Joshua Griffin discusses the Government’s response to the Law Commission’s project on Updating the Land Registration Act 2002.
On 24 July 2018, the Law Commission published its Report, Updating the Land Registration Act 2002 (Law Com No 380) which made 53 recommendations for reform covering a broad range of discrete issues, along with a draft Bill which would implement those recommendations.
Almost three years later, the Government published its full response on 25 March 2021. Overall, the response was positive, with the Government accepting a total of 40 of the Law Commission’s recommendations. It rejected 3 recommendations outright and concluded that it needed to consider the remaining 10 recommendations further.
This article shall summarise the recommendations that were accepted by Government, since they are therefore likely to become law at some point. However, it is not clear when these recommendations will be implemented; the fact that the Government will be considering 10 of the Law Commission’s recommendations further suggests that this will, unfortunately, be later rather than sooner.
The introduction of a new statutory duty of care on conveyancers
This recommendation is to introduce a new statutory duty of care on conveyancers to verify the identity of their clients. The aim of this recommendation is to reduce registered title fraud. This type of fraud occurs when a fraudster impersonates the owner of registered land, and purports to sell that land to an innocent purchaser.
Of course, conveyancers are already under legal and professional obligations to verify their client’s identity. The current regimes of identity checks are not uniform in their application, however, and are not aimed at tackling emerging types of identity fraud.
The new statutory duty of care would be clear and limited in its scope. HMLR would, following consultation, set out the steps that must be taken to verify a client’s identity and, importantly, would have the power to update those steps to tackle emerging identity fraud. A conveyancer who followed those specified steps would discharge their duty, even if fraud were to occur. HMLR would only have a right of recourse against the small minority of conveyancers who did not follow the required steps to verify their client’s identity.
The Government’s response indicates an intention to widen this duty beyond conveyancers to include individuals acting without a conveyancer. The extent to which registered title fraud occurs in ‘DIY conveyancing’ is not clear, but it seems sensible to extend the statutory provision so that HMLR can impose such a duty if such a problem does arise. A balance will need to be struck between ensuring that the rules applicable to such individuals are stringent enough to reduce fraud without being so onerous as to suppress ‘DIY conveyancing’.
Facilitating electronic conveyancing
The LRA 2002 provides for the introduction of electronic conveyancing. Although some progress has been made towards making it a reality, the manner in which the LRA 2002 is drafted hinders the incremental development of electronic conveyancing.
In particular, section 93 of the LRA 2002, which contains provisions for making electronic conveyancing mandatory, only applies to electronic conveyancing involving simultaneous exchange and completion. Although simultaneous exchange and completion remains a worthwhile goal, it has yet to be developed. Against this, there is likely to be significant advantages to making other forms of conveyancing mandatory at some point in the future, as an interim measure. The Government accepted the Law Commission’s recommendation to introduce a new section 92A of the LRA 2002 to allow for this.
Similarly, it was envisaged that mandatory electronic conveyancing could be introduced in stages by means of land registration rules made by the Secretary of State with the advice and assistance of the Rule Committee. The rules-making process was less flexible than anticipated, with it taking more than a year for rules to be enacted in some cases. As such, the Law Commission recommend introducing a power to make secondary legislation that delegates to HMLR, following consultation, the power to set the timetable for mandatory electronic conveyancing. The Government accepted this recommendation, albeit on the caveat that it “will wish to consider the appropriate legislative mechanism…at the time of implementation”.
Rationalising the jurisdiction of the First-tier Tribunal
The First-tier Tribunal has the jurisdiction to decide applications that are referred to it under section 73(7) of the LRA 2002.
Under the current law, there are some irregularities as to the First-tier Tribunal’s jurisdiction in these cases. In particular:
- The Tribunal may determine whether a party has a beneficial interest in land, but it is unclear whether it has the power to declare the extent of that interest.
- The Tribunal may determine whether a party has an equity by estoppel, but it is unclear whether it has the power to determine how it is to be satisfied.
- The Tribunal may direct the registrar to reflect the exact line of the boundary in the register, but it is not clear whether it can do so where the boundary is substantially or wholly different to that on the applicant’s plan.
The Government accepted the Law Commission’s recommendation to rationalise these irregularities by giving the First-tier Tribunal the express statutory power to decide whether a boundary lies, and the express statutory jurisdiction to determine how an equity estoppel should be satisfied and to declare the extent of a beneficial interest in land.
Simplifying easements benefitting short leases
In general, the same formality requirements apply to the grant of a lease and an easement: the grant must be made by deed and completed by registration. For leases, this is subject to two exceptions:
- Short leases, granted for a term of seven years or less, do not need to be registered and, indeed, cannot have their own register of title.
- Parol leases, granted for a term of three years or less at market rent with no additional premium, need not be made in writing (deed or otherwise).
The same exceptions do not apply, however, to easements benefitting short leases. For example, an easement granted in the same deed as a short lease will need to be registered even though the lease itself does not. The result is that such easements only take effect in equity and are therefore not capable of being overriding interest.
The Government accepted the Law Commission’s recommendations to remove the registration requirements for easements benefitting short leases and to allow equitable easements benefitting parol leases to qualify as overriding interests.
At first blush, this may seem like a technical issue rather than one of much practical importance. The practical implications of the current law, however, are revealed by the Law Commission’s Impact Assessment, which shows that 5,900 easements benefitting short leases were registered between October 2016 and September 2017. The Impact Assessment estimates that a total annual cost saving of £450,000 would be achieved if its recommendations reduced the number of applications to register easements benefitting short leases by 70%.
Summary of other recommendations
The majority of the other recommendations accepted by the Government were more in the nature of technical tweaks to the LRA 2002 and are summarised below:
- Extending compulsory first registration to discontinuous leases and allowing them to be noted on the register;
- Introducing priority rules to apply to unregistered land once compulsory registration has been triggered but before the application for first registration has been made;
- Clarifying that a person with a derivative interest under a trust may apply for a caution against first registration;
- Restricting applications for unilateral notices in respect formerly overriding interests where there has been a registered disposition since 2013;
- Introducing a power to create rules to restrict the types of contractual obligations that can be protected by restriction and how they can be so protected;
- Amending the land registration rules to permit non-dispositive lease variations to be recorded in the register;
- Clarifying the operation of restrictions in relation to charging orders;
- Allowing for the identity of the beneficiaries of agreed notices to be recorded on the register;
- Clarifying that the scope of owners’ powers’ provisions to ensure the validity of the title of the disponee;
- Clarifying the extent of owners’ powers in relation to registered charges;
- Revising the definition of valuable consideration to include nominal consideration in money save in relation to insolvency;
- Clarifying that the ability of a person to seek alteration or rectification of the register is not capable of being a property right;
- Clarifying the limitation period and the valuation principles applicable to indemnities;
- Permitting the beneficiary of a trust of a registered charge to make further advances which rank in priority to subsequent charges; and
- Rationalising the rules on adverse possession in relation to registered land.