Mirror Principle and the Land Act

Question 1

The Mirror Principle And The Land Act Of 2002

A sound system of land registration is underpinned by three principles:

1. the insurance principle;
2. the curtain principle, and;
3. the mirror principle.

The insurance principle refers to the guarantee secured by the State that any loss incurred by a registered land resulting from reliance on the conclusiveness of the land Registry by a land purchaser will be compensated through a statutory indemnity system.

The curtain principle, on the other hand, is the concept that land registration may allow certain equitable interests attached to the land hidden from a purchaser’s view. This ‘curtain,’ however, does not affect the validity of any transaction on the registered land so long as the details of the registration reflects the validity of the title.

Finally, there is the mirror principle. The mirror principle refers to the idea that the due registration of a land title must reflect all the important and significant details that a purchaser must know before buying the land. These details refer to the identity of the “owner, the nature of his ownership, any limitations on his ownership and any rights enjoyed by other persons over the land that are adverse to the owner.” The objective of the mirror principle has not been met under the Land Registration Act 2000 because of the impossibility of entering all land details in the Registry.

According to Gray and Gray (2008), the objective of land registration is that “any prospective purchaser of registered land should always be able to verify, by simple examination of the register, the exact nature of all interests existing in or over the land which he proposes to buy.” Yet, the Land Registration Act 2002 contains provisions that render the mirror principle, as applied to land registration, wanting. These provisions refer to proprietary rights that the law allows to exist unrecorded and which can only be known through actual ocular inspection of the land. These provisions are contained in ss. 11(4) (b), 12(4) (c), Schedule 1, s 29(1)-(2(a) (i-ii), and Schedule 3.

In addition, there are other interests that are not required to be registered outside of the law that can override registration, and all these can be lumped together as minor interests.

Section 11(4) (b) of the Land Registration Act 2002 states that “The estate is vested in the proprietor subject only to the following interests affecting the estate at the time of the registration – (b) unregistered interests which fall within any of the paragraphs of Schedule 1.” A look at Schedule 1 and 3 of the same law reveals seven kind of unregistered interests that can override first registration: leasehold estates in land, interests of persons in actual occupation, easements and profits a prendre, customary and public rights, local land charges, mines and minerals, and other miscellaneous interests. Schedule 1 refers to unregistered lands and 3 to registered ones.

Overriding interests in land registration refer to interests in which a registered title is subject to even if such interests are not found in the Registry. Such interests bind both the registered owner and the person who subsequently acquires interest over the titled property. Short leases, under Schedule 1 of the LRA 2002, is granted an overriding interest over first registration if the term granted is not more than seven years subject to certain exceptions under ss. 4(d), (e) and (f). This is nevertheless, an improvement over the previous LRA 1925, which granted overriding interest for 21 year leases.

On the other hand, the overriding interest of a person in actual occupation does not include a settlement under the Settled Land Act of 1925 and if such occupation partakes only of a portion of a whole land, the overriding interest extends only to that specific portion. If the actual occupant, however, failed to confirm his interest on the property he actually occupies when asked about it and a disposition subsequently takes place, the interest of that actual occupant does not become overriding and not protected. In addition, if the interest of an actual occupant is not evident upon ocular inspection reasonably made, that actual occupant’s interest is not protected. This is and the previous statement does not apply to first registration but only on subsequent registrations. Persons who are granted the rights to receive rents and profits from registered lands are not anymore extended an overriding interest.

The question of what constitutes actual occupation and when actual occupation should be reckoned vis-à-vis the question of overriding interest was illustrated in the case of Abbey National Building Society v Cann. In that case, a son bought a property in his name although his mother had also contributed to the purchase amount. On 11:45 of August 13, when the sale was completed, workers brought in the mother’s furniture and fitted her carpets although she was abroad. At about 12: 20 of the same day, the land transfer was executed in favor of the son. He executed at once a mortgage in favor of the building society. The land transfer, together with the mortgage, was subsequently registered on September 13 of the same year. The son failed to pay the mortgage loan and the mother invoked her constructive trust interest against the building society. The issue before the House of Lords was when the actual occupation took effect to be effective as an overriding interest against the building society. First, HL defined actual occupation as occupation that may be actual or constructive (such as when a caretaker or representative occupies the place on behalf of the person), but must have some degree of permanency and continuity. As to when it took effect, the HL determined it as of the date of completion on 12:30 of August 13.

