispositions of registered land operate only in equity until they are registered. Registration is deemed to be effective from the date on which the application for registration was lodged.21 This so-called “registration gap” between the date of the transaction and its eventual registration, although quite short,22 is one of the more significant drawbacks of the current system of land registration, and it gives rise to a number of difficulties, as we explain at various places in this Report. In Part XI, we outline how a system of electronic conveyancing, when it is eventually introduced, will largely eliminate this problem.
The move towards total registration
2.8     As we have already explained, the whole of England and Wales has been subject to the requirement of compulsory registration since December 1990.23 What this means is that certain dealings with unregistered land have to be completed by registration. The scope of these “triggers” was considerably extended by the Land Registration Act 1997.24 The following dispositions of unregistered land are now required to be completed by the registration of the title to the estate that is transferred, created or mortgaged—
(1) a conveyance of the freehold estate, a grant of a lease of more than 21 years, and an assignment of a lease25 which has more than 21 years to run, and which is made for valuable consideration, by way of gift, or pursuant to an
15    As where the transfer was a forgery.
16    See Land Registration Act 1925, s 69(1). There may and usually will be grounds for rectification of the register in such circumstances.
17    See further below, para 2.43.
18    The mechanism used is that of the trust: see below, paras 10.28 and following.
19    See below, paras 10.44 and following.
20    For the administrative framework of land registration, see below, paras 2.10 and following. For registered conveyancing, see below, Part XI.
21    See below, para 11.3.
22    Ibid.
23    See above, para 1.2.
24    See s 1, inserting new ss 123 and 123A into the Land Registration Act 1925. See above, paras 1.8, 1.10.
25    But not if it is a surrender of the lease to the owner of the immediate reversion.
12
order of the court;
(2)     a disposition made by an assent26 or a vesting deed of either a freehold estate or a lease which has more than 21 years to run; and
(3)     a first legal mortgage of the freehold or of a lease having more than 21 years to run that is supported by a deposit of the documents of title.27
2.9 These ‘triggers’ will bring much (but not all) land on to the register. In relation to land held by corporations,28 there may never be any disposition of the land that will lead to registration. However, it is hoped that the improvements that we propose in this Report may, in time, encourage many landowners to register their titles voluntarily, because of the benefits (and particularly the greater protection) that registered title offers.29
The legal and administrative framework
HM Land Registry
2.10     HM Land Registry, which is an Executive Agency, is the body charged with the administration of the land registration system in England and Wales.30 It consists of an administrative headquarters in London and 22 district land registries. Those district land registries are responsible for the registration of titles to land and other entries on the register within the areas allocated to them.31 The Chief Land Registrar is responsible for the whole system of registration and is appointed by the Lord
Chancellor.32
The register
2.11     The register has been described as—
the official record of one estate owner’s title to a particular property which is described by reference to an official plan kept at the Land Registry, each register carrying the unique number allotted to the title.33
Almost all titles are now kept in computerised form34 and the process of converting all titles into computerised registers is expected to be complete in the near future. The
26    Including a vesting assent.
27    See Land Registration Act 1925, s 123(1), (2), (6) (as inserted). Section 123A (as inserted) makes provision for such transactions to operate in equity only if they are not registered within two months. The effect is that the transactions will either have to be repeated or the transferee will have to seek leave to register out of time: see s 123A(3).
28    Including the Crown, the Church of England and many charitable bodies.
29    If our proposals in Part X are accepted, and a new system governing adverse possession is introduced (see above, para 2.6), registration would of itself provide protection against the acquisition of title by adverse possession.
30    Land Registration Act 1925, ss 1 (as substituted), 126, 127.
31    See ibid, s 132(1).
32    Ibid, s 126(1).
33    Ruoff & Roper, Registered Conveyancing, 3-01.
34    Cf Land Registration Act 1925, s 1 (as substituted by Administration of Justice Act 1982, s 66(1)).
13
register is open: any person can search it without any need to obtain the consent of the registered proprietor.35 Such searches can be made orally, by telephone, in writing, by fax or by computer (for those who have direct access to the Registry’s computer
system).36
2.12     The register itself consists of three parts,37 namely—
(1)     The Property Register, which both describes the land and the estate comprised in the title and records the benefit of rights such as easements and covenants that are enjoyed by the property: this is the “credit entry” as regards the
title;38
(2)     The Proprietorship Register, which records the nature of the title,39 the name, address and description of the proprietor, and any entries which affect his or her right to dispose of the land;40 and
(3)     The Charges Register, which records those encumbrances which burden the property: this is the corresponding “debit entry” in relation to the title.41
Interests in registered land
Registrable interests
2.13     The principal interests which can be registered with their own title on the register are a legal freehold and a legal term of years having more than 21 years unexpired.42 It follows that, in relation to any one piece of registered land, there may be several titles, as where a freeholder grants a 99-year lease of the land, and the tenant then sublets for 25 years. The freehold title, the lease and the sublease will each have its own title on the register, though there will be a note on the immediately superior title of the lease and sublease respectively. The owner of the registered estate is called the registered
35    Land Registration Act 1925, s 112 (substituted by Land Registration Act 1988, s 1(1)).
36    See Land Registration (Official Searches) Rules 1993, r 3. For the direct access scheme, see below, para 11.17.
37    Land Registration Rules 1925, r 2.
38    Ibid, r 3; see Ruoff & Roper, Registered Conveyancing, 3-05 - 3-08.
39    That is, whether it is absolute (as is usually the case), good leasehold, possessory or qualified. For these grades of title, see below, para 5.78.
40    Land Registration Rules 1925, r 6; Ruoff & Roper, Registered Conveyancing, 3-09 - 3-10. The entries in question are cautions, restrictions and inhibitions. See below, paras 2.25 and following; and Part VI of this Report.
41    Land Registration Rules 1925, r 7; Ruoff & Roper, Registered Conveyancing, 3-11 - 3-15. Such encumbrances fall into two categories: registered charges (mortgages) and other rights which are protected by notice. See below, para 2.26; and Part VI of this Report.
42    See generally Ruoff & Roper, Registered Conveyancing, Chapter 9; and below, para 3.6.There are certain other miscellaneous legal interests which, because they are treated as land for the purposes of the Law of Property Act 1925 (see 205(1)(ix), can also be registered with their own titles. These include a legal rentcharge granted for an interest in fee simple or for a term of years of which more than 21 years are unexpired. See Ruoff & Roper, Registered Conveyancing, 26-03. For the position of manors, see below, para 3.20.
14
proprietor.43
2.14     There are other categories of registrable interests which do not have their own title, but which may be protected by an entry on the charges register of the title burdened by them. First, there are registered charges. These provide the mechanism by which legal mortgages of registered land are created.44 Secondly there are certain incorporeal legal interests, such as easements and profits à prendre.45 These are incapable of being registered with their own title even if they exist in gross.46
2.15     Estates and interests which are capable of being registered estates will, until registered, take effect in equity only and not as legal estates or interests.47 As such they will be overridden by any registered disposition for valuable consideration.48 It is the risk that an interest may be defeated in this way that serves as the inducement to register a disposition of registered land.49
Overriding interests
2.16     Overriding interests are interests in or over registered land which are not protected on the register but to which all registered dispositions of the land nonetheless take subject.50 They are listed in section 70(1) of the Land Registration Act 1925.51 Amongst the most important are the following—
43    He or she will be given a land certificate as an indicia of his or her title. Although this records the state of the title on the date when the certificate was granted, it is the register alone that is conclusive as to the state of that title. The land certificate will be retained in the Registry if the proprietor creates a registered charge (ie, a mortgage) over his or her land.
44    Although the registered proprietor of the charge does not have his or her own title, a charge certificate is issued to him or her. We make certain minor recommendations in relation to registered charges in Part IX of this Report.
45    Where the rights are appurtenant to and for the benefit of a registered estate (such as the benefit of an easement), they may be noted on the property register of that estate, but will in any event pass with that estate on any transfer.
46    See below, para 3.17 for the possible difficulty which this may create. A right in gross is a free-standing right over another’s land, such as a profit à prendre to shoot game or take fish, that is enjoyed for the benefit of the grantee, and not for the benefit of another piece of land. Easements cannot exist in gross (though this view has not gone unquestioned: see M F Sturley, “Easements in Gross” (1980) 96 LQR 557), but some profits à prendre can: see Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) pp 834 - 835, 909 - 912.
47    See Land Registration Act 1925, s 101.
48    For registered dispositions, see below, para 2.21.
49    For the position where a disposition of unregistered land is required to be registered and is not, see Land Registration Act 1925, s 123A (substituted by Land Registration Act 1997, s 1); above, para 2.8.
50    See Land Registration Act 1925, s 3(xvi).
51    See below, Part V of this Report, where they are considered in detail.
15
(1)     certain easements and profits, customary and public rights52 and appurtenant
rights;53
(2)     squatters’ rights;54
(3)     rights of persons in actual occupation;55
(4)     seignorial and manorial rights and franchises;56
(5)     leases granted for 21 years or less;57and
(6)     rights in coal.58
2.17     Because overriding interests bind transferees of the land even though they are, by definition, not protected on the register, they are widely acknowledged to be a potential source of difficulty in registered conveyancing. They necessarily reduce both the reliability and the comprehensiveness of the register. This is especially so given both the breadth of the rights which can be overriding interests (as the above examples demonstrate) and the fact that some of them are not readily discoverable. It should be noted that most overriding interests - but not quite all - are capable of protection by registration instead.59
2.18     In Part IV of this Report we examine the reasons for overriding interests.60 We conclude that the characteristic that most (but not all) share is that it is unreasonable to expect the person having the benefit of the interest to protect it by registration.61 We go on to examine in detail in Part V of this Report ways in which both the numbers and the scope of overriding interests could be reduced, and seek views on our proposals.
Minor interests
2.19     Finally, there is a residual category of interests - called minor interests - which are neither registrable nor overriding interests.62 This “definition” is slightly misleading. First, there are rights which may be protected by an entry on the register as minor interests, but which will take effect as overriding interests if they are not so protected. For example, a person in occupation of land under an agreement for a lease may
52    Land Registration Act 1925, s 70(1)(a); below, paras 5.2, 5.25 and 5.30.
53    Land Registration Rules 1925, r 258; below, para 5.2.
54    Land Registration Act 1925, s 70(1)(f); below, para 5.42.
55    Ibid, s 70(1)(g); below, para 5.56. Under this category, an occupier may protect rights that are expressly created and which could, therefore, have been protected by registration.
56    Land Registration Act 1925, s 70(1)(j); below, para 5.84.
57    Ibid, s 70(1)(k); below, para 5.87.
58    Ibid, s 70(1)(m); below, para 5.97.
59    Leases granted for a term of 21 years or less (Land Registration Act 1925, s 70(1)(k)) cannot be protected on the register, but can only take effect as overriding interests.
60    See below, paras 4.4 and following.
61    See below, para 4.4.
62     Cf Land Registration Act 1925, s 3(xv).
16
protect that agreement either by relying on his or her occupation so that it takes effect as an overriding interest,63 or by entering it as a minor interest on the register. Secondly, a disposition of registered land which is a registrable interest takes effect as a minor interest pending its registration. The category of minor interests is in fact enormously wide. It includes rights over registered land which, if the title had been unregistered, would have been registrable as land charges,64 interests under trusts of land and settlements, and interests which, in unregistered land, would have depended for their protection on the doctrine of notice.65 As we explain below, there are four methods of protecting minor interests on the register - notices, cautions, restrictions
and inhibitions.66
Making dispositions of registered land
Introduction
2.20     We set out below the ways in which estates, rights and interests in registered land should be created, transferred or protected, and we explain what form registration should take. As we have already indicated,67 a registered proprietor of land may create interests in or deal with the land in the same way as if the title were unregistered. However, until the disposition is registered, it takes effect as a minor interest. As such it is liable to be overridden by a subsequent registered disposition for valuable
consideration.68
Registered dispositions
2.21     Certain dispositions by a registered proprietor, called “registered dispositions”, should be completed by registration,69 and the validity of them is then guaranteed by the Registry. What links such registered dispositions is that they involve the grant or transfer of a legal estate, or the creation or reservation of a legal right over the land.70 They include71
(1)     a transfer in whole or part of the registered estate in the land;
(2)     a transfer of the mines and minerals in the land apart from the surface or vice versa;
(3)     the grant of a rentcharge in possession;
63    The rights of persons in actual occupation: Land Registration Act 1925, s 70(1)(g).
64    Such as restrictive covenants.
65    Such as an equity arising by estoppel.
66    See paras 2.25 and following.
67    See above, para 2.15.
68    Land Registration Act 1925, s 101.
69    There is an obvious ambiguity in the term “registered disposition”. It is only when the particular disposition has been registered that it is, in reality, a registered disposition.
70    Land Registration Act 1925, ss 18(4), 21(4). The creation of an equitable right over land, such as a restrictive covenant, is not therefore a registered disposition.
71    For the main statutory provisions, see Land Registration Act 1925, ss 18, 21, 33, 34. See too Ruoff & Roper, Registered Conveyancing, 15-03.
17
(4) the grant of an easement, right or privilege72 in or over land;
(5)     the transfer of the registered estate subject to the reservation of a rentcharge, easement, right or privilege;
(6)     the grant of a lease or underlease;
(7)     the creation of a registered charge;
(8)     the transfer of a registered charge.
2.22     A registered disposition confers on the transferee or grantee the estate or interest in question, together with the benefit of all appurtenant rights. The transferee or grantee takes the land subject to—
(1)     the incumbrances and other entries appearing on the register;
(2)     overriding interests;73 and
(3)     where the interest is leasehold, “all implied and express covenants, obligations, and liabilities incident to the estate transferred or created”;74
but free from all other estates and interests.75 It is this “special effect or priority” that is the hallmark of registered dispositions.76
2.23     The Land Registration Act 1925 makes special provision for the priority of competing registered charges. It provides that they are to rank in order of registration not in order of creation.77 This is in fact no more than an application of the rule set out in the previous paragraph.
Priority searches
2.24     We have explained that there is necessarily a period of time between the execution of a transaction, and its registration as a registered disposition.78 To protect a purchaser in the period prior to the transaction up to the time when the transaction is registered, a purchaser may apply to search the register in such a way as to obtain priority for a period of thirty days.79 Any entry which is made during the thirty days is “postponed to a subsequent application to register the instrument effecting the purchase”.80 A “purchaser” is, for these purposes, defined as—
72    This phrase includes rights such as profits à prendre.
73    Unless the contrary is expressed on the register.
74    Land Registration Act 1925, s 23(1)(a).
75    Ibid, ss 20(1), 23(1).
76    Ibid, s 3(xxii). We consider priorities in detail in Part VII of this Report.
77    Land Registration Act 1925, s 29; see below, para 7.5.
78    See above, para 2.7.
79    See Land Registration (Official Searches) Rules 1993.
80    Ibid, rule 6.
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any person (including a lessee or chargee) who in good faith and for valuable consideration acquires or intends to acquire a legal estate in
land.81
The intending grantee of some minor interest cannot make a priority search, because he or she does not intend to acquire a legal estate.
Minor interests
2.25     Because the transferee or grantee of a registered disposition takes it free of interests which are not protected on the register or which do not take effect as overriding interests, it is incumbent on a person who has the benefit of a minor interest to ensure that an appropriate entry is made on the register. There are four types of entry that can be made: notices, cautions, restrictions and inhibitions. Their functions are very different, and with the exception of a notice, the primary aim of making them may not be to ensure that a particular interest in land will bind the grantee or transferee under a registered disposition. The Registry does not guarantee the validity of minor interests, even though they are protected by registration.82 In this respect they differ from registered dispositions.83
Protection by notice
2.26     The entry of a notice is the best method of protecting an encumbrance over land which is not an interest under a trust (and therefore capable of being overreached on a disposition of the land).84 A notice provides a permanent form of protection for a right and will ensure that it binds any person who acquires the land.85 It may be entered on the register only with the concurrence of the registered proprietor, or pursuant to an order of the court or the registrar. The entry on the register will set out the nature of the interest.
Protection by caution
2.27     The entry on the register of a caution against dealings is not, as such, a means of protecting an interest in land. Such an entry institutes a procedure whereby a person interested in the land (the cautioner) will be notified of a proposed dealing with the property.86 He or she can then take steps to assert the priority of his or her right. Unlike the notice, a caution may be entered unilaterally, without the permission, or even the prior knowledge, of the registered proprietor. When registering a caution there is no requirement for the cautioner to prove the existence of the right. All that he or she has to do is set out the claim in outline in the accompanying declaration. It is essentially a personal entry as the register will state only the name and address of the cautioner.
81    Ibid, r 2(1).
82    If, eg, an option were protected on the register by the entry of a caution, and it turned out that the option was void for (say) failure to comply with the formal requirements of the Law of Property (Miscellaneous Provisions) Act 1989, s 2, the grantee of the option would not be entitled to any indemnity if the caution was removed from the register.
83    See above, para 2.21.
84    For a full consideration of notices, see below, para 6.3. For overreaching, see below, para 2.32.
85    Land Registration Act 1925, ss 48(1), 52(1).
86    For cautions against dealings, see below, para 6.10.
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2.28     The caution entitles the cautioner to notice of any proposed registered dealing of the land. No dealing with the land may be registered without the cautioner’s consent until such notice has been served.87 If on service of the notice the cautioner objects, the Land Registration Rules 1925 provide a procedure for dealing with his or her claim before the registrar.88 At the hearing, the main options open to the registrar are—
(1)     to allow the transaction to proceed and to cancel the caution;
(2)     to refuse to register the proposed disposition; or
(3)     to make an entry on the register to protect the cautioner’s interest on the register in a permanent form, such as by a notice.
It is unusual for the registrar to allow the transaction to proceed while at the same time allowing the caution to continue. Because the entry of a caution does no more than initiate a procedure, it confers no priority on the right or interest of the cautioner.89 In Part VI, we identify this as the principal weakness of a caution.90
The differences between a notice and a caution
2.29     The differences between the entry of a caution and of a notice are best illustrated by an example. 1 Acacia Avenue, Newtown has a registered title. A conveyance between John Doe and Richard Roe reserves to the owners of 3 Acacia Avenue a right of passage, through 1 Acacia Avenue. The owner of 3 Acacia Avenue is Joanna Harrison. If she were to lodge a caution, to protect her right of way, she would apply to the Registry stating that she claimed an interest in 1 Acacia Avenue. The entry on the register would read—
Caution in favour of Joanna Harrison of 3 Acacia Avenue, Newtown.
This entry would entitle Ms Harrison to be notified of any subsequent registered dealing with the land, and to object to any such dealing. If she does not object to a dealing her caution is unlikely to remain on the register. On the other hand if Ms Harrison were to register a notice she would apply to the Registry, sending the instrument which created the right, in order to prove her entitlement. The entry on the register would state—
The land is subject to the following rights reserved by a conveyance dated 1 June 1996 made between (1) John Doe and (2) Richard Roe :
Reserving to the owners and occupiers for the time being of 3 Acacia Avenue a right of way over the passageway through 1 Acacia Avenue
87    When a caution has been lodged, the Registry notifies the registered proprietor. There is provision under the Land Registration Rules 1925, r 218, by which the proprietor can challenge the caution without having to wait until there is a disposition of the land. For such “warning off”, see below, para 6.15.
88    See r 220.
89    Clark v Chief Land Registrar [1994] Ch 370.
90    See below, para 6.16.
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This entry would preserve the right of way against any registered disposition of 1 Acacia Avenue, and it would be entered as a notice on the charges register of the title.
2.30     The example illustrates the fundamental differences between a caution and a notice. The caution is a personal and temporary method of protection designed to warn the cautioner of impending transactions. The notice is impersonal and provides permanent protection for the interest.
Protection by restriction
2.31     The purpose of a restriction is to record any limitation on the otherwise unlimited powers of disposition of the registered proprietor. A restriction is only available to restrict the disposition of a registered interest, it cannot be used to restrict the disposition of a minor or overriding interest.
2.32     Restrictions are often used to protect interests under a trust, and are indeed the best method of doing so. They provide a means of ensuring that such interests are overreached on any disposition by the trustees.91 Overreaching can only take place if there are two trustees, and a restriction can be employed to ensure that this is so.
Protection by inhibition
2.33     An inhibition is an order, made either by the court or the registrar, that inhibits the registration or entry of any dealing with registered land or with a registered charge. The registration of an inhibition effectively freezes the register. It is a draconian remedy of last resort, to be used primarily in cases of fraud and bankruptcy.
Criticisms
2.34     In Part VI of this Report, we examine critically the operation of the methods that presently exist for the protection of minor interests.92 They are unnecessarily complicated, and there is, in our view, no need to have four separate methods of protection. We single out for particular criticism the inadequate protection that is offered in respect of cautions. We also identify a number of other miscellaneous defects. We recommend the replacement of the present system with a simple system in which the only types of entry would be notices and restrictions.93
The priority of minor interests
2.35     Although the Land Registration Act 1925 sets out the priority of registered dispositions, it is silent on the priority of minor interests between themselves. However, the matter has now been settled by judicial decision, and it is clear that because minor interests take effect in equity only, the traditional rules governing the priority of equitable interests apply to such interests, and that this is so, whether or not the interest is protected by an entry on the register. It follows that the register provides no guide as to the priority of minor interests. We explain these rules on the priority of
91    Overreaching applies as much to interests in registered land as it does to interests where the title is unregistered. Even if the interests of the beneficiaries under the trust are overriding interests they may be overreached: see City of London Building Society v Flegg [1988] AC 54.
92    See below, paras 6.43 and following.
93    See below, paras 6.48 and following.
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minor interests in detail in Part VII of this Report.94 Our conclusion is that the future introduction of electronic conveyancing makes it unnecessary to create any statutory system for regulating such priorities.
