Practitioner's Guide to the Land Registration Act 2002

Malcolm Dowden

• Publisher: Estates Gazette
• Year: 2013
• Print ISBN: 9781138424944
• eBook ISBN: 9781135326975
• Edition: 1
• Topic: Jura
• Subtopic: Eigentumsrecht

Key provisions of the Land Registration Act 2002 provide the legal framework for electronic conveyancing. This book will explain the legislative framework and the current proposals – including the key issues of security and authorisation – and will highlight the points that need to be addressed by practitioners in order to qualify for access to the new system.Electronic conveyancing will not be with us until 2006 and this book will take a thematic approach, highlighting the main practical issues arising from the new law and providing precedents and checklists to help busy conveyancers to manage the risks. This book will seek to highlight – and to give practical advice on – the day to day requirements of the new regime, and to promote sensible and cost-effective management of the risks.

1

Land Registration Act and Rules

The Land Registration Act 2002 (the “LRA 2002”) was the fruition of the largest single project undertaken by the Law Commission since its foundation in 1965. The LRA 2002 and its accompanying Land Registration Rules (the “LRR”) together constitute a complete rewrite of law and practice relating to registered land. The LRA 2002 received royal assent in February 2002 but did not come into force until 13 October 2003. The intervening period saw a series of consultations and an unprecedented programme of training and education spearheaded by the Land Registry. That effort included major conferences and seminars, training videos, a new set of practice guides and articles in the mainstream press and in leading professional journals such as the Estates Gazette. By 13 October 2003 few property lawyers can have remained unaware of the major changes that were taking place.

The unfinished revolution

The Law Commission’s work culminated in the publication of its report Land Registration for the Twenty First Century – A Conveyancing Revolution.¹ For anyone seeking to understand the fundamental objectives of the LRA 2002, and the detailed reasoning that underpins its provisions, this report remains an invaluable reference point. It also stands as a signpost to the future of conveyancing and property ownership, pointing to the ultimate objective of an entirely electronic system of title registration, and entirely electronic means of creating and transferring interests in land. If that ambitious goal is to be achieved then:

1. all express dispositions of registered land will have to be appropriately protected on the register unless there are very good reasons for not doing so;

2. the categories of overriding interests will have to be very significantly reduced in scope; and

3. dispositions of registered land will have to be registered simultaneously, so that it becomes impossible to make most dispositions of registered land except by registering them.²

The elements of the LRA 2002 that came into operation on 13 October 2003 are concerned with the first two objectives. E-conveyancing remains a work in progress, with pilot schemes anticipated by 2006–2007 and full implementation perhaps by 2010–2011. The LRA 2002 sets the legal framework for e-conveyancing. It remains for the IT infrastructure to be designed, built and rolled out.

In the meantime, conveyancing searches have undergone their own revolution since the implementation of the National Land Information Service (“NLIS”) and Land Registry Direct, offering electronic access to a range of data providers including local authorities, the Coal Authority and the Land Registry itself. Indeed, since the summer of 2004 it has been possible to obtain electronic official copies of the register and title plans. In September 2004 the Land Registry issued a new practice guide³ detailing the information that is now available in electronic format.

Commonhold – a new way of owning property

As if to underline the sweeping nature of the conveyancing revolution, a new form of property ownership has been created in conjunction with the overhaul of land registration. Commonhold took effect on 27 September 2004 and is a type of freehold ownership of properties with shared facilities whose creation and operation depends upon registration of prescribed forms at the Land Registry.

Commonhold combines freehold ownership of a single property within a larger development, with membership of a company limited by guarantee that owns and manages the common parts of the development. In essence, it is the commonhold community rather than a third party landlord who has control of the development.

Commonhold is suitable for houses, mixed use and commercial developments, but it is expected that it will be adopted most often for residential flats. Commonhold can be set up for new developments, but existing leasehold developments can also be converted to commonhold, provided that the correct statutory procedures are followed.

Commonhold comprises:

•  units: these are the individual freehold properties, such as flats, offices, shops or houses; the owners of the freehold units will be known as “unit-holders”

•  common parts: those parts of the development that do not form part of a unit, for example, shared facilities such as the roof, staircases, car parking areas and gardens. The common parts are owned and managed by a company limited by guarantee and known as the Commonhold Association (CA), membership of which is confined to the unit-holders within the commonhold.

The governing documents for a commonhold development are the commonhold community statement and the memorandum and articles of the commonhold association.

The commonhold community statement:

•  defines the extent of the property within the commonhold

•  sets out the rights affecting the property in the commonhold

•  sets out the rights and duties of the commonhold association, the unit-holders, and any tenants of the unit-holders, and

•  outlines the procedures for resolving any disputes.

The form and much of the content of the commonhold community statement is prescribed by the Commonhold Rules 2004, so that much of the document will be in standard form. “Local rules” can be added, however, to make the commonhold community statement relevant to the particular circumstances of each commonhold.

Before it can take effect as such, the commonhold must be registered at the Land Registry. The forms and procedures are set out in the new Land Registry Practice Guide 60.⁴

A new form of lease?

At the time of writing (September 2004) the Land Registry is consulting⁵ on proposals for a new compulsory form L1 setting out key information in each lease (including rent, rent reviews, alienation, easements, options and rights of pre-emption, charges and rentcharges). The proposals also canvass the possible alternative of prescribed clauses rather than a mandatory form of frontsheet. It is highly likely that the proposals will come to fruition in 2005–2006. Standardisation of documents, or at least the easy extraction of registrable information, is a key requirement for any rational system of e-conveyancing. That much is clear from the Chief Land Registrar’s foreword to the consultation:

With leases getting ever longer anyone who has to consider or prepare a lease will find much benefit in the principal terms being:

– contained at the front of a lease; and

– presented in a standardised format.

