The Law on Squatting: Adverse Possession

Introduction

Interests in land that cannot be registered as separate titles are either overriding interests or interests which need protection on the register. Overriding interests are enforceable without being protected on the register and bind a registered proprietor and his transferee despite the fact he does not know of their existence. This means overriding interests effectively detract from the principle that the register should be a mirror of the title. Under the old regime of the Land Registration Act 1925, overriding interests were listed in section 70 (1)^[1] which states these to be “all incumbrances, interests, rights, and power not entered on the register but subject to which dispositions are to take effect.”

If however, an overriding interest appears on the register (as in Re Dance Way, West Town, Hayling Island)^[2] then its protection under this category is superfluous. It will cease to bind as an overriding interest and its protection is then the protection of a minor interest on the register.

The grounds for reform of overriding interests contained in the Land Registration Act 2002 (“LRA 2002”), arose as a result of criticism of the category of overriding interests under the Land Registration Act 1925.^[3] Overriding interests caused uncertainty and have been the subject of several reports attempting to deal with the problems, culminating in the LRA 2002.

As illustrated in Overseas Investment Services Ltd v Sim Cobuild Construction Ltd^[4] judicial opinion was also one for change. In this case Peter Gibson LJ stated, “as overriding interests constitute an exception [to the mirror of title principle] the court should in my opinion, bet be astute to give a wide meaning to any item constituting an overriding interest.”^[5]

The LRA 2002 aims to create an electronically based conveyancing system where it will be possible to investigate title online with minimum additional enquiries. A major obstacle to achieving this is the existence of overriding interests.. The LRA 2002 has therefore reduced the circumstances in which overriding interests can exist. The policy behind the Act is that interests should only have overriding status where protection against buyers is needed, but where it is neither reasonable to expect nor sensible to require any entry on the register. With the advent of electronic conveyancing the circumstances in which overriding interests can arise will be reduced. This is because expressly created rights will only be created through simultaneous registration.

In addition to electronic conveyancing, the LRA 2002 adopts four approaches for handling the problems associated with overriding interests, which are:

1. 1. The abolition of certain rights which can exist as overriding interests, including the liability to repair the chancel of a church.^[6] Abolition follows the Court of Appeal decision in Aston Cantlow Parochial Church Council v Wallbank^[7] which held that chancel repair liability contravenes the European Convention on Human Rights and is therefore unenforceable. The LRA 2002 also affects the rights of those acquired by squatters under adverse possession.^[8] It introduces an entirely new scheme of adverse possession for registered land, although there are limited transitional provisions to protect squatter’s vested rights. For three years after the Act comes into force (ie the 12 year limitation period had expired) will continue to have overriding interest even if he or she is not in actual occupation.^[9] The squatter will have three years to protect their position by registering their rights Furthermore, on first registration the legal estate is vested in the first registered proprietor subject to interests acquired under the Limitation Act 1980 of which he or she has notice at the time of registration.^[10]
   2. The phasing out after ten years of several existing categories of overriding interest, including ancient rights of franchises, manorial rights, crown rents, rights concerning embankments and sea walls, and corn rents
   3. The narrowing down and clarification of the scope of some previous categories that remain as overriding interests. The most important being easements and profits under the old s. 70 (1) (a) of the Land Registration Act 1925 and the rights of persons in actual occupation or in receipt of rents and profits under the old s. 70 (1) (g) of the 1925 Act
   4. A requirement that when overriding interests come to light they are, as far as possible, entered on the register.^[11] In addition, a new requirement exists where a person who applies for registration, must disclose any overriding interests known to them.

The LRA 2002 provides for the continued existence of 14 categories of overriding interest and further creates a new category, that of the Public-Private Partnership (PPP) lease. Five of the 14 categories will disappear after ten years. In the case of legal easements and profits, the rights of persons in actual occupation and short leases (seven years or less), the substantive requirements for what amounts to an overriding interest will be different depending on whether it is a first registration or a subsequent registrable disposition for valuable consideration. The LRA 2002 recognises this distinction by listing those interests which override first registration in schedule 1 and those interests which override registered dispositions in schedule 3.

Unregistered interests which override first registration

As discussed above, these are set out in schedule 1 of the LRA 2002. When a person becomes the first registered proprietor of land on first registration, they take the estate subject to certain interests, including interests the burden of which is entered on the register (s 11 (4) (a)) and interests the burden of which is not entered on the register but which fall within any of the paragraphs of Schedule 1 (s 11 (4) (b) overriding interests).