Rectification and indemnity
2.36     Rectification is the process by which mistakes in the register are corrected. If any person suffers loss as a result of either rectification or a decision not to rectify the register, they are entitled to be indemnified by the Registry.
Rectification
2.37     We explain in detail in Part VIII of this Report the ten grounds on which the register may be rectified. However, they may be broadly summarised as follows—
(1)     Where a court makes an order which either gives effect to an established property right or interest, or orders the removal from the register of an entry in respect of a right which has not been established.95
(2)     Where the court or the registrar decides that the register is incorrect in some
way.96
(3)     Where the registrar decides that a clerical error needs to be corrected.97
Even where a ground for rectification exists, it is a matter of discretion whether or not it is ordered. However, in practice, in a case where a court has concluded that a person is entitled to a right or interest in the land, rectification will always be ordered.98
2.38     There is a significant restriction on the power to order rectification of the register, which we refer to as a form of qualified indefeasibility. Where the registered proprietor is in possession, the register may not be rectified so as to adversely affect the registered proprietor’s title unless—
(1)     the rectification is required in order to give effect to an overriding interest;99 or
(2)     the proprietor caused or substantially contributed to the error or omission, by fraud or lack of proper care;100 or
(3)     it would be unjust not to rectify the register.101
94    We also consider the difficult subject of the priority of overriding interests, on which, subject to one exception, there is no statutory guidance.
95    Land Registration Act 1925, s 82(1)(a), (b).
96    Ibid, s 82(1)(c),(d),(e),(f),(g), and (h).
97    Land Registration Rules 1925, rr 13, 14.
98    See Norwich & Peterborough Building Society v Steed [1993] Ch 116, 139; below, para 8.13.
99    Land Registration Act 1925, s 82(3).
100  Ibid, s 82(3)(a).
101  Ibid, s 82(3)(c).
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As we explain in Part VIII, there is some doubt about exactly who constitutes a proprietor in possession for these purposes, as the definition is potentially wide enough to include all registered proprietors.102 Even if one of these grounds is established, there is still a discretion as to whether the register will be rectified. In practice, it usually will be, particularly where an overriding interest has been established. When rectification is ordered, it may affect not only the title of the registered proprietor but also those with derivative interests in the land.
2.39     The present law governing rectification works well in practice and gives rise to few difficulties. Nevertheless, this review of land registration offers an opportunity to simplify and clarify the legislation, and we make provisional recommendations to this effect in Part VIII.
Indemnity
2.40     The provisions for rectification and for indemnity are directly linked. Where the register is rectified, any person suffering loss by reason of the rectification may be indemnified.103 However, indemnity also serves a wider purpose in that it protects persons from loss—
(1)     caused by errors and omissions on the register, even where the register is not
rectified;104
(2)     because documents lodged at the Registry have been lost or destroyed; or
(3)     as a result of an error in any official search.105
2.41     Where the claimant for an indemnity has caused all or part of the loss by fraud, no indemnity will be paid. If the loss is caused by a lack of proper care the indemnity will be reduced, according to what is just and equitable having regard to the person’s responsibility for the loss, unless the loss was caused wholly by a lack of proper care in which case no indemnity will be paid.106
2.42     We make no recommendations for the reform of the law on indemnity, because that task was undertaken in the First Report of the Joint Working Group. The recommendations in that Report were implemented by the Land Registration Act
1997.107
Adverse possession
2.43     As we have already indicated, the principles of adverse possession apply to registered land in a similar (but not identical) way to the manner in which they apply to
102  See below, para 8.24.
103  Land Registration Act 1925, s 83(1) (as inserted by the Land Registration Act 1997, s 2). This includes the case where the proprietor of the land or charge claims in good faith under a forged disposition: ibid, s 83(4).
104  There is now a power to award indemnity where a person seeks and obtains rectification, but still suffers loss as well: ibid.
105  Land Registration Act 1925, s 83(3) (as substituted by Land Registration Act 1997, s 2).
106  Ibid, s 83(5) (as substituted by Land Registration Act 1997, s 2).
107  See above, para 1.8.
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unregistered land.108 The essential features of the treatment of adverse possession in registered land are as follows—
(1)     The rights of a squatter constitute an overriding interest.109 As such, once the rights of the registered proprietor have been barred by 12 years’ adverse possession, the squatter’s rights will bind any purchaser of the land even though the squatter has ceased to be in possession of the land.110
(2)     Once his or her rights have been barred, the registered proprietor holds the registered estate on trust for the squatter.111 The squatter can apply to be registered as proprietor of the land in place of that registered proprietor. The full implications of this trust device have not been fully worked out. However, as we explain in Part X of this Report, the results could be very
unsatisfactory.112
2.44 The ability of a squatter to acquire title by adverse possession is a sensitive issue, and is, from time to time, the subject of hostile public criticism.113 We have already explained that there is no logical reason why the rules of adverse possession for registered and unregistered land should be the same, given that the basis of title is fundamentally different,114 and that we propose for consideration in Part X a wholly new system of adverse possession that would be applicable only to registered land.115 We also propose—
(1)     the abolition of the use of the trust as a means of giving effect to the rights of
squatters;116 and
(2)     that squatters’ rights should only be an overriding interest while the squatter remains in actual occupation of the land.117
108  See above, para 2.6; and below, paras 10.27 and following.
109  Land Registration Act 1925, s 70(1)(f); below, para 5.42.
110  Unless, of course, the squatter’s rights have themselves been barred by 12 years’ adverse possession.
111  Land Registration Act 1925, s 75(1).
112  See paras 10.28 and following.
113  Cf Limitation of Actions, Consultation Paper No 151, para 13.119.
114  See above, para 2.6; and below, para 10.11, for further discussion
115  See below, paras 10.44 and following.
116  See below, paras 10.70 and following.
117  See below, para 5.49.
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Conveyancing issues
The move to electronic conveyancing
2.45     As we have already mentioned,118 under the present system of registered conveyancing, where a disposition of registered land is made, the following steps occur—
(1)     a document in the form prescribed by the Land Registration Rules 1925 is executed by which the transaction is effected (whether it be a transfer, or the creation of some right or interest in land);
(2)     that document is lodged with the appropriate district land registry; and
(3)     when the transaction has been processed, the appropriate entry is made on the register.
2.46     In Part XI of this Report we draw attention to a number of unsatisfactory features of this system.119 It is enough to emphasise at this stage—
(1)     the fact that there is a period of time - albeit not a very long one - between the completion of the transaction and its entry on the register; and
(2)     the duplication of effort120 and the risk of error that flows from the present system.
2.47     It is against this background that we propose in Part XI that there should be a move to electronic conveyancing. Our ideas for such a system must necessarily be tentative because such a system lies some way off. However, its objective would be to move from the three-stage process described above in paragraph 2.45 to a one-stage process, by which the creation and registration of a disposition of registered land would be conterminous.121 In relation to the dispositions to which it applied, it would mean that it was no longer possible to create a right “off the register” as it is now.122 Our provisional view is that the requirement of electronic “creation by registration” would apply to the transfer of registered estates, to registered dispositions, to the creation of registered charges, and to the express creation of any right that would be entered on the charges register. Rights that could arise without express grant or reservation or by operation of law, interests under trusts and short leases which were overriding interests would not be subject to the “creation by registration” requirement.
2.48     The move to electronic conveyancing would not prevent persons conducting their own conveyancing.123 We consider it important that this should be retained. However, such transactions would not enjoy the advantages of simultaneity that electronic conveyancing should provide.
118  See above, para 2.7.
119  See below, paras 11.5 - 11.7.
120  And therefore cost.
121  See below, paras 11.8 and following.
122  See above paras 2.7, 2.15.
123  The number of sales and purchases which are conducted by persons undertaking their own conveyancing is very small. Gifts of land and discharges of mortgages are much more commonly undertaken personally.
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Proof of title
2.49 As we have indicated above, the register itself provides proof of title to the land, except as regards matters upon which it is not conclusive, such as overriding interests.124 The provisions of the Land Registration Act 1925 which regulate the deduction of title are somewhat prescriptive in the requirements that they lay down.125 They do, of course, date from the time when the register was not open, and it was therefore necessary to obtain the registered proprietor’s consent to search the register. We examine these provisions in detail in Part XI126 and conclude that they are largely unnecessary. We conclude that the parties should be free to agree what proof of title they will require to satisfy the seller’s obligation both to have and to prove his or her title.
124  See above, para 2.4.
125  See s 110.
126  See below, para 11.35.
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PART III
DEFINITIONS AND CONCEPTS
Introduction
3.1     One of the principal weaknesses of the Land Registration Act 1925 is that it does not contain a clear statement of the fundamental elements of which it is constructed.1 The Joint Working Group considers that it would be highly desirable to set out those elements at the beginning of the Act. Part of this task involves no changes in substance to the present legislation, but a recasting of it in a form that is much clearer and more comprehensible. Although the Joint Working Group has undertaken much detailed work in preparing this reformulation, it is not a matter on which, for the most part, consultation is necessary.2 In this Part we seek the views of readers only on those matters where a change is either proposed, or where a case can be made for it.
3.2     It may be helpful for readers to know that the Joint Working Group intends that any legislation should contain definitions of the following terms—
(1)     “an interest”;
(2)     “a registered estate”;
(3)     “a registered charge”;
(4)     “an overriding interest”; and
(5)     “a minor interest”.
The first of these terms is not in fact presently defined by the Land Registration Act 1925 at all, but its nature is implicit. It encompasses any estate, charge, interest in or over land and, to the extent that these do not fall within that description, any pending action, writ, order or deed of arrangement.3 As regards the third, we seek the views of readers on a proposed definition in Part IX of this Report.4
3.3     There are however a number of specific issues on which we seek the views of readers in this Part. For convenience they may be summarised as follows—
(1) In relation to registered estates—
(a)     should there be any change in the law as to which leases are capable of registration as registered estates?
(b)     are their any incorporeal rights existing in gross which are not presently
1     This comes as no surprise, given the manner in which the Act was built up by accretion from earlier land registration statutes, particularly the Land Transfer Acts 1875 and 1897.
2     But see below, para 9.3.
3     See Land Registration Act 1925, s 59.
4     See paras 9.2, 9.3.
27
registrable that ought to be?
(c) should manors continue to be substantively registrable?
(2)     Are there any rights which are presently characterised as minor interests that ought to be elevated to the status of registered dispositions?
(3)     Should the status of the following rights that are at present in some way either uncertain or unsatisfactory be clarified or changed—
(a)     rights of pre-emption;
(b)     rights arising by estoppel or acquiescence; and
(c)      inchoate rights arising under the Prescription Act 1832?
(4)     How should the concept of “purchaser” be defined for the purposes of the law on land registration?
3.4     One aspect of the working of the present law upon which the Joint Working Group received a number of criticisms in the course of its inquiries, is the treatment of mines and minerals. For reasons which we explain,5 although we have considerable sympathy with the concerns that were raised, we have felt unable to make any recommendations at this stage to resolve them.
Registered estates
The present definition
3.5     At present, the Land Registration Act 1925 defines a registered estate as—
the legal estate, or other registered interest, if any, as respects which a person is for the time being registered as proprietor, but does not include a registered charge...6
The definition therefore includes both estates and interests in land. “Interests” is not here used in the technical sense in which it is employed in para 3.2 above, but to indicate an incorporeal hereditament.7 To avoid any confusion, we refer to these as “incorporeal rights”. We examine each in turn and raise for consultation whether there is any case for extending the range of estates and rights which can be registered with their own titles.
5     See below, para 3.13.
6     Section 3(xxiii).
7     Under Land Registration Act 1925, s 2, a person can only be registered as proprietor of a legal estate. For these purposes, a “legal estate” includes incorporeal rights over land: see ibid, s 3(xi) referring by necessary implication to Law of Property Act 1925, ss 1(1), (2) and 205(1)(x).
28
Estates which may be registered
3.6     As we have already explained,8 the only estates with which a proprietor of registered land may be registered are, subject to certain minor statutory exceptions,9 the following10
(1)     a legal fee simple absolute in possession; and
(2)     a legal term of years of more than 21 years.11
The grant of estates in mines and minerals gives rise to special considerations which are explained below.12
Registered estates: specific issues
Leases
3.7     Any lease granted for a term of 21 years or less is not capable of substantive registration13 but takes effect as an overriding interest. 14 As such a lease cannot be noted on the register of title, it can never be a minor interest.15 Any dealings with it have to be conducted in accordance with the rules of unregistered conveyancing,16 rules which are both technical17 and, as we have already explained, increasingly unfamiliar.18 Nowadays, many leases with substantially less than 21 years to run have a high capital value.19 Indeed the traditional twenty-five year business lease (which is registrable) is becoming less common and terms of fifteen years or less (which cannot be registered) are now regularly granted instead.20
8     See above, para 2.13.
9     These relate to certain underleases of 21 years or less granted to a tenant under the right to buy legislation: see Housing Act 1985, Schedule 9A, para 2.
10    See Land Registration Act 1925, ss 2, 4, 8.
11    A lease may come to be registered either when it is first granted, or in the case of a lease of unregistered land, on its assignment, if more than 21 years of the lease remains unexpired. Where a lease has been granted for more than 21 years out of a registered estate, it can be registered even though, at the time when the application for registration is made, the lease has 21 years or less to run: see Land Registration Act 1925, ss 19(2), 22(2); Ruoff & Roper, Registered Conveyancing, 21-11.
12    See para 3.13.
13    Land Registration Act 1925, ss 19(2), 22(2).
14    Ibid, s 70(1)(k). See para 5.87 below.
15    Land Registration Act 1925, s 48(1).
16    See Ruoff & Roper, Registered Conveyancing, 6-32.
17    See Mark Thompson, Barnsley’s Conveyancing Law and Practice (4th ed 1996), Chapter 10.
18    See above, para 1.6.
19    Traditionally business leases were granted for 25 years. A period of 10 to 15 years is now more common.
20    See James Robinson “Inflexible leases stifle business, warns RICS” [1997] 44 EG 52, recording a RICS-sponsored report which suggested that lease lengths fell from an average of 23 years in 1990 to 14 years in 1995. See too Jane Roberts, “Tenants set the pace” [1997] 24 EG 55 recording the trend to much shorter leases.
29
3.8     We believe that it is appropriate to consider as part of this comprehensive review of land registration whether the range of registrable leases should be widened.21 It is particularly important that it should be considered in the light of the future move to electronic conveyancing. As we explain below,22 the introduction of electronic conveyancing should offer considerable benefits. In relation to leases, one of the most important of these benefits is the reduction in the considerable paper storage and access problems associated with modern leases. If leases granted for 21 years or less remain as overriding interests, they will not benefit from the move to electronic conveyancing. Any dealings with them will be according to the increasingly unfamiliar principles of unregistered conveyancing. An extension of the registration requirements to leases granted for some duration that is less than 21 years will be warranted if it is likely to facilitate dealings with them—
(1)     by making it easier to grant or assign them;
(2)     by making it easier to access the terms of the lease; or
(3)     by increasing the security of title for any derivative interests - sub-leases and charges - which are carved out of them.
We therefore wish to know whether—
(1)     the fact that leases granted for 21 years or less are incapable of registration causes any difficulties in practice at present;23 and
(2)     practitioners foresee that it may, once electronic conveyancing is introduced.
3.9     In seeking the views of readers we wish to canvass a number of options. It would be possible to retain the present structure by which leases of a certain length are either required to be registered or take effect as overriding interests. There is however another possible approach. As the law stands, a lease which is required to be registered but is not takes effect as a minor interest and will be overridden by a disposition of the land for valuable consideration,24 unless the tenant is in actual occupation.25 It would be possible to make provision by which longer leases would remain, as now, subject to a requirement that they must be registered, but that in relation to other shorter leases, the tenant would be permitted to register the lease. In relation to this latter category, if the tenant chose not to register the lease, it would take effect as an overriding interest. Any
21    In the Land Registry Consultation Document, “Completing the Land Register in England and Wales” (1992), the Registry undertook not to consult again on new triggers for compulsory registration for five years. That period has now elapsed.
22    See para 11.14.
23    When the Law Commission sought views on the subject in October 1985 from a very limited body of specialist representatives at a seminar, there was a consensus in favour of retaining the 21 year period, “on the twin grounds of not increasing the cost and inconvenience to tenants and their professional advisers or the workload of HM Land Registry”: Law Com No 158, para 2.41. Although those two concerns have become less pressing than they were at that time, they will remain relevant until electronic conveyancing is introduced. For this seminar and those who attended, see ibid, para 2, Appendix A, Part II.
24    Land Registration Act 1925, s 101(2).
25    The lease will then take effect as an overriding interest under s 70(1)(g) (rights of persons in actual occupation). See below, para 5.56.
30
lease that was neither required nor permitted to be registered would also take effect as an overriding interest.26 It must be noted that there are possible risks in introducing any such option, and we have reservations about it. It could lead to confusion as to which leases had to be registered, and there might therefore be a failure to register where registration was necessary.27
3.10     We therefore seek the views of readers as to which of the following options they favour—
(1)     that the present law should remain unchanged;
(2)     that leases granted for a term of more than 14 years should be required to be completed by registration;
(3)     that leases granted for a term of 21 years would, as now, be required to be registered, but leases of a term of more than 14 years could be registered if the tenant (or some other person having the power to register) so wished but would otherwise take effect as overriding interests; or
(4)     that there should be some other requirements for the registration of leases (please specify).
We deliberately make no recommendation on this issue.
3.11     Even if readers think that there should be no change to the present law, we would welcome their views on the possibility of conferring on the Lord Chancellor a power to extend by statutory instrument the range of leases that were capable of registration. If at some future date consultation revealed that there was support for the registration of shorter leases, the necessary changes could then be made without the need for primary legislation. We ask readers whether they agree with our provisional recommendation that there should be a power for the Lord Chancellor by rule to reduce the duration of leases that—
(1)     may be registered as registered estates, both on first registration and in relation to dealings by a registered proprietor; and (commensurately with such a change)
(2)     can exist as overriding interests and cannot be noted on the register.
3.12     We provisionally recommend that there should be one qualification to this proposal. Rules made by statutory instrument under the Land Registration Act 1925 are not subject to annulment, but merely have to be laid before Parliament.28 We consider that
26    The suggestion is made by Roger J Smith in “Land Registration: Reform at Last?”, Paul Jackson and David C Wilde (ed), The Reform of Property Law (1997) p 129 at p 139.
27    It would also be something of an anomaly in the system of electronic conveyancing as we presently visualise it. Under the scheme which we tenatively outline in Part XI of this Report, leases other than short leases which were overriding interests, would be incapable of creation except by registering them. Leases which were overriding interests would be wholly outside the registration scheme: see below, paras 11.8 - 11.12. The clarity of that division would be blurred.
28    Land Registration Act 1925, s 144(3).
31
this procedure would not be appropriate to extend the requirement of registration to leases granted for 21 years or less because it is a step of considerable significance.29 We provisionally recommend that any such rule should be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament. We ask whether readers agree.
Mines and minerals
3.13     The grant of estates in mines and minerals requires special comment.30 Where a registered proprietor either transfers the freehold in or grants a lease for a period exceeding 21 years of all or any mines or minerals apart from the surface, the transferee or grantee must be registered as proprietor of that interest.31 Where the owner of unregistered land makes an equivalent disposition, there is no obligation to register it, because the registration of mines and minerals apart from the surface are at present exempt from the requirements of compulsory registration.32 It should also be noted that rights to coal take effect as overriding interests only.33
3.14     Although the registration of a transfer of freehold land or the grant or transfer of leasehold land is deemed to include the mines and minerals in the absence of contrary evidence,34 no indemnity is payable on account of any mines or minerals or of the existence of any rights to work or get them, unless a note is entered on the register that the mines and minerals are included in the registered title.35 In practice not only will such a note be rare, but where a grant of mines and minerals is made, the grantee will seldom be registered with an absolute title. There are a number of reasons for this which include the following—
(1) Where properties were registered prior to 1898, any severed mineral rights that were enjoyed over them were not registrable but took effect as what would now be called overriding interests. As regards titles that were registered after 1897 and before 1926, the same was true of mineral rights granted before the land was registered.36 Our inquiries suggest that such rights are still
29    Compare the power conferred by Land Registration Act 1925, s 123(4) (as inserted by Land Registration Act 1997, s 1) to add new grounds for compulsory registration (and see below, para 3.18, n 47). This too must be done by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament: ibid, s 123(5). For such “negative” or “prayer” procedure, see J A G Griffth and M A J Wheeler-Booth, Parliament: Functions, Practice and Procedures (1989) pp 245, 246; and Criminal Law: Consents to Prosecution, Consultation Paper No 149, paras 7.28 - 7.30. See further below, paras 11.19, 11.20, where we recommend the use of the same procedure in relation to a statutory instrument to introduce rules for the introduction of paperless conveyancing.
30    Cf para 3.4, above.
31    Land Registration Act 1925, ss 18(1), 21(1); Land Registration Rules 1925, rr 50, 53.
32    Land Registration Act 1925, s 123(3)(b) (inserted by Land Registration Act 1997, s 1).
33    Land Registration Act 1925, s 70(1)(m). See below, para 5.97.
34    This follows because “land” is defined to include mines and minerals: Land Registration Act 1925, s 3(viii); see Ruoff & Roper, Registered Conveyancing, 12-27. Where it is apparent from the documents of title or the admission of the proprietor that all or some of the mines and minerals have been severed from the land, a note is entered on the Property Register to indicate that they are excepted from registration: Land Registration Rules 1925, r 196.
