Still an Overriding Concern?
Thu 27 Nov 2014
Overriding interests in registered land have long been and remain 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 its potential to require that all interests in land must be created through the act of electronic registration. Overriding interests are created “outside” the act of registration (whether manual or electronic) and this is not only contrary to the agenda of electronic conveyancing but may not be possible in the future under such a regime. This article looks at the continued role of overriding interests within this changing climate, taking account of the Law Commission’s recent recommendations 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 Schedule 1 and Schedule 3 of 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 (amongst other things) leases for a term of seven years or less, the rights of persons in actual occupation, legal easements, customary and public rights and profits à prendre. Equally, a number of these interests are now archaic (for example, 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.
Overriding interests are 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 and this, in itself, creates a fundamental tension. Indeed, chancel repair liability (the obligation to contribute to the repair of the chancel of the local parish church) was an overriding interest under the pre-2002 Act regime. This is no longer the case, however, and since October 2013 chancel repair liability will only bind purchasers of land if the burden is registered on the title for that land. This shows that our land registration regime is capable of expecting beneficiaries of (previously) overriding interests to protect their interests by registration.
This should also apply to those overriding interests, which are now archaic (for example franchises and rights to mines and minerals in land registered before 1898). Such rights should be registered at the Land Registry or lose their overriding status. This is not to say there should not be a transition period to facilitate such registration (provided this period is not unduly long and used as a means to artificially extend the life of overriding interests) but beyond this the overriding status should be lost.
The argument in favour of overriding interests in unregistered land may be stronger as no title will yet have been registered at the Land Registry but the expectation on persons seeking to enforce proprietory interests to register that interest should remain unchanged. The responsibility falls on the Land Registry and Government to amend Section 4 of the Land Registration Act 2002 to require all overriding interests currently contained in Schedules 1 and 3 of the Land Registration Act 2002 to trigger first registration and only bind purchasers if registered.
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 overriding status as it would be “unreasonable or unrealistic to expect (them) to be registered”. 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 of the Land Registration Act 2002 (for 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). 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 very 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 deeply 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 with electronic conveyancing. 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. The 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, indeed, 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.