The Law of Property Act

The introduction of the Law of Property Act 1925 and the system of land registration has solved the problems that existed prior to this date and has made the transfer of land much simpler.

Critically Analyse This Statement.

“The result of nearly a thousand years of development from a feudal origin was that the law of real property contained so many antiquated rules and useless technicalities that additional and unnecessary impediments had arisen to hinder the transfer of land”. The Law of Property Act (LPA) 1925 was introduced with a batch of other legislation and was intended to modernise the law and render “the sale of land as rapid and as simple as the sale of goods”; and to simplify conveyancing and facilitate the alienability of the land, with the pinnacle [being] the successful establishment of a title register.

To achieve Lord Birkenhead’s vision of simple transfer of land and to solve many of the pre-1925 problems, the failings of the previous systems had to be addressed. Under the ‘old’ system, title to land was established by viewing title deeds, there was no official record of these since they were retained by the parties. This system required the “wearisome and intricate task of examining title”. They were “difficult to read, impossible to understand and disgusting to touch”. Also, it was not unusual for land to be fragmented into a series of life estates, estates in fee tail and to have divided ownership between potentially unlimited numbers of persons. There was frequently no clear estate owner. It would be difficult to investigate all ownership claims, ascertain which third parties have interests and obtain agreement from all parties to the purchase. There was even difficulty in proving the vendor was actually entitled to sell the land, which was a significant barrier to conveyancing. Buying land encumbered with third party interests which could not be terminated easily did not make purchase desirable prior to 1926. The LPA and system of land registration intended to solve these problems.

S1(1) LPA allows only the fee simple absolute and the term of years absolute to be legal estates. S1(2) provides a limited list of legal interests with all others being equitable per s3. This significantly reduced the problem of fragmentation of interests and made land transfer simpler since ownership was confined “to dispositions of an ordinary and commercial kind”. Land was more freely alienable as a result of these reforms and clear estate owners were beginning to emerge. Obviously, this was a significant success in solving pre-1925 problems; however did not entirely remove the “ghosts of the past” (supra).

The LPA also had to deal with third party interests. The challenge was to remove these interests without doing an injustice to those who held them. The doctrine of overreaching from s2 and s27 LPA was part of the machinery to protect both purchasers and third parties. It is noteworthy that there is an argument that overreaching is provided for by the LRA and has little to do with the LPA, if this is the case then it can be said that the LPA did little to deal with the problems of third party interests. However, the statute wording is clear and seems to rebut this theory. Overreaching allowed third party equitable interests in land to be converted into a pecuniary figure by payment of the purchase price of the land to at least two trustees. It has been described as guaranteeing “saleability at the price of some loss of security for beneficial owners” This loss of security would be better described as significant due to the ease with which interests can be overreached. All equitable interests are vulnerable to being overreached.

Overreaching has been extended by the LPA, all interests which arise under settlements of land were made overreachable. It has also displaced the doctrine of notice insofar as non-commercial interests in land are concerned. This rendered purchase a more attractive option and consequently solved some of the problems encountered prior to 1925.

Although overreaching solved some of the pre 1925 problems, it by no means solved everything and brought with it its own problems. Interests of beneficiaries can be overreached even though no capital money had been advanced at the time of purchase; “the exercise intra vires of a power of disposition which does not give rise to any capital money … overreaches just as much as a transaction which does”. However it is clear that overreaching “without the transformation of the beneficiaries’ interests into interests in the capital money provides very limited protection for the beneficiaries”. The law commission has recommended change to require the consent of the owner of the equitable interests before overreaching can commence unless the court should choose to dispense with it. However, the government has decided not to implement this.

Overreaching is also intended to protect buyers of land, however, it is possible to for a purchaser to acquire title to land but, due to ultra vires action by the trustees from whom he is purchasing the land, the transfer will succeed but the interests will not be overreached. This is another clear limitation of the doctrine. It allows one party to achieve a successful bargain yet leaves the other with land encumbered with third party interests and no remedy.

We have seen, therefore, that overreaching cannot be relied upon to protect both the interests of purchasers and the interests of the owners of equitable interests in certain circumstances. Since doing justice is critical to any piece of legislation, one cannot call a system that is generally just, or quite just, a complete success. It is therefore only partially successful in achieving its aims.

