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3.1.2 The Doctrine of Notice Lecture

OVERVIEW

This guide is split into four parts. The first part is an introduction to unregistered land: what unregistered land is, how it is proven, and – briefly – how those people in possession of unregistered land may protect their rights. The second part discusses the different types of rights that a person with unregistered interests can have, and how those different types of rights can be protected. The third part discusses the concept of notice within the context of unregistered land. The fourth part discusses the advantages of unregistered land, and the disadvantages of unregistered land. The fifth part discusses unregistered land in the context of adverse possession.

PART ONE: INTRODUCTION TO UNREGISTERED LAND

Unregistered land is any land which does not have a record of title in the Land Registry. Although registration is not always compulsory, certain “trigger events” can make it compulsory, such as the sale of the land. Indeed, any transfer of land that fails to register the land is automatically void (Land Registration Act 2002, ss. 6(4), 7(1)).

For unregistered land, title is proved by title deeds (Sen v Headley [1991] Ch. 425 per Nourse LJ). These documents “deeds bundles” should identify the person who currently holds the best “title” to the land. When a party looks to purchase that land, they are required to look at least at the previous 15 years in order to show a “good root of title.”

In other words, the purchaser must be able to demonstrate a clear chain of conveyancing relating to the property, up to and including the present person in possession of the property. The rights these persons in possession have over the land may or may not bind a purchaser depending on two factors: the nature of the right, and whether it has been protected.

It should be stressed that the distinction between registered land and unregistered land is substantial and will affect rights - Lloyds Bank plc v Carrick(1996) 28 H.L.R. 707.Most rights have to be protected by the use of the Land Charges Act 1972. Using the 1972 Act, the rights are registered as charges.

“Can a person still claim to have a right to the land without obtaining protection by documentary evidence?”

A person can claim ownership of the land by relying on the fact of their having occupied and possessed the property. They would do so under the Statutory Declarations Act 1835, and this approach is sanctioned by the Land Registration Act 2002, s.9(5).

PART TWO: TYPES OF RIGHTS

This discussion on unregistered land must also consider the interests of the parties that occupy land from time to time. Certain proprietary entitlements are allowed to exist ‘off the register’, meaning they are not recorded in the Land Registry. These rights are classified as ‘unregistered interests’ and are deemed to be ‘overriding interests’, meaning they can bind subsequent purchasers of the land.

The Land Charges Act 1925 was intended to protect the rights of those with unregistered interests in one of three ways:

  • Legal rights – these rights bind the whole world and do not require any further protection.
  • Equitable rights – these form two of the three ways in which the 1925 Act protected third party rights. Equitable rights no longer protected by the doctrine of notice. These are registrable either (1) as land charges if they are “commercial interests”, or (2) should be “overreached” if they are “family interests.” These rights do not bind a purchaser, however the interests are to be reflected in the purchase price, i.e. the satisfaction of these rights will impose a higher financial cost on the purchaser.

There are exceptions however to these categories of legal and equitable rights, and it is here where the ancient doctrine of notice still applies. They are:

The Land Charges Register provides different “classes” of third party interests (A-F). If an interest ought to have been registered as a land charge and was not, then the interest will be void against nearly all potential purchasers of the land (Hollington v Rhodes [1951] 2 All E.R. 578.

Class F is the type of class which you are most likely to encounter in a problem question. Class F is a spouse’s statutory rights to occupy the matrimonial home. As with any other of the classes, if a spouse had a right to occupy the land, but the Class F land charge was not registered, then such a right will be void. And this remains the case even if the purchaser knew about the unprotected interest (Midland Bank Trust Co Ltd v Green (No. 1) [1981] A.C. 513). Statutory authority for this is found in s.199 of the Law of Property Act 1925.

Note that all the various classes are only void in certain circumstances; in the case of Class F, if the spouse’s right to occupy is unregistered at the time the property is purchased, that right to occupy is void against anyone who gives value in exchange for the interest in the land. This couples up with what is said above about equitable rights, in that the value of the interest is reflected in the purchase price.

Conversely, a notice that is registered binds everyone, according to s.198 of the Law of Property Act 1925. Therefore, even if a purchaser does not find the notice in their search, they are still bound by it.

PART THREE: NOTICE

This doctrine is employed as a kind of stopgap, because there are some rights which are not registrable as land charges yet would have been recognised prior to the 1925 and 1972 Acts as equitable rights that ought to bind purchasers.

Prior to 1926, it was presumed that all equitable rights in and over land were enforceable against all other parties except for bona fide purchasers of a legal estate for valuable consideration without notice (Pilcher v Rawlins(1871-72) L.R. 7 Ch. App. 259 per James LJ). It does not, however, apply in the case of registered land.

