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You are here: BAILII >> Databases >> The Law Commission >> Land Registration For The Twenty-First Century: A Conveyancing Revolution (Report) [2001] EWLC 271(1) (9 July 2001) URL: http://www.bailii.org/ew/other/EWLC/2001/271(1).html Cite as: [2001] EWLC 271(1)

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THE LAW COMMISSION

AND

HM LAND REGISTRY

Item 5(a) of the Law Commission's Seventh Programme of Law Reform

To the Right Honourable the Lord Irvine of Lairg, Lord High Chancellor of Great Britain

PART I

THE LAND REGISTRATION BILL AND ITS

OBJECTIVES

INTRODUCTION

1.1      The Land Registration Bill is the final outcome of six years' joint work by the Law Commission and HM Land Registry.^[1] The purpose of the Bill is a bold and striking one. It is to create the necessary legal framework in which registered conveyancing can be conducted electronically. The move from a paper-based system of conveyancing to one that is entirely electronic is a very major one and it will transform fundamentally the manner in which the process is conducted. The Bill will bring about an unprecedented conveyancing revolution within a comparatively short time. It will also make other profound changes to the substantive law that governs registered land. These changes, taken together, are likely to be even more far-reaching than the great reforms of property law that were made by the 1925 property legislation. Not only will the Bill introduce a wholly different method of conveyancing, but, as we explain below, it will also alter the way in which title to land is perceived.^[2] The Land Registration Bill is the largest single law reform Bill and project that has been undertaken in the Law Commission since its foundation in 1965.

1.2      When the Law Commission and HM Land Registry first began planning the Bill, the possibility that conveyancing might be conducted electronically had scarcely been mooted. The Consultative Document from which the Bill derives, "Land Registration for the Twenty-First Century", which the Law Commission and HM Land Registry published in 1998,^[3] set the agenda for the development of dematerialised conveyancing and stimulated a good deal of public debate. There is now wide support, both within the property industry and from many legal practitioners, for the introduction of a system of dealing with land in dematerialised form. Indeed, such a system has come to be regarded as inevitable. The Bill provides the necessary changes to the law at precisely the time when they are needed. It will enable those who deal with property to take full advantage of the developments in information technology unconstrained by out-of-date legislation.

1.3      In this Part we explain-(1) the objectives of the Bill and the thinking behind them; (2) some key features of the Bill; and (3) the background to the Bill and how it has come about.

THE OBJECTIVES OF THE BILL

1.4      We have explained above that a system of conveyancing conducted in dematerialised form is now regarded as inevitable.^[4]Dealings with land cannot remain unaffected by the general development of electronic commerce. Nevertheless, however inevitable it may now seem, there is a legitimate public expectation that the change to an electronically based system for dealings with land will produce clear and demonstrable benefits. The public rightly seeks a more expeditious and much less stressful system of dealing with land. It also wants to see better protection for title to land and for the rights and interests that exist in land. The Bill attempts to meet these expectations.

1.5      The fundamental objective of the Bill is that, under the system of electronic dealing with land that it seeks to create, the register should be a complete and accurate reflection of the state of the title of the land at any given time, so that it is possible to investigate title to land on line, with the absolute minimum of additional enquiries and inspections.

1.6      Although that ultimate objective^[5] may seem an obvious one, its implications are considerable, and virtually all the changes that the Bill makes to the present law flow directly from it. The Bill is necessarily limited in its scope to registered land or to dealings with unregistered land in England and Wales that will trigger first registration. Although the great majority of titles are in fact now registered, there are still substantial amounts of land (particularly in rural areas) that are unregistered. However, as we explain in Part II, unregistered land has had its day.^[6] In the comparatively near future, it will be necessary to take steps to bring what is left of it on to the register.^[7]

