Riding for a fall?

Overriding interests in registered land are a controversial area of debate for practitioners and academics alike. This debate has only accelerated in recent years, with the advent of electronic conveyancing and the possibility that, one day, all interests in land will need to be created through the act of electronic registration.

The current approach to overriding interests has an inherent contradiction, which in many ways encapsulates the friction between definitive registration and social policy rationale in favour of interests existing outside the register

Overriding interests are created ‘outside’ the act of registration (whether manual or electronic), and this can be an unpleasant surprise for purchasers of land who subsequently discover that they are subject to third-party rights they did not know about. This article looks at the continued role of overriding interests within this changing climate, taking account of the Law Commission’s 2001 review of the law in this area and the founding principle of a coherent land registration system, that the fact of registration alone should confer title.

Overriding interests are currently defined in schedules 1 and 3 to the Land Registration Act 2002. Those contained in schedule 1 will automatically bind any purchaser of land on the first registration of that land, despite not being granted or reserved by the title deeds for that land. Similarly, those contained in schedule 3 will bind subsequent purchasers of land despite existing ‘off’ the register. In many cases, these interests are far from insignificant and can have far-reaching and adverse effects on property transactions.

They include (among other things) leases for terms of seven years or less; the rights of persons in actual occupation; legal easements; customary and public rights; and profits à prendre. A number are now archaic – such as franchises and rights to mines and minerals in land registered before 1898 – and their continued ability to defeat the registered title or title deeds (in the case of unregistered land) must be questionable.

Since 13 October 2013, certain overriding interests (franchises, manorial rights, the right to Crown rents, non-statutory rights in respect of embankment or sea or river walls, payment in lieu of tithe, and chancel repair) will only continue to override if registered on the title. In this regard, an element of consideration has been given to the notion that the register of title should be definitive. But there remains a group of overriding interests (including leases for a term of seven years or less, persons in actual occupation, easements and profits à prendre, customary and public rights, and mines and minerals) which will continue to override even if not registered on the title. As a result, the current approach to overriding interests has an inherent contradiction, which in many ways encapsulates the friction between definitive registration and social policy rationale in favour of interests existing outside the register.

This second group of overriding interests is typically justified as serving a legal and social need that must be given prevalence over the ‘absolute certainty’ of the registered title and title deeds. By way of example, it has been said that the overriding status of customary and public rights should be preserved for the important community benefit they bring, and that it would be hostile to expect the beneficiaries of such rights to register them against the burdened land. This approach does, however, assume that sentimentality is an acceptable concession to make in a land registration regime. The fact that we now have a group of overriding interests that, post-13 October 2013, should only bind registrable disposals if noted against the title, shows that our land registration regime is capable of requiring beneficiaries to protect their interests by registration. The issue here is not one of capability, but of agenda and desire.

In particular, a requirement for registration should apply to the remaining, archaic overriding (such as franchises and rights to mines and minerals in land registered before 1898). Such rights should be registered at Land Registry or lose their overriding status. Admittedly, this may (in the short term) mean additional administrative burden for Land Registry in processing applications, but that should not be reason to resist change. This is also not to say that there should not be a transition period to facilitate such registration (provided this period is not unduly long nor used as a means to artificially extend the life of overriding interests), but beyond this, the overriding status should be lost.

As part of this exercise, it would, however, be incumbent on Land Registry to properly review and examine applications to ensure that the claim to register an overriding interest is legitimate. Many practitioners will be familiar with the artificiality of having to put mines and minerals indemnity insurance in place for parts of the country where there is no such apparent risk (such as in London), simply because there is a generic mines and minerals entry on the registered title.

The argument in favour of overriding interests in unregistered land may be stronger, as no title will yet have been registered at Land Registry. The expectation that persons seeking to enforce proprietary interests should register that interest (for example, by making a caution against first registration) is equally as pervasive, however.

In recent times, the Law Commission has stopped short of recommending that all overriding interests should be registered, and has reserved a category of interests which should maintain their overriding status as it would be ‘unreasonable or unrealistic to expect (them) to be registered’ (at paragraph 4.23 of part 1 of the Law Commission report).

Instead, the Law Commission identified some overriding interests that should be abolished, and otherwise recommended that the scope of interests having overriding status be reduced. This has now been reflected (in part) in schedule 3 to the Land Registration Act 2002. By way of example, the interests of persons in actual occupation will now no longer override if enquiries were made of the vendor and the interests were disclosed prior to acquisition, or if the relevant occupation would not have been reasonably obvious on reasonably careful inspection. Similarly, there are now also a number of overriding interests which will only bind purchasers if registered on title (please see above).

Such an approach, however, still puts the burden on purchasers to raise often hypothetical and far-reaching enquiries of the vendor to ascertain if any overriding interests may affect the land. This could be problematic if electronic conveyancing is fully introduced, as one of the main aims of an electronic regime is to simplify and minimise the enquiry process. Most fundamentally of all, however, the Law Commission’s approach does not resolve the underlying friction between the desire for the fact of registration to be definitive, and social policy concerns in favour of maintaining certain overriding interests.

To conclude, the area of overriding interests is contentious, and this is unlikely to change in the immediate future. In recent years, attempts have been made to limit their scope, and it is accepted that the creation of overriding interests in the future may be more difficult if electronic conveyancing is fully introduced. The advent of electronic conveyancing is, however, only likely to intensify the current friction between the ‘definitive’ register and overriding interests, and this contradiction is increasingly difficult to sustain.

Land Registry may now consider it appropriate to give proper and honest effect to the ‘mirror principle’ and require that all interests currently having overriding status should only bind purchasers if they are registered. Such an approach would provide purchasers of land with a definitive account of the interests burdening that land before the relevant acquisition, and finally establish a regime of land registration suitable for the social and economic conditions of our time.