Short leases

Subject to exceptions (discussed below) a leasehold estate that has been granted for a term not exceeding seven years from the date of grant, overrides first registration.^[12] This replicates the position under the Land Registration Act 1925 s. 70 (1)(k) except for the reduction in the duration of short leases from 21 years to 7. It is also likely in the future, that the Lord Chancellor will reduce the period to 3 years. The reason for excluding short leases from having their own registered titles is to prevent the register from becoming cluttered with leases that are subject to expire shortly. Instead, a notice of the short lease should be entered on the register of the title out of which it has been granted.

There are however, exceptions to this rule and the following types of leases are incapable of being considered overriding interests, even in instances where they are for 7 years of less, and must be registered with their own titles:

1. 1. a reversionary lease granted out of unregistered land to take effect in possession more than three months after the date of the grant of the lease (this is new and they are excluded because they may be difficult to discover)
   2. a lease granted out of an unregistered legal estate under the right to buy provisions of Pt V of the Housing Act 1985 (there is no change here from the previous law)
   3. a lease granted by a private sector landlord out of an unregistered legal estate to a person who was formally a secure tenant and has a preserved right to buy under the Housing Act 1985 (again there is no change here from the previous law)

Interests of persons in actual occupation

The discussion which follows relates to the overriding status of occupier’s rights on first registration. Occupier’s rights in relation to registered dispositions will be considered later in this essay.

The interests of persons in actual occupation have historically been the most problematic of all overriding interests resulting in considerable amounts of litigation. Prior to the LRA 2002, the relevant section of the 1925 Land Registration Act was s.70(1)(g) which read, “the rights of every person in actual occupation of the land or in receipt of rents or profits thereof, save where enquiry is made of such person and the rights are not disclosed.”

The LRA 2002 deals with unregistered interests which override first registration in Schedule 1, paragraph 2, which defines the interests of persons in actual occupation as “An interest belonging to a person in actual occupation, so far as relating to land of which he is in actual occupation except for an interest under a settlement under the Settled Land Act 1925.”

The Law Commission concluded in its report^[13] that it remained necessary to protect the rights of those in actual occupation. This is predicated assuming such persons will often not have appreciated the need to take further steps to protect their rights against purchasers by lodging a caution against first registration. This is especially the case for informally created rights (for example a matrimonial homes right of occupation which may be protected by a class F land charge registration)

It should be noted that the LRA 2002, unlike the old law, does not give overriding status to those who are only in receipt of rents and profits. This is a change from s 70 (1) (g) and was made with the idea that it is often very difficult for buyers to discover the existence of an intermediate landlord simply from an inspection of the property.

The new law maintains the exception that a beneficiary under a settlement under the Settled Land Act 1925 is excluded from overriding status. Despite the fact this retention goes against the Law Commission’s original recommendation, it was decided that the exception was sensible as since the Trusts of Land and Appointment of Trustees Act 1996 came into force, such settlements can no longer be created.

It is important to consider the wording of Schedule 1 paragraph 2 which states, “so far as relating to land of which he is in actual occupation.” This is a new addition by the 2002 Act and means that where someone is in actual occupation of part of the land but have rights over the whole land purchased, their rights protected by actual occupation are confined to the part which they occupy.

A further change in the law, in relation to occupier’s rights on first registration, is the absence of the qualification in s70 (1) (g) which says, “save where enquiry is made of such person and the rights are not disclosed.” These words are excluded from the 2002 Act because they are no longer relevant to overriding interests on first registration. Whether a purchaser has made enquiries of a person in actual occupation is irrelevant on first registration because the question of whether or not the first registered proprietor is bound by the rights of an occupier will have been decided at an earlier stage under the unregistered conveyancing rules. That is to say, on completion when the legal title becomes vested in the purchases. However, it should be noted that the qualification is retained for registered dispositions.