1.7      The process of registration of title is conducted by the State through the agency of HM Land Registry. Indeed, the State guarantees the title to registered land. If, therefore, any person suffers loss as a result of some mistake or omission in the register of title, he or she is entitled to be indemnified for that loss. At present, there is no requirement that a disposition of registered land has to be entered in the register if it is to be effective. Even without registration, dispositions are valid not only between the parties to them, but as against many but not necessarily all third parties who subsequently acquire an interest in the same registered land. This is a necessity under the present law because there is a hiatus -called the "registration gap" -between the making of any disposition and its subsequent registration. The transfer or grant has to be submitted to the Land Registry for registration, which inevitably takes some time.^[8] It would be wholly unacceptable for the transfer or grant to have no legal effect in that interim period. It should be noted that there are some interests in registered land, presently known as overriding interests, which are not protected in the register at all but which nonetheless bind any person who subsequently acquires an interest in the land affected. This is so whether or not that person knew of, or could readily have discovered, the existence of these interests.

1.8      If it is to be possible to achieve the fundamental objective of the Bill mentioned in paragraph 1.5 above-

(1) all express dispositions of registered land will have to be appropriately protected on the register unless there are very good reasons for no 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.

The aim stated in (3) will be possible only if conveyancing practitioners are authorised to initiate the process of registration when dispositions of registered land are made by their clients. This is a very significant departure from present practice.

1.9      To achieve the goals stated in paragraph 1.8 will also require a change in attitude. There is a widely-held perception that it is unreasonable to expect people to register their rights over land. We find this puzzling given the overwhelming prevalence of registered title. Furthermore, the law has long required compliance with certain formal requirements for the transfer of interests in land and for contracts to sell or dispose of such interests. The wisdom of these requirements is not seriously questioned. We cannot see why the further step of registration should be regarded as so onerous. In any event, under the system of electronic conveyancing that we envisage (and for which the Bill makes provision), not only will the process of registration become very much easier, but the execution of the transaction in electronic form and its simultaneous registration will be inextricably linked.

1.10      These changes will necessarily alter the perception of title to land. It will be the fact of registration and registration alone that confers title. This is entirely in accordance with the fundamental principle of a conclusive register which underpins the Bill.^[9]

SOME KEY FEATURES OF THE BILL

1.11      It may be helpful to list some of the most striking changes that the Bill will either introduce as soon as it is brought into force or allow to be introduced subsequently. Two of the main changes -in relation to the introduction of electronic conveyancing and the recasting of the law on adverse possession- call for specific comment.

Electronic conveyancing

1.12      The Bill will create a framework in which it will be possible to transfer and create interests in registered land by electronic means. It is envisaged that, within a comparatively short time, it will it will be the only method of conducting registered conveyancing. As we have indicated above,^[10] an essential feature of the electronic system when it is fully operational is that it will be impossible to create or transfer many rights in or over registered land expressly except by registering them. Investigation of title will be almost entirely online. It is intended that the secure electronic communications network on which the system will be based, will be used to provide information about properties for intending buyers. It will also provide a means of managing a chain of transactions by monitoring them electronically. This will enable the cause of delays in any chain to be identified and remedial action encouraged. It is anticipated that far fewer chains will break in consequence and that transactions will be considerably expedited. Faster conveyancing is also likely to provide the most effective way of curbing gazumping. The process of registration under the electronic system will be initiated by solicitors and licensed conveyancers, though the Land Registry will exercise control over the changes that can be made to the register. Electronic conveyancing will not come into being as soon as the Bill is brought into force. It will be introduced over a number of years, and there will be a time when both the paper and electronic systems co-exist.