35    Land Registration Act 1925, s 83(5)(b) (as substituted).
36    See below, para 5.95; and Ruoff & Roper, Registered Conveyancing, 6-26.
32
encountered.37
(2)     Where land was formerly copyhold, the minerals belonged to the lord of the manor and did not pass on the enfranchisement of the copyhold.38 Manorial rights of this kind may be protected by an entry on the register of the title affected, but more usually take effect as overriding interests.39
(3)     Mines and minerals may have been granted away many years ago when title was unregistered, and the fact of the severance may not have been carried forward on the title.40
3.15     We are very conscious that the treatment of mines and minerals in registered land is unsatisfactory both for historical and other reasons. In the course of our inquiries, we have been made aware of the dissatisfaction with the present position of those in the mining and extraction industries. However, we consider that rights to mines and minerals in registered land raise peculiar difficulties of a distinct kind that would be better resolved as a discrete exercise. We have therefore decided to make no recommendations in relation to such rights at this time, but we hope that it may be possible to address them fully at a future date after full consultation with interested parties.
Incorporeal rights over land
The present law
3.16     In addition to those estates of freehold and leasehold that may be registered with their own titles, there are certain interests41 - all of them incorporeal hereditaments - of which a person may be a registered proprietor. These are not specifically listed in the Land Registration Act 1925 itself. However, the Land Registration Rules 1925 make provision for the first registration with their own separate title of “manors, advowsons, rents, tithe rentcharges or other incorporeal hereditaments”.42
Incorporeal rights in gross
3.17     Some incorporeal rights may exist only as appurtenant to an estate in land. Easements fall into this category and profits à prendre may be granted or acquired as appurtenant to land. Such rights must benefit (“accommodate”) the land to which they are attached. There are however certain incorporeal rights that can exist “in gross”. These are free-standing rights that do not have to benefit other land belonging to the person who enjoys them. They include franchises, manors43 and profits à prendre which have
37    See further para 5.96 below.
38    See Ruoff & Roper, Registered Conveyancing, 12-29.
39    Land Registration Act 1925, s 70(1)(j); see below, para 5.84.
40    See Ruoff & Roper, Registered Conveyancing, 12-28.
41    We are not here using the word “interest” in the technical sense given to it in para 3.2 above, but simply to indicate an incorporeal right over land which is not an estate.
42    See r 50. This rule also deals with the first registration of certain types of corporeal land, such as flats, cellars, mines and minerals. The reference in r 50 to advowsons is now otiose, because such rights are no longer interests in land for the purposes of registered land: Patronage (Benefices) Measure 1986, s 6.
43    For our proposals on manors, see below, para 3.20.
33
been granted in gross. The Land Registration Rules 1925 expressly provide that the benefit of easements, rights and privileges (which includes profits à prendre) are not capable of registration except as appurtenant to a subsisting legal estate.44 While the sense of this is obvious in relation to easements and those profits à prendre that do not exist in gross, it is less so in relation to either profits à prendre in gross or franchises. As regards profits, it means that the owner of valuable shooting or fishing rights can only protect those rights by registering the burden of them against the land affected.45 The title cannot be proved from the register, but must be deduced by the owner as if the title to the land were unregistered. Certain franchises, especially franchises of market, are of some importance and have been the subject of much reported litigation in recent
years.46
3.18     It should be noted that—
(1)     there is at present no requirement of compulsory registration as regards registrable estates which are incorporeal hereditaments;47 and
(2)     new rentcharges can now only be created in a very few situations and most existing ones will be extinguished in 2037.48
It follows from (1) that if the list of incorporeal rights of which a person might be a registered proprietor were extended, no person who had the benefit of such a right would be thereby prejudiced. It would be entirely a matter for him or her to decide whether or not to register the right.
3.19     We do not know whether the fact that neither profits à prendre in gross nor franchises can be registered with their own title is the source of any difficulty in practice. It may be that dealings in such rights are not common and that it is not thought necessary to change the law to make provision for their registration. Once again, this is a point on which the views and experience of readers will be of the greatest assistance to us and where we make no recommendation. We ask whether readers consider that—
(1)      profits à prendre in gross; and/or
(2)     franchises; should be capable of being registered with their own titles.
44    Rule 257.
45    Land Registration Rules 1925, r 197(5). Rule 197 is concerned with the entry on the register of overriding interests. It seems intrinsically unsatisfactory that a profit à prendre that has been expressly granted can only be entered on the register under this provision. See below, para 5.14.
46    See, eg, Spook Erection Ltd v Secretary of State for the Environment [1989] QB 300.
47    Land Registration Act 1925, s 123(3)(a) (inserted by Land Registration Act 1997, s 1). The Lord Chancellor now has power by statutory instrument to add to the dispositions which are subject to the requirement of compulsory registration: Land Registration Act 1925, s 123(4) (inserted by Land Registration Act 1997, s 1). This includes the three cases listed in section 123(3) that are at present expressly excepted from the requirement, of which incorporeal hereditaments are one. For another, see below, para 3.22.
48    See Rentcharges Act 1977, ss 2, 3.
34
Manors
3.20     The position of manors requires special consideration. By “manor” we mean specifically the lordship of a manor and not other seignorial rights (which are subject to quite different considerations).49 The manorial rights of a lord of the manor are wholly incorporeal50 and may be (and commonly are) owned separately from the land that was comprised in the manor. They impose no burden on any land within the manor and they are therefore “land” only in the most abstract sense.51 Although a manor may be registered with its own title,52 the experience of the Land Registry suggests that this is no longer appropriate. The position of manors is closely analogous to that of another type of incorporeal hereditament, namely advowsons.53 For the purposes of the Land Registration Act 1925, these are no longer regarded as land.54 We consider that manors should be treated in the same way. We provisionally recommend that, for the purposes of the Land Registration Act, manors should cease to be regarded as land. Do readers agree?
3.21     The proprietary status of manors would not be affected by this change, and sales of manors would be conducted as if they were unregistered land. Our proposals would not affect either—
(1)     manors that have already been registered with their own titles (which would continue to be dealt with as registered estates);55 or
(2)     seignorial rights (which would continue to be overriding interests or minor interests).
3.22     There is one concomitant of this recommendation. Most dispositions of unregistered freehold land or unregistered leases with more than 21 years to run are now subject to the requirement of compulsory registration.56 At present, that requirement does not apply to “corporeal hereditaments which are part of a manor and are included in the sale of a manor as such”.57 The thinking behind this exception is, apparently, as
49    For seignorial rights, see below, para 5.84.
50    In practice, the principal rights conferred by ownership of a manor (apart from the title) are (i) to hold one’s own court (but this is meaningless in fact as nobody owes suit); and (ii) to have the manorial records. There may be others: see below paras 5.84 and following, and generally, Corpus Christi College, Oxford v Gloucestershire County Council [1983] QB 360, 365.
51    Cf the position of advowsons which are no longer land for the purposes of registered land: Patronage (Benefices) Measure 1986, s 6.
52    Land Registration Rules 1925, rr 50, 51.
53    An advowson is a right to present to a living in the Church of England.
54    See Patronage (Benefices) Measure 1986, s 6(2), amending Land Registration Act 1925, s 3(viii).
55    We do not propose to follow the model of advowsons to the extent of deeming the existing registered titles to manors to be closed: cf Patronage (Benefices) Measure 1986, s 6(1). We take the view that if those who own lordships of the manor have taken the trouble to register them, it would be unreasonable to remove them from the register.
56    Land Registration Act 1925, s 123 (substituted by Land Registration Act 1997, s 1).
57    Land Registration Act 1925, s 123(3)(c) (inserted by Land Registration Act 1997, s 1: this provision was formerly contained in Land Registration Act 1925, s 120(1), which was repealed by Land Registration Act 1997).
35
follows.58 The lands of the manor are appurtenant to the manor. Although the manor itself may be registered (under the present law), it is not required to be. If, therefore, the manor is not subject to compulsory registration then its appurtenances should not be either.
3.23     If manors cease to have the status of land for the purposes of land registration, then they can no longer have appurtenances. If that is so, we can see no good reason why transfers of land which would otherwise be registrable should be exempted from the requirement because they happen to be transferred with a right that is no longer regarded as land. We provisionally recommend that the exception from compulsory registration of “corporeal hereditaments which are part of a manor and are included in the sale of a manor as such” should be repealed.59 We ask whether readers agree with us.
Registered dispositions
3.24     We have explained that—
(1)     certain dispositions by a registered proprietor are called registered
dispositions;60
(2)     when registered these are given “special effect or priority”61 in the sense that the transferee or grantee takes subject only to entries on the register and overriding interests;62 and
(3)     such dispositions are guaranteed by HM Land Registry, whereas minor interests are not.63
As we indicated, the uniting characteristic of registered dispositions is that they all involve the grant or transfer of a legal estate, or the creation or reservation of a legal right over land.64 In the preceding paragraphs of this Part we have identified a number of situations in which a case could be made for registering a legal estate or interest with its own title where at present it cannot be. We seek the views of readers as to whether the range of registered dispositions should be extended. Are there any other rights or interests the creation or transfer of which are not registered dispositions, but which should be?
3.25     The provisional view of the Joint Working Group is that—
58    See Brickdale & Stewart-Wallace’s Land Registration Act 1925 (4th ed 1939), p 270.
59    It would of course have been inappropriate for the Joint Working Group to recommend this repeal in its First Report because we had not at that stage reviewed the status of manors within the scheme of registered land. It is already the case that, where there is a disposition of a manor as such that also includes the lands of the manor (which have unregistered title) and the transfer is not one on sale, it will normally be subject to the requirements of compulsory registration: see Land Registration Act 1925, s 123(1), (2), (6) (inserted by Land Registration Act 1997, s 1).
60    See above para 2.21.
61    Land Registration Act 1925 s 3(xxii).
62    See above, para 2.22.
63    See above, paras 2.21, 2.25.
64    See above, para 2.21.
36
(1)     only the creation or transfer of legal estates, rights and interests ought to be registered dispositions; and
(2)     if any new legal rights were created, then the creation or transfer of such rights should have the status of registered dispositions.
3.26     The difficulty in extending the status of registered disposition to the creation or transfer of certain minor interests lies in formulating appropriate criteria for identifying those interests for which the status would be appropriate. Once some minor interests are admitted to the fold as registered dispositions, there will be pressure for others to follow. It should also be noted that the elevation of any right to the status of a registered disposition would have implications for the evidence of title to the right or interest that would have to be deduced before the Registry could guarantee it. That could have implications for the speed and cost of registration.
3.27     However, notwithstanding our provisional view, we consider that it is important for readers to have an opportunity to express their opinions on this issue. We therefore seek the views of readers as to whether there are any rights over, or interests in land, the creation or transfer of which ought to be registered dispositions when completed by registration, but which at present are not. If it is thought that there are any such rights, on what basis should they be made registered dispositions?
Rights of uncertain status
3.28     There are a number of rights in or over land, the exact status of which is in some sense uncertain or unsatisfactory. They are as follows—
(1)     a right of pre-emption;
(2)     an equity arising by estoppel or acquiescence before effect has been given to it by a court order;
(3)     an inchoate right arising under the Prescription Act 1832.
It is in each case uncertain either whether such a right is a property right at all, or where it may be, the time at which it becomes so. This has clear implications for the means by which such rights may (if at all) be protected. The proposals which we make in relation to these rights do not derive from the Law Commission’s Third and Fourth Reports and we would be particularly grateful for the views of readers upon them.
Rights of pre-emption
3.29     A right of pre-emption is a right of first refusal. The grantor undertakes that he or she will not sell the land without first offering it to the grantee. It is similar to but not the same as an option, because the grantee can purchase the property only if the grantor decides that he or she wants to sell it.
3.30     The precise status of a right of pre-emption was considered by the Court of Appeal in Pritchard v Briggs.65 In some cases it had previously been held that it was merely a
65 [1980] Ch 338.
37
contractual right and could never be an equitable proprietary interest.66 In others, the right was held to create an equitable interest in land from its inception.67 There are also a number of statutory provisions which were enacted on the assumption that rights of pre-emption created interests in land.68
3.31 In Pritchard v Briggs,69 a majority of the Court of Appeal expressed the view that a right of pre-emption did not confer on the grantee any interest in land. However, when the grantor chose to sell the property, the right of pre-emption became an option and, as such, an equitable interest in land.70 It should be noted that the remarks of the Court of Appeal were only obiter71 and have been recognised as such.72 They have been much criticised,73 and this criticism has not escaped judicial attention.74 Not only was there no previous authority for “this strange doctrine of delayed effectiveness,”75 but if it is correct its effects can be unfortunate—
(1) It can lead to something “which a sound system of property law ought to strive at all costs to avoid: the defeat of a prior interest by a later purchaser taking with notice of the conflicting interest”,76 as indeed happened in Pritchard v Briggs itself. For example, if A grants B a right of pre-emption which B immediately registers, and A then mortgages the land to C, it seems
66    See eg, Murray v Two Strokes Ltd [1973] 1 WLR 823. This was also the view of Goff LJ, dissenting, in Pritchard v Briggs.
67    See, eg Birmingham Canal Co v Cartwright (1879) 11 ChD 421. This was also the view of Walton J at first instance in Pritchard v Briggs [1980] Ch 338.
68    See, eg Law of Property Act 1925, s 186; Land Charges Act 1972, s 2(4)(iv).
69    [1980] Ch 338.
70    Goff LJ dissented, holding that a right of pre-emption was a mere contractual right and could never be an equitable interest in land.
71    The conflict in that case was between a right of pre-emption and an option that was granted subsequently. The terms of the right of pre-emption and the option were such that they did not in fact conflict: the former was exercisable only prior to the death of the grantor, the latter only after his death. The view of the majority of the Court of Appeal, that the option would have taken priority over the right of pre-emption in any event (because it created an equitable interest in land when it was granted, whereas the right of pre-emption created no equitable interest until the grantor decided to sell the land), was therefore necessarily obiter.
72    See London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1994] 1 WLR 31, 38. Although the remarks were applied by Vinelott J in Kling v Keston Properties Ltd (1983) 49 P & CR 212, the right of pre-emption was held to have crystallised in that case and was binding on the purchaser of the land in question. In Homsy v Murphy (1996) 73 P & CR 26, M had granted H a right of pre-emption over a property, which had been protected by a notice on the register. M then granted a lease of the premises to X. In a claim for damages, M alleged that X was bound by H’s right of pre-emption (which had crystallised), that H could enforce his rights against X, and that M was not therefore liable in damages, because H has suffered no loss. The Court of Appeal rejected this argument on the basis that there was no evidence as to when M had agreed to grant the lease to X. It might have pre-dated the grant of the pre-emption to H. Although Beldam LJ referred to Templeman LJ’s views in Pritchard v Briggs, above, it was only to distinguish them.
73    See especially HWR Wade, “Rights of Pre-Emption: Interests in Land” (1980) 96 LQR 488; Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) pp 604 - 606.
74    See the remarks of Peter Gibson LJ in London & Blenheim Estates Ltd v Ladbroke Retail Parks Ltd [1994] 1 WLR 31, 38, in which both Beldam and Ralph Gibson LJJ concurred.
75    HWR Wade, “Rights of Pre-Emption: Interests in Land”, (1980) 96 LQR 488, 489.
76    Ibid.
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likely that C will not be bound by the right of pre-emption because the execution of the mortgage probably does not cause the pre-emption to crystallise into an equitable interest. C could therefore, in exercise of his paramount powers as mortgagee, sell the land free from B’s right of pre-emption.
(2)     Although the person having the benefit of a right of pre-emption may register it at the time it is created either as a land charge (where the title is unregistered)77 or as a minor interest (where the title is registered),78 the right is effective for the purposes of priority only from the moment when the grantor demonstrates an animus to sell the land, not from the date of
registration.79
(3)     Similarly, if the grantee of the right of pre-emption is in actual occupation of the land to which it relates and the title is registered, the right of pre-emption takes effect as an overriding interest under section 70(1)(g) of the Land Registration Act 1925 only when the grantor does something to indicate an intention to sell.80 The precise time when that occurs is uncertain, but it will be no later than the time when the contract to sell to a third party is
executed.81
3.32     Because the remarks in Pritchard v Briggs were merely obiter, the law cannot be regarded as finally settled, particularly in the light of the criticisms that have been made of them. We therefore propose that, for the purposes of registered land, the matter should be clarified and the effect of Pritchard v Briggs should be modified. We provisionally recommend that, for the purposes of determining priorities, a right of pre-emption should take effect as an interest in registered land from the time when it is created and we ask whether readers agree with us. The effect of this will be that such a right will be subject to the same rules on priority as any other minor interest. Furthermore, the right will exist as an overriding interest from the date upon which it is created, if coupled with actual occupation. We would emphasise that this provision would not affect the status of a right of pre-emption (whatever it may be) for other purposes - such as whether the grant of such a right is a contract for the sale or other disposition of an interest in land so as to fall within the formal requirements of the Law of Property (Miscellaneous Provisions) Act 1989,82 or whether it is subject to the rule against perpetuities.83
Rights arising by estoppel or acquiescence
3.33     The doctrine of proprietary estoppel is one of increasing importance, because it has
77    Land Charges Act 1972, s 2(4)(iv).
78    Land Registration Act 1925, ss 49(1)(c); 59.
79    Ruoff & Roper, Registered Conveyancing, 35-18.
80    Kling v Keston Properties Ltd (1983) 49 P & CR 212.
81    Ibid, at p 217.
82    Section 2. This point has not yet been the subject of any reported decision. Cf below, para 11.21.
83    Cf The Rules Against Perpetuities and Excessive Accumulations (1998) Law Com No 251, para 3.46. If the recommendations in that Report were implemented, it would be clear that the rule against perpetuities was inapplicable to rights of pre-emption.
39
become one of the principal vehicles for accommodating the informal creation of proprietary rights.84 Although the courts deprecate any attempt to define with undue precision the elements of proprietary estoppel,85 it is possible to summarise the effect of the doctrine as set out in the following paragraphs.
3.34     The owner of land, A, in some way leads or allows the claimant, B, to believe that he has or can expect some kind of right or interest over A’s land. To A’s knowledge, B acts to his detriment in that belief. A then refuses B the anticipated right or interest in circumstances that make that refusal unconscionable. In those circumstances, an “equity” arises in B’s favour. This gives B the right to go to court and seek relief. The court has a very wide discretion as to how it will give effect to this equity, but in so doing it will “analyse the minimum equity to do justice” to B.86 It will not give him or her any greater rights than he or she had expected to receive. The range of remedies that the courts have shown themselves willing to give is very wide. At one extreme, they have ordered A to convey the freehold of the land in issue to B.87 At the other, they have ordered A to make a monetary payment to B (in some cases secured on A’s
land).88
3.35     It will be apparent from this that the doctrine of proprietary estoppel involves two stages. First, the circumstances must occur which generate the “equity” in B’s favour. Secondly, the court may give effect to that equity in proceedings brought for that purpose or in which it is in issue. Clearly, once the court has declared how the equity should be satisfied there is little difficulty. If B is held entitled to a property right, that right can then be recorded in the usual manner on the register.89 In such circumstances the register can be amended to give effect to the order of the court.90 The difficulty arises in the interim period between the equity arising and effect being given to it. There is some controversy as to the status of the equity in this interim period. Because the court may not grant B any proprietary rights over A’s land, but only, say, a sum of compensation, some commentators have tended to regard B’s equity as a purely personal right.91 If that is so, it cannot be protected against third parties either as a minor interest, or by B’s actual occupation of the land affected, as an overriding interest.92 Against this however, there are good reasons for regarding the inchoate
84    For proprietary estoppel as the means of creating rights in or over property, see Western Fish Products Ltd v Penwith District Council (1978) [1981] 2 All ER 204, 217; West Middlesex Golf Club Ltd v Ealing London Borough Council (1993) 68 P & CR 461, 478.
85    See, eg Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd (1979) [1982] QB 133, 148.
86    Crabb v Arun District Council [1976] Ch 179, 198, per Scarman LJ.
87    See, eg Pascoe v Turner [1979] 1 WLR 431.
88    See, eg Baker v Baker [1993] 2 FLR 247.
89    See Graham Battersby “Informal Transactions in Land, Estoppel and Registration” (1995) 58 MLR 637, 641, 642.
90    See Land Registration Act 1925, s 82(1)(a).
91    See D J Hayton “Developing the Law of Trusts for the Twenty-First Century” (1990) 106 LQR 87, 97, n 26.
92    Under the Land Registration Act 1925, s 70(1)(g).
40
equity as a property right.93 There is indeed some authority that, where title to the land is unregistered, the equity is binding on both a purchaser of the land affected who has notice of B’s rights94 and a donee regardless of notice.95 Furthermore, where the title is registered, not only has it been accepted that an equity arising by estoppel coupled with actual occupation could be an overriding interest,96 but it is already the practice of the Land Registry to allow such an equity to be registered as a minor interest.97
3.36     In view of the increasing importance of estoppel as a mechanism for the informal creation of rights over land, it is obviously desirable to clarify in relation to registered land the status of an equity arising by estoppel before effect has been given to it by a court order. We therefore provisionally recommend that an equity arising by estoppel or acquiescence in relation to registered land should be regarded as an interest from the time at which it arises.98 This will make clear that such an equity is a minor interest and that it may also exist as an overriding interest where the person having the benefit of it is in actual occupation.
Inchoate rights arising under the Prescription Act 1832
3.37     In Part X of this Report, we examine the prescription of easements and profit à prendre over registered land.99 We explain that there are three methods by which easements may be acquired by prescription - at common law, by the doctrine of lost modern grant, and under the Prescription Act 1832.100 The status of rights in the course of acquisition by prescription over registered land under the 1832 Act is uncertain101 due
93    See in particular Graham Battersby, “Contractual and Estoppel Licences as Proprietary Interests in Land” [1991] Conv 36, 45; Simon Baughen, “Estoppels Over Land and Third Parties: An Open Question” (1994)14 LS 147, 154; Graham Battersby, “Informal Transactions in Land, Estoppel and Registration” (1995) 58 MLR 637, 642.