Legal easements and profits a prendre

Under the old law, equitable easements which were openly exercised and enjoyed by the dominant owner as appurtenant to their land could take effect, on first registration, as overriding interests.^[14] Under the new law, only legal easements and profits a prendre can do so.^[15] Accordingly, in preventing unregistered equitable easements from acquiring overriding status the decision in Celsteel is reversed. This follows the underlying principle of the new Act that rights expressly created over land should be completed by registration. It further reflects the established view in unregistered land that equitable easements should only bind a purchaser if they are registered as Class D (iii) land charges under the Land Charges Act 1972. It is hoped that in the future, few legal easements and profits will qualify as overriding interests. In fact the LRA 2002 contains rule-making powers to ensure that, as far as possible, overriding interests are disclosed to the registrar on first registration to enable them to be noted on the register.

Customary and public rights

The 2002 Act retains both customary and public rights as overriding interests^[16] referred to herewith for the sake of completeness but not discussed further.

Local Land Charges

This type of overriding interest has not been changed by the new Act. Schedule 1, paragraph 6 of the 2002 Act replicates s. 70(1) (i) of the Land Registration Act 1925, by allowing a local land charge to override first registration. Again these are referred to for the sake of completeness and will not be discussed further.

Mines and Minerals

No change has been made by the new Act to this category of overriding interests which is again referred to for the sake of completeness. The overriding status of some mining and mineral rights previously found in s 70 (1) (l) and (m) of the Land Registration Act 1925 are today found under Schedule 1, paragraphs 7-9 of the Land Registration Act 2002. Many of these rights would be impossible to register in light of their extent and complexity as well as the prohibitive cost of preparing plans for them. The Law Commission accordingly thought it was best in this instance to preserve their overriding status.

Miscellaneous interests

There are five categories of overriding interests that have been grouped together under a miscellaneous heading under Schedule 1 paragraphs 10-14 of the 2002 Act. These are rare, of ancient origins and not always easy to discover. They have maintained their overriding interest in the same way as under the Land Registration Act 1925 and are as follows, a franchise, a manorial right, a right to rent which was reserved to the Crown on the granting of any freehold estate (whether or not the right continues to be vested in the Crown), a non-statutory right n relation to an embankment or sea or river wall, and a right to payment in lieu of tithe (corn rents).

Maintaining these miscellaneous items as overriding interests had been thought unpopular, but the Law Commission concluded that to abolish their overriding status immediately, might risk a contravention of the right to property under the European Convention on Human Rights.^[17] Therefore the 2002 Act provides that these rights will cease to have overriding status ten years after the Act comes into force. In the meantime, s117 of the Act allows persons with the benefit of those rights to protect them during the ten-year period without charge. This can be achieved by entering a caution against first registration (for unregistered land) or an entry on the register (for registered land). If the interests are protected in this way, any intending buyer of the subject property will be made aware of them.

Unregistered Interests which override Registered Dispositions

A registered disposition for valuable consideration of a registered estate or a registered charge takes subject to those overriding interests affecting the estate or charge that are listed in Schedule 3.^[18] 12 out of those 15 interests are the same as those which override first registration, which have been considered above. The three categories that are different from those that apply on first registration are, short leases, interests of persons in actual occupation and easements and profits.

Short leases

Three exceptions were mentioned in relation to short leases that do not qualify as overriding interests. There are a further five exceptions in relation to registered dispositions. All five must be registered in their own right in light of the fact they are registrable dispositions granted out of a registered estate and therefore cannot be overriding interests. These are, firstly reversionary leases granted to take effect in possession more than three months after the date of the grant of the lease, secondly leases under which the right to possession is discontinuous, thirdly leases granted in pursuance of the right to buy provisions of Pt V of the Housing Act 1985, fourthly leases granted by a private sector landlord to a person who was formerly a secure tenant and has a preserved right to buy and lastly leases of a franchise manor.

Transitional Arrangements

Transitional arrangements are in place for existing short leases that are overriding interests under the old law.^[19] Paragraph 12 of Schedule 12 provides that leases that had been previously granted for a term of more than seven but not more than 21 years shall continue to remain as overriding interests after the 2002 Act is in force. However, any assignment of these leases will trigger compulsory registration if the term has more than seven years to run at the time of the assignments.