With respect to overriding interests extended to easements and profits a prendre, the same are true for the first registration. On subsequent dispositions, such interests may lose protection if they are not evident upon a reasonable inspection of the land, if the purchaser does not have personal knowledge of them, if such interests were not exercised within one year immediately before the disposition, and if the profits are not registered under the Commons Registration Act 1965. All easements and profits that existed prior to the inception of the new LRA continued to be valid but they must be registered on October 12, 2006. This is true as well to express grants of easements and profits a prendre made after implementation of the new law, which must be registered otherwise they will only be regarded as equitable interest. In addition, adverse interest on land is granted overriding interest over registered land. This is subject to the condition, however, that the claimant of adverse possession is actually occupying the land. On first registration, the only requirement is for the registered owner to have noticed of the claim for adverse possession.

There is also a class of proprietary interests that are subject to protection. Minor interests do not belong to the class of overriding interests or of mortgages by registered charge but may include “estate contracts, restrictive covenants, unpaid vendor’s liens, and matrimonial home rights.” Although the general rule is that a purchaser of a titled property duly registered takes the property free from minor interests that have not been duly registered even if he/she knows of the existence of such interests, a case decided by the HL seems to provide exception to this ruling. LRA 2002 provides that minor interests must be protected by an entry of a notice. In the case of Lyus v Prowsa Development, the Court allowed the protection of a minor interest that was not entered in the registry. In that case, the plaintiffs entered into an agreement with a developer to purchase a piece of land. The developer subsequently went insolvent and the bank to which it was mortgaged sold it subject to the plaintiff’s contract. The first buyer resold the same within months to a second buyer subject to the same. When the sale however was registered, the interest was not entered. The Court held that the second buyer was, nevertheless, bound by the minor interest because he bound himself to it in the contract of sale.

Question 2

As to Donald: The lease being contemplated in Donald’s case is called a reversionary lease because it gives a lessee the right to possess the land on a future date although the agreement is being executed in the present. “A reversionary lease is ‘vested’ as soon as it is granted but until the term begins it is vested only in interest and not in possession for although it already exists, it gives no present right to enjoy any estate in land.” Reversionary leases respecting registered lands of are the subject of s 27 which provides for dispositions in registered estates required to be registered, ss. (b) (ii) thereof provides a situation in which leases are required to be registered if their effectiveness takes effect after three months from the time the lease is agreed upon, without differentiating between short and long-term leases. The distinction between the two provisions, of course, is that the first provision refers to unregistered estate whilst the second to lands that have already been registered.

Applying the above provisions to the case at hand, the contract of lease between Alice and Donald respecting a 2-year lease of workshop of Bearfield Farm must therefore, be registered to protect both parties since it does not come within the ambit of overriding interest guaranteed protection by the law. Since the Bearfield Farm is a registered estate, s 27(b) (ii) of the LRA 2002 is the applicable provision to the case of Donald and Alice. The failure of registering it may diminish it to just a minor interest whose protection is not absolute.

As to Bertram: The LRA 2002 provides that leases which are to take effect for more than seven years from the date of the grant must be registered in accordance with the said law. This is the holding in s 27(b) (i) of the LRA 2002. In the case of Bertram where a lease of more than seven years is contemplated, viz. 25 years of lease, there is a necessity of registering the same in accordance with LRA 2002.

As to Florence: The case of Florence contemplates two kinds of dispositions regarding Bearfield Farm. The first transaction being contemplated is a sale of a portion thereof called the Greenacre and the second considers the establishment of an easement over Greenacre for the purpose of laying drainage pipes and connecting it to a public drainage system which lies next to Greenacre.

The sale of a registered land like the Greenacre, which is part of a registered freehold estate, is covered by s 27 of the LRA which enumerates the dispositions respecting a registered estate that are required to be registered. The first on the list (a) are transfers and it is under this provision that Florence must register the purchase between her and Alice of Greenacre.