94    Duke of Beaufort v Patrick (1853) 17 Beav 60, 78; 51 ER 954, 961; Inwards v Baker [1965] 2 QB 29, 37; E R Ives Investment Ltd v High [1967] 2 QB 379. In Lloyds Bank Plc v Carrick [1996] 4 All ER 630, 642, Morritt LJ commented that “[i]n the circumstances it is unnecessary to consider further the submission... to the effect that a proprietary estoppel cannot give rise to an interest in land capable of binding successors in title. This interesting argument will have to await another day, though it is hard to see how in this court it can surmount the hurdle constituted by the decision of this court in Ives v High”.
95    Voyce v Voyce (1991) 62 P & CR 290, 294, 296.
96    Lee-Parker v Izzet (No 2) [1972] 1 WLR 775, 780, obiter. Cf Habermann v Koehler (1996) 73 P & CR 515, where the Court of Appeal remitted a case for a retrial to determine inter alia whether an equity arising by estoppel could bind a purchaser as an overriding interest under Land Registration Act 1925, s 70(1)(g).
97    Under the Land Registration Act, ss 49(1)(f) (notice); 54(1) (caution). See Ruoff & Roper, Registered Conveyancing, 8-02; 35-33; 36-13.
98    It has not been definitively settled when an equity arises. At the very latest it will be when the circumstances make it unconscionable for the land owner, A, to go back on the expectation which he has created by representation or conduct: Lim v Ang [1992] 1 WLR 113, 118. In most cases that will be when the other party, B, has acted to his detriment in reliance upon the expectation. That moment will not always be easy to define.
99    See below, paras 10.79 and following.
100  See below, paras 10.80 - 10.86.
101  No similar uncertainty exists in relation to the rights of an adverse possessor. From the time that he takes adverse possession, a squatter has a fee simple absolute in possession. This is so regardless of the estate against which he is adversely possessing. The squatter’s fee is of course liable to defeasance by a person having a better right to possess. See Rosenberg v Cook (1881) 8 QBD 162, 165; below, para 10.22.
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to the provisions of that Act. By that Act, certain rights are deemed to be either free from challenge on the ground that they had not been enjoyed since 1189, or “absolute and indefeasible”, depending on the nature of the right asserted and the length of time that it has been exercised without interruption.102 However, each of the specified periods is “deemed and taken to be the period next before suit or action” in which “the claim or matter to which such period may relate shall have been brought into question”.103 This provision has been taken to mean that it is only on the commencement of legal proceedings that “the enjoyment... shall ripen into a right”.104 In consequence of this—
however long the period of actual enjoyment, no absolute or indefeasible right can be acquired till the right is brought in question in some action or suit. Until it be so brought in question, the right, if it can be called a right, is inchoate only...105 (italics added).
3.38 In Part X, we provisionally recommend that, for the future, the only means by which an easement or profit à prendre could be established should be under the Prescription Act 1832. It would no longer be possible to rely upon prescription at common law or by lost modern grant.106 Even if readers reject these proposals, there is a problem that needs to be addressed. In many cases where prescription under the Prescription Act 1832 could be established, prescription at common law (or more usually) under the doctrine of lost modern grant could also be successfully asserted.107 In such cases, if the necessary preconditions are met, the right can be regarded as established. It is not in any sense “inchoate”. There may however be cases where a right can only be established under the Prescription Act 1832 and not at common law or under the doctrine of lost modern grant. This will be so in some cases where the servient owner lacked the capacity to grant such an easement.108 There is a real risk in such cases that a person, who has been exercising a right over registered land for more than the relevant period prescribed by the Prescription Act 1832,109 might find that his right was defeated. This is because that right might be regarded as being too shadowy to exist as an overriding interest110 and so not bind a purchaser of the servient land. To avoid these difficulties we provisionally recommend that rights acquired or in the course of being acquired by prescription, whether or not such rights are regarded as inchoate, shall be interests for the purposes of the Act.
102  Sections 1 (rights of common and profits à prendre); 2 (rights of way and other easements); and 3 (rights of light). See below, para 10.82.
103  Prescription Act 1832, s 4.
104  Cooper v Hubbuck (1862) 12 CB(NS) 456, 467; 142 ER 1220, 1225, per Willes J.
105  Hyman v Van den Bergh [1907] 2 Ch 516, 524 - 5, per Parker J, approved on appeal: [1908] 1 Ch 167. See too Colls v Home and Colonial Stores Ltd [1904] AC 179, 189 - 190; Newnham v Willison (1987) 56 P & CR 8, 12.
106  See below, para 10.94.
107  These are explained below, paras 10.81; 10.84 - 10.86.
108  For the circumstances in which this will be the case, see J Gaunt & P Morgan, Gale on Easements (16th ed 1996), paras 4-58 - 4-60.
109  The different periods laid down in that Act are in fact measured backwards from the time when proceedings are brought in which the right is in issue: s 4.
110  We provisionally recommend that prescriptive rights in the course of acquisition should be overriding interests: see para 5.17 below.
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Purchasers
The definition of “Purchaser”
3.39     In the Third Report, two proposals were made as to the definition of “purchaser” for the purposes of the Land Registration Act 1925.111 These were that all purchasers and transferees—
(1)     should take free of an unregistered minor interest only if they were in good faith for valuable consideration; but
(2)     would not be regarded as dishonest merely because they had actual knowledge of the unprotected minor interest in question.
3.40     The reasons given in the Third Report for the first of these proposals were that—
(1)     it would resolve an ambiguity as to whether a “transferee” for valuable consideration (who takes free of unregistered minor interests) was “a purchaser” for the purposes of the Act;112 and
(2)     it would ensure that the definition of “purchaser” in the Land Registration Act 1925113 remained in line with that which is found in the Law of Property Act 1925 and the Settled Land Act 1925.114
It is clear that the Commission intended that on a transfer of registered land for valuable consideration, the transferee would take free of unregistered minor interests only if he or she were in good faith and that the question of good faith could therefore be in issue.115 This might appear unremarkable. However, the result that the Commission desired appears to be very similar to the situation that applies under Torrens systems of title registration in Australia and New Zealand, under which a purchaser of land acquires an indefeasible title free of unregistered interests except in cases of fraud.116 Actual knowledge of an unregistered interest without more is not for these purposes fraud.117 Although the courts insist that there must be “actual fraud, ie, dishonesty of some sort, not what is called constructive or equitable fraud”,118 it has
111  Law Com No 158, paras 4.14 - 4.15. These proposals were incorporated in the Draft Bill in the Fourth Report: see Law Com No 173, Draft Bill, Cls 70(1) and 9(4) respectively.
112  Compare Land Registration Act 1925, ss 20(1), 23(1) (which concern transferees for valuable consideration), with s 3(xxi), which defines a purchaser as “a purchaser in good faith for valuable consideration and includes a lessee, mortgagee, or other person who for valuable consideration acquires any interest in land or any charge on land”. In Peffer v Rigg [1977] 1 WLR 285, 293, 294, Graham J had held that where a transferee within s 20(1) was in fact a purchaser, he or she was to be regarded as a “purchaser” for the purposes of the definition in the Act and therefore had to be “in good faith”.
113  Section 3(xxi) (set out in the preceding footnote).
114  Sections 205(1)(xxi) and 117(1)(xxi) respectively. In each case, purchaser is defined as “a purchaser in good faith” for value or valuable consideration.
115  Though the onus of proving lack of good faith would have rested on the person with the unprotected minor interest: Law Com No 158, para 4.17.
116  See, eg ss 42, 43, Transfer of Land Act 1958 (Victoria).
117  Ibid.
118  Assets Co Ltd v Mere Roihi [1905] AC 176, 210, per Lord Lindley.
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been said that “the meaning of the concept of fraud within the Torrens system is far from clear”.119 The experience under such Torrens systems suggests that the existence of the uncertain exception of fraud may undermine the indefeasibility of registered title.120 Given this criticism, it would be unfortunate if these principles were introduced into the English system, not least because it would require courts to investigate the motives of the parties to a transaction, a task of peculiar difficulty.121As we explain in Part XI of this Report, when electronic conveyancing is introduced, it will be impossible to create many types of right or interest except by registering them.122 In relation to such rights and interests, the difficulty considered in this paragraph could not therefore arise. Even so, electronic conveyancing is still some way off, and there will be certain categories of rights and interests that will still be capable of being created without registration.123
3.41     The present definition of “purchaser” in the Land Registration Act 1925 as “a purchaser in good faith” is a legislative accident.124 The Law of Property Act 1922 amended the Land Transfer Acts as a prelude to their consolidation in what is now the Land Registration Act 1925. Amongst the amendments was the insertion of a definition of “purchaser” as including “a lessee, mortgagee, or other person who for valuable consideration acquires any interest in land or in any charge on land”.125 That definition contained no reference to good faith. There was no further amendment to this provision by the Law of Property (Amendment) Act 1924. By some quirk however, the words “in good faith” were included in the Land Registration Act 1925, which was a consolidating Act and, as such, not intended to change the law.
3.42     Instead of following the definition of “purchaser” in the Law of Property Act 1925 and the Settled Land Act 1925, we consider that it would be more appropriate to revert to what was intended to be in the Land Registration Act 1925 and what is actually found in the Land Charges Act 1972. The latter is also a registration statute and its underlying assumption (like that of the Land Registration Act 1925) is that registration takes the place of notice. That Act defines “purchaser” as “any person (including a mortgagee or lessee) who, for valuable consideration takes an interest in land or in a charge in land”.126 It is the intention of the Joint Working Group that in drafting any
119  I J Hardingham, “Midland Bank Trust v Green under the Torrens System” (1982) 2 OJLS 138, 140. It is fraud if the purchaser is party to a sham transaction that is set up to defeat an unregistered interest, or knows of the vendor’s fraudulent purpose to defeat such an interest by means of a sale: ibid.
120  See, eg R Sackville, “The Torrens System - Some Thoughts on Indefeasibility and Priorities” (1973) 47 ALJ 526, 540 et seq.
121  Midland Bank Trust Co Ltd v Green [1981] AC 513, 530. See the criticisms of Law Com No 158 on this point: Roger J Smith, “Land Registration Reform - The Law Commission’s Proposals” [1987] Conv 334, 346 - 347.
122  See below, paras 11.8 - 11.11.
123  See below, para 11.12.
124  See Professor D C Jackson, “Security of Title in Registered Land” (1978) 94 LQR 239, 244 -246.
125  Law of Property Act 1922, Sched 16, para 2(2).
126  Land Charges Act 1972, s 17(1).There are however special exceptions in cases of bankruptcy where a purchaser of a legal estate in good faith for money or money’s worth will, in certain circumstances, take free of a petition in bankruptcy or a bankruptcy order: see ibid, ss 5(8), 6(5), 6(6). Concepts of good faith are employed elsewhere in dealings which involve a bankrupt’s property: see, eg Insolvency Act 1986, s 342 (as amended by Insolvency (No 2) Act 1994, s 2).
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new legislation the doubts that have arisen as to whether and when a transferee for value is a purchaser should be avoided.
3.43     At present, the Act defines “valuable consideration” so as to include marriage but not a nominal consideration in money.127 We consider that marriage consideration is an anachronism and should cease to be regarded as valuable consideration in relation to dealings with registered land. A transfer of land in consideration of marriage is in substance in most cases a wedding gift. We therefore propose that for the purposes of the Act—
(1)     marriage should cease to be valuable consideration; and
(2)     a transfer of land in consideration of marriage should be regarded as a gift.128
Doctrines of notice and registered land
3.44     In proposing this new definition of “purchaser” we are concerned to emphasise what is generally assumed to be the case, namely that issues of good faith and notice are, subject to certain statutory exceptions,129 irrelevant in relation to registered land.130 The point is not wholly free from doubt because of the attempt to import doctrines of good faith and notice into registered conveyancing by the much-criticised decision in Peffer v Rigg.131 In that case, Graham J, applying the definition of “purchaser” that is presently found in the Land Registration Act 1925,132 held that a purchaser could not be in good faith if he had notice of something which affected his title. It is generally assumed that this reasoning cannot be supported and our new definition of purchaser should preclude any possible repetition of it. However, we consider that the matter should be placed beyond doubt by a statement in the Act of the general principle that the doctrine of notice should have no application in dealings with registered land except where the Act expressly provides to the contrary.
3.45     In making this recommendation, we are very conscious that we are going against the
127  Land Registration Act 1925, s 3(xxxii).
128  It is important that such a transfer should be designated a gift. Transfers of unregistered land made by way of gift are now subject to the compulsory registration provisions found in Land Registration Act 1925, s 123(1), (6)(a)(ii), as substituted by Land Registration Act 1997, s 1.
129  See Land Registration Act 1925, ss 33(3) and 61(6). Cf s 59(6).
130  “The doctrine of notice has no application to registered conveyancing”: Williams & Glyn’s Bank Ltd v Boland [1981] AC 487, 508, per Lord Wilberforce ; “...the doctrine of purchaser for value without notice has no application to registered land...”: Barclays Bank Plc v Boulter [1998] 1 WLR 1, 11, per Mummery LJ. See too Frazer v Walker [1967] 1 AC 569, 582, where, in the context of the New Zealand Land Transfer Act 1952, Lord Wilberforce observed that “[i]n all systems of registration of land it is usual and necessary to modify and indeed largely to negative the normal rules as to notice, constructive notice, or enquiry as to matters possibly affecting the title of the owner of the land”.
131  [1977] 1 WLR 285. The criticisms are conveniently summarised in K J Gray, Elements of Land Law (2nd ed 1993) pp 190 - 193.
132  Section 3(xxi).
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view strongly expressed by a number of distinguished academic commentators.133 They have urged us to introduce a principle by which purchasers of registered land would be bound by registrable but unregistered interests affecting that land of which they had actual knowledge (but not merely constructive notice). To do so, it is said, would “allow a more truly equitable allocation of priority”134 by introducing into the registered system an “ethical element”.135 The position has been summarised as follows—
One can readily comprehend the argument that a purchaser who is aware of an unprotected right should not be able to take advantage of a failure to register it. Whilst one of the most important benefits of registration is the ouster of constructive notice, protection of purchasers who are aware of unprotected interests is less easy to defend. As has been observed time and time again, the courts strive to find means of holding these purchasers bound: judges obviously feel that justice points in that direction. That may be reasonable on the facts of a particular case, but the question facing the law reformer is whether it causes an unacceptable level of uncertainty for
purchasers generally.136
3.46 We have the greatest respect for these views and for the concerns that underlie them. However, we have concluded - as the Law Commission has done on two previous occasions137 - that there should in general be no place for concepts of knowledge or notice in registered land. We have reached this conclusion for the following reasons—
(1)     It was intended that the system of registration under the Land Registration Act 1925 should displace the doctrine of notice.138
(2)     There is little evidence of which we are aware that the absence of the doctrine of notice in dealings with registered land has been a cause of injustice in the seventy-two years in which the present system has been operative.
(3)     The ethical argument is weaker than at first sight it appears to be if the issue is considered in relation to those principles which should in our view, guide
133  Graham Battersby “Informal Transactions in Land, Estoppel and Registration” (1995) 58 MLR 637; Jean Howell, “Notice: A Broad and a Narrow View” [1996] Conv 34; Roger J Smith, “Land Registration: Reform at Last” in Paul Jackson and David C Wilde (ed), The Reform of Property Law (1997) p 129. We have also been urged to adopt the principles relating to notice for a very different purpose. In “The Proprietary Effect of Undue Influence” [1995] Conv 250, 253, Peter Sparkes suggests that “[T]he Land Registration Act 1925 requires urgent amendment to allow a bona fide purchaser to override overriding interests”. We consider what is probably the most significant aspect of this point further below, para 5.71.
134   Jean Howell, “Notice: A Broad and a Narrow View” [1996] Conv 34, 42.
135  Graham Battersby “Informal Transactions in Land, Estoppel and Registration” (1995) 58 MLR 637, 655.
136  Roger J Smith, “Land Registration: Reform at Last” in Paul Jackson and David C Wilde (ed), The Reform of Property Law (1997) p 129 at p 136.
137  Property Law: The Implications of Williams & Glyn’s Bank Ltd v Boland (1982) Law Com No 115, Appendix 2, paras 16 - 17; Third Report (1987) Law Com No 158, para 2.62.
138  See Property Law: The Implications of Williams & Glyn’s Bank Ltd v Boland (1982) Law Com No 115, Appendix 2, para 17; Mark P Thompson, “Registration, Fraud and Notice” [1985] CLJ 280, 289, 290.
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the development of land registration.139 Registration should be regarded as an integral part of the process of creating or transferring interests in registered land, closely akin to the formal requirement of using a deed (or in some cases, writing) in unregistered conveyancing. Just as a deed is required to convey or create a legal estate or interest in unregistered conveyancing,140 a disposition of registered land must be completed by registration if it is to confer a legal estate or interest.141 When electronic registration is introduced, it seems probable that many rights will be incapable of being created except by registering them.142
(4)     In practice, if it were provided that unregistered rights in or over registered land were binding because a purchaser had actual knowledge of them, it would be very difficult to prevent the introduction by judicial interpretation of doctrines of constructive notice. If actual knowledge sufficed, the question would inevitably be asked: why not wilful blindness as well?143 In reality the boundary between actual knowledge and constructive notice is unclear and is, in our view, incapable of precise definition.144
(5)     The mere fact that a purchaser could be bound if he or she had actual knowledge of an unregistered right or interest would inevitably weaken the security of title that registered land at present provides. Disappointed third parties, who found their rights apparently defeated by a purchaser, would threaten litigation. Because of the nuisance value of such threats, purchasers would often settle out of court.
3.47     We do however acknowledge that there is a need for some form of “safety valve” in the registration system, for cases where parties cannot reasonably be expected to register their rights.145 This requirement is substantially met by the category of overriding interests, which we consider in Parts IV - V.
3.48     Furthermore, we consider that the separate but related concerns that underlay the
139  See above, para 1.14.
140  Law of Property Act 1925, s 52.
141  Land Registration Act 1925, ss 19, 22 and 26. Although a deed is at present required to make a registered disposition (see Ruoff & Roper, Registered Conveyancing, 15-12, for discussion), its functions are evidential, cautionary and standardising rather than dispositive. (For these and other functions of formality requirements, see J D Feltham, “Informal Trusts and Third Parties” [1987] Conv 246, 248, 249.) The effect of the deed is shortlived and is spent once the disposition is registered. For possible future developments, see below, paras 11.21 - 11.23.
142  See below, para 11.10.
143  Compare the as yet unresolved arguments over the degree of knowledge or notice that is required to make a person liable for receiving trust property transferred in breach of trust. In fairness, those who advocate the introduction of actual knowledge address this point. Thus Professor Battersby comments that “[w]e must certainly avoid any repetition of the kinds of difficulties in which the courts have become ensnared in defining the degree of knowledge necessary to establish liability for knowing receipt of trust property..., but this problem is soluble by careful thought and skillful drafting”: “Informal Transactions in Land, Estoppel and Registration” (1995) 58 MLR 637, 656. We do not share his optimism.
144  Cf Roger J Smith, Property Law (2nd ed 1998), p 224.
145  Eg, because the right can be created informally.
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proposal in the Third Report,146 are already met. This is because the law provides a wide range of personal remedies against those who in some way behave improperly.147 The operation of these personal remedies can be demonstrated by four examples:
(1)     If A transfers trust property to B in breach of trust and B knows or (perhaps) has notice of this, B is liable as constructive trustee for “knowing receipt” of trust property.148 Liability is personal and not proprietary and the obligation is to make restitution for the loss suffered by the trust. It has been assumed that this form of liability may apply where the trust property transferred is registered land and the rights of the beneficiaries have not been protected, so that as a matter of property law, the transferee takes the land free of the
trust.149
(2)     If property is transferred by A to B expressly subject to some right of C’s which will not in fact bind B,150 a constructive trust may be imposed upon B if he refuses to give effect to C’s right in circumstances in which that refusal is unconscionable.151 B can in this way be compelled to give effect to C’s rights. This principle has emerged clearly only since the publication of the Third and Fourth Reports.152
(3)     There may be circumstances where tortious liability is imposed because A conspires with B to defeat C’s proprietary rights.153
(4)     If B induces A by misrepresentation or undue influence to charge his or her property to C to secure B’s debts, A will be able to set the charge aside if C has notice of B’s misconduct.154
3.49 In each of these cases, a purchaser may acquire the registered land free from the rights of the third party, yet find himself personally liable for the loss suffered by that third
146  Law Com No 158, paras 4.14 - 4.15.
147  See Mark Thompson, “Registration, Fraud and Notice” [1985] CLJ 280.
148  The Law Commission is presently examining the liability of persons who receive trust property transferred in breach of trust.
149  Eagle Trust Plc v SBC Securities Ltd [1993] 1 WLR 484, 503 - 504.
150  Perhaps because it requires registration but has not been registered, or because it is a purely personal right, such a contractual licence.
151  Ashburn Anstalt v Arnold [1989] Ch 1, 22 - 26. See too IDC Group Ltd v Clark [1992] 1 EGLR 187, 189 - 190.
152  The principle is not without its difficulties. It is a novel use of a constructive trust to compel a person to give effect to a contractual undertaking or to make them bound by some form of encumbrance. In all other cases in which a constructive trust is imposed, the trustee becomes subject to one or more aspects of a trustee’s or fiduciary’s obligations or liabilities.
153  See Midland Bank Trust Co Ltd v Green (No 3) [1982] Ch 529.
154  See Barclays Bank Plc v O’Brien [1994] 1 AC 180 (laying down both the principle and the circumstances in which C would be fixed with notice). As Mummery LJ explained in Barclays Bank Plc v Boulter [1998] 1 WLR 1, 11, “[i]n O’Brien cases it is irrelevant whether the land is registered or unregistered: the question is whether the third party creditor has actual or constructive notice of the facts on which the equity to set aside the transaction is founded” (citing Martin Dixon and Charles Harpum, “Fraud, Undue Influence and Mortgages of Registered Land” [1994] Conv 421). This is just one example where a personal equity exists against a person who has a registered estate or charge.