It was recognised before the LPA was enacted that more people were buying property together and an increasing number of new dwellings were being built. There was mass social change, more women started working, and dual income households became more common therefore more people had the money to buy their own houses. By 1918 certain classes of women could vote which catalysed more creation of trust provisions within the LPA. It was therefore necessary to include provisions for co-ownership that were better than those in place before the LPA was enacted. Strict settlements had the result of preventing, inter alia, the person in possession from transferring the land in fee simple and granting a lease for a period longer than his life “these drawbacks were found to be increasingly irksome in the changing social conditions of the nineteenth century” These were abolished by the LPA and provision was made for the implementation of trusts.

To put property in an express trust, all that is required is a written declaration of trust, trusts may also be created informally or implied by statute. The LPA has imposed a statutory trust “as a management vehicle”. The creation of such trusts has solved the pre-1925 problem of land becoming deadlocked. Such trusts (which are obviously subject to overreaching [supra]) have made the land more freely alienable since it can no longer become tied up in a strict settlement

The LPA solved the problem of fragmentation of land and (arguably) the problem of encumbering the land with third party interests to the detriment of land transfer. However it was not entirely successful (infra) and was certainly not the only means by which pre 1925 problems were solved and the transfer of land was made simpler.

The idea of establishing a central register of title was not a new one. The Land Registration Act 2002 radically simplified the transfer of land since it allowed a purchaser “[to] discover from the mere inspection of the register” important interests in the land. There was a vision of a register that “should be a complete and accurate reflection of the title of the land at any given time”, requiring only “the absolute minimum of additional inquiries and inspections.” There were three principles underpinning the register; the mirror, curtain and indemnity principles. The LRA 2002 lists registrable dispositions, third party interests must be registered as a notice or restriction. A registered interest will constitute actual notice, interests must be registered otherwise they will not be binding on a purchaser unless the interest is overriding (infra)

The LCA 1972 provided a system of partial registration to protect vulnerable interests until they were registered under the LRA. Rights in land are registered as land charges against the legal owner under the land charges register. Interests in unregistered land must be registered if they appear under s2 of the LCA otherwise they will not be binding even if a purchaser is aware. If the interest is not registrable, the law reverts to its pre 1925 state. This system was as useful as was reasonably practicable. Since the land registry could not cope with registration en masse, unregistered land must be dealt with differently. Although it did not confer on purchasers all of the benefits of registered land, it still provided a means of ascertaining certain equitable rights over the land by viewing a central register. The principle difference here from the registered system is that the doctrine of notice is especially relevant since notice must be given in order to enforce any equitable rights over the land. Overall, it is clear that the LCA succeeded to a degree in solving the pre-1925 problems and making the transfer of land simpler since it was the only practical step that could be taken insofar as unregistered land was concerned. Complete registration would be impractical, no registration would obviously be of no help so a compromise was effected in the form of partial registration.

The systems of land registration attempted solve the problems of establishing title to land (ie was the vendor entitled to sell it) investigating all interests and protecting the rights of both third parties and purchasers. This was a slow, complicated and inefficient process. The system of land registration went some way to improving it. The vast majority of title to land in England and Wales is now registered. This provides “a fairly comprehensive record of title to land and of third party interests in that land”. Title to land can be quickly established by reference to the register thereby saving time and money. Perhaps the most significant reform made by the LRA 2002 was the introduction of framework for electronic conveyancing. Such a method would see dealings in land conducted entirely on computer. This would not only save money but would also cut down on clerical errors, increase the speed of conveyancing and remove the registration gap. The system of land registration will gradually become more useful as the number of registered titles increases.

There were, of course, some drawbacks with this legislation. Overriding interests require a purchaser to make inquiries beyond the register since “the Law Commission rejects any attempt to link overriding interests with the doctrine of notice”. They are interests which do not have to be registered and include short leases, an interest of a person in actual occupation of both registered and unregistered land (subject to LRA schedule 3) and certain easements or profit a prendre. Most overriding interests were obvious upon inspection of the land or would not cause major problems with the use of land; they were fairly benign in nature. It is accepted that overriding interests cannot be simply destroyed: “destruction of an easement [or other overriding interest] intentionally created between landowners may perhaps be regarded as more drastic and less acceptable than a failure to destroy such a one”. Although they have, perhaps become more problematic in nature than was originally envisaged since the case of Pettitt v Pettitt in which the undiscoverable overriding interest has emerged. It is this type of interest which is one of the problems of the 1925 system. This is a violation of the mirror principle and limits the usefulness of the land register. Measures have been taken to limit the effectiveness of overriding interests .