The second disposition being contemplated respecting Greenacre is a reservation or easement for the laying of pipes to be connected to the main pipe lying after the Greenacre land which therefore, necessitates installing the pipes under and through Greenacre. The old law, LRA 1925, treated easements (and profits a prendre) as overriding interests. Upon the inception of the new law, easements established under the old law continued to be respected as such subject to certain requirements. The new law distinguishes between two kinds of easements: equitable easements and legal easements. An equitable easement is an easement that has not been registered in accordance with the law and therefore cannot override a registered title. A legal easement is one which has been substantially registered but it must be entered as against the title of a servient estate to have a legal effect. A servient estate is one which is burdened with an easement as opposed to a dominant land for whose benefit an easement has been created, and in both cases of equitable or legal easement, the benefit of such passes to a subsequent purchaser of the dominant land. The new law, however, requires that new easements and profits a prendre respecting a registered land, which are to be expressly established and granted under it must be registered. The registration is completed by entering a ‘notice’ of the easement in the title of servient property as well as the registration of a corresponding benefit with the title of the dominant property. The effect of this registration is to make the owner of the dominant land the owner of a registered ‘legal estate’ of that specific easement found in the servient land.

In the case at hand, an easement by reservation is being contemplated. To make the easement an overriding one, Alice must make it legal by having it registered in the remaining portion of the property of Bearfield Farms after the portion of Greenacre has been detached, called the dominant land as a beneficial interest of the land. Such registration, whether Florence will register the same as a burden of the servient land’s title, will make it a legal easement and entitles it an overriding interest in subsequent dispositions of the servient estate under Schedule 3, s 3 of the LRA.

As to Doris: Alice must, first of all, prove that there is a real necessity on her part to impose an easement against the property of Doris. Considering that the property of Doris is not part of Alice’s property, the latter must prove an easement of necessity unless of course, she enters into an agreement founded on a consideration with Doris for the latter to observe the easement of view that Alice wants. An easement of necessity is one in which a dominant land is deprived of its use without an easement imposed on a subservient land. The case of MRA Engineering v Trimester, which is although about easement of the right of way, may be used as a parallel case in the present situation because it involves the demand of an easement by an owner against the owner of an adjoining land who became a subsequent purchaser to the original owner. The court ruled in this case that for an easement of necessity to be acquired over a servient state, the claimant must show that the dominant land is useless without it. As the land can be accessed using a public footpath, the claim of easement by necessity therefore failed.

As to which registered titles will be affected: In the cases of Donald, Bertram and Florence, the registered title of Bearfield Farm will be affected because it is upon this title that the reversionary lease of Donald, the 25-year of lease in favor of Bertram and the beneficial interest of the dominant title will be entered and noted.

As to the creation of new registered title: In all the cases, only in the case of Florence will new titles be created: the servient title which corresponds to the Greenacre being sold to Florence, and; the new title of Bearfield Farms, the dominant land, which consists of the remainder of the land after the disposition of a part thereof, viz. Greenacre, to Florence. The dominant land is the original titled land minus the Greenacre owned by Alice.

As to which part of the register the entries will be made: The register has three parts: the property register; the proprietorship register, and; the charges register. The property register contains the description of the land and refers to a plan of the land. It also notes the type of ownership that the proprietor has over the land. The proprietorship register is that part of the register which identifies the owner of the land, class of title and entries that may affect any subsequent transaction of the land. Finally, the charges register is that part of the register which contains the entries pertaining to any charges and other matters affecting the property.

The registration of the lease to Donald should be entered in the charges registry; the lease to Bertram shall likewise be entered in the charges registry; the sale of Greenacre to Florence will result in a new title in favor of Florence corresponding to the area and boundaries of Greenacre and another revised title of the Bearfield Farms containing its new area and boundaries; the registration of the easement as to the dominant land owned by Alice will be entered in the property register whilst its registration in the servient land of Florence will be entered in the proprietorship register; and in the event, Alice has proven her right to an easement of necessity as against the property of Doris, the same should be entered in the proprietorship registry as well of her title.

Bibliography

Abbey National Building Society v Cann [1991] AC 56.

Dixon, Martin, Modern Land Law (Routledge Cavendish, 2005).

Gray, Kevin & Gray, Susan Francis, Elements of Land Law (5th Ed OUP, London 2008) 190.

Gray, Susan, Land Law (Butterworth Core Texts Series, Edition5, Oxford University Press, 2007).

Land Registration Act 2002.

Land Registry Practice Guide 15, http://www1.landregistry.gov.uk/assets/library/documents/lrpg015.pdf.

Land Registry Practice Guide 25, http://www1.landregistry.gov.uk/assets/library/documents/lrpg025.pdf.

Lyus v Prowsa Development [1982] 1 WLR 1044.

MRA Engineering v Trimster [1998] 56 P & CR 1.

Sexton, Roger, Land Law (Oxford University Press, USA 2006) 134.

Wonnacott, Mark, Possession of Land (Cambridge University Press, 2006).