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The Land Registration Act 2002 – Some Problems Remain

About The Author

Thomas Horton (Former Writer)

Thomas studied Law at the University of Birmingham, and graduated with a 2:1 in July 2013. In the elapsed time, Thomas has worked for law firm HowardKennedyFsi LLP as a paralegal in the property department. Thomas has also been awarded a Major Scholarship by the Honourable Society of the Inner Temple and will begin the BPTC with City Law School in September 2014.

Registration of title provides a title guarantee. The Land Registration Act 2002 (LRA 2002), building upon the basic philosophy introduced by the Land Registration Act 1925, aimed to provide a ‘clear, workable and coherent body of law’, providing a conclusive account of title, and also establishing a framework for the introduction of e-conveyancing. Nearly twelve-years after the introduction of the LRA 2002, it is time to analyze its effects. Working as a paralegal in an investment property department has allowed me develop a practical understanding of the importance of having a complete title register in order to provide a smooth conveyance of property. Further, the introduction of e-conveyancing would have huge logistical advantages, in addition to reducing paralegal paper cuts.

By focusing on the recent decision of  Fitzwilliam v Richall Holdings Services Ltd it is apparent that there is a distorting of the 2002 Act’s intention. In addition, land registry consultations concerning the introduction of e-conveyancing demonstrate the difficulties of protection from abuse of an electronic system; will e-conveyancing ever be achieved?

Certainty of the Land Register

The case law referred to above was decided almost one-year ago: Fitzwilliam v Richall Holdings Services Ltd. In summary, the court’s decision allowed for the alteration of the land register pursuant to Schedule 4 of the LRA 2002.

Facts: Fitzwilliam (F) had been the registered owner of a property prior to the registration of ownership Richall (R). R had registered his ownership following the sale of the concerned property by a third-party; the third-party purported to have been granted power of attorney by F to sell the property.

The Claim: F claimed that he had never granted the power of attorney to the third-party. F accordingly submitted that he was entitled to have the register altered in his favour under the LRA 2002.

The question that such litigation awakens is: should the title register be conclusive of title irrespective of the circumstances in which the title was registered? Therefore, had R, by registering their title, been invested with the legal and beneficial title of the property in question?

The Decision:There was overwhelming evidence to confirm that the power of attorney was forged. S. 58 LRA 2002 defines the conclusiveness of registration in relation to the vesting of a legal estate only; s. 29 LRA 2002 deals with legal dispositions only. Therefore, summarily, as s. 27(1) LRA 2002 defines in principle, a disposition of a registered estate which was required to be completed by registration did not take effect at law until the relevant registration requirements were met. There is, therefore, no mention of a valid legal disposition to defeat a beneficial interest. Accordingly, and in application of the Court of Appeal’s decision in Malory Enterprises Ltd v Cheshire Homes (UK) Ltd, a fraudulent transfer was not a disposition within the meaning of the LRA 2002; the beneficial ownership had not been transferred to R. F remained the beneficial owner of the property notwithstanding R’s registration, and the alteration of the register was ordered under Schedule 4 of the LRA 2002.

That the court arrived at this decision in application of the decision of Malory, which was decided upon the application of the LRA 1925, is evidence that the purposes behind the LRA 2002 are not being forwarded. S. 20 and 69 of the LRA 1925 were held by the court to be replicated in the previously stated s. 29 and 58 LRA 2002, i.e. the legal disposition relates only to the legal ownership, and not the beneficial ownership. In Malory, the purchaser, Cheshire Homes, had obtained the legal title of purchased property that had been sold to them fraudulently by a third-party who had the same name as the claimant’s, Malory Enterprises Ltd. Because the legal title had been obtained by fraudulent means, despite the innocence of the respondents, Cheshire was held to be subject to the rights of the previous proprietor (Malory) as beneficial owner.  

Newey J, who delivered the judgment in Fitzwilliam, has evidently applied the law as it is to be interpreted accordingly, and is not to blame for the lack of advancement in developing and upholding a complete register. Moreover, beneficial ownership and equitable principles in property law appear to mean that there will never truly be a complete register. In his decision of Fitzwilliam, Newey J referred to the comments of Martin Dixon in Modern Land Law, 8th Edition, at page 44:

Acceptance of the Malory approach would be to import principles of unregistered conveyancing into registered land and this would wholly contradict the system of registration of title and the move to e-conveyancing that the LRA 2002 is designed to facilitate.

Nonetheless, Newey J rightly recognized and held:

[I]t is not open to me to depart from the Court of Appeal's construction of the Land Registration Act 1925. More specifically, it means that I must proceed on the basis that (a) section 69 of the 1925 Act dealt only with the legal estate in the relevant land and not its beneficial ownership and (b) a fraudulent transfer that would be of no effect in the absence of the 1925 Act could not constitute a “disposition” within the meaning of section 20 of the Act. Further, it is incumbent on me, I think, to construe equivalent provisions in the Land Registration Act 2002 similarly unless there are relevant distinctions between those provisions and their predecessors in the 1925 Act.

Martin Dixon has commented following the decision in Fitzwilliam that it is not ‘axiomatic that the 2002 Act should be interpreted in the same way’. However, despite this thought, and the principles behind the introduction of the 2002 Act, it is difficult to see how Newey J would have been able to interpret the application of the 2002 Act differently, without usurping the legal convention of stare decisis. The decision of Fitzwilliam, therefore, highlights the importance of a purchasing party to carry out searches and extensive enquiries when purchasing a property. However, and as Dixon notes, this predicament ‘makes title registration a mere cipher for unregistered conveyancing.’

E-registration

The last consultation on the introduction of e-conveyancing highlighted clear concerns that ‘the basic premise of e-transfers will be wide open to fraud.’ This is a pragmatic response to the suggestion. Indeed the reliance of law firms, let alone the land registry, on computers is pushing ever closer the eventuality of a major-hacking incident. However, it is common practice for law firms to make electronic copies of all documents that are signed and sent out, allowing for files to be sent away for storage, and providing a keep-safe second copy of documents readily available. Moreover, the land registry now has a huge amount of documents available via electronic means, such as official copies of title and title plans, which is a extremely useful resource available for property lawyers and the facilitation of a smooth conveyancing procedure. Despite the willingness to add these electronic additions to conveyancing procedures the consultation (linked above) highlights a reluctance of property lawyers to adopt the mechanism. Forget equitable principles that can upset the certainty of the register for a moment, let us just highlight the idiom that appears to being advocated from the consultation responses: “if it ain’t broke don’t fix it”.

Moreover, even if the introduction of e-registration were ever seen, the floodgates would open for claims against the conclusiveness of the register (see Part 8 of the LRA 2002 for the applicable statute should e-conveyancing be introduced). The introduction of e-conveyancing would do away with written contracts; written contracts however are not always guaranteed as the doctrine of proprietary estoppel demonstrates, therefore requiring electronic versions is likely to cause further instances of disconformity with formalities. It is expected, as a result, that there would be a surge of proprietary estoppel claims by those who believe they are complying with legal formality requirements (s. 2 of the Law of Property and Miscellaneous Provisions Act 1989) by having a written agreement. Admittedly, this would be good news for fans and counsel specializing in equity, yet bad news for the certainty of the land register and the dependency of conveyancers upon that register.

Although property law academics believed the 2002 Act would propel property law into the 21st Century (see D Capps, ‘Conveyancing in the 21st Century: an outline of electronic conveyancing and electronic signatures’ Conv. (2002) 443), it appears that there are major concerns that need to be satisfied, and we should brace ourselves for the litigation that can ensue.

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Tagged: Commercial Law, Equity, Property Law

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