Adverse possession

1.13      The Bill abandons the notion that a squatter acquires title once he or she has been in adverse possession for 12 years. It creates new rules in relation to registered land that will confer greater protection against the acquisition of title by persons in adverse possession. This is consistent with one of the objectives of the Bill -that it is registration alone that should confer title.^[11] The essence of the new scheme is that a squatter will be able to apply to be registered as proprietor after 10 years' adverse possession. However, the registered proprietor will be notified of that application and will, in most cases, be able to object to it.^[12] If he or she does, the application will be rejected. However, the proprietor will then have to take steps to evict the squatter or otherwise regularise his or her position within two years. If the squatter is still in adverse possession after two years, he or she will be entitled to be registered as proprietor. We consider that this new scheme strikes a fairer balance between landowner and squatter than does the present law. It also reflects the fact that the basis of title to registered land is the fact of registration, not (as is the case with unregistered land) possession.

Other changes

1.14      Some of the other striking changes that the Bill makes can be summarised as follows-

-the requirement of compulsory registration of title is to be extended to leases granted for more than 7 years, with power to reduce the length of registrable leases still further;

-in favour of those dealing with them, owners of registered land will be presumed to have unrestricted powers of disposition in the absence of any entry on the register;

-the rules as to the competing priority of interests in registered land will be clarified and simplified;

-the protection for rights in or over registered land will be simplified and improved by the extension of notices and restrictions and the prospective abolition of cautions and inhibitions;

-the range of overriding interests will be significantly restricted in their scope: the ambit of particular categories of overriding interests will be narrowed, some categories will be abolished altogether and others will be phased out after 10 years;

-it will become possible to access the history of a registered title (to the extent that the Registry has it) if there is a reason to see it;

-charge certificates will be abolished and land certificates will have a much less important role;

-Crown land, including much of the foreshore around England and Wales, that is not presently registrable will become so; and

-a new system of independent adjudication of disputes arising out of disputed applications to the registrar will be set up.

THE BACKGROUND TO THE BILL

1.15      As we have indicated above,^[13] the Land Registration Bill has its genesis in the Consultative Document, "Land Registration for the Twenty-First Century", which was published by the Law Commission and HM Land Registry in 1998.^[14] This was part of the continuing work of the Law Commission and Land Registry on the reform of the law on land registration.^[15] That Document was prompted by three factors-

(1) the need to create the legal environment in which it was possible to conduct conveyancing in electronic form and which reflected the possibilities that electronic conveyancing could offer;^[16]

(2) the unsatisfactory nature of the legislation that governs land registration;^[17]

(3) the need to create principles that reflected the fact that registered land was different from unregistered land and rested on different principles.^[18] The Document set out in great detail the present law and made proposals for the reform of almost all aspects of it, having regard to the three matters listed above.

1.16      The Consultative Document attracted a good deal of interest and attention. There were nearly 70 written responses, many of them very detailed and wellinformed. We list those who kindly responded in Appendix B to this Report. In addition to these written responses, the Law Commission and Land Registry had the benefit of the views that were expressed at three very well-attended seminars that were held to discuss the proposals, namely-

(1) a seminar for members of the Bar held at Falcon Chambers and kindly organised by Derek Wood, CBE, QC;

(2) a meeting of the Chancery Bar Association; and

(3) a meeting of the Property Litigation Association. Furthermore, both Steve Kelway, the General Counsel to the E-Conveyancing Taskforce at HM Land Registry, and Charles Harpum, the relevant Law Commissioner, have spoken regularly to firms of solicitors around the country, to seek their views on the development of electronic conveyancing. We are very grateful to all of those who went to so much time and trouble to assist us. It will be apparent from the Bill and the commentary on it that their efforts were not wasted. We gratefully acknowledge the assistance that we have received from others on specific aspects of the Bill elsewhere in this Report.

1.17      The great majority of the recommendations contained in the Consultative Document were accepted on consultation. Where different or better views were expressed, they have been accepted in preference, as the Report makes clear. There is only one issue upon which we have diverged from the views of respondents, and that concerns the length of registrable leases.^[19] Having regard to other, compelling policy objectives, we did not follow the trend of responses.

1.18      There are two matters on which we sought views in the Consultative Document which were supported on consultation which we have nevertheless not taken forward.

