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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(12) (9 July 2001) URL: http://www.bailii.org/ew/other/EWLC/2001/271(12).html Cite as: [2001] EWLC 271(12) |
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PART XII
CONVEYANCING 1: GENERAL PROVISIONS
INTRODUCTION
(1) the proof of title -
(a) to registered land; and(b) where there is a contract to grant a lease out of unregistered land that will trigger the requirement of compulsory registration; and
(2) covenants for title in relation to dispositions of registered estates.
PROOF OF TITLE
Introduction
12.2 In the Consultative Document,[1] we summarised the three obligations of a seller of land to a buyer, namely—
(1) to disclose latent defects in title prior to contracting;[2]
(2) to convey to the buyer on completion a title to the land that is in accordance with the contract;[3] and
(3) to prove that title.[4]
We emphasised that (2) and (3) were distinct obligations, and this has indeed been reiterated by the Court of Appeal.[5] We made no recommendations in relation to (1) and (2), as the principles appeared to us to be sound and to require no change. As regards (3) however, we considered that changes were needed.
12.3 A seller's obligations as to proof of title are presently governed by section 110 of the Land Registration Act 1925.[6] We commented in detail on these provisions in the Consultative Document.[7] In essence, they require the seller to produce-
(1) copies of subsisting entries on the register;
(2) copies of filed plans;
(3) copies or abstracts of documents noted on the register so far as they affect the property and will not be discharged or overridden on completion;[8] and
(4) copies, abstracts and evidence in respect of subsisting rights and interests which are either appurtenant to the registered land or are matters excepted from the effect of registration.[9]
The seller's obligations in relation to the first three of these matters cannot be altered by contrary stipulation,[10] whereas in relation to the fourth they can.[11]
What proof of title must a seller deduce?
12.4 Section 110 also makes provision for the case where a seller of land is not in fact registered as proprietor of the land.[12] In this case, at the request of the buyer, the seller must, at his or her own expense, either-
(1) procure his or her registration as proprietor; or
(2) procure a disposition from the proprietor to him or herself.[13]
This subsection applies notwithstanding any stipulation to the contrary.[14]
12.5 When section 110 was first enacted, there were no postal searches — they were not introduced until 1930. It was necessary to attend in person at the Land Registry in London to undertake a search of the register.[15] Although there was statutory provision for the creation of district land registries,[16] none had been created outside London prior to the Second World War.[17] Against that background, the prescriptive nature of section 110 is comprehensible. When the Land Registration Act 1925 was first enacted, searching the register and obtaining office copies were expensive matters.
12.6 The contrast with the position today could not be more striking.
(1) The register is now open, and it is no longer necessary for an intending buyer to obtain the consent of the seller to search the register, or to obtain copies of documents referred to in the register.[18]
(2) The system of searching the register has become very much simpler and cheaper than was formerly the case. A direct access official search by computer costs £2 and an official search in any other way costs £4. An office copy obtained by direct access costs £2 and one obtained by some other means £4.[19]
(3) Registered conveyancing is now the normal method of conveyancing, with unregistered conveyancing applicable only to dealings with leases granted for 21 years or less and dispositions of unregistered freeholds that trigger first registration.
12.7 In the light of these fundamental changes, the present rules that govern proof of title look very prescriptive and heavy-handed. They are certainly badly out of date. In the Consultative Document,[20] we recommended that-
(1) the provisions of section 110 of the Land Registration Act 1925, explained above, should not be replicated in the Bill;
(2) in principle, parties should be left to make their own contractual arrangements as to how title should be deduced;
(3) there should be a safeguard in case this freedom is abused;[21]
(4) this should be in the form of a rule-making power to make rules as to the proof of title that a buyer might require; and
(5) such rules would override any contractual term that conflicted with them.
On consultation, some four-fifths of those who responded on this point supported our recommendations.
(1) proof of title; or
(2) perfection of title
of a seller under a contract for the transfer or other disposition for valuable consideration of a registered estate or charge.[22] The reference to provision about perfection of title is to cover the case of the seller who is not the registered proprietor.[23] Any rules that may be made under this power may be expressed to have effect notwithstanding any stipulation to the contrary.[24] If any such rules are made, they will be land registration rules, and will be laid before Parliament only.[25]
What title is a buyer entitled to see?