Therefore, the doctrine of notice has been confirmed to apply to unregistered land, and not registered land - Holaw (470) Ltd v Stockton Estates Ltd (2001) 81 P. & C.R. 29. That said, the bona fide purchaser rule can still mean overriding interests do not take precedence over the rights of bona fide purchasers. This is so, provided that certain conditions are met:

  1. The purchaser must show that his absence of notice was ‘genuine and honest’ (Midland Bank Trust Co Ltd v Green (No.1) [1981] A.C. 513).
  1. The purchaser must take a legal estate in the land concerned, however a lender who takes a charge “by way of legal mortgage” is regarded as having “the same protection” as if a legal estate had been created in his favour (Law of Property Act 1925, s.87(1)). A purchaser who takes only an equitable interest in the land is, in principle, subject to all pre-existing equitable interests regardless of notice.
  1. A person is a purchaser if they take property by reason of the act of another person, which means they cannot take property as a purchaser if they seek to take possession of the property based solely on an operation of law.
  2. Finally, a bona fide purchaser must take the property without notice. There are different categories of notice:
  1. Actual notice (LPA 1925 s.199(1)(ii)Ia)). This is effectively a subjective test.
  1. Constructive notice (LPA 1925 s.199(1)(ii)(a)). This, unlike actual notice, is an objective test (Hunt v Luck [1902] 1 Ch. 428).
  1. Imputed notice is attributed to a purchaser where the knowledge is held, actually or constructively, by an agent of the purchaser (LPA 1925 s.199(1)(ii)(b)).

Note that in cases of bona fide purchasers without notice purchasing property, the unregistered rights are not only void against that purchaser; in fact, the unregistered right upon being held void against that purchaser are forever extinguished.

PART FOUR: ADVANTAGES AND DISADVANTAGES OF UNREGISTERED LAND

ADVANTAGES OF UNREGISTERED LAND

In the case of unregistered land, rights over land tend to lie with the long-standing occupant(s) of the property, rather than the nascent purchaser. That means that, in the event another party purports to sell the occupant’s property to an innocent purchaser without the occupant’s consent, the occupant retains the right to the property.

There are several reasons for this approach:

  1. Allowing the innocent purchaser to win in a dispute over ownership would be objectionable to the original occupant, given they did not authorise the disposition of the property.
  2. The concept of security of title (meaning, if you have title to property, you have a reasonable expectation it cannot be interfered with without your consent) is arguably strengthened if the original occupant is favoured over a later innocent purchaser (Thomas Mapp, Torrens’ Elusive Title (Alberta) (1976)).
  3. The layperson’s view, according to the Scottish Law Commission, is that such dispositions as described above ought to be declared void.
  4. The layperson may not realise that they ought to protect their interest by way of a charge.

ARGUMENTS AGAINST UNREGISTERED LAND

There are several reasons why favouring the purchaser, which means opting for registered land rather than unregistered land, is preferable:

  1. The choice simplifies and makes cheaper the conveyancing process for the purchaser. They can take the Register at face value and would not need to go through the cumbersome process of establishing the “good root of title.
  2. This preference for the purchaser could help to bring about a more confident and dynamic property market
  3. The intersection for example between cases which require notice and those which do not is not always clear, and as a result a purchase of unregistered land can be complicated -Williams & Glyn’s Bank Ltd v Boland [1981] A.C. 487.

“Why is it so complex?”

Titles have to be investigated afresh on every successive purchase. Purchasers can therefore have serious evidential hurdles to surmount when establishing the “good root of title”, and it is clearly not desirable.

Compare the process of tracing title of unregistered land to the process of determining title over registered land. In that instance, when a purchaser comes to inspect the title of the land, it has already been approved by the Chief Land Registrar, both graded and guaranteed by the Registrar. There is therefore no issue about the validity of title. Compared to the practice of establishing “good root of title” in unregistered land, establishing title for registered land is inexpensive, straightforward, and certain.

PART FIVE: ADVERSE POSSESSION

A key element of adverse possession (squatters’ rights) is limitation. And in the case of unregistered land, there is a defined limitation period, after which objections to adverse possession cannot be enforced - The Limitation Act 1980 s.15(1). As you will recall from your reading on adverse possession generally, the right of action accrues to the person with paper title at the time when they become aware of the person without paper title being in possession of the property.

What should be made clear is that the expiry of the twelve-year period does not bring about a conveyance of land from the person with paper title to the person without paper title. Instead, the right is extinguished (Limitation Act 1980, s.17) which makes the squatter’s independent possessory title ‘impregnable’ (Buckinghamshire County Council v Moran [1990] Ch. 623).

Finally, the squatter, upon taking possession, must be bound by all prior encumbrances, charges etc. Because they have taken possession by operation of law, they cannot rely on the defence of being a bona fide purchaser without notice, and therefore is subject to restrictive covenants and unregistered rights as per the pre-1926 convention (Re Nisbet and Potts Contract [1906] 1 Ch. 386).


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