The Land Registration Act 2002 came into force on 13 October 2003. Its purpose is to modernise land registration so that the register provides a complete and accurate reflection of the state of the title of the land at any given time. This will require additional land interests to be registered. The Act also pushes further the idea of an open register so that all information on it is publicly available. This note highlights the main changes.
Confidential information
One of the changes that has received much publicity is the ability of the public to view any lease, mortgage or deed that is registered at the Land Registry. This will apply to all documents registered after 13 October 2003. For pre-existing documents the rule will only apply after October 2005. Owners concerned that confidential information should not be open to public view may apply (in the case of pre-existing documents within the next two years) to blank out from public view any provisions in any document, which would prejudice their commercial interests if disclosed. A successful application will result in the document being designated an "exempt information document". If an application is made to receive a copy of such a document then the Land Registry will only provide the edited document, excluding the prejudicial information. It is possible for a third party to apply to see a full copy of the document but this would only be permitted if the registrar decides that the information is not prejudicial or that the public interest outweighs the prejudice. Property owners may, for example, want to keep information out of public view:
- in a shopping centre lease to an anchor tenant with special concessions and financial arrangements
- in a first letting on a new scheme where the rent or concessions may prejudice other letting prospects
- on a site assembly for a development where options are being negotiated individually
- where a clawback has been agreed in the event of future development
- where a series of rights of light releases are negotiated
- price information in pre-emption agreements.
Whilst there may be ways around the full disclosure of information normally found in registered documents, a commercial decision must be made as to whether the information is sufficiently prejudicial so as to warrant both the inconvenience of applying for an exemption and also the additional costs involved.
We consider there will be few instances where such applications are likely to be made.
A further consequence of this is likely to be the standardisation of leases, as prospective tenants will be able to see the leases granted to others in the same building.
Leases and plans
The Act requires that leases granted for seven years and over, or the assignment of any lease with more than seven years left to run, must be registered. This means that most business leases will require registration.
Where the original lease contains a plan that is not suitable for Land Registry purposes, or no plan at all, both landlord and tenant will have to agree a satisfactory plan in order for the lease to be registered, except where the whole of the landlord's title is being let.
It is likely that a high proportion of plans contained in leases granted before the Act will not be satisfactory. For example an approved plan must
- be drawn to and show its actual scale
- show its orientation
- not be reduced in scale
- show sufficient detail to be identified on the Ordnance Survey map
- identify different floor levels where appropriate.
A request for a licence to assign a lease may now be accompanied by a request to agree or prepare a new plan to accommodate the Land Registry. Landlords will have to approve any new plan and either sign the plan or signify that it correctly identifies the land described in the lease. Landlords may want tenants to pay their costs for doing so. Both landlords and tenants will need to take care that this arrangement does not amount to a surrender and re-grant of the lease; this should be achievable by a simple declaration in the document.
On new lettings plans which comply will need to be prepared. In complicated developments it might be wise to have the plans pre-approved by the Land Registry.
De-materialisation
Land and charge certificates are abolished and instead the Land Registry will provide, on completion of a registration, a title information document. This document in itself will have no value other than for information purposes. The Land Registry will not need the certificate to be produced before an application is made and both banks and lawyers will have to be extra careful to satisfy themselves as to the identity of buyers and sellers.
Similarly, documents lodged with the Land Registry will be destroyed, reliance to be placed on electronic copies. If originals are to be returned, this must be notified to the Land Registry at the time of the application.
Adverse possession
The Act will give better protection to the owners of registered land against claims from squatters. Those claiming title by adverse possession will be able to apply for registration after not less than ten years' occupation. The registered proprietor (and the proprietor of any registered charge) will be notified and will have an opportunity to object. If the registered owner does not object within 65 business days, he could lose his entitlement to the land and so it is vital to take the appropriate action. The registered proprietor will then have two years to take steps to remove the squatter from his land and if he fails to do so, the squatter can then make a further application. If the registered proprietor, having been given notice of the occupation of the squatter, fails to do anything within two years then the squatter will generally succeed in obtaining title by adverse possession.
Transitional arrangements apply over the next three years during which the existing twelve-year adverse possession rules will still apply.
Addresses for Service
Although the Land Registry no longer requires the lodgement of a certificate before amending the register, it will notify the proprietor of an application either before or after its completion. This could include adverse notices registered by third parties. Failure to act swiftly on receipt of a notice will mean that the registration will take substantive effect. It is therefore essential that both the registered proprietors of titles and charges should lodge and maintain their correct addresses with the Land Registry. The Land Registration Rules now allow up to three addresses to be given, one of which must include a postal address although this need not be in the United Kingdom. In addition to a postal address it is possible for a proprietor to give a DX and/or email address. Any notice will be sent to all addresses.
If an owner has a large portfolio of properties, the Land Registry will need to be informed of the change of address in respect of each title.
The period within which it is necessary to respond to a Land Registry notice is determined by its importance. For example, 15 business days to respond to a request to cancel a "unilateral notice" (which includes what were formally called "cautions") and 65 business days in relation to a squatter's application.
Prompt action is advisable, especially in relation to the registration of notices.
Overriding interests
Certain land interests override registration (for example, a tenant under a two year lease).
When buying or taking a lease of land we will be asking you detailed questions concerning unrecorded rights that may affect the land. These will cover interests of persons in actual occupation or which might be apparent on reasonable inspection. This is because the Act imposes a new duty on applicants to disclose overriding interests. The duty extends only to interests within the applicant's actual knowledge and does not include local land charges or public rights. (Note therefore that this will be a requirement from a purchaser of a property, when previously we would have not troubled a purchaser client with such queries). The Land Registry will note the unregistered rights against the title.
We will provide a detailed guidance note and questionnaire giving details of the rights and interests that will have to be disclosed. Please do not assume that we will have knowledge of all the interests that may affect the land. Your own information is needed for any application to register.
Easements
Easements have become more difficult to deal with under the new Act as a result of the desire to make the register as clear and as comprehensive as possible. Easements granted by deed out of registered titles need to be registered and this will be done automatically if they are contained in a registrable lease or transfer. If a landlord grants a tenant a lease of any length that includes an easement (for example a right of way) over any adjoining registered land, that easement will have to be registered even if the lease itself is too short to be registered (under seven years) or to be noted against the landlord's title (under three years). This could lead to a lengthy title, for example where a landlord grants a multitude of Christmas tenancies. Whilst there may be ways to avoid the need for registration, it is likely that the good management of a portfolio of properties will require a periodic "cleanse" of the registered title.
Rights of pre-emption
Be careful when negotiating any rights of pre-emption as the new Act provides that a right of pre-emption, even if informally granted, will be binding from the moment it is created and an innocent letter may be registered against the title and become difficult to remove.
For further information please contact Pranai Karia a partner in our real estate group on +44(0) 20 7367 2742 or pranai.karia@cms-cmck.com
