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«Property Law The Qualified Lawyers Transfer Scheme – QLTS Sample Material – Unregistered Land QLTS School Ltd. All Rights Reserved. Not for ...»

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Property Law

The Qualified Lawyers Transfer

Scheme – QLTS

Sample Material – Unregistered Land

QLTS School Ltd. All Rights Reserved. Not for Distribution

UNREGISTERED LAND

This chapter looks at the seller’s obligation to show a good title to the property and how

this is done in the case of unregistered title.

8.1 DEDUCTION OF TITLE

This is the traditional system, under which the seller must “deduce his title”, i.e. he must

furnish to the buyer – at the seller’s own expense – documentary evidence as to his good title to the property, by supplying copies of the title deeds (which are documents showing ownership, rights, obligations or mortgages on the property) accompanied by an “epitome” or list giving, in chronological order, the date, parties and nature of each document in respect of which a photocopy is supplied. These deeds will take the form of all those documents by which the seller and his predecessors in title have acquired the estate.

From this collection of deeds, an unbroken chain of transmission of the seller’s estate will need to be shown, from one owner to the next, in the form of past conveyances and other documents attesting to the previous ownership of the land, culminating in the conveyance to the current seller. At least 15 years’ undisputed ownership, before the present sale/purchase transaction (i.e. at the date on which contracts are exchanged), must be proven. Once the transaction is completed and the purchase price paid, the seller then hands over the title deeds to the buyer.

8.2 GOOD ROOT OF TITLE In order to deduce title, one needs to start with a “good root of title”. This is a document which deals with both the legal and beneficial interest in the property being conveyed and which contains nothing to cast any doubts on the validity of the seller’s title. Normally, a conveyance which evidences a sale or a legal mortgage will be sought, because it can be presumed that the purchaser (or legal mortgagee) in that transaction himself investigated the title for the necessary period, and the fact that he took the conveyance or agreed to lend money on a mortgage indicates that he found no defect. Voluntary conveyances or specific assents will also suffice as a good root, although the drawback, here, is that no QLTS School Ltd. All Rights Reserved. Not for Distribution H8-2 PROPERTY LAW – SAMPLE MATERIAL – UNREGISTERED LAND money has actually changed hands, and it cannot be assumed, therefore, that the title has been checked out1.

If the property has not been sold for many years, the root of title could be much longer than 15 years old; for example if it was simply passed down by succession within the same family. This process must be repeated every time the land is sold. Furthermore, there is no guarantee that no-one else will show a better claim to the land, on the grounds that his rights were usurped by the current owners, or there are defects in the title deeds.

If a “short root” is accepted, the buyer runs the risk that he may find himself bound by encumbrances which predate the root and which he is unable to discover or investigate. It would also reduce his chances of being registered with absolute title on the Land Register.

Description of the property A good root of title will also contain a description by which the property can be identified.

For example:

“That the Seller as beneficial owner hereby conveys unto the Purchasers ALL THAT piece of land situated at Sandhill Drive, Leeds, more particularly described in a Conveyance dated 21 July 1970 made between Tony Brookes (1) and Maureen Brookes (2) WITH THE BENEFIT of a right of way with or without vehicles over the land shown hatched blue on the plan annexed hereto”.

A conveyance which does not contain a full description of the property may not be a good root of title.

8.3 PRE-ROOT TITLE LPA 1925 prevents the buyer from requiring the production of a copy or

Abstract

of any deed, will, or other document which forms part of the pre-root title. Nor can the buyer raise any requisitions or objection to such documents. Where, within the statutory chain of title, the buyer comes across a recital referring to a pre-root document, the buyer must assume that the recitals are correct and that each document was duly executed.

However, the buyer is entitled to require the production of an abstract or copy, and

requisitions can be raised on the following pre-root documents:

• a pre-root power of attorney, under which any abstracted document was executed (the buyer will need to check that the power was of the correct type and that it actually authorised the transaction);

Albeit that the older such documents are, the less of a risk there will be of anyone else being able to prove a better title to the property.

–  –  –

• any matter of obligation which affects the property and which appears on the abstract and may have survived the root of title (e.g. pre-root restrictive covenants, leases or easements);

• where the property is described by reference to a plan in a pre-root document, the buyer is entitled to see the plan.

8.4 DOCUMENTS OF POST-ROOT TITLE Once a good root of title has been shown, the seller must abstract and produce copies of





every deed, after the root which has affected the property, i.e.:

 conveyances on sale;

 legal mortgages affecting the property;

 receipts on legal mortgages (these prove that the mortgage has been properly paid off );

 transfers (“assents”) by personal representatives of a deceased landowner to the person entitled under his will or intestacy;

 grants of probate (confirming the right of the executor under a will to deal with the property) and letters of administration (which vest the legal estate in the estate administrators);

 deeds of gift (however, voluntary dispositions may be overturned by the court, if the donor becomes bankrupt within five years of the gift);

 trust deeds2;

 leases which still affect the property, including those leases which have been expired before their time, e.g. by forfeiture or surrender, to enable the buyer to check that they have been properly killed off;

 court orders which affect the ownership of the property, e.g. an order appointing a trustee in bankruptcy who acquires title to the legal estate, as well as (retrospectively) to the act of bankruptcy;

 powers of attorney, under which any abstracted document has been executed (the buyer must ensure that the power has been validly granted and not been revoked).

Certain documents should not be abstracted. These include:

 those deeds affecting the equitable interests which will be overreached upon the sale (e.g. beneficial interests created under a deed of trust);

A trustee’s deed of appointment will double up as a conveyance of the trust property to the new trustee.

A trustee’s deed of retirement will similarly, automatically, transfer his interest in the legal estate to the continuing trustees.