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party or subject to some personal equity, which enables the transaction to be set aside. This accords with the principle applicable under Torrens systems that indefeasibility of title, “in no way denies the right of the plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant”.155 In addition to any claims which he may have against the purchaser, the third party may have remedies against the person who transferred the land whether for breach of trust or contract or in tort.
3.50     In the light of these considerations, we provisionally recommend that—
(1)     “purchaser” should be defined to mean “any person (including a mortgagee or lessee) who, for valuable consideration takes an interest in land or in a charge on land”;
(2)     “valuable consideration” should for these purposes be defined to mean money or money’s worth but should not include marriage or a nominal consideration in money;
(3)     a transfer of land (whether registered or unregistered) for marriage consideration should take effect as a gift for the purposes of the Act;
(4)     it should be made clear in the Act that the doctrine of notice shall not apply to dealings with registered land except in those cases where the Act expressly provides to the contrary.
We ask whether readers agree with our provisional view and, if they do not, what their preferred approach would be in relation to each of these issues.
Summary and key issues
3.51     In this Part we consider and seek views on whether the estates which must or may be registered as registered estates with their own titles should be extended to—
(1)     leases granted for a term of more than 14 years (rather than 21 as at present);
(2)     profits à prendre in gross; and
(3)     franchises.
We offer as a possible alternative to (1) the possibility of retaining the present position by which leases granted for more than 21 years are required to be registered, but permitting leases of more than 14 years to be registered.
3.52     We also recommend that—
(1) the Lord Chancellor should have power to reduce by statutory instrument the duration of leases that must be registered; and
155 Frazer v Walker [1967] 1 AC 569, 585, per Lord Wilberforce. See D Skapinker, “Equitable Interests, Mere Equities, ‘Personal’ Equities and ‘Personal Equities’ - Distinctions with a Difference” (1994) 68 ALJ 593.
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(2) manors should cease to be regarded as land for the purposes of the Land Registration Act (and so be incapable of protection by registration).
3.53     We ask readers whether the range of registered dispositions should be extended to the creation or transfer of any rights or interests in land which do not have that status under the present law.
3.54     We seek to clarify the status of certain rights which are at present uncertain, and recommend that—
(1)     for the purposes of determining priorities, rights of pre-emption should take effect as interests in registered land from the time at which they are created;
(2)     in relation to registered land, an equity arising by estoppel or acquiescence should be regarded as an interest from the time at which it arises; and
(3)     rights acquired or in course of being acquired by prescription should be regarded as interests in registered land.
By characterising any of these rights as an interest, it would be capable of protection, either as a minor interest by an entry on the register, or, where the person having the benefit of the right is in actual occupation of the land, as an overriding interest.
3.55     Finally, we make recommendations as to the meaning of both “purchaser” and “valuable consideration” in any legislation. We take the view that considerations of good faith and notice are unnecessary in dealings with registered land both because of the protection given to overriding interests and because of the wide range of personal remedies that are available to counteract unconscionable conduct.
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PART IV
OVERRIDING INTERESTS - THE
APPROACH TO REFORM
Introduction
4.1     In Parts IV and V we examine overriding interests. These are, by definition, interests in or over registered land which do not appear on the register but which will nevertheless bind transferees of the land.1 All but one of the rights that can exist as overriding interests are currently listed in section 70(1) of the Land Registration Act 1925.2 Because such rights subsist and operate outside the register, they are an inevitable source of tension within the land registration system. In making proposals for reform there is often a difficult balance to be struck between, on the one hand, the desire to achieve a fair result in individual cases, and on the other, the goal of making conveyancing simpler, quicker and cheaper, which is the justification for title registration.
4.2     The structure of this Part is as follows. First, we explain the rationale of overriding interests. Secondly, we consider the criticisms that have been made of such interests as a category of rights in registered land. Thirdly, we examine some of the proposals for reform that were made by the Law Commission in its Third Report and explain why we are unable to accept two of its principal recommendations. Finally, we outline the strategy that we have adopted towards reform and the principles upon which it is based.
4.3     Although we consider the different overriding interests individually in Part V of this Report, it may be helpful at this stage to indicate in summary form the nature of the rights in question.3 The following are the main categories of overriding interests—
(1)     certain easements and profits, customary and public rights4 and appurtenant
rights;5
(2)     liabilities having their origins in tenure;6
(3)     liabilty to repair a church chancel;7
1     See Land Registration Act 1925, s 3(xvi).
2     For the exception, see below para 5.2. Until recently, there were two categories of overriding interests that were not listed in s 70(1). However, one of these has now been added to the section by amending legislation: see s 70(1)(m); below, para 5.97.
3     This is not intended to be a precise list. For the exact content of each of the categories, see Part V.
4     Land Registration Act 1925, s 70(1)(a); below, paras 5.2, 5.25 and 5.30.
5     Land Registration Rules 1925, r 258; below, para 5.2.
6     Land Registration Act 1925, s 70(1)(b); below, para 5.32.
7     Ibid, s 70(1)(c); below, para 5.37.
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(4)     liability in respect of embankments, and sea and river walls;8
(5)     liability to make various payments in lieu of tithe or tithe rentcharge;9
(6)     squatters’ rights;10
(7)     rights of persons in actual occupation;11
(8)     interests excluded from the effect of registration where the proprietor is registered with a title other than absolute title;12
(9)     local land charges;13
(10)   seignorial and manorial rights and franchises;14
(11)   leases granted for 21 years or less;15
(12)   certain mineral rights in relation to property registered prior to 1926;16 and
(13)   rights in coal.17
The rationale of overriding interests
Why do we have overriding interests?
4.4 The orthodox explanation for the existence of overriding interests is that they are—
various minor liabilities which are not usually, or at any rate not invariably, shown in title-deeds or mentioned in abstracts of title, and as to which, therefore, it is impracticable to form a trustworthy record on the register... As to these, persons dealing with registered land must obtain information aliunde in the same manner and from the same sources as persons dealing with unregistered land obtain it.18
The way in which the law on overriding interests has developed over the last seventy-two years has demonstrated that overriding interests are by no means only “minor liabilities”. Furthermore, as will become apparent from the analysis of individual
8     Ibid, s 70(1)(d); below, para 5.38.
9     Ibid, s 70(1)(e); below, para 5.40.
10    Ibid, s 70(1)(f); below, para 5.42.
11    Ibid, s 70(1)(g); below, para 5.56.
12    Ibid, s 70(1)(h); below, para 5.78.
13    Ibid, s 70(1)(i); below, para 5.80.
14    Ibid, s 70(1)(j); below, para 5.84.
15    Ibid, s 70(1)(k); below, para 5.87.
16    Ibid, s 70(1)(l); below, para 5.95.
17    Ibid, s 70(1)(m); below, para 5.97.
18    Brickdale & Stewart Wallace’s Land Registration Act, 1925 (4th ed 1939) p 190. The substance of the passage is retained in Ruoff & Roper, Registered Conveyancing, 6-04.
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overriding interests in Part V of this Report, this explanation of the rationale of such interests is no longer correct in all respects, whatever the position may have been perceived to be when the legislation was first enacted. Most overriding interests do appear to have one shared characteristic, however, that is related to the orthodox explanation of them, namely that it is unreasonable to expect the person who has the benefit of the right to register it as a means of securing its protection. As we shall explain, not every overriding interest can be justified on that basis, and this in itself is a reason for examining such interests in detail. An examination of the list of overriding interests -at least as they have come to be understood in practice - suggests that most of them fall into five tolerably clear categories.
Categories of overriding interests
Those which provide a means of accommodating rights which may be created informally or where the origins of the rights may be obscure
4.5     First, overriding interests provide a means of accommodating rights which can be created (or may arise) informally, and where registration at the time of creation may therefore be unrealistic. These include—
(1)     easements that arise by prescription or by implied grant or reservation;19
(2)     the rights of adverse possessors;20 and
(3)     in the case of persons in actual occupation, rights arising by estoppel or constructive trust.21
4.6     The inclusion of customary and public rights as overriding interests,22 is justifiable on a similar basis, namely the obscurity that may surround their origins. Customary rights can only be established by long user - in theory (but not in practice) this must be shown from the beginning of legal memory in 1189.23 Although public rights can of course arise in other ways, it is not uncommon for their origins to be uncertain and undocumented and, in effect, to depend upon proof of long exercise.24
Rights that had overriding status prior to 1926
4.7     Secondly, rights which were the equivalent of overriding interests under the previous land registration legislation25 became overriding interests under the Land Registration
19    See Land Registration Act 1925, s 70(1)(a); but note the doubts about whether such rights arising by implied grant and reservation really are accommodated by the system of registered title: below, para 5.11.
20    Land Registration Act 1925, s 70(1)(f); below, para 5.42.
21    Ibid, s 70(1)(g); below, para 5.56.
22    Ibid, s 70(1)(a); below, paras 5.25, 5.30.
23    See Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 849. There is in fact some uncertainty as to the sense in which the expression “customary rights” is employed in the Land Registration Act 1925: see below, para 5.25.
24    Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 844.
25    See Land Transfer Act 1875, s 18, as amended by the Land Transfer Act 1897. The rights were rather clumsily described as interests which were not deemed to be encumbrances within the meaning of the Land Transfer Act 1875.
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Act 1925.26 Most of these rights were of a kind that could no longer be created. The overriding interests that fall within this category are—
(1)     liability to repair highways by reason of tenure, quit-rents, crown rents, heriots, and other rents and charges having their origin in tenure;27
(2)     chancel repair liability;28
(3)     liability in respect of embankments, and sea and river walls;29
(4)     liability to make various payments in lieu of tithe or tithe rentcharge;30
(5)     seignorial and manorial rights and franchises;31 and
(6)     in relation to land registered—
(a)     prior to 1898, mineral rights created before that date; and
(b)     after 1897 and before 1926, mineral rights created prior to first
registration.32
It would obviously have been unreasonable in those circumstances to impose an obligation to register such rights.33
Incorporeal rights in existence at the time of first registration but not registered
4.8 Thirdly, incorporeal rights such as easements and profits, which were in existence but were not noted on the register at the time of the first registration of the land burdened by them, take effect as overriding interests.34 The status of overriding interest here acts as a “fail-safe” mechanism to protect such rights in case they do not come to light on
first registration.35
26    The five categories of overriding interest that were introduced for the first time in the Land Registration Act 1925 were (i) customary and public rights (s 70(1)(a)); (ii) the rights of adverse possessors (s 70(1)(f)); (iii) the rights of persons in actual occupation (s 70(1)(g)); (iv) the rights excepted from the effect of registration in cases where title was registered with some title other than absolute (s 70(1)(h)); and (v) rights under local land charges (s 70(1)(i)).
27    See Land Registration Act 1925, s 70(1)(b); below, para 5.32.
28    Ibid, s 70(1)(c); below, para 5.37.
29    Ibid, s 70(1)(d); below, para 5.38.
30    Ibid, s 70(1)(e); below, para 5.40.
31    Ibid, s 70(1)(j); below, para 5.84.
32    Ibid, s 70(1)(l); below, para 5.95.
33    There are other situations in the 1925 property legislation where a registration requirement was imposed prospectively, so as not to affect the existing method of protecting rights that had already been created. Thus restrictive covenants and equitable easements created before 1926 are not registrable as land charges in unregistered land, but continue to be protected by the doctrine of notice: see Land Charges Act 1972, s 2(5)(ii), (iii).
34    This can be inferred from Land Registration Act 1925, ss 70(1)(a); 70(2); and 70(3).
35    Cf ibid, s 70(2).
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Rights which it would be inconvenient or pointless to register
4.9 Fourthly, some rights are overriding interests because it would be either inconvenient or even pointless to register them. Leases granted for a term not exceeding 21 years,36 and rights in coal37 both fall into this category.
Rights which are otherwise protected
4.10     Finally, there are rights which are otherwise protected and where it may therefore be regarded as otiose to expect them to be registered. An obvious example of this is the category of local land charges which are protected by registration on a register kept by the relevant local authority.38 More controversially, the rights of those in actual occupation39 are also explicable on this basis. At common law, the rights over land of a person in occupation - and perhaps in possession as well - were protected by that occupation or possession.40 The exact scope of this principle was never precisely defined.41 Sometimes it was explained on the basis that occupation gave notice of the rights of the occupier.42 On other occasions, it was formulated more widely. The mere fact of occupation, whether or not it was apparent, was notice of the rights of the occupier.43 Whatever the extent of the principle, the idea that an occupier was not required to take any further steps to protect his or her rights in the property was an ancient and deeply engrained one.
Criticisms of overriding interests
Introduction
4.11     Although, as we have explained, it is possible to explain the rationale of most of the categories of overriding interests,44 such interests have nonetheless been much criticised. In the following paragraphs we set out the most important grounds of criticism.
Title not absolute
4.12     First, the existence of overriding interests means that absolute title cannot be absolute in the true sense, because the register may not be a true mirror of the state of the title. However, the register could only be a wholly accurate reflection of the title at a price, namely the suppression of many third party rights. This is because in practice the nature of overriding interests is such that if they were now required to be registered,
36    Ibid, s 70(1)(k); below, para 5.87.
37    Ibid, s 70(1)(m); below, paras 5.97, 5.98, where an explanation is given as to why rights in coal are overriding interests.
38    Ibid, s 70(1)(i); below, para 5.80.
39    Ibid, s 70(1)(g); below, para 5.56.
40    For a discussion, see Charles Harpum, “Overreaching, Trustees’ Powers and the Reform of the 1925 Legislation” [1990] CLJ 277, 315 - 320.
41    Nor, given the effect upon it of the provisions of the Law of Property Act 1925 and what is now the Land Charges Act 1972, is it ever likely to be.
42    See, eg Barnhart v Greenshields (1853) 9 Moo PC 18, 32; 14 ER 204, 209.
43    Holmes v Powell (1856) 8 De GM & G 572, 580 - 581; 44 ER 510, 514.
44    See above, paras 4.4 and following.
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some at least might not be.45 They would therefore be defeated by any subsequent disposition for value of the land burdened by them.46 There are in fact only two other ways in which such rights can be accommodated with the land registration system. First, they could simply be extinguished wholesale by statute. To do this in accordance with the European Convention of Human Rights, it would almost certainly be necessary to pay compensation to those deprived of their rights.47 To adopt this option would involve an unquantifiable commitment to pay compensation on a potentially large scale. The second option is to accept (as the Land Registration Act 1925 does accept) that such rights can exist independently of the register.
Undiscoverability
4.13 Secondly, overriding interests are not necessarily discoverable from a reasonable inspection of land.48 For example, to ascertain whether a property is subject to a liability to pay for chancel repairs,49 it may be necessary to search the tithe records which are kept in several different branches of the Public Record Office. As those records are incomplete, there is in fact no certainty that a property is free from liability even when such a search has been made. As regards the rights of occupiers, it has been said that “there can be cases where a purchaser may make the most searching enquiries without discovering that the land in question is in the actual occupation of a third party”.50 A purchaser of registered land may find that he or she is bound by a right that has not been protected by an entry on the register,
notwithstanding that there is no person other than the vendor in apparent occupation of the property and that careful inspection and inquiry has failed to reveal anything which might give the purchaser any reason to suspect that someone other than the vendor had any interest in or rights
over the property.51
45    See the discussion below, paras 4.25, 4.26.
46    Where it can be demonstrated that a category of overriding interests is almost certainly obsolete, these considerations do not apply. In such cases we consider that the category should be removed from the list of overriding interests: see below, para 4.31.
47    See Article 1 of the First Protocol of the Convention, considered below, para 4.27.
48    This appears to have been recognised as a defect since the Act was passed: see Brickdale & Stewart Wallace’s Land Registration Act, 1925 (4th ed 1939) p 193; below, para 5.57.
49    Which is an overriding interest under Land Registration Act 1925, s 70(1)(c).
50    Kling v Keston Properties Ltd (1983) 49 P & CR 212, 222, per Vinelott J. Factually similar situations can produce different results: compare Epps v Esso Petroleum Co Ltd [1973] 1 WLR 1071 (parking a car on a strip 11' x 80' was not actual occupation) with Kling v Keston Properties Ltd, above (parking a car within a garage was actual occupation).
51    Kling v Keston Properties Ltd, above, at p 222.
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Rectification but no indemnity
4.14     The third criticism that is often made of overriding interests is one that is, in our view, unjustified. Where an overriding interest exists, the register may be rectified even as against a proprietor in possession in order to give effect to an overriding interest.52 Furthermore, because a purchaser of registered land takes it subject to overriding interests,53 when the register is so rectified, no indemnity is payable. This is because the proprietor is not a “person suffering loss by reason of any rectification of the register” within the meaning of the Land Registration Act 1925.54 In such a case, all that the rectification of the register does is to ensure that it reflects the true state of affairs.55 It is for this reason that we are unconvinced by this particular criticism of overriding interests. It should be noted that in this regard the position of registered land is exactly the same as unregistered land. A purchaser of unregistered land would not expect to receive state compensation because it transpired that part of the land that he or she had purchased belonged in fact to a squatter who had acquired title to it by adverse possession. Any remedy which the purchaser might have would be against the vendor on the implied covenants for title. It is not obvious to us that this outcome is wrong, particularly as the covenants for title now provide a more effective remedy in many such instances than was formerly the case.56
Unsatisfactory drafting
4.15     Fourthly, the drafting of section 70(1) of the Land Registration Act 1925 is unsatisfactory for the following reasons—
(1)     the range of rights which may exist as overriding interests is not clearly or precisely defined;
(2)     a number of rights that are listed as overriding interests in the section are now obsolete;
(3)     certain rights which must in practice be treated as overriding interests are omitted from the section;
(4)     it fails to exclude - as in principle it should - expressly created easements,57 which have in consequence been held to be overriding interests;58
(5)     the wording of the section is verbose and several of the rights listed are no more than examples of broader categories contained within it.
4.16     Given that overriding interests operate in effect outside the register, it is clearly important that the range of such rights should be defined with as much precision and clarity as possible and that the list should be no wider than is necessary. We note that
52    Land Registration Act 1925, s 82(3). It is only in the four exceptional cases listed in that subsection, of which this is one, that the register may be rectified against a proprietor who is in possession. We consider this matter further below, at paras 8.23 and following.
53    Land Registration Act 1925, ss 20(1), 23(1).
54    Section 83(1) (as substituted).
55    Re Chowood’s Registered Land [1933] Ch 574.
56    See the Law of Property (Miscellaneous Provisions) Act 1994.
57    Which ought of course to be completed by registration as registered dispositions.
58    See below, paras 5.8, 5.9.
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in a recent decision, Staughton LJ expressed a similar sentiment when he said that “[i]t is desirable that overriding interests should be in a narrow rather than a wide class and should be clearly defined”.59
The recommendations in the third report
The approach to reform
4.17     With the criticisms listed above as a background, the Third Report made a number of recommendations in relation to the reform of overriding interests.60 In making its recommendations for reform, the Commission applied two principles.61 First, in the interests of certainty and of simplifying conveyancing, the class of right which might bind a purchaser otherwise than as the result of an entry in the register should be as narrow as possible.62 This first principle was however subject to the second, which was that—
interests should be overriding where protection against purchasers is needed, yet it is either not reasonable to expect nor sensible to require any entry on the register.63
The Joint Working Group, would not dissent from these objectives.64 However, we would place the emphasis rather differently. In our opinion, it is a necessary corollary of the first principle that the only overriding interests should be those “where protection against purchasers is needed, yet it is either not reasonable to expect nor sensible to require any entry on the register”.
Two specific proposals
4.18     While the Joint Working Group agrees with many of the recommendations made by the Law Commission in its Third Report,65 two of the most important of those proposals - which were interlinked - have proved to be particularly controversial both because of their cost implications and because they cut across the principles which have hitherto governed registered land. We recommend that they should be abandoned because there is no realistic prospect of their being implemented in the foreseeable future.
Indemnity for overriding interests
4.19     The first was that indemnity should be payable when the register is rectified to give
59    Overseas Investment Services Ltd v Simcobuild Construction Ltd (1995) 70 P & CR 322, 330. See too Peter Gibson LJ at p 327: “the court should... not be astute to give a wide meaning to any item constituting an overriding interest”.
60    Law Com No 158, Part II.
61    Ibid, para 2.6.
62    This principle was in fact derived from Transfer of Land: Land Registration (Second Paper) (1971) Working Paper No 37, para 34.
63    Law Com No 158, para 2.6.
64    Cf above, para 4.16.
65    As will be apparent from the recommendations made in Part V.
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effect to an overriding interest.66 There is undoubtedly a strong case for this proposal. If overriding interests are not discoverable on inspection they can work great hardship on purchasers and the system of registered title - which is supposed to increase the security of title - can be seen to fail them. Nevertheless, this proposal has proved to be the major stumbling block to the acceptance of the Third and Fourth Reports, however desirable many other proposals in those Reports might be. We consider that, notwithstanding its attractions, it is open to a number of serious practical objections—
(1)     It would create an open-ended financial liability. The extent of this liability would be incapable of prediction but it might be considerable. The cost would have to be borne by all users of the Land Registry. It would undoubtedly increase registration fees and thereby detract significantly from the attractiveness of land registration.
(2)     The potential liability would never end. There would be no final extinction of overriding interests or prohibition on their creation.
(3)     It would mark a significant change in the concept of indemnity. Hitherto indemnity has been paid for those errors in the register which cause loss.67 Where the register is rectified to give effect to an overriding interest, the change does no more than reflect the reality of the title.68 The only loss that the registered proprietor may suffer in such circumstances is the cost of the rectification and indemnity proceedings and this is in practice recoverable from the Registry as indemnity.