12.9 The Bill makes one other change in relation to the proof of title. This arises, in part at least, as a consequence of the fact, mentioned above,[26] that the register is now open, and an intending buyer no longer requires the seller's consent to search the register. Section 44 of the Law of Property Act 1925 prescribes the statutory commencement of title. Thus, for example, the period of commencement of title is 15 years,[27] and there are a series of rules as to the title that an intending lessee or sub-lessee or an intending assignee of a lease or sublease is entitled to see under a contract to grant or assign a lease.[28] As regards the latter, an intending tenant or assignee may always inspect any lease under which the other contracting party holds, but there is no right to inspect the title to the freehold.[29]
12.10 The rules found in section 44 are default rules and can be ousted by express provision to the contrary in the contract,[30] and in practice, often are. Thus, under condition 8.2.4 of the Standard Conditions of Sale,[31] on the grant of a new lease—
If the term of the new lease will exceed 21 years, the seller[32] is to deduce a title which will enable the buyer[33] to register the lease at HM Land Registry with an absolute title.
12.11 Neither the rules on the commencement of title, nor those which apply to the grant of leases, have any practical effect as to the proof of title to the transfer of a registered estate or the grant of a lease out of such a registered estate. This is because the register itself is proof of a registered estate and any transferee or grantee can inspect the title of the estate that is to be transferred or out of which the grant is to be made.[34] The Bill therefore disapplies section 44 of the Law of Property Act 1925 in relation to registered land or to a lease derived out of registered land.[35]
12.12 The Bill goes further than that however and introduces provisions in relation to any contract to grant a lease out of an unregistered estate where that lease will be subject to the requirement of compulsory registration.[36] Wherever possible, we are anxious to ensure that such leases can be registered with absolute and not merely good leasehold title. This is in accordance with what is now common practice, as the condition of sale quoted in paragraph 12.10 above demonstrates. The Bill therefore disapplies the relevant provisions of section 44 of the Law of Property Act 1925[37] in relation to contracts to grant leases that trigger compulsory first registration under Clause 4.[38] As a result, where the owner of an unregistered freehold contracts to grant a lease that will be subject to the requirement of compulsory registration, he or she will have to deduce his or her title for the statutory period[39] unless the parties agree to the contrary. In most cases, the lessee will then be registered with an absolute title.
COVENANTS FOR TITLE
Introduction
12.14 The obligation of a seller of land to deduce a title in accordance with the terms of the contract of sale,[40] like most other obligations under the contract, is merged in the deed of conveyance under the doctrine of merger, and no action lies for its breach thereafter.[41] As the seller's obligations in relation to his or her title cease to be enforceable on completion, it has long been customary for a seller to provide some kind of warranty as to his title in the conveyance. Such covenants for title are covenants which may be given either by a seller of freehold or leasehold land or, on or after 1 July 1995, by the grantor of a lease.[42] Such covenants are the principal, and indeed often the only, remedy that a grantee or transferee of land may have for any defects in title that emerge after completion.
12.15 Covenants for title have been implied since the Conveyancing Act 1881 by the use of certain words in a conveyance. The use of the appropriate words carried with it the implication of certain covenants. Prior to July 1, 1995, the relevant words were "as beneficial owner", "as settlor", "as trustee", "as mortgagee", "as personal representative of X deceased" or "under an order of the court".[43] After June 1995, as part of a major reform of the law governing such covenants,[44] the relevant words are "with full guarantee" or "with limited guarantee".[45] The Bill does not materially change the substance of the present law as to the implication of covenants for title on the transfer of a registered estate.[46] It does, however, create a more coherent framework for it.
No liability for matters on the register
(a) all charges and other interests appearing or protected on the register at the time of the execution of the disposition and affecting the title of the registered proprietor;
(b) any overriding interest of which the person to whom the disposition is made has notice and which will affect the estate created or disposed of when the disposition is registered."
12.17 Section 6 of the Law of Property (Miscellaneous Provisions) Act 1994 provides that there is no liability in relation to some of the covenants implied by Part I of that Act[47] in certain circumstances. In particular, under section 6(2), the person making the disposition is not liable under any of the relevant covenants for anything that is either within the actual knowledge or is a necessary consequence of facts that are within the actual knowledge of the person to whom the disposition is made.
12.18 To deal with the matters that are presently covered by rule 77A(2) of the Land Registration Rules 1925, the Bill inserts a new subsection (4) into section 6 of the Law of Property (Miscellaneous Provisions) Act 1994.[48] It provides that where the disposition is of an interest, the title to which is registered under the Bill, the covenantor is not liable for anything which was at the time of the disposition entered in relation to that interest in the register of title under the Bill. It will be noted that there is nothing that corresponds to rule 77A(2)(b)[49] in relation to overriding interests. However, section 6(2) of the 1994 Act would appear to make that provision unnecessary.[50]
Rules
12.20 The Land Registration Act 1925 contains a rule-making power "prescribing the effect" of covenants for title implied under the Law of Property Act 1925 and Part I of the Law of Property (Miscellaneous Provisions) Act 1994.[51] The rulemaking powers in relation to covenants for title that are contained in the Bill are more precisely focused.[52]
(1) First, there is a power for rules to make provision about the form of provisions that extend or limit any covenant that is implied by virtue of Part I of the Law of Property (Miscellaneous Provisions) Act 1994.[53] There are certain rules in the Land Registration Rules 1925 that have this effect[54] and the power under the Bill will enable similar provisions to be made.