Interests of persons in actual occupation

The guiding principles of reform to this area of law, is that expressly crated rights that are substantively registrable should be registered and no longer enjoy the protection of being an overriding interest. In this instance the rights concerned are those that arise informally in favour of those persons who do not always appreciate there is a need to register their rights. The Law Commission stated in their Consultative Document that, “it is unreasonable to expect all encumbrances to register their rights, particularly where those rights arise informally, under (say) a constructive trust or by estoppel. The law pragmatically recognises that some rights can be created informally, and to require there registration would defeat the sound policy that underlies their recognition. Furthermore, when people occupy land they are often unlikely to appreciate the need to take the formal step of registering any rights that they have in it. They will probably regard their occupation as the only necessary protection. The retention of this category of overriding interest is justified…because this is a very clear case where protection against purchases is needed but where it is not reasonable to expect or not sensible to require any entry on the register.” ^[20]

Paragraph 2 of Schedule 3 provide that an interest belonging at the time of a registered disposition to someone who is in actual occupation is an overriding interest, only so far as it relates to land of which they are in actual occupation. Furthermore, there is also an important qualification to this general principle in that actual occupation will only protect a person’s occupation so far as it relates to land of which that person is in actual occupation. Any rights that particular person has over other registered land must be protected by an appropriate entry in the register for that title. This reverses the Court of Appeal decision in Ferrishurst Ltd v Wallcite Ltd^[21] where an overriding interest was held to extend to the whole of a registered title and not merely the part in occupation.

There are however, four exceptions to this principle. These are, firstly interests under a settlement under the Settled Land Act 1925, secondly interests of a person of whom inquiry was made prior to the disposition and who failed to disclose the right when they could reasonably have been expected to do so (note this is very similar to the working of s. 70 (1) (g) of the Land Registration Act 1925. Thirdly is a new and important exception relating to the rights of persons whose occupation is not apparent, in which case an interest will not be protected as an overriding interest if:

1. 1. it belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and
   2. the person to whom the disposition is made does not have actual knowledge at that time.

It is important to note that the Law Commission emphasised three important points in relation to this exception. Firstly that it is the occupier’s occupation that must be apparent and not their interest. Secondly the test is not one of constructive notice of the occupation, but rather it is the one applicable to an intending purchaser, that occupation should be obvious on any reasonably careful inspection of the land. Thirdly the Law Commission emphasised that even if a person’s occupation is not apparent, the exception does not apply where a purchaser has actual knowledge of the occupation.

The fourth and final exception is that of a lease that has been granted to take effect in possession more than three months after the grant and which has not taken effect in possession at the time of the disposition. This is rare and is a corollary of the requirement to register reversionary leases that are to take effect in possession more than three months after their grant.

As referred to previously, those who are not in actual occupation but are in receipt of rents and profits are no longer given overriding status. A transitional period does provide that an interest which, came into being immediately before the coming into force of the 2002 Act, and was an overriding interest under s. 70 (1) (g) of the Land Registration Act 1925 by virtue of a person’s receipt of rent and profits, continues to be so for the purposes of Schedule 3.^[22] If however, the person thereafter ceases to be in receipt of rent and profits, the interest will cease to be overriding.

Legal easements and Profits a Prendre

Easements and profits concerned the Law Commission who were determined to restrict the circumstances in which they could acquire overriding status. This is because purchasers of registered land often find it difficult to discover easements and profits that are not noted on the register. This is further compounded by the fact that non users of easements or profits, even after many years, fail to raise any presumption of abandonment.^[23] Accordingly the Law Commission felt it was wrong in principle that easements and profits that were expressly created, should take effect as overriding interests and believed they ought to be completed by registration.

This has meant that reforms in this area have been extensive. The LRA 2002 provides that no easements or profits expressly granted or reserved out of registered land after the Act comes into force can take effect as overriding interests. This is because these rights do not take effect at law until they have been registered. This is in line with the aim of the 2002 Act to ensure the possibility of investigating title almost entirely on-line with only minimal additional enquiries.

Furthermore, no equitable easements or profits, no matter how they were created, are capable of overriding a registered disposition, as noted reversing the decision in Celsteel. It follows that only a legal easement or profit may be overriding in relation to a registered disposition.^[24] Furthermore, since the Act has been in force, the only legal easements and profits capable of being overriding interests are, those already in existence (that have not been registered), those arising by prescription (which has not been reformed by the LRA 2002) and those arising by implied grant or reservation (for example under s 62 of the Law of Property Act 1925)

Furthermore, so as to circumvent the non-abandonment presumption under paragraph 3.1 of Schedule 3, some categories of legal easements and profit have been totally excluded from overriding status. These are not capable of being overriding interests unless they have either been registered under the Commons Registration Act 1965 or have been exercised within one year prior to the registered disposition in question.