The inevitable conclusion is that the system of land registration was only partially successful in solving the problems that existed prior to 1925 and only partially successful in making the transfer of land simpler. Although it is impossible for the sale of land to be as simple as that of goods, “the present system of registration of title may be said to go almost as far on that road as is practicable”.

The LPA and the system of land registration have without doubt made the transfer of land much simpler. It became much easier to establish ownership of land and made the purchase of land significantly easier through the limitations on the number of legal estates and the introduction of measures to reduce the fragmentation of land. However, such improvements were from an appallingly low base, it would have been easy to improve on the ‘old’ system due to the sheer number of unnecessary “impediments to the transfer of land”. Whether the LPA and land registration systems solved the problems that existed prior to 1925 is somewhat more complicated to answer. The only reasonable answer one can give is that it went part way to solving the problems of previous years. It is granted that registration of title, overreaching of certain interests , protecting the rights of third party rights whilst still leaving purchase an attractive option and providing the framework for electronic conveyancing were all successes, these are balanced by failure; overriding interests. Even though the LRA 2002 seeks to limit the scope of overriding interests , they are nonetheless a failure of the mirror principle as long as they are undiscoverable, since even the prudent purchaser would be dealt an injustice by them. It remains to be seen how the provisions for electronic conveyancing set down in the LRA 2002 solve the pre 1925 problems and make the transfer of land simpler, although it would be fair to speculate that the impact is likely to bring about significant improvements.

Bibliography

Books

1. Cheshire & Burns, Modern Law of Real Property
2. Birkenhead, Points of View, Volume ii, p 34
3. Nigel P. Gravells, Land Law, Texts and Materials, 3rd Edition, Sweet & Maxwell
4. Dowson and Sheppard, Land Registration, 2nd edition 1956, p11, Per Lord Westbury LC
5. N. Henderson, Land Law 5th Edition, Sweet & Maxwell, 1988, p 28
6. Simpson, A history of the Land Law, pp. 270
7. Jackson, Conveyancer and Property Lawyer, Overreaching and unauthorised disposition of registered land, 2007
8. Sparks, A New Land Law, Hart Publishing, 2003
9. A.J. Oakley, Megarry’s Manual of the Law of Real Property, 8th Edition, Sweet & Maxwell, p 84
10. Martin Dixon, Principles of Land Law, 4th edition, Cavendish Publishing p 25
11. Keeton and Sheridan, the Law of Trusts, 10th Edition, 1974 p41

Cases

1. City of London Building Society v Flegg [1987] 3 ALL ER 435
2. Pettitt v Pettitt [1969] 2 W.L.R. 966
3. Celsteel Ltd v Alton House Holdings Lts & Another [1985] 2 ALL ER 562
4. Lloyds Bank Plc v Rosset [1989] Ch 350
5. Williams & Glyn’s Bank v Boland [1981] AC 487
6. Chhokar v Chhokar [1984] FLR 313,
7. State Bank of India v Sood [1997] Ch 276 at 281 per Gibson LJ
8. Harpum [1990] C.L.J. 227
9. Midland Bank Trust Co Ltd v Green [1981] AC 513
10. Kings North Trust Ltd v Tizard [1986] 2 ALL ER 54

Journals

1. Deveral Capps, Conveyancing in the 21st century: an outline of electronic conveyancing and electronic signatures, Conveyancer and Property Lawyer 2002
2. Roger Smith, Conveyancer & Property Lawyer 1987, Land Registration Reform, the Law Commission’s Proposals
3. Jean Howell, Deeds Registration in England: A Complete Failure? Cambridge Law Journal
4. British Historical Statistics, Mitchell (1988)
5. A.M Prichard, Easements and Profits as Overriding Interests, 51 Conv (197) p328
6. Law Com. No. 188, Transfer of Land: Overreaching: Beneficiaries in Occupation (1989) para 4.3 – 4.19
7. LRA 2002, Explanatory Notes, para.10
8. Hansard HL, March 19th 1998