(2) Secondly, there is a power for rules to make provision about the application of section 77 of the Law of Property Act 1925 to transfers of registered estates.[55] Section 77, which applies to transfers of registered land, is concerned with the covenants that are to be implied on a conveyance of land subject to a rentcharge.[56] Many rentcharges will be phased out in 2037 under the Rentcharges Act 1977, and the circumstances in which new ones can be created under that Act are very limited. To the extent that the rules may be needed, they may be employed (for example) to enable the implication of the covenants to be modified or negatived.[57] (3) Thirdly, there is a power for rules to make provision about reference in the register to implied covenants, including provision for the state of the register to be conclusive in relation to whether covenants have been implied.[58]
Covenants implied on the assignment of a lease prior to 1996
12.21 In relation to leases granted prior to 1996, a tenant who assigns a lease remains liable to the landlord on the covenants in that lease for its entire duration notwithstanding any assignment by him or her of that lease. Such "first tenant liability" has been abolished for leases granted after 1995 by the Landlord and Tenant (Covenants) Act 1995. However, leases granted prior to 1996 will continue in existence for many years. As regards such leases, section 24(1)(b) and (2) of the Land Registration Act 1925 made provision for implied indemnity covenants on the part of the transferee in favour of the transferor, and, in relation to a transfer of part, an implied indemnity covenant on the part of the transferor in favour of the transferee. Section 24(1)(b) and (2) of the Land Registration Act 1925 were repealed prospectively by the Landlord and Tenant (Covenants) Act 1995,[59] but only in respect of "new tenancies" — in essence those granted after the Act was brought into force.[60] The Bill replicates in more comprehensible form the effect of section 24(1)(b) and (2) in relation to the assignment of leases which are not "new tenancies" for the purposes of the 1995 Act.[61]
Note 1 Law Com No 254, para 11.30. [Back] Note 2 Seeibid, paras 11.32—11.33. [Back] Note 3 Seeibid, para 11.34. [Back] Note 4 Seeibid, paras 11.35 and following. [Back] Note 5 Barclays Bank Plc v Weeks Legg & Dean [1999] QB 309, 324. [Back] Note 6 See s 110(1)-(3), (5). The section applies “on a sale or other disposition of registered land to a purchaser other than a lessee or a chargee”. [Back] Note 7 Law Com No 254, paras 11.35-11.43. [Back] Note 8 Land Registration Act 1925, s 110(1). [Back] Note 9 Land Registration Act 1925, s 110(2). [Back] Note 10 Land Registration Act 1925, s 110(1). [Back] Note 11 Land Registration Act 1925, s 110(2). [Back] Note 12 In the absence of a special condition this will only arise where the seller is entitled to be registered, as where he or she is the executor of a deceased registered proprietor or the registered proprietor holds the registered estate or charge on trust for the seller. [Back] Note 13 Land Registration Act 1925, s 110(5). [Back] Note 14 This subsection was first enacted as Land Transfer Act 1897, s 16(2). However, by Law of Property Act 1925, s 42(3) (a provision first introduced in 1925), “[a] stipulation contained in any contract for sale or exchange of land made after the commencement of this Act, to the effect that an outstanding legal estate is to be traced or got in at the expense of a purchaser or that no objection is to be taken on account of an outstanding legal estate, shall be void”. This subsection places a significant restriction on what an unscrupulous seller of land can foist on a purchaser, and greatly weakens the need for a provision equivalent to Land Registration Act 1925, s 110(5). [Back] Note 15 See Brickdale & Stuart Wallace’s Land Registration Act, 1925 (4th ed 1939), p 493. [Back] Note 16 See Land Registration Act 1925, s 132. [Back] Note 17 Brickdale & Stuart Wallace’s Land Registration Act, 1925 (4th ed 1939), p 283. [Back] Note 18 See above, para 9.37. [Back] Note 19 See Land Registration Fees Order 2001, Schedule 3. [Back] Note 20 Law Com No 254, paras 11.47, 11.48. [Back] Note 21 As by buyers making excessive requests for evidence of title, or by sellers who impose terms which unreasonably preclude inquiries on matters upon which the register is not conclusive. [Back] Note 22 Schedule 10, para 2(1). [Back] Note 23 Cf above, para 12.4. [Back] Note 24 Schedule 10, para 2(2). This leaves open the possibility of making rules that are not overriding, for