It is important to note that a purchaser of registered land for valuable consideration will only be bound by an easement or profit as an overriding interest if the same is registered under the Commons Registration Act 1965, or the purchaser knows about the said right or it is so obvious that no seller would be obliged to disclose it or it has been exercised within one year before the purchase date.

Transitional arrangements

The LRA 2002 contains a transitional provision allowing existing easements or profits that are overriding interests at the time the Act came into force but which would not qualify under the new provisions to retain their overriding status.^[25] A second transitional provision states that for three years after the Act comes into force, any legal easement or profit that is not registered will be an overriding interest.^[26] Examples include implied grants under s. 62 of the Law of Property Act 1925 and the intention was to strike a fair balance between buyers and those with the benefit of these rights allowing time for the latter to register them. Notably any equitable easements and profits that were created after the Act coming into force, must be protected by registration if they are to be binding on a purchaser of the servient land.

Adverse Possession

The LRA2002 made radical changes in the law where the title to land occupied by a squatter has been registered under the system of registration. Where land occupied by a squatter has not been registered, the pre-existing laws, as contained in the Limitation Act 1980, continues to apply. Under the 1980 Act, the period of limitation for actions for the recovery of land is 12 years. If proceedings to recover land from a squatter have not commenced by the end of this period, the action becomes statute barred and the squatter obtains title to the land.

Over the last few decades, instances occurred where title to land of considerable value was lost to its owner as a result of adverse possession. Whilst the need was recognised for retaining a system where it was possible for a good possessory title to be obtained, the Law Commission expressed the fact that justice was not being served when any person could, as a result of tortious acts of trespass, together with an oversight or act of tolerance on behalf of the landowner, come to acquire land worth a considerable amount whilst having paid nothing in return. It was felt that the law unduly favoured the interests of squatters against those of the owner of the land and it was one of the purposes of the Land Registration Act 2002 to seek to redress the balance.

The LRA 2002 does not change the fact that after 12 years’ adverse possession, a squatter may acquire title to the land. The Act does however, introduce a procedure where, after 10 years’ adverse possession, the owner is warned that, unless he takes steps to recover the land, after a further two years his title will be lost and the squatter will become the registered proprietor.

Prior to considering how the 2002 Act operates, it is important to first consider what adverse possession actually is, particularly in light of the fact that it is a requirement in the case of unregistered land under both the Limitation Act 1980 and the 2002 Act.

If a squatter takes possession of land and retains it for 12 years, then as per the law prior to the LRA 2002, the owner’s title is barred and the squatter acquires a good title. This is not the case if the squatter takes possession of the land by being granted a lease (or a licence). If the owner’s title is to be barred after 12 years, the squatter’s occupation must have been without the owner’s authority, his possession must have been “adverse”.

For possession of land to amount to adverse possession, the squatter must show the fact of his possession. This means he must show an appropriate degree of physical control over the land.^[27] This would include the building of a house, or the use of the land for agricultural purposes. If a squatter only makes occasional use of the land,^[28] this may constitute trespasses of land but not possession thereof.

A squatter’s use of the land must sufficiently exclude the owner. In Bligh v Martin^[29] where the squatter turned heifers on to the owner’s land to graze, it was held that this action did not exclude the owner sufficiently so as to amount to adverse possession. On the other hand, a squatter’s possession need not necessarily be such as to totally exclude the owner. In Fowley Marine (Emsworth) Ltd v Gafford^[30]a squatter laid buoys in the owner’s creek and made a charge to those using the moorings. In this case, this action was held to be sufficiently exclusive so as to constitute possession of the creek by the squatter.

It is however, enclosure of the land that demonstrates the strongest possible evidence of adverse possession.^[31] It is not however, a prerequisite or conclusive evidence thereof.^[32] Furthermore, a squatter does not have to show he has taken physical possession of the whole land,^[33] although it is not sufficient to claim adverse possession for acts done on, over or under the land.^[34] As well as showing the fact of possession, a squatter must also show an intention from the start of the limitation period to take possession.

So far this essay has referred to adverse possession where the owner abandons the land and the squatter enters into possession of it. However, adverse possession can also happen:

1. The squatter drives the owner out of possession and takes possession himself
2. The owner fails to take possession of and the squatter takes possession