4.20 We note for the record that the recommendation in the Third Report that indemnity should be payable in respect of overriding interests—
(1)     was contrary to the proposal made by the Law Commission in an earlier Working Paper that it should not;69 and
(2)     was not itself the subject of a full public consultation in the way that is usual with the Law Commission’s proposals.70
66    Law Com No 158, paras 2.10 - 2.14. See too Law Com No 173, Draft Bill, Cls 45(1)(c) and 45(2).
67    See Land Registration Act 1925, s 83 (as substituted by Land Registration Act 1997, s 2).
68    In some cases it can be said that rectification of the register to give effect to an overriding interest does put right a “mistake”, as where A is registered as proprietor of land to which B had previously acquired title by adverse possession (as in Chowood Ltd v Lyall (No 2) [1930] 2 Ch 156). In others, there may have been no “mistake” in any real sense, either because the overriding interest arose after a person was registered as proprietor (as where a squatter acquires title by adverse possession subsequent to such registration, and where the registrar is required to register the squatter as proprietor: Land Registration Act 1925, s 75(3)), or because the register is amended to record some encumbrance which had hitherto bound the proprietor as an overriding interest (as where an easement that arose by prescription is entered on the register).
69    Transfer of Land: Land Registration (Third Paper), (1972) Consultation Paper No 45, para 101. This proposal does not appear to have attracted any criticism from consultees.
70    See above, para 1.9.
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Overriding interests and general burdens
4.21     The second, interconnected proposal was that the present categories of overriding interests should be sharply reduced and a number of existing overriding interests should be recategorised as “general burdens”. Broadly speaking, a purchaser of registered land takes it subject to entries on the register and overriding interests.71 It was noted in the Third Report, however, that registration did not confer on the registered proprietor freedom from any right, liability or obligation affecting land which did not amount to an estate or interest, such as the liability to the consequences of planning laws or to tortious or criminal liability in relation to land.72 These obligations could be regarded as “general burdens”. The Law Commission considered that public rights, chancel repair liability, local land charges, certain pre-1925 mineral rights, and franchises should all cease to be overriding interests and should instead fall into this category of general burdens.73 The one significant feature of general burdens as they were proposed was that there would never be any question of rectifying the register to give effect to them. As a result, no indemnity would be payable in respect of them.74 As the Joint Working Group recommends that the proposals as to the payment of indemnity for overriding interests should be abandoned, a separate category of general burdens becomes wholly unnecessary.75 In any event, the Joint Working Group considers that the division drawn in the Third Report between general burdens and overriding interests was in practice an arbitrary one.76
4.22     We therefore provisionally recommend that—
(1)     the rule that no indemnity should be payable where the register is rectified to give effect to an overriding interest should be retained; and
(2)     in consequence, there should be no new category of “general burdens”.
Strategies for Reform
Introduction
4.23     The scope for the reform of overriding interests is necessarily limited for the reasons
71    Land Registration Act 1925, ss 20(1), 23(1).
72    Law Com No 158, para 2.1.
73    Ibid, paras 2.15 and 2.107. See too Law Com No 173, Draft Bill, Cl 5(3), giving a rather fuller list. See Law Com No 158, paras 2.6 and 2.24 for the criteria adopted by the Commission in selecting these particular rights.
74    Law Com No 158, paras 2.15 and 2.107.
75    For proposals that will put it beyond doubt that transferees of registered land take it subject to burdens imposed by the general law which are not encumbrances even though such rights are not overriding interests, see below, para 4.36.
76    Two examples will illustrate the point. First, certain rights that were designated by the Commission as “general burdens” for which no indemnity would have been payable were rights that cause considerable difficulties as a matter of conveyancing practice because they are not readily discoverable. An obvious example is chancel repair liability. Secondly, the practical difference between customary rights (which would have remained overriding interests and for which indemnity would therefore have been payable) and public rights (which would have been general burdens) is, in some cases at least, negligible.
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outlined above.77 As we have already indicated7,8 our principal objective in making proposals for reform is to ensure that a right is protected as an overriding interest only where it is unreasonable or unrealistic to expect it to be registered. To achieve this, the Joint Working Group believes that it is necessary to have recourse to a number of strategies. We have considered six. Of these, we have rejected one and accepted the second only in limited circumstances. We consider that the remaining four offer the best prospects of success.
Abolition of substantive rights?
4.24     First, some rights which can exist as overriding interests are anomalous and may be difficult to discover.79 These could be abolished as a matter of substantive law but only after a detailed consideration of each of them. Although it may be desirable that such an exercise should be undertaken, it is not one that can be done as part of this Report. It would have to be conducted on the clear understanding that it could have very significant financial implications.80 We have therefore rejected this as a viable strategy for reform.
Remove the status of overriding interest from certain rights?
The recommendations in the Third Report
4.25     Secondly, some rights which are presently listed as overriding interests might lose their status as such. If they were still extant, they would instead become minor interests which would require registration if they were to bind third parties. In the Law Commission’s Third Report, the Commission recommended that a number of overriding interests should be treated in this manner.81 The Commission’s recommendations encompassed both rights that are for all practical purposes dead, and those which are still actively enforced. As regards the former, there is little point in apparently perpetuating rights that have in practice ceased to be asserted. Indeed it is in the public interest to remove any risk that rights that had long been abandoned might be resurrected at some future date in circumstances where the landowner could not have discovered their existence. However, where there is a real prospect that such rights exist on any scale, it may be unreasonable to remove their overriding status in the absence of other countervailing considerations.
4.26     There are several reasons for this. First, many such persons would not appreciate the need to register their rights (though this difficulty could be minimised by consultation and publicity). Secondly, in order to register their rights they would have to pay for legal advice and the costs of registration (though it may be possible to meet this objection in part by transitional provisions). Thirdly, failure to register carries with it the risk that the right might be lost. This would occur if the land affected by it was sold
77    See para 4.12.
78    Above, para 4.17.
79    See, eg chancel repair liability and certain manorial rights.
80    Because of the European Convention on Human Rights. See above, para 4.12; and below, para 4.27.
81    See Law Com No 158, paras 2.82 and following. The rights in question were the liability to repair highways by reason of tenure, liability in respect of embankments, and sea and river walls, crown rents, payments in lieu of tithe and for the redemption of certain tithe rentcharges, and seignorial and manorial rights (other than franchises).
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to a purchaser, who would necessarily take free of it as an unprotected minor interest.82 As we explain in the following paragraphs, this might be regarded as tantamount to expropriation. Finally, experience of the workings of the one modern statute that has required the registration of existing property rights on a large scale - registration of rights of common under the Commons Registration Act 1965 - strongly suggests that it is an experiment not to be repeated.83
The European Convention on Human Rights
4.27     Implicit in these reasons is a particularly important issue that was not considered in the Third Report. The European Convention for the Protection of Human Rights and Fundamental Freedoms (which we refer to hereafter as “ECHR”) is likely to be incorporated into domestic law in the near future.84 Article 1 of the First Protocol of the Convention provides that—
1. Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.85
2. The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest or to secure the payment of taxes or other contributions or penalties.
4.28     Article 1 has been held by the European Court of Human Rights in Sporrong and Lönnroth v Sweden86 to comprise three distinct rules. The first “enounces the principle of peaceful enjoyment of property”. The second “covers deprivation of possessions and subjects it to certain conditions”. The third “recognises that States are entitled, amongst other things, to control the use of property in accordance with the general interest, by enforcing such laws as they deem necessary for the purpose”.
4.29     The decisions of that Court on the interpretation of this Article, establish the following propositions that are relevant to the present issue—
(1) In substance it guarantees the right of property.87 It is clear that an interference with the right to peaceful enjoyment can be brought about by legislation which in some way deprives a person either of his or her
82    See Land Registration Act 1925, ss 20, 23.
83    Not only has the Commons Registration Act 1965 provoked considerable litigation, but it has been necessary to pass corrective legislation - the Common Land (Rectification of Registers) Act 1989 - which has itself led to a number of reported decisions.
84    The Human Rights Bill is presently before Parliament.
85    It has been held by the European Court of Human Rights that “the general principles of international law are not applicable to a taking by a State of the property of its own nationals”: James v United Kingdom (1986) 8 EHRR 123, 151, para 66. For this reason, this particular element of the Article has no relevance here.
86    (1982) 5 EHRR 35, 50, para 61. This analysis has been applied by the Court in all subsequent cases.
87    Marckx v Belgium (1979) 2 EHRR 330, 354, para 63.
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possessions or the effective rights that go with them.88
(2)     The exception of deprivation in the public interest has been widely interpreted to encompass at least some situations where there is a transfer of property from one private individual to another. It need not be a deprivation by the state.89 The Court has said that “a taking of property effected in pursuance of legitimate social, economic or other policies may be ‘in the public interest’, even if the community at large has no direct use or enjoyment of the property taken”.90
(3)     In determining what is “in the public interest”, a state enjoys “a margin of appreciation” so that it is “for national authorities to make the initial assessment both of the existence of a problem of public concern warranting measures of deprivation of property and of the remedial action to be taken”.91 It is only if the state’s assessment is manifestly unreasonable that the deprivation will be taken to fall outside the exception.92
(4)     There must be “a reasonable relationship of proportionality between the means employed and the aim sought to be realised”,93 when a state takes away property rights in the public interest.94 In particular, “the taking of property in the public interest without payment of compensation is treated as justifiable only in exceptional circumstances”.95
(5)     By contrast, where the regulation of property rights by the state (rather than their expropriation) is in issue,96 “a right to compensation is not inherent”.97 Whether or not compensation should be paid in such a case will depend upon an assessment of “the proportionality of the response in question”.98
4.30 If the status of overriding interest were to be removed from an existing right that had hitherto enjoyed it, so that it took effect thereafter only as a minor interest that step
88    Sporrong and Lönnroth v Sweden, above (planning blight caused by expropriation permits that were never eventually exercised).
89    James v United Kingdom, above, at p 140, para 40 (leasehold enfranchisement legislation). See too Mellacher v Austria (1989) 12 EHRR 391.
90    James v United Kingdom, above, at p 142, para 45.
91    Ibid, at p 142, para 46.
92    Ibid, at p 144, para 49; Pressos Compania Naviera SA v Belgium (1995) 21 EHRR 301, 336, para 37.
93    James v United Kingdom (1986) 8 EHRR 123, p 145, para 50; Holy Monasteries v Greece (1994) 20 EHRR 1, 48, para 70. It has also been expressed in terms of striking a fair balance between the demands of the general interest of the community and the protection of the individual’s fundamental rights: Stran Greek Refineries v Greece (1994) 19 EHRR 293, 328, para 69.
94    In other words, when the first and not the second paragraph of Article 1 is in issue.
95    James v United Kingdom, above, at p 147, para 54. This principle has been frequently applied by the Court: see, eg Holy Monasteries v Greece, above at p 48, para 71.
96    That is, where the second and not the first paragraph of Article 1 is relevant.
97    Banér v Sweden No 11763/85, 60 DR 128, 142 (1989) (European Commission on Human Rights).
98    Ibid.
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might be regarded as either—
(1)     a deprivation of a property right within the first paragraph of Article 1 of the
First Protocol;99 or
(2)     a control of use within the second paragraph of Article 1 of the First
Protocol.100
As we have explained above,101 this reduction in status would jeopardise the right and might lead to its destruction. However, we consider that this step would probably fall within the “public interest” exception contained in the Article. The objective of the legislation would be the legitimate economic aim of simplifying and cheapening the transfer of land by making the rights in question more readily discoverable. By itself this would not of itself satisfy the requirements of Article 1—
(1)     If the reduction of status fell within the first paragraph of that Article, the requirement of proportionality would not normally be satisfied unless adequate provision were made for compensation in such cases. That compensation might have to come from the Land Registry (and this would have considerable resource implications), or it might take the form of a payment from the person whose land had previously been burdened by the right.102 Any scheme to give effect to the latter would be difficult both to devise and to implement.
(2)     If the reduction of status fell within the second paragraph of the Article, there might still be an issue of compensation “in cases where a regulation of use may have severe economic consequences to the detriment of the property owner”.103 While this seems unlikely in relation to the overriding interests where abolition is likely to be an issue,104 it cannot be ruled out.105
We have therefore concluded that, as the removal of overriding status in the absence of compensation carries with it at least some risk of contravening Article 1, it cannot be contemplated except where—
(1) rights can reasonably be regarded as obsolete;
99    That is the second rule in Sporrong and Lönnroth v Sweden (1982) 5 EHRR 35, 50, para 61; above, para 4.28.
100  That is the third rule in Sporrong and Lönnroth v Sweden, above.
101  See para 4.26.
102  Cf James v United Kingdom (1986) 8 EHRR 123.
103  Banér v Sweden No 11763/85, 60 DR 128, 142 (1989). There is some difficulty in knowing exactly what this means. Suppose a person was entitled to corn rents of £2,000 per annum from certain land, and that right lost the overriding status it presently has under Land Registration Act 1925, s 70(1)(e), below, para 5.40. If, as a result of a sale of the land burdened, the right to corn rents was then lost, would that amount to “severe economic consequences” if, say, the recipient depended in part on that income?
104  Cf above, para 4.25.
105  No doubt other steps could be taken, eg allowing a long transitional period to register such rights before they lost their overriding status, and giving extensive publicity to the need to register them.
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(2) those affected have consented;106 or
(3) there are other strong policy grounds for so doing and suitable transitional arrangements are put in place.107
The extent of obsolete overriding interests
4.31     In the light of the recommendations in the Third Report, the Law Commission has made extensive preliminary inquiries to discover—
(1)     which overriding interests of those recommended for abolition in that Report, if any, are obsolete; and
(2)     what difficulties are perceived to exist in relation to the possible removal of overriding status from those categories of interests.
We are very grateful to those who kindly assisted us in these inquiries and whom we have listed in the Appendix to this Report. The conclusion that we have drawn from this survey is that there are in fact only two categories of overriding interest that can safely be abolished in whole or part on the grounds that they are in practice obsolete.108 We make appropriate recommendations below.109 We would stress that, as a strategy for reducing the impact of overriding interests, the repeal of those categories which are obsolete is, by definition, largely a paper exercise. It does however have the merit of removing any uncertainty for the future.
Clarify the meaning of the legislation
4.32     Thirdly, the drafting inadequacies that presently exist in section 70(1) (which have already been outlined110) could be addressed. It is important that the existing categories of overriding interest should be clearly and accurately defined. We consider this to be essential to any reform of the law and we make recommendations that will have this effect.
Redefine the scope of certain overriding interests for the future
4.33     The fourth possible strategy for reform is closely connected with the third. There are, under the present law, particular uncertainties in relation to the scope of specific
106  Article 1 will not avail those who have consented to the deprivation of their rights: see Holy Monasteries v Greece, above, at p 49, paras 76 - 78. As it happens, we have not in the end been able to recommend the abolition of overriding status for any rights on the basis of consent: cf below, para 5.40.
107  See below, paras 5.42 and following, where we identify as such a case the rights of squatters who are no longer in actual occupation of land.
108  See Land Registration Act 1925, ss 70(1)(b) (various tenurial liabilities) and 70(1)(e) (payments in lieu of tithe, etc). In the case of the latter, one of the rights encompassed by the paragraph -the liability to pay corn rents - does still exist. Although in many cases it has ceased to be economic to enforce it, and the principal recipient, the Church Commissioners, have raised no objections to the abolition of its overriding status, we have discovered that other landowners do still receive significant sums from it. The overriding status of the liability to pay corn rents is therefore recommended for retention.
109  Paras 5.36 and 5.40.
110  See para above 4.15.
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overriding interests. There are also a number of rights which are overriding interests which, having regard to the fundamental principles of land registration, should not be. In particular, rights which have been expressly granted or reserved over registered land ought to be entered on the register. We consider that the scope of overriding interests should accord with the fundamental principles of registered land that we identified in Part I of this Report.111 The fourth strategy is therefore both to resolve these uncertainties and to abolish the status of overriding interest in relation to rights to which it should not apply.112 This strategy offers a substantial opportunity to reduce the number of overriding interests for the future.
Encourage the registration of overriding interests
4.34     Fifthly, we consider that positive steps should be taken to encourage the registration of overriding interests which come to light when a person acquires registered land. We believe that the obligations to make disclosure that the law imposes on vendors of land may provide a means of achieving this objective. However, we consider that incentives as well as penalties should be used to encourage the registration of overriding interests. An obvious way to achieve this is to improve significantly the protection that is given to minor interests that are entered on the register. We explain in Part VI of this Report that if an interest that has hitherto been an overriding interest is protected instead as a minor interest by means of a caution, it is possible that it may be less well protected than it was before.113 We make recommendations in that Part to remedy that defect.114
Electronic conveyancing
4.35     Finally, although electronic conveyancing will be introduced over a period of years, it offers what is probably the most effective means of limiting the creation of overriding interests for the future. In Part XI, we outline the system of electronic conveyancing that we envisage will be introduced.115 One of its most important features is that it will be impossible to create many rights and interests in or over registered land except by registering them.116 This will necessarily restrict the ambit of what is at present one of the widest overriding interests, the rights of persons in actual occupation.117
Rights and liabilities under the general law are not overriding interests
4.36     We would stress by way of clarification that only rights and liabilities which can in law constitute proprietary rights and interests in or over land are capable of being overriding interests. This means that neither—
(1) rights and liabilities that are merely potential and not actually in existence; nor
111  See above, para 1.14.
112  See above, para 4.17.
113  See below, para 6.18.
114  See below, paras 6.50 and following.
115  See below, paras 11.8 and following.
116  See below, para 11.10.
117  See below, para 5.56.
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(2) rights and liabilities that are imposed in relation to property generally;118
should be regarded as proprietary rights or interests.119 To the extent that owners of land are bound by such rights it is not because they are proprietary rights or interests but because they are part of the general law.120 Any right that is not a proprietary right or interest by these criteria cannot be an overriding interest. We therefore provisionally recommend that section 70(1) should be redrafted to make it clear that—
(1)     only proprietary rights could subsist as overriding interests; and
(2)     rights and liabilities that were—
(a)     merely potential and not actually in existence; or
(b)     imposed in relation to property generally;
would bind a transferee of registered land under and to the extent that is provided by the general law.
Summary and key issues
4.37     In this Part we explain in detail why there are overriding interests. They provide a means of protection for rights that a person cannot reasonably be expected to register. We explain the criticisms that have been made of them. Of these, the most powerful are that—
(1)     overriding interests may be undiscoverable; and
(2)     the drafting of section 70 of the Land Registration Act 1925 (which lists all but one of the overriding interests) is defective in a number of respects.
4.38     We examine the approach that was taken to overriding interests by the Law Commission in its Third and Fourth Reports and we provisionally reject two proposals that were made in them, namely—
(1)     that indemnity should be payable where the register is rectified in respect of an overriding interest (which is not at present the case); and
(2)     that there should be a new category of interests called “general burdens” in respect of which such indemnity would not be available.
118  Cf Ruoff & Roper, Registered Conveyancing, 6-09: “all land is subject to the potential rights and powers of central and local government on behalf of the public arising, for example, from such matters as planning control or compulsory acquisition”. These rights under the general law are not the same as the “general burdens” to which registered land would have been subject if the proposals made in the Third Report had been accepted: see above, para 4.21. Such general burdens would have included rights which are presently overriding interests, namely public rights, chancel repair liability, local land charges, certain pre-1925 mineral rights and franchises. None of these overriding interests falls within the proposals contained in this paragraph.
119  See Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 611.
120  We note that in Law of Property (Miscellaneous Provisions) Act 1994, s 3(2) this point was expressly recognised.
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In respect to each, we recommend that the law should remain unchanged.
4.39     We examine a number of possible strategies for the reform of overriding interests—
(1)     We reject as a strategy the wholesale abolition of substantive rights as a means of reducing the number of overriding interests. Any such abolition would have to be conducted as a separate law reform exercise with full regard to its implications.
(2)     We accept that it may sometimes be appropriate to remove the overriding status of interests and require them to be protected instead by registration as minor interests. The danger of abolishing the overriding status of an interest is that to do so might contravene the provisions of the ECHR which protect rights of property. We consider that it can only be justified—
(a)     if such rights are obsolete;
(b)     where the persons having the benefit of them agree to it; or
(c)      where there are significant policy grounds for doing so and appropriate transitional provisions are made.
(3)     We regard it as highly desirable that the legislation should be clarified so that the existing categories of overriding interest are accurately defined.
(4)     We consider that the scope of specific overriding interests should be prospectively redefined so as to exclude from them rights that ought to be protected on the register.
(5)     We think it desirable that positive steps should be taken to encourage the entry on the register of overriding interests which come to light on a disposition of land. Part of this strategy is to provide better protection for rights that are entered on the register.
(6)     The introduction of electronic conveyancing will of itself significantly reduce the number of overriding interests, because it will not be possible to create many rights except by registering them.
4.40     We provisionally recommend that the legislation should be redrafted to make it clear that rights and liabilities under the general law are not overriding interests.
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PART V
OVERRIDING INTERESTS - PROPOSALS
FOR REFORM
Introduction
5.1     In this Part we begin by considering critically the operation of the thirteen categories of overriding interest that are listed in section 70(1) of the Land Registration Act 1925. We examine each of these categories in the light of the general principles of land registration that we have identified and in accordance with the strategies for reform that we have set out above.1 We make recommendations in relation to every category. In some cases, we recommend the abolition of the overriding interest. In others, we suggest either that there should be no change or that the provision should be redrafted in some way. Finally, we examine a number of general points relating to the operation of overriding interests.
Easements and analogous rights Section 70(1)(a)
Introduction
5.2     There are at present two provisions which deal with easements, profits, customary and public rights and they must be considered together. The first is contained in section 70(1)(a) of the Land Registration Act 1925, which provides that the following rights shall be overriding interests—
Rights of common, drainage rights, customary rights (until extinguished), public rights, profits à prendre, rights of sheepwalk, rights of way, watercourses, rights of water, and other easements not being equitable easements required to be protected by notice on the register.