1.19      First, the proposals contained in Part X of the Consultative Document^[20] on prescription have been abandoned for three reasons-

(1) there was not a compelling case for the reform of the law of prescription in the context of registered land alone as there was in relation to the law of adverse possession;

(2) the Law Commission is now undertaking a comprehensive review of easements and land obligations which will include prescription and it seems better to view prescription as a totality; and

(3) some of the conveyancing concerns that informed our proposals^[21] have been addressed in more direct ways in the Bill.^[22]

1.20      Secondly, we have not made any specific recommendations in relation to a problem thrown up by the decision of the Court of Appeal in Brown & Root Technology Ltd v Sun Alliance & London Assurance Co Ltd.^[23] The particular problem there was as follows. A tenant had assigned a registered lease. The assignee did not register the assignment. The assignor then exercised a break clause and successfully determined the lease. This case caused considerable concern and we explored a number of ways in which it might be resolved in the Consultative Document.^[24] However, we have decided that no reform is needed because the law already provides an adequate remedy. Where a seller of land^[25] has executed a transfer of a registered title, he or she holds that land on a bare trust for the buyer until the buyer is registered as proprietor. If the seller purports to dispose of the land after it has been transferred but before registration, he or she commits a breach of trust for which the usual remedies exist. The problem thrown up by the Brown & Root case will disappear when electronic conveyancing is introduced, because the making of dispositions and their registration will occur simultaneously.^[26]

STRUCTURE OF THE REPORT

1.21      In Part II of this Report we explain the principal changes to the law which the Bill will make.^[27] In Parts III-XVII, we provide a detailed commentary on the Bill and explain how it is intended to operate. That commentary follows the structure of the Bill in most respects, but not slavishly.

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Note 1   The collaboration has already resulted in Land Registration Act 1997, which (amongst other things) extended the triggers to compulsory first registration and recast the provisions on indemnity.    [Back]

Note 2   See below, para 1.10.    [Back]

Note 3   (1998) Law Com No 254, referred to throughout this Report as “the Consultative Document”. See below, para 1.15.    [Back]

Note 4   See above, para 1.2.    [Back]

Note 5   It will not be achieved at once.    [Back]

Note 6   See below, para 2.9.    [Back]

Note 7   See below, para 2.13.    [Back]

Note 8   Registration is effective from the time when an application is taken to have been received in the Registry.    [Back]

Note 9   See above, para 1.5.    [Back]

Note 10   See para 1.8.    [Back]

Note 11   See above, para 1.10.    [Back]

Note 12   If there is no objection to the application, the squatter will be registered.    [Back]

Note 13   See para 1.2.    [Back]

Note 14   (1998) Law Com No 254.    [Back]

Note 15   The Consultative Document was the second report produced by the Law Commission and HM Land Registry. The recommendations contained in the first, Land Registration: Land Registration: First Report of a Joint Working Group (1995) Law Com No 235, were implemented by Land Registration Act 1997. For the background to this joint collaboration, see Law Com No 254, paras 1.7-1.9.    [Back]

Note 16   Law Com No 254, para 1.2.    [Back]

Note 17   Principally the Land Registration Act 1925. See Law Com No 254, para 1.3.    [Back]

Note 18   Law Com No 254, para 1.6.    [Back]

Note 19   See below, para 3.14.    [Back]

Note 20   See Law Com No 254, paras 10.79 and following.    [Back]

Note 21   See Law Com No 254, para 10.89(2).    [Back]

Note 22   See below, para 8.66.    [Back]

Note 23   [2000] 2 WLR 566.    [Back]

Note 24   See Law Com No 254, paras 11.26-11.29.    [Back]

Note 25   Including an assignor of a lease for valuable consideration.    [Back]

Note 26   See above, para 1.12.    [Back]

Note 27   We have not included a statement of the present law on land registration because the matter was exhaustively considered in the Consultative Document, Law Com No 254, to which reference should be made.    [Back]