–  –  –

 wills where the testator died after 1925 (only the grant of probate will enable a legal sale to be completed, while the beneficial entitlement under the will is a matter strictly between the PR and the beneficiary and of no concern, therefore, for the buyer); and  leases which have expired due to the effluxion of time.

Equitable mortgages, even though they have been discharged or will be paid off on completion, are not, in practice, abstracted, unless the mortgage is referred to in another abstracted document, or is registered as a land charge. By contrast, legal mortgages should always be abstracted, including those that have been discharged, in which case, the receipt is also abstracted.

Other matters which are covered by the principle of “caveat emptor” remain the buyer’s responsibility to check, e.g. local land charges, and need not be disclosed either.

Any entries in the Central Land Charges Register need not be abstracted (being a matter of public record which the buyer can easily obtain); however, as they affect the title, the buyer needs to be aware of any such entries, and the seller’s solicitor will disclose any certificates that he has on file to the buyer, as a matter of courtesy. Similarly, where there has been a death or marriage which affects the title, the buyer will request proof of this.

8.5 ENCUMBRANCES As mentioned in paragraph 8.2 above, certain encumbrances may be discovered during the buyer’s examination of the seller’s title. Indeed, the seller must show any documents which create encumbrances independently of the above deeds, e.g. deeds of covenant, deeds of easement, leases or tenancy agreements which have not expired and which still, therefore, affect the property; and leases which have been surrendered or forfeited, before the end of their term (to enable the buyer to check that they have, in fact, been properly killed off ).

However, other enquiries and inspections will also be required, before the exchange of contracts, to enable the buyer to take possession free of other rights of which he is unaware. Making such enquiries can be highly time-consuming and the 1925 legislation, therefore, introduced a system of registering certain encumbrances as land charges, thus enabling the purchaser to search the appropriate register. The search should be made against the names of the current and previous estate owners, not the property.

Other rights – notably those still governed by the general equitable doctrine of constructive notice – will continue not to bind a bone fide purchaser for value without notice, provided he can show that he has not discovered them.

Furthermore, in Midland Bank Trust Co Ltd v Green [1981] AC 513, it was held that the knowledge of the purchaser of the unregistered interest governed by LCA 1972 is irrelevant and will not bind him. The consideration paid by the purchaser should be valuable, although the court should not inquire as to what is adequate consideration.

QLTS School Ltd. All Rights Reserved. Not for Distribution PROPERTY LAW – SAMPLE MATERIAL – UNREGISTERED LAND H8-5 8.5.1 Interests Registrable Under the Land Charges Act 1972 Land charges are almost all equitable interests in land which are set out in LCA 1972.

To bind a purchaser, these interests need to be protected – against the name of the estate owner, at the time the charge is created – on the Central Land Charges Register3, at the Land Charges Registry, which is held on a computer in Plymouth. If they are not registered, before completion of a subsequent sale, they will be void against a purchaser of a

legal estate in the land. The main classes of land charge are as follows:

8.5.1.1 Class C(i) A so-called “puisne mortgage” – i.e. a mortgage which is not protected by the deposit of title deeds. In practice, this will be a second legal4 mortgage (because the first mortgagee will have taken the deeds away from the estate owner to prevent him dealing further with the property). A mortgagee who does not take the deeds should, therefore, register his mortgage as a Class C(i) land charge against the mortgagor.

8.5.1.2 Class C(iii) General equitable charge – All equitable charges on property which are not specifically excluded by the Act itself from this class of land charge. It includes charges not protected by deposit of title deeds, e.g. an equitable mortgagee who does not have the title deeds to the property; an informal mortgage to the bank to secure a temporary loan; a charging order to secure a judgment debt; a seller’s lien on the land for an unpaid purchase price.

8.5.1.3 Class C(iv) Estate contract – Any contract to create a legal estate in land or any option to purchase a legal estate. It includes a contract to convey the legal estate in land (this will give the buyer an equitable interest in the house, before completion of the sale, at which point the buyer will become the legal owner of the property as well); a contract to create a lease (an equitable lease); an option to take or to renew a lease; an option to purchase the fee simple.

The Central Land Charges Department actually keeps five separate registers under LCA 1972, of which the most important are: (a) the land charges register; and (b) the register of writs and orders affecting land (which will reveal whether any bankruptcy orders have been, or are in the process of being made against, the sellers).

Unlike most other land charges which are equitable or statutory interests.

–  –  –

8.5.1.4 Class D(i) HMRC charge – This is a charge in favour of HMRC where a liability to pay inheritance tax in respect of land has not been discharged.

8.5.1.5 Class D(ii) Restrictive covenants – Any covenants or agreements which are restrictive of the person using the land and which were created after the 1st of January 1926, other than those made between a landlord and a tenant, e.g. a covenant not to keep pigs on a particular property.

8.5.1.6 Class D(iii) Equitable easements – Any easements, rights or privileges affecting land which were created after the 1st of January 1926, and which are equitable only. By contrast, legal easements are not registrable as land charges.

8.5.1.7 Class F “Matrimonial home rights” – Registration under this head confers on a spouse who is not a co-owner of the matrimonial home (and whose right does not, therefore, appear on the legal title) the right to occupy the matrimonial home5. Where the right is protected in this manner, it will bind anyone who acquires the legal estate in the property.

[Note: The Land Charges Registry registers third party interests (encumbrances) on unregistered land; it has nothing to do with HM Land Registry which registers title to registered land!].

8.5.2 Legal and Equitable Interests Not Registrable as Land Charges It is clear that there are many other third party rights to unregistered land which do not fall into any of the above classes of land charge. These include: legal and equitable mortgages which are protected by a deposit of the title deeds; the rights of beneficiaries under a trust of land; and rights created before January 1926.



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