Cheshire & Burns, Modern Law of Real Property

Also included the Land Charges Act 1925, Land Registration Act 1925, Settled Land Act 1925, Trustee Act 1925 and the Administration of Estates Act 1925

Birkenhead, Points of View, Volume ii, p 34

Nigel P. Gravells, Land Law, Texts and Materials, 3rd Edition, Sweet & Maxwell

Jean Howell, Deeds Registration in England: A Complete Failure? Cambridge Law Journal

Per Lord Scarman, Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 at 511

Dowson and Sheppard, Land Registration, 2nd edition 1956, p11, Per Lord Westbury LC

Fee tail and life estates were abolished by the act

1. Henderson, Land Law 5th Edition, Sweet & Maxwell, 1988, p 28

Simpson, A history of the Land Law, pp. 270

Jackson, Conveyancer and Property Lawyer, Overreaching and unauthorised disposition of registered land, 2007

S2(1) “conveyance to a purchaser of a legal estate in land shall overreach any equitable interest or

power affecting that estate, whether or not he has notice thereof” [providing certain conditions are met]

Or a trust corporation Sparks, A New Land Law, Hart Publishing, 2003

City of London Building Society v Flegg [1987] 3 ALL ER 435

Aside from interests of a commercial nature (such as estate contracts, restrictive covenants etc as opposed to family interests; there is a distinction but it is not mentioned explicitly in the act

City of London Building Society v Flegg [1987] 3 ALL ER 435

A.J. Oakley, Megarry’s Manual of the Law of Real Property, 8th Edition, Sweet & Maxwell, p 84

Notice has been replaced by registration insofar as commercial interests in land are concerned

State Bank of India v Sood [1997] Ch 276 at 281 per Gibson LJ Op. Cit 4, p118

Law Com. No. 188, Transfer of Land: Overreaching: Beneficiaries in Occupation (1989) para 4.3 – 4.19

Hansard HL, March 19th 1998

Harpum [1990] C.L.J. 227

British Historical Statistics, Mitchell (1988)

Keeton and Sheridan, the Law of Trusts, 10th Edition, 1974 p41

Law of Property Act 1925 s53(1)(b)

Law of Property Act 1925 s53(2)

Law of Property Act 1925 ss34 & 36

Op. Cit. 13 Page 100

Its origins can be traced back to the Land Registry Act 1862

Which repealed the Land Registration Act 1925

Op. Cit 9, p111

LRA 2002, Explanatory Notes, para.10

Land Registration Act 2002 s27

Ibid, s32(1) & s40(1)

Law of Property Act 1925 s198

Land Registration Act 2002 ss.11, 12, 29 & 30 and Sched. 1 & 3

Which repealed the Land Charges Act 1925

Law of Property Act 1925 s199

Midland Bank Trust Co Ltd v Green [1981] AC 513:

Legal interests in unregistered land are binding against the whole world and equitable interests in unregistered land are binding against the whole world except the bona fide purchaser for value without notice

Either actual (purchaser aware), constructive (purchaser should have been aware) or imputed (purchasers agent had actual or constructive notice) notice is required for equitable interests to be binding on a purchaser.

Martin Dixon, Principles of Land Law, 4th edition, Cavendish Publishing p 25

Deveral Capps, Conveyancing in the 21st century: an outline of electronic conveyancing and electronic signatures, Conveyancer and Property Lawyer 2002

Roger Smith, Conveyancer & Property Lawyer 1987, Land Registration Reform, the Law Commission’s Proposals

Williams & Glyn’s Bank v Boland [1981] AC 487

Which has been interpreted widely by the courts Chhokar v Chhokar [1984] FLR 313, see also Lloyds Bank Plc v Rosset [1989] Ch 350

Kings North Trust Ltd v Tizard [1986] 2 ALL ER 54

“If the person with the interest is asked … and he or she fails to disclose the interest when that could reasonably have been expected… [or if] a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition[overriding status is lost]”

Celsteel Ltd v Alton House Holdings Lts & Another [1985] 2 ALL ER 562

A.M Prichard, Easements and Profits as Overriding Interests, 51 Conv (197) p328

Pettitt v Pettitt [1969] 2 W.L.R. 966

Op. Cit 23 p 36.

Schedules 1 & 3 of the Land Registration Act 2002

Op. Cit 9