Secondly, by rule 258 of the Land Registration Rules 1925—
Rights, privileges, and appurtenances appertaining or reputed to appertain to land or demised, occupied, or enjoyed therewith or reputed or known as part or parcel of or appurtenant thereto, which adversely affect registered land are overriding interests within section 70 of the Act.
These provisions are amongst the most unsatisfactory in the Land Registration Act 1925 and the Land Registration Rules 1925 respectively, and it is necessary to make a detailed criticism of them. In so doing, we echo many of the points that were made about them in the Law Commission’s Third Report.2
5.3     The wording of section 70(1)(a) encompasses four distinct entities—
(1) easements;
1    Paras 4.23 - 4.35.
2    See Law Com No 158, paras 2.19 - 2.21; 2.25 - 2.35.
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(2) profits à prendre;
(3)     customary rights; and
(4)     public rights.
5.4     The following expressions found in the paragraph are all superfluous3
(1)     “rights of common” and “rights of sheepwalk”4: these are examples of profits à prendre;
(2)     “drainage rights” and “rights of way”: these are either examples of easements or of public rights; and
(3)     “watercourses”: in so far as these are not natural rights, they are just one example of an easement.5
5.5     We examine in turn the position of the four categories of rights that presently fall within section 70(1)(a) in the light of the interpretation that has been given to that paragraph.
Easements and profits à prendre
5.6     The paragraph protects both easements and profits à prendre “not being equitable easements required to be protected by notice on the register”. Where a registered proprietor grants or reserves an easement or profit à prendre, that disposition is required by the Land Registration Act 1925 to be completed by registration.6 If such a disposition is not registered, it takes effect as an unregistered minor interest, and as such is liable to be overridden by a disposition of the registered land for valuable consideration.7 If the land registration system is to work effectively, the principle that rights expressly created should be registered should be applied absolutely.8 It provides a powerful incentive to complete a disposition by registration and this incentive should not be undermined by providing a fall-back position by which such a disposition can take effect as an overriding interest although not registered. As we explain in Part XI, within the comparatively near future, we expect registration to become an essential step in the express creation of a right, so that no right would come into being unless and until it was registered.
3    Ibid, para 2.20.
4    More accurately described as rights of “fold-course”: see Robinson v Maharajah Duleep Singh (1879) 11 ChD 798.
5    In Taylor v Corporation of St Helens (1877) 6 ChD 264, 271, Jessel MR considered that the express grant of a watercourse could mean one of three things: (i) an easement to the running of water; (ii) the channel-pipe or drain which contained the water; or (iii) the land over which the water flowed. If it was not clear from the context which of these it was to mean, it would be taken to mean (i). Natural rights cannot be overriding interests because they are not property rights at all but are protected by the law of tort: see Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 842.
6    Sections 18(1)(c) & (d); 19(2); 21(1)(b) & (c); 22(2).
7    See Land Registration Act 1925, s 101; above, para 2.20.
8    See above, para 1.14.
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5.7     It was long thought that equitable easements and profits à prendre could not be overriding interests within section 70(1)(a) because they were necessarily excluded by the wording of the paragraph.9 On that basis neither of the following could be an overriding interest within the paragraph—
(1)     an equitable easement or profit à prendre that was in existence at the time of first registration but was not noted on the register; or
(2)     an easement or profit à prendre that was expressly granted or reserved over registered land but was not noted on the register and therefore took effect in equity only.
However, it has been held that this interpretation of the paragraph is incorrect.
5.8     In Celsteel Ltd v Alton House Holdings Ltd,10 Scott J considered section 70(1)(a), and particularly the words “not being equitable easements required to be protected by notice on the register” and held as follows—
(1)     In this context, “equitable easement” was not to be given the restrictive interpretation that it had received when used in the Land Charges Act 1972,11 but included all equitable easements.
(2)     The expression “required to be protected” meant “need to be protected”.
(3)     All equitable easements fell within the exception and could not therefore be overriding interests except those which, by reason of some other statutory provision or principle of law, could be protected without an entry on the register.
(4)     An equitable easement which fell within rule 258 of the Land Registration Rules 1925, that is, one which was openly exercised and enjoyed by the dominant owner as appurtenant to his land, was one which did not require protection by entry on the register and could therefore be an overriding interest within section 70(1)(a).
5.9     It follows from this, that whenever an easement is expressly granted or reserved, it will be unnecessary to protect it by registration, even though it is a registered disposition, provided that it is openly exercised and enjoyed with the land to which it is appurtenant.12 This reasoning conflicts with the principle that underlies this Report,
9     See, eg D J Hayton, Registered Land (3rd ed 1981) p 84.
10    [1985] 1 WLR 204. The relevant part of the judgment is at pp 219 - 221. The decision on this point has been approved by the Court of Appeal: Thatcher v Douglas (1996) 146 NLJ 282.
11    In E R Ives Investments Ltd v High [1967] 2 QB 379, 395, Lord Denning MR held that, for the purposes of Class D(iii) land charges under what was then the Land Charges Act 1925, “equitable easements” referred to that limited class of rights which before the 1925 property legislation were capable of being created or conveyed at law but thereafter were capable of existing only in equity. The reason for this narrow interpretation has never been apparent.
12    In Thatcher v Douglas (1996) 146 NLJ 282, transcript, p 23, Nourse LJ rejected the view that r 258 applied only to legal and not to equitable interests. He noted that the Law Commission had recommended in the Third Report that only legal easements should be overriding interests but considered that r 258 as worded could not be so limited.
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namely that rights which are expressly created over registered land should be completed by registration.13 When electronic conveyancing is introduced, it is anticipated that they will have to be.14
5.10 Where title to land is unregistered, there are a number of ways in which an easement or (in some cases) a profit à prendre may arise by implied grant or reservation.15 These are summarised in the table below.
Implied reservation Implied grant
1 Easements of necessity
1 Easements of necessity
2 Intended easements
2 Intended easements
3 Easements arising under the rule in Wheeldon v Burrows16
4 Easements and profits à prendre impliedly granted under section 62 of the Law of Property Act 1925.
5.11     The Land Registration Act 1925 makes no provision for the implied reservation or grant of easements and profits à prendre except those arising under section 62 of the Law of Property Act 1925.17 Indeed, there is nothing in the Land Registration Act 1925 which indicates whether it is even possible to create easements and profits à prendre by implied reservation or grant other than under section 62 of the Law of Property Act 1925. It is however generally assumed that—
(1)     it is possible for easements and profits à prendre to be created by implied grant or reservation in registered land just as much as it is where title is unregistered; and
(2)     such rights take effect as overriding interests.
Although these propositions remain untested by judicial decision, and cannot be regarded as wholly free from doubt, they do accord with common sense. It is precisely in those cases where easements and profits à prendre arise otherwise than by express grant or reservation that their status as overriding interests is needed.
5.12     Both the Land Registration Act 1925 and the Land Registration Rules 1925 make express provision for the application of section 62 of the Law of Property Act 1925 to registered land.18 Section 62(1) provides that a conveyance of land is deemed to
13    See above, para 1.14.
14    See below, para 11.10.
15    For an account of the law, see Sir Robert Megarry & Sir Williams Wade, The Law of Real Property (5th ed 1984) pp 859 - 869.
16    (1879) 12 ChD 31.
17    See below, para 5.12.
18    See Land Registration Act 1925, ss 19(3), 22(3); Land Registration Rules 1925, rules 251, 258.
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include and shall operate to convey with the land—
all... liberties, privileges, easements, rights, and advantages whatsoever, appertaining or reputed to appertain to the land, or any part thereof, or, at the time of the conveyance, demised, occupied, or enjoyed with, or reputed or known as part or parcel of or appurtenant to the land or any
part thereof.19
Rule 258 of the Land Registration Rules 1925 echoes this wording very closely, and appears to say that easements arising under section 62 are to take effect as overriding interests and not as encumbrances. The logic of this is obvious. As section 62 commonly converts into full legal easements rights that had hitherto been enjoyed permissively,20 it is unlikely that any right so acquired would be registered. Hence rule 258 provides that it takes effect as an overriding interest. The Joint Working Group considers that this is correct in principle.
5.13     Having regard to the inadequacies of the present law, the Joint Working Group considers that the part of section 70(1)(a) that is concerned with easements and profits à prendre should be replaced with a new provision. The objectives of the new provision would be as follows.
5.14     Easements and profits à prendre expressly granted21 or reserved should be completed by registration (as the Land Registration Act 1925 itself suggests) and should not be capable of existing as overriding interests under section 70(1)(a).22 When the electronic transfer or creation of rights over registered land is eventually introduced, it will cease to be possible to create easements and profits à prendre except by registering them.23
5.15     There are five situations in which an easement or profit à prendre should take effect as an overriding interest until such time as it is entered on the register. In each case, we consider that the legislation should make the overriding status of such rights explicit.
19    Although the creation of easements by s 62 is often referred to as a form of implied grant, it is more accurate to regard its operation as a form of express grant: see Broomfield v Williams [1897] 1 Ch 602, 610. The section implies into a conveyance words that were at one time commonly incorporated expressly by conveyancers. It can be excluded by an expression of contrary intention in the conveyance: s 62(4).
20    See, eg International Tea Stores Co v Hobbs [1903] 2 Ch 165. For criticism of this principle, see Louise Tee, “Metamorphoses and Section 62 of the Law of Property Act 1925" [1998] Conv 115.
21    Other than under Law of Property Act 1925, s 62, if that does indeed operate by way of express grant.
22    This was in fact the recommendation of the Law Commission in its Third Report: Law Com No 158, paras 2.25 - 2.26. However, in the Draft Bill attached to its Fourth Report, this proposal was implemented by a clause which provided that only legal easements and profits à prendre could exist as overriding interests: Law Com No 173, Draft Bill, Cl 7(2)(a). This seems unnecessarily restrictive. It is possible for equitable easements to arise impliedly, where there is, for example, a contract to grant a lease: see Borman v Griffith [1930] 1 Ch 493 and Sovmots Investments Ltd v Secretary of State for the Environment [1977] QB 411 at 440; and the discussion in Sir Robert Megarry and Sir William Wade, The Law of Real Property (5th ed 1984) pp 867, 868. There is no obvious reason to deny them the status of overriding interests. Rather than confine overriding interests to legal easements and profits à prendre, the Joint Working Group considers that it would be better to provide that easements and profits à prendre that had been expressly granted could not be overriding interests.
23    See below, para 11.10.
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5.16     The first category are those arising by implied grant or reservation, whether these are legal or equitable. This category would include easements and profits à prendre arising through the operation of section 62 of the Law of Property Act 1925. We have already explained the reasons why we think such easements and profits à prendre should be overriding interests.24
5.17     The second category is that of easements and profits à prendre that have been acquired by prescription.25 At present, under the Land Registration Rules 1925, the easements and profits à prendre which have been acquired by prescription are to take effect as overriding interests and, as such, may be noted on the register of the servient title.26 The third category is a related one. It is those easements and profits à prendre that are in course of acquisition by prescription. The status of such rights is not at present addressed by either the Act or the Rules.27 To give them overriding status will put it beyond argument that a change of ownership of the burdened land will not mean that prescription has to start afresh.
5.18     The fourth category are those legal (but not equitable) easements and profits à prendre that were in existence at the time when the property burdened by them was first registered, but were not then noted on the register.28 Equitable easements and profits à prendre that were in existence at the time of first registration should not, in our view, be overriding interests. Where title is unregistered, such rights should be protected by registration as Class D(iii) land charges under the Land Charges Acts 1925 or 1972. If that is so, a corresponding entry should be made on the register at the time of first registration and the rights would then be protected as minor interests. If any equitable easement or profit à prendre had not been registered as a land charge, it would not be binding on any purchaser of a legal estate for money or money’s worth.29 Its position should not be improved on first registration by elevating its status to that of an overriding interest.30
5.19     Finally, those easements and profits à prendre that are appurtenant to an overriding interest should themselves be overriding interests. This will be the case in relation to rights appurtenant to a legal lease granted for a term not exceeding 21 years,31 or to an equitable lease arising from an agreement for a lease which is not protected by a notice on the register.32
24    See above, para 5.11.
25    For a discussion of prescription, see below, paras 10.79 and following.
26    See r 250, (made pursuant to Land Registration Act 1925, s 75(5)).
27    Indeed the power to make rules under Land Registration Act 1925, s 75(5) (see above) applies only to cases “where an easement, right or privilege has been acquired by prescription” (emphasis added).
28    See above, para 4.8
29    See Land Charges Act 1972, s 4(6).
30    First registration of title will normally take place on a disposition for value and so any unregistered equitable easements will generally have become void when the title is registered anyway. However, this will not always be the case, as where registration of title is effected voluntarily or under the new triggers for compulsory registration (see Land Registration Act 1925, s 123, as substituted by Land Registration Act 1997, s 1).
31    Land Registration Act 1925, s 70(1)(k); below, para 5.87.
32    Ibid, s 70(1)(g), below para 5.56.
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5.20     It will be necessary to make transitional provision for those easements that are in existence at the time when the legislation comes into force and which under the present law take effect as overriding interests even though they were expressly created. As it has been settled since 1984 that expressly created easements can be overriding interests within section 70(1)(a),33 and that view now enjoys the approval of the Court of Appeal,34 it would be unreasonable to remove the overriding status of such rights. To do so would (in effect) compel those who had the benefit of such rights to register them or risk losing them for non-registration as against any purchaser of the servient tenement. For reasons that have already been explained,35 the removal of overriding status might contravene the ECHR, unless provision were made to pay compensation in such circumstances. We have therefore concluded that those existing easements and profits à prendre which are overriding interests at the time when the legislation comes into force should retain that status.
5.21     We do have one concern however. It has been settled comparatively recently that once an easement has been established, the mere fact of non-user - for however long - will not raise any presumption that the easement has been abandoned.36 The view that used to be widely held, that mere non-user of the right for a period of 20 years would raise such a presumption,37 has been rejected by the Court of Appeal. Abandonment is a matter of intention, and it will not be lightly presumed.38 In Tehidy Minerals Ltd v Norman,39 Buckley LJ explained that—
[a]bandonment of an easement or of a profit à prendre can only... be treated as having taken place where the person entitled to it has demonstrated a fixed intention never at any time thereafter to assert the right himself or to attempt to transmit it to anyone else.
Furthermore, there is no statutory power to discharge or modify an easement or profit à prendre on the ground that it is obsolete or would impede some reasonable user of the land, as there is in relation to restrictive covenants.40
5.22     If an easement or profit à prendre takes effect as an overriding interest even if it has not been exercised for many years, there is a potential conveyancing trap of some magnitude. A purchaser may find that he or she is bound by a right that was wholly undiscoverable. Furthermore, not only is there no mechanism for the discharge of such a right, but the purchaser will be unable to obtain any indemnity if the register is
33    Celsteel Ltd v Alton House Holdings Ltd [1985] 1 WLR 204.
34    Thatcher v Douglas (1996) 146 NLJ 282.
35    Above, paras 4.27 - 4.30.
36    See Benn v Hardinge (1992) 66 P & CR 246, where non-user for 175 years did not establish abandonment.
37    See Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 898. This view has many attractions. If 20 years’ user of a right normally leads to the conclusion that there is an easement or profit à prendre under the doctrine of lost modern grant (see below, para 10.84), it seems illogical that, if the right is not then exercised for 20 years, there is no presumption of abandonment.
38    See Benn v Hardinge, above; Bosomworth v Faber (1992) 69 P & CR 288, 294, 295; Snell & Prideaux Ltd v Dutton Mirrors Ltd [1995] 1 EGLR 259, 261, 262.
39    [1971] 2 QB 528, 553.
40    See Law of Property Act 1925, s 84 (as amended by Law of Property Act 1969, s. 28).
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rectified to give effect to such an overriding interest.41 We consider that a proportionate response to this problem, and one which would not contravene the ECHR, would be to reinstate what until recently was thought to be the law, namely, that if an easement or profit à prendre could not be shown to have been exercised within the previous 20 years, there should be a rebuttable presumption that the right had been abandoned.42
5.23     We would emphasise that—
(1)     this presumption would apply only to those easements and profits à prendre that took effect as overriding interests: there would be no such presumption if the right had been protected by registration;43 and
(2)     the presumption would be rebuttable if the party asserting the right could show that there was some reason for its non-user other than abandonment, such as user of some alternative right, or the absence of any occasion to exercise the right.
The recommendations set out in the previous paragraph are consistent with one of our main objectives in this Part, which is to secure the registration of overriding interests wherever possible. They are more generous to a person claiming an easement or profit à prendre by prescription than are the equivalent proposals which we make in relation to a squatter who has extinguished the rights of a registered proprietor, but has then ceased to be in actual occupation of the land.44 We consider that this difference of treatment is justifiable. Prescription is based on a presumption that the right claimed has some lawful origin. That right must therefore be openly enjoyed without the use of force.45 The owner of the land does not lose his or her land, but holds it subject to the easement or profit à prendre. By contrast, adverse possession is based upon wrongdoing. It can be forcible in its origin, it need not be open, and it leads to the owner losing his or her title altogether.46
5.24     We therefore provisionally recommend that—
(1) all easements and profits à prendre should be overriding interests except where—
(a)     they have been expressly granted; or
(b)     they arise from a contract to grant such a right expressly;47
41    No indemnity is payable where the register is rectified to give effect to an overriding interest, because no loss is suffered by reason of the rectification: see above, para 4.14.
42    See above, para 5.21.
43    This is consistent with our view that the fact of registration should of itself protect a right.
44    See below, paras 5.49 and following.
45    See below, paras 10.1, 10.79.
46    See below, para 10.1.
47    It has been held that a grant does not include a contract to grant: City Permanent Building Society v Miller [1952] Ch 840. It is therefore necessary to make express provision for equitable easements and profits arising out of contracts to grant such rights.
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(2)     without prejudice to the generality of that rule, the following easements and profits à prendre (whether legal or equitable) should be overriding interests unless and until they are noted on the register of the servient title—
(a)     those arising by implied grant or reservation, including rights arising by the operation of section 62 of the Law of Property Act 1925;
(b)     those that are acquired or are in the course of being acquired by prescription;
(c)     those to which a property was subject at the time of its first registration, which were legal rights but were not noted on the register; and
(d)     those which are appurtenant to an overriding interest;
(3)     to the extent that there was any conflict between the principles in (1) and (2), those in (2) should prevail;48
(4)     rule 258 of the Land Registration Rules 1925 should be revoked;
(5)     where an easement or profit à prendre takes effect as an overriding interest, there should be a rebuttable presumption that the right had been abandoned if the party asserting it was unable to show that it had been exercised within the previous 20 years; and
(6)     there should be transitional provisions by which easements and profits à prendre which are—
(a)     in existence when the legislation comes into force; and
(b)     overriding interests immediately prior to that date even if they would not be created thereafter;
should retain their status as overriding interests.
We ask whether readers agree.
Customary rights
5.25     The Land Registration Act 1925 provides no definition of customary rights. The term has been used to describe two distinct types of rights and it is uncertain which of these the draftsman of the Act had in mind.49
5.26     First, there are those which had their origin in tenure, such as the customary suits and
48    This is to make it clear eg, that if A granted B a lease for 3 years together with a right of way over the land which A retained, B would not have to register his right of way because it would be appurtenant to B’s lease, which was an overriding interest.
49    See Ruoff & Roper, Registered Conveyancing, 6-08.
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services of customary freeholders and copyholders, and the customary modes of assurance and descent. These have all been abolished.50 The reference in the Act to “customary rights (until extinguished)”,51 suggests that it may have been these rights which the draftsman had in mind. Further support for this view comes from the fact that customary rights were not listed in section 18(4) of the Land Transfer Act 1875 (from which much of section 70(1)(a) of the Land Registration Act 1925 derives).52 The addition of “customary rights” to the list of overriding interests may therefore have been intended merely as part of the transitional provisions of the 1925 Act. If this view is correct, this category of overriding interests is now obsolete.
5.27     Secondly, there are the customary rights which are enjoyed by all or some of the inhabitants of a particular locality. These rights are certainly not obsolete and have the following characteristics53
(1)     they may be exercised by all who enjoy the benefit of the custom;
(2)     they may exist in gross: there is no requirement of a dominant tenement; and
(3)     they are not exercisable by members of the public generally, but only by the members of a local community or some particular defined class of such
persons.54
5.28     The range of rights which can exist as customary rights is very wide,55 but is probably analogous to those that can exist as easements and profits à prendre. Such rights are similar to public rights except that they benefit a more limited class of persons. As both public rights and easements can exist as overriding interests, it would be anomalous to deny the same status to customary rights of this second category.
5.29     We therefore provisionally recommend that—
(1)     as customary rights arising by tenure have ceased to exist they should no longer be listed as overriding interests; and
(2)     unless and until they are noted on the register, customary rights that are exercisable by all or some of the inhabitants of a particular locality (other than those arising by tenure) should be a separate and distinct
50    See Law of Property Act 1922, s 128 and Schedule 12; Administration of Estates Act 1925, s 45.
51    See s 70(1)(a).
52    The list of what are now called overriding interests in Land Transfer Act 1875, s 18(4) was “rights of common, rights of sheepwalk, rights of way, watercourses, and rights of water, and other easements.”
53    See Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 849.
54    See, eg Goodman v Mayor of Saltash (1882) 7 App Cas 633 (right for the inhabitants of free tenements in the Borough of Saltash to fish for oysters); Mercer v Denne [1905] 2 Ch 538 (right of the fisherman of the parish of Walmer to dry their nets on private land); Wyld v Silver [1963] Ch 243 (right of inhabitants of Wraysbury to hold a fair or wake on waste land of the parish); Peggs v Lamb [1994] Ch 172 (right of freemen and the widows of freemen of the Borough of Huntingdon to pasture and graze beasts on certain common land).