Each year Land Registry receives over 200,000 applications to register new leases (whether as a result of first registration or transfers of existing leases). The number of leases received by the Land Registry will inevitably increase. Under the current rules all new leases granted for terms of more than 7 years must be registered, as must existing leases assigned when they have more than 7 years left to run. There is also the prospect of the Lord Chancellor, at some point in the future, extending the compulsory registration regime to leases granted for terms of more than three years.

The move towards e-conveyancing and a more transparent property market has resulted in the consultation. The implementation of standardised lease information would make it easier to understand the principle terms as well as result in a more streamlined registration of registrable leases.

A new tax

It was inevitable that the move towards e-conveyancing would see the end of stamp duty. A tax that depends upon the affixing of stamps to documents clearly has no place in a system based upon “dematerialisation” – the online creation and disposition of interests in land.

On 1 December 2003 stamp duty was replaced by stamp duty land tax “SDLT”. Despite the similarity of the names, stamp duty and SDLT are radically different taxes. SDLT applies to any land transaction within the United Kingdom, whether that transaction is effected onshore or offshore, and whether it is effected by way of documents or orally. A “land transaction” is defined by s 43 Finance Act 2003 as the acquisition of a “chargeable interest”. The definition of “chargeable interest” is very widely drawn, and includes a freehold or leasehold interest in land as well as rights such as easements or the benefit of restrictive covenants.

Under the SDLT regime, the Land Registry has an important policing function. No land transaction falling within s 79 of Finance Act 2003 may be registered without production of a Revenue Certificate confirming that a land transaction return has been submitted to the Inland Revenue or a self certificate confirming that no land transaction return is required in respect of the transaction. In view of the greatly enhanced scope of compulsory registration under s 4 of the LRA 2002, this is a highly significant compliance tool for the purposes of the new tax. In practice, title cannot be registered or interests protected without evidence that the applicable tax has been paid.

Interesting times

So what is the point of this book? Quite simply, to examine how the LRA 2002 and related developments are working from the perspective of a practitioner, and to provide guidance on issues that have arisen since 13 October 2003. Already it is clear that some of the issues thought in the summer of 2003 to be problematic have in fact caused few difficulties. The Land Registry’s IT infrastructure seems to have worked well, and the transition was smooth. Others, by contrast, have emerged as unexpectedly significant for conveyancers since the LRA 2002 came into operation.⁶ It is also intended to assist lawyers in practice areas other than conveyancing or landlord and tenant – in particular, those concerned with family and matrimonial issues, trusts and litigation, all of whom have had to come to terms with the new world of unilateral notices, agreed notices and standard form restrictions.

2

Total Registration

The fundamental objective of the LRA 2002 and of associated developments such as e-conveyancing and NLIS is “total registration” – explained by the Law Commission in the following terms:

that the register should be a complete and accurate reflection of the state of the title to the land at any given time, and it should be possible to investigate title to land online, with the absolute minimum of additional enquiries and inspections⁷

The Land Registry Practice Guide on first registration⁸ sets out the advantages of registration in terms that reflect the fundamental objective. Registration under the LRA 2002 supports home and property ownership and the secured credit market by:

• providing title guarantee

• providing greater protection against the possibility of losing title by adverse possession

• indemnifying the proprietors under s 103 and schedule 8, LRA 2002 against any loss if they are deprived of their state guaranteed title on a rectification of the register under s 65 and schedule 4, LRA 2002

• introducing certainty and simplicity into conveyancing

• setting out or referring in the register to all the rights that benefit and affect the title other than certain overriding interests

• showing clearly the extent of the land in each title by means of a title plan

• ensuring that capital can circulate freely in the economy by making land readily available as security, and

• making large holdings of land and portfolios of charges readily marketable.

Interests that may be registered

In order to meet the fundamental objective the LRA 2002 increases the number of interests in land that are registrable. S 3 sets out the interests that can be registered with separate title. These are:

• an estate in land. As defined by s 132 LRA 2002 this includes:

• buildings and other structures

• land covered with water, and

• mines and minerals, whether or not held with the surface.

• a rent charge

• a franchise

• a profit à prendre in gross.

The ability to register profits à prendre and franchises with separate titles is new.

It is no longer possible to register title to the lordship of a manor. Under the LRA 1925 this was never compulsory but could be done voluntarily. Where the title to a manor is already registered, the proprietor may apply for it to be removed from the register.⁹

Many manorial titles include no physical land. Sometimes, however, land may still be attached to a manor and title to it may pass on a transfer of the manor. The compulsory registration provisions of the LRA 1925 did not apply to land which was part of a manor and included in the sale of a manor as such (s 123(3)(c), LRA 1925 (repealed)). There is no such exception in the LRA 2002. Therefore, if a manor includes physical parcels of land, the title to the land concerned must be registered following a transfer, mortgage or lease of a kind that triggers first registration....

Table of contents

• Cover
• Title Page
• Copyright Page
• Table of Contents
• Preface
• Table of Cases
• 1 Land Registration Act and Rules
• 2 Total Registration
• 3 Protecting Third Party Interests - Notices
• 4 Restrictions
• 5 Overriding Interests
• 6 Mortgages and the Land Registration Act
• 7 Rejection of Applications, Requisitions and Cancellation
• 8 Boundaries, Physical Fatures and Plans
• 9 The Open Register and Confidential Information
• 10 Cautions against First Registration
• 11 Adverse Possession and the Land Registration Act 2002
• 12 Leases – The Next Steps
• Appendix 1 Significant Dates
• Appendix 2 Glossary of Terms
• Appendix 3 Standard Form Restrictions
• Index