example, by way of guidance as to what might be considered to be good practice. These would then apply unless the parties stipulated to the contrary. [Back] Note 25 See Cls 125(3); 129(1); below, para 17.5. [Back] Note 26 See para 12.6(1). [Back] Note 27 Law of Property Act 1925, s 44(1) (as amended by Law of Property Act 1969, s 23). [Back] Note 28 Law of Property Act 1925, s 44(2)-(5). [Back] Note 29 Megarry and Wade’s Law of Real Property (6th ed 2000), 14-295. [Back] Note 30 Law of Property Act 1925, s 44(11). [Back] Note 32 That is, the landlord: Standard Conditions of Sale, c 8.2.2. [Back] Note 33 That is, the tenant: Standard Conditions of Sale, c 8.2.2. [Back] Note 34 See above, para 9.37. [Back] Note 35 Law of Property Act 1925, s 44(12), inserted by Schedule 11, para 2(4). [Back] Note 36 For the requirement of compulsory registration, see Cl 4; above, paras 3.22 and following. [Back] Note 37 Namely s 44(2) and (4). [Back] Note 38 Law of Property Act 1925, s 44(4A), inserted by Schedule 11, para 2(2). [Back] Note 39 That is, for at least 15 years: Law of Property Act 1925, s 44(1), above, para 12.9. The commencement of title would be the first instrument that could be a good root of title that was more than 15 years old. [Back] Note 40 See above, para 12.2. [Back] Note 41 See generally Knight Sugar Co Ltd v The Alberta Railway & Irrigation Co [1938] 1 All ER 266, 269. Where title is unregistered, merger operates on the execution of the conveyance. Although merger does apply to registered land, it is not settled whether it occurs on the execution of the transfer or on registration. The former seems preferable: see D G Barnsley, “Completion of a Contract for the Sale and Purchase of Land” [1991] Conv 15, 24. [Back] Note 42 There were no covenants for title implied on the grant of leases prior to that date. [Back] Note 43 See Law of Property Act 1925, s 76(1). This section is repealed as regards dispositions made on or after July 1, 1995: see Law of Property (Miscellaneous Provisions) Act 1994, s 10. [Back] Note 44 Brought about by Law of Property (Miscellaneous Provisions) Act 1994, which implemented (with amendments) the recommendations of the Law Commission in Transfer of Land: Implied Covenants for Title (1988) Law Com No 199. [Back] Note 45 Law of Property (Miscellaneous Provisions) Act 1994, s 1. The Welsh language equivalents which may be used (see s 8(4)) are, respectively, “gyda gwarant teitl llawn” and “gyda gwarant teitl cyfyngedig”. [Back] Note 46 There are some marginal changes: cf below paras 12.18, 12.19. [Back] Note 47 Namely the covenants that the person making the disposition has the right to dispose of the property (Law of Property (Miscellaneous Provisions) Act 1994, s 2(1)(a)), that he or she is disposing of the property free from charges, incumbrances and third party rights (ibid, s 3), and that where the disposition is of leasehold land, the lease is valid (ibid, s 4). [Back] Note 48 Schedule 11, para 31(2). [Back] Note 49 Overriding interests of which the disponee had notice. [Back] Note 50 Rule 77A(2)(b) speaks of an overriding interest of which the disponee “has notice”, whereas under Law of Property (Miscellaneous Provisions) Act 1994, the covenant does not extend to matters that are either within the disponee’s “actual knowledge” or are a “necessary consequence of facts” that are within his or her actual knowledge. A disponee is not therefore affected by matters of which he or she merely has constructive notice under section 6(2). In Ruoff & Roper, Registered Conveyancing, 16-11, it is stated that “notice” in r 77A(2)(b) does in fact have the same meaning as Law of Property (Miscellaneous Provisions) Act 1994, s 6(2), and does not include overriding interests of which the disponee merely has constructive notice. [Back] Note 52 See Schedule10, para 3. [Back] Note 53 Schedule 10, para 3(a). [Back] Note 54 See Land Registration Rules 1925, rr 76A(5), 77A(3). [Back] Note 55 Schedule 10, para 3(b). [Back] Note 56 At present, Land Registration Rules 1925, r 109, makes provision for the application of the implied covenants to registered land and (somewhat curiously) replicates for registered land certain provisions found in Law of Property Act 1925, s 77, which would in any event apply. [Back] Note 57 Cf Land Registration Rules 1925, r 109(6). [Back] Note 58 Schedule 10, para 3(c). At present, under Land Registration Rules 1925, r 76A(4), no reference is to be made in the register to any covenant implied by Part 1 of Law of Property (Miscellaneous Provisions) Act 1994, subject to one exception. [Back]