55    See Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 850 for examples.
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category of overriding interests.56
Public rights
5.30     Once again, the Land Registration Act 1925 provides no definition of “public rights” for the purposes of section 70(1)(a), though like all overriding interests, it has hitherto only encompassed rights that are proprietary.57 Public rights have been described as those which are exercisable “by anyone, whether he own land or not, merely by virtue of the general law”58 and in Overseas Investment Services Ltd v Simcobuild Construction Ltd,59 the Court of Appeal accepted that description as a definition of a public right for the purposes of section 70(1)(a). It did not have the wider (and vaguer) meaning of “rights of a public nature”. The court provided additional guidance as to the meaning of “public rights”—
(1)     it was confined to public rights presently exercisable and did not include potential rights;60
(2)     it would include matters such as rights of passage along the highway, rights of passage in navigable waters, rights of fishing and rights to discharge into a public sewer, because “each such right is exercisable by anyone merely by virtue of being a member of the public and under the general law”.61
5.31     In the light of these observations, we consider that it would be helpful if the nature of public rights was codified in the Act in accordance with the Overseas Investment decision. We therefore provisionally recommend that—
(1)     “public rights” should remain as a category of overriding interest in cases where the rights have not been noted on the register; and
(2)     they should be defined as rights exercisable by any member of the
56    It is clear from the Law Commission’s Third Report that the reference to “customary rights” in Land Registration Act 1925, s 70(1)(a) was thought by the then Commissioners to refer to this second category of customary rights rather than the first: see Law Com No 158, paras 2.71 -2.73.
57    See National Provincial Bank Ltd v Ainsworth [1965] AC 1175. This is because Land Registration Act 1925, s 70(1) provides that registered land is deemed to be subject to such of the overriding interests listed in that subsection “as may be for the time being subsisting in reference thereto”.
58    Sir Robert Megarry & Sir William Wade, The Law of Real Property (5th ed 1984) p 844.
59    (1995) 70 P & CR 322, reversing the unreported decision at first instance of Judge Colyer QC, sitting as a deputy High Court judge. See Ruoff & Roper, Registered Conveyancing, 6-09.
60    (1995) 70 P & CR 322, 327. It did not therefore include an agreement made under Highways Act 1980, s 38, by virtue of which land was to be dedicated as a highway with effect from a future date - which was the issue in that case. That agreement had not been registered and it was held that a purchaser of the land was not bound by the agreement. At first instance, Judge Colyer QC had held that the agreement did not fall “within the category of matters which section 1 of the Local Land Charges Act 1975 constitutes local land charges”: unreported, 22 October 1993, transcript, p 40. However, it is not entirely clear why it did not fall within s 1(1)(d) of that Act (see now however New Roads and Street Works Act 1991, s 87). Had it been a local land charge, it would have bound the purchaser under Land Registration Act 1925, s 70(1)(i); considered below, para 5.80.
61    (1995) 70 P & CR 322, 328, per Peter Gibson LJ.
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public over land under the general law.62
Do readers agree?
Liabilities having their origins in tenure Section 70(1)(b)
Introduction
5.32     Section 70(1)(b) lists as overriding interests—
Liability to repair highways by reason of tenure, quit-rents, crown rents, heriots, and other rents and charges (until extinguished) having their origin in tenure.63
As a result of our inquiries, we are reasonably satisfied that this category of overriding interests is now virtually (if not completely) obsolete.
Tenurial obligations to repair highways
5.33     First, as regards tenurial obligations to repair highways, the only evidence that we have been able to discover in the course of our inquiries of the existence of any such obligations has come from the Crown Estate. None of those whom we consulted could give us an actual example of such a right.64 We have therefore concluded that such rights are probably obsolete, at least for all practical purposes. We would however be glad to learn of any specific examples from readers, in case our view is incorrect.
62    Public rights which are local land charges will fall within s 70(1)(i) rather than s 70(1)(a). See below para 5.80.
63    See Ruoff & Roper, Registered Conveyancing, 6-10.
64    One correspondent drew our attention to Highways Act 1980, ss 56, 57, which deal with proceedings to obtain an order to repair a way or a bridge and which applies inter alia to “a highway which a person is liable to maintain... by reason of tenure”. These sections serve perhaps as a warning of the dangers of retaining provisions on the statute book in respect of liabilities which are obsolete. The mere fact that statutory provisions refer to tenurial liabilities to maintain highways encourages the belief that such obligations are still extant.
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Quit rents, heriots and other charges
5.34     Secondly, quit rents,65 heriots,66 and other charges having their origins in tenure, were amongst the last vestiges of the old system of feudal tenure, and were finally abolished at the end of 193567 by the provisions of the Law of Property Act 1922.68 They can no longer exist therefore.
Crown rents
5.35     Thirdly, we have had some difficulty in ascertaining exactly what Crown rents might be, as did the Law Commission when it considered them in the Third Report.69 We agree with what the Commission then said about such rights, namely that—
(1)     from the wording of section 70(1)(b), they must be of a tenurial character; and
(2)     they are probably the rents payable on land held in ancient demesne, that is, land of the manor that belonged to the Crown at the time of the Norman Conquest and which was then granted by the Crown to a subject in return for the payment of a rent.
None of those whom we contacted - including the Crown Estate - were certain of the precise meaning of the phrase. In consequence, none were aware of the existence of any such rights. It seems likely therefore that even if Crown rents do in theory still exist, they have in practice been obsolete for many years.
5.36     In the light of these findings, and subject to any information about the incidence of such rights that may be disclosed on consultation, we provisionally recommend that—
(1)     section 70(1)(b) should be repealed; and
(2)     any tenurial liabilities within the paragraph that may still exist should cease to be overriding interests and should take effect as minor interests instead.
Do readers agree?
Liability to repair the chancel of any church
Section 70(1)(c)
5.37     Liability to repair the chancel of any church is an overriding interest under section 70(1)(c) of the Land Registration Act 1925. It is a highly anomalous liability that
65    Quit rents were payments made in commutation of services due under socage feudal tenure: Sir Robert Megarry & Sir William Wade, The Law of Real Property (4th ed 1984) pp 18, 19.
66    Where land was held in copyhold tenure, this was the lord’s right to take the tenant’s best beast or other chattel on the tenant’s death: ibid, p 24.
67    Ibid, p 35.
68    See especially Sched 13.
69    Law Com No 158, para 2.87.
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attaches to certain properties and requires the owner (the “lay rector”70) to pay for the repair of the chancel of some pre-Reformation churches.71 It is still enforced7,2 on occasions even against landowners who purchased the land without knowing of the liability, and its existence can be very difficult to discover.73 The obligation to pay is several, so that where there is more than one lay rector, one of them can be required to meet the whole amount due and has then to seek contribution from the others.74 This liability will necessarily have to remain as an overriding interest. We therefore provisionally recommend the retention of chancel repair liability as an overriding interest in cases where it has not been noted on the register.
Liability in respect of embankments, and sea and river walls
Section 70(1)(d)
5.38     “Liability in respect of embankments, and sea and river walls” has the status of an overriding interest by section 70(1)(d) of the Land Registration Act 1925.75 As the Law Commission explained in its Third Report, this liability is not confined either to carrying out repairs (it may include a duty to contribute to the cost of carrying out such works) nor to obligations deriving from tenure.76 It has been held that “it is part of the duty of the Crown of England to protect the realm of England from the incursions of the sea by appropriate defences”,77 and that this duty is “for the benefit, not of one person in particular, but of the whole commonwealth”.78 In fact, over the centuries - beginning in 1427 - the Crown’s duties have been placed in the hands of a number of statutory bodies,79 to the extent that those duties are now subsumed within the statutory scheme.80 That scheme is presently to be found in the Coast Protection Act 1949, the Land Drainage Act 1991 and Part IV of the Water Resources Act 1991.
5.39     At common law, a landowner whose property fronted on the sea or on a river was
70    Or “lay impropriator”.
71    For an excellent summary of the development of the law, see J H Baker, “Lay Rectors and Chancel Repairs” (1984) 100 LQR 181.
72    The Law Commission has on its files a number of very recent instances of this, including one in which the liability may exceed the value of the land burdened by it.
73    We have already mentioned above (para 4.13) that the tithe records are incomplete and are scattered at several branches of the Public Record Office.
74    In 1985, the Law Commission recommended that the liability should be terminated ten years after the legislation came into force: Property Law: Liability for Chancel Repairs, Law Com No 152. It is understood that the Government is likely to indicate its response to this Report in the near future.
75    For a helpful survey of the law on coastal protection and sea defences, see W Howarth, Wisdom’s Law of Watercourses (5th ed 1992) pp 59 -65, to which we are indebted. See too the Third Report, Law Com No 158, paras 2.84, 2.85.
76    Law Com No 158, paras 2.83, 2.84. Cf Land Registration Act 1925, s 70(1)(b) (“liability to repair highways by reason of tenure”); above, para 5.33.
77    Attorney-General v Tomline (1880) 14 ChD 58, 61, per James LJ.
78    Attorney-General v Tomline (1879) 12 ChD 214, 231, per Fry J.
79    Originally commissioners for sewers.
80    See Symes & Jaywick Associated Properties Ltd v Essex Rivers Catchment Board [1937] 1 KB 548, 572.
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under no obligation to repair the sea wall or river bank.81 However, liability to repair and maintain such defences might be imposed on a frontager by contract, prescription, covenant (supported by a rentcharge), grant, custom, tenure or statute.82 A contractual obligation, not being proprietary,83 cannot subsist as an overriding interest within section 70(1)(d). Nor can liability imposed by statute84 because it arises under the general law. 85 The others are, however, proprietary 86 and do fall within the paragraph.87 In its Third Report, the Law Commission recommended that these liabilities should be reduced from the status of overriding interests to that of minor interests.88 Our inquiries have not yielded any specific examples of the survival of this liability. However, a number of those who responded expressed surprise that the Commission considered that it might be obsolete. We shall be glad to learn from any readers whether they have any experience of obligations falling within section 70(1)(d). Subject to any views expressed or information that may be offered on consultation, we provisionally recommend—
(1)     the retention of liability in respect of embankments, and sea and river walls as overriding interests; and
(2)     that it should be confirmed by the Act that such liability is limited to that arising by prescription, grant, covenant (supported by a rentcharge), custom or tenure.
Do readers agree?
Payments in lieu of tithe, and charges or annuities payable for the redemption of tithe rentcharges
Section 70(1)(e)
5.40 As a relic of a category of overriding interests that was once rather wider, section 70(1)(e) of the Land Registration Act 1925 provides that—
...payments in lieu of tithe, and charges or annuities payable for the redemption of tithe rentcharges
are overriding interests. Formerly the list also included “land tax” and “tithe
81    Hudson v Tabor (1877) 2 QBD 290. The case was concerned with a sea wall but “[i]t appears that the same principle extends to the bank of a river, whether it is tidal or non-tidal”:
W Howarth, Wisdom’s Law of Watercourses (5th ed 1992) p 62.
82    See, eg London & North-Western Railway Co v Fobbing Sewers Commissioners (1896) 75 LT 629 (liability “ratione tenurae”).
83    Cf Eton Rural District Council v Thames Conservators [1950] Ch 540.
84    See, eg Public Health Act 1936, s 264 (obligation imposed on owners and occupiers in certain urban areas to repair, maintain and cleanse any culvert in, on or under their land).
85    See above, para 4.36.
86    They have been described as “ancient incidents of land tenure the origin of very many of which is lost in the obscurity of history”: ibid, at p 547, per Vaisey J.
87    These liabilities are specifically preserved by the Coast Protection Act 1949, s 15(2); the Land Drainage Act 1991, s 21; and the Water Resources Act 1991, s 107(4). There is a power to commute such proprietary liabilities: Land Drainage Act 1991, s 33.
88    Law Com No 158, para 2.86.
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rentcharge” but those references have been repealed.89 The highly technical body of law that underlies this paragraph was explained by the Law Commission in its Third Report90 and it is unnecessary to rehearse it. With one exception, the rights listed in this paragraph are obsolete. Certain payments, commonly known as “corn rents” do still exist and some are still paid,91 though the sums involved are normally so modest that corn rents have largely faded away. Indeed, the principal beneficiary of corn rents,92 the Church Commissioners, ceased to enforce them in 1990 because they were uneconomic to collect.93 They have indicated that they have no objections to the removal of overriding status from such rents. However, our inquiries suggest that there are other recipients of corn rents and that, in one instance at least, the sums involved are not negligible. In these circumstances, we feel unable to recommend the complete repeal of section 70(1)(e). We do however consider that the scope of this category should be narrowed to include just this one situation. We provisionally recommend that liability to make payments (commonly known as corn rents) by any Act of Parliament other than one of the Tithe Acts, out of or charged upon any land in respect of the commutation of tithes, should continue to be an overriding interest, but that section 70(1)(e) should otherwise be repealed. Do readers agree?
5.41     There is a minor connected point. Section 70(1) of the Land Registration Act 1925 provides that the registrar may enter on the register the fact that any land which is or is about to be registered is exempt from land tax (which no longer exists), or tithe rentcharge or payments in lieu of tithe (which are obsolete). Even though some corn rents still exist, we doubt that this provision is still needed. If, on registration, it appears that the land is subject to a liability to pay corn rents, that fact will be noted
on the register.94
Squattersrights Section 70(1)(f)
Introduction
5.42     The Land Registration Act 1925 makes elaborate provision for the application of the Limitation Acts to registered land and we consider this subject more fully in Part X of this Report. What is of particular relevance here is that, unless and until the squatter
89    By Finance Act 1963, s 73(8)(b); Sched 14, Pt IV; and Tithe Act 1936, s 48(3); Sched 9, respectively.
90    Law Com No 158, paras 2.89 - 2.92.
91    We are concerned with those so-called corn rents which are payable out of or are charged upon any land by any Act of Parliament other than one of the Tithe Acts (the Acts in question date from the time of Charles II up to 1836). Not all of these payments are variable with the price of corn and many of them are fixed. Some corn rents are not within s 70(1)(e) because they are unrelated to tithes. These are chiefly associated with the Colleges of Oxford, Cambridge, Eton and Winchester.
92    We wish to record our gratitude to the Country Landowners Association for their assistance. Through their kind offices we were able to make known our interest in corn rents, and received a number of interesting letters, for which we are very grateful. Of a number of cases that were drawn to our attention only one was a corn rents within s 70(1)(e), but that one case was, however, of considerable interest.
93    The statutory machinery for their collection is likely to be repealed in the near future.
94    See Land Registration Act 1925, s 70(2), (3); below, para 5.99.
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becomes registered as proprietor under the provisions of the Act,95 his rights take effect under section 70(1)(f) of the Land Registration Act 1925 which provides that—
Subject to the provisions of this Act, rights acquired or in course of being acquired under the Limitation Acts
are overriding interests.
Recommendations in the Third Report
5.43     In its Third Report, the Law Commission did not suggest any fundamental reappraisal of this category of overriding interest. The Commission considered that “a right in the course of acquisition by adverse possession, but not yet acquired” could not be treated as an overriding interest.96 For this reason, it was recommended that there should be a separate and distinct provision to make it clear that time should not start to run again on the registration of a new proprietor. This was duly reflected in the Draft Bill contained in the Fourth Report.97 This particular proposal appears to rest on a misconception of the legal status of an adverse possessor’s interest in the land in question. As Jessel MR explained in Rosenberg v Cook,98 “the title of the disseisor is in this country a freehold title”.99 However bad his or her title may be, the squatter has a freehold in the land from the moment that he or she takes adverse possession, regardless of the estate of the person against whom he or she is adversely possessing, and notwithstanding that the freehold is liable to defeasance by title paramount. As a squatter has an estate in land, he or she must therefore have an “interest” for the purposes of s 70(1) of the Land Registration Act 1925.100
The treatment of adverse possession in this Report
5.44     The Joint Working Group has considered the position of squatters in relation to registered land in some detail. In Part X of this Report we explain both the nature of adverse possession and the rules of law which govern its application.101 We provisionally recommend that the rules which govern the acquisition of title to registered land by adverse possession should be recast to reflect the principles of title registration.102 We further propose that, whether or not readers wish to see any change in the substantive law, the existing machinery by which the principles of adverse possession are applied to registered land should be replaced by a much simpler and clearer system.103 What is important for present purposes is that adverse possession will continue to apply to registered land whether in its present or in some much more attenuated form.
95    See s 75.
96    Law Com No 158, para 2.37.
97    Cl 17(3)(e).
98    (1881) 8 QBD 162, 165.
99    See the discussion of this below, paras 10.22 - 10.24.
100  Compare the suggested definition of “interest”, above, para 3.2.
101  See below, paras 10.4 - 10.39.
102  See below, paras 10.65 - 10.69.
103  See below, para 10.78.
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Squatters’ rights as overriding interests: two problems
5.45     As we explain in Part X,104 for a squatter to acquire title by adverse possession—
(1)     he or she must take possession of the land, whether by dispossessing the true owner or by entering land which has been abandoned;
(2)     that possession must be adverse and not (for example) with the true owner’s express or implied licence;
(3)     he or she must intend to exclude the world, including the true owner; and
(4)     such adverse possession must continue for the duration of the limitation period.
5.46     There are two difficulties about the overriding status that is given to squatters’ rights under section 70(1)(f) of the Land Registration Act 1925. The first is that there is no requirement that adverse possession should be obvious to anybody who inspects the land.105 Indeed there can be situations where the person against whom adverse possession is taken is wholly unaware of the fact.106 Adverse possession is “possession as of wrong”,107 and there is therefore no requirement that it should be enjoyed openly.108 Furthermore, the acts that may amount to a taking of adverse possession may be slight, given either the nature of the land or the fact that the true owner has abandoned it.109 It follows that a purchaser of registered land may be bound by the rights of a squatter of whom the vendor was unaware at the time of sale and which the purchaser could not reasonably have discovered.110 If that does happen, and the register is rectified to give effect to the squatter’s rights, the purchaser will receive no indemnity.111 If the proposals that we make in Part X of this Report are accepted by readers, this particular risk will be considerably reduced, but it will by no means be eliminated.
5.47     The second difficulty arises from the fact that once a squatter has barred the rights of the true owner by adverse possession, his or her rights continue to be an overriding interest, even if he or she abandons possession of the land and the registered proprietor
104  See below, para 10.4.
105  An example involving an unfortunate purchaser of unregistered land, who was registered as first registered proprietor, is Chowood Ltd v Lyall (No 2) [1930] 2 Ch 156. The land in question was woodland and it may be inferred from the report that the squatter’s possession was not apparent. The case arose out of an action for trespass brought by the purchaser against the squatter who entered the land to which she had in fact acquired title in order to cut underwood.
106  See Red House Farms (Thorndon) Ltd v Catchpole [1977] 2 EGLR 125 (owner unaware that defendant was shooting fowl on its land); Prudential Assurance Co Ltd v Waterloo Real Estate Inc [1998] EGCS 51; The Times 13 May 1998 (neighbour took over party wall without owner’s knowledge).
107  Buckinghamshire County Council v Moran [1990] Ch 623, 644, per Nourse LJ; below, para 10.1.
108  It has been accepted that a person may lose his or her title to an adverse possessor even though he or she has not been negligent: see Rains v Buxton (1880) 14 ChD 537, 540.
109  See below, para 10.4.
110  Cf Chowood Ltd v Lyall (No 2), above.
111  See above, para 4.14.
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resumes possession.112 It is the registered proprietor who is then in adverse possession and the rights of the former squatter will not be barred until the proprietor has remained in possession for the limitation period. Should that proprietor sell the land to a purchaser in the interim, that purchaser will be bound by the former squatter’s overriding interest. In this way, a situation can arise where a purchaser can acquire land from a registered proprietor, who is the only person in possession, and yet find that he or she can both be deprived of that land by a squatter and have no entitlement to indemnity.113 Once again, if the proposals that we make in Part X are accepted by readers, this risk will diminish considerably, but it will still remain to some degree.114
5.48     Whether or not readers favour the wide-reaching reform to the law of adverse possession of registered land that we provisionally propose in Part X of this Report, we consider that the present unqualified overriding status of squatters’ rights over-protects such rights. As between a purchaser and a squatter whose possession is not apparent, we are firmly of the view that the equities favour the purchaser. Indeed, we suspect that most people would be astonished to discover that there was any possibility that a squatter who had long ago abandoned a piece of land, could reappear and successfully claim it from an innocent purchaser who had bought it from the registered proprietor. The Joint Working Group considers that a solution to the two difficulties which we have identified lies in striking a balance between the protection that should be given to—
(1)     the rights of those who are in actual occupation of land, including both purchasers and squatters;115 and
(2)     purchasers against rights which are neither registered nor readily discoverable on a reasonable inspection of the land.
In our view that balance can be struck quite simply by repealing section 70(1)(f) of the Land Registration Act 1925. We explain the results in the following paragraphs.
The solution: repeal section 70(1)(f) and protect only squatters in actual occupation
5.49     If section 70(1)(f) were repealed, any squatter who was in actual occupation of the land in question and - if the recommendation that we make below is accepted116 - whose rights were apparent on a reasonable inspection of the land would be protected under another category of overriding interests which we consider below, namely the rights of persons in actual occupation.117
112  If the squatter abandons adverse possession before the registered proprietor’s title is barred, the period of adverse possession has no effect on the registered proprietor’s title: see below, para 10.49(4).
113  See the valuable analysis by Roger J Smith, “Land Registration: Reform at Last”, in Paul Jackson and David C Wilde (ed), The Reform of Property Law (1997) p 129 at p 139.
114  Under the proposals that we make, title would not be barred merely by lapse of time: see below, paras 10.49; 10.65.
115  For the meaning of “actual occupation” in this context, see below, paras 5.71 and following.
116  See para 5.75.
117  Land Registration Act 1925, s 70(1)(g), below, para 5.56.
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