Proposed amendments to Land Registration Act 2002: A practical insightPrint publication
In April 2016 Walker Morris considered the Law Commission’s Consultation Paper which detailed proposed amendments to the Land Registration Act 2002 (the Act). Following an extensive review with industry professionals, a draft bill seeking to implement a wide range of amendments has now been placed before Parliament. Walker Morris’ Louise Power reviews some of the most significant and interesting changes.
Context: Combatting fraud
It has been almost 15 years since the implementation of the Act and in that time significant economic fluctuations have contributed to a notable increase in property related fraud. The need for legal clarity and certainty in property transactions has never been greater and it is clear that the Land Registry must keep one step ahead of the game to minimise the impact from any future economic turbulence.
Whilst it is widely agreed that the operation of the Act has been a success, the fact remains that in the last decade alone HM Land Registry has had to pay out almost £60 million in indemnity claims. It is therefore no surprise that that Law Commission’s recent review has focussed primarily on the Land Registry’s guarantee of title, rectification of the register, protection of interests and the prevention of fraud.
Guarantee of title and rectification of interests
The purpose of the Land Registry is to provide a guarantee of title. There must be certainty that what is on the register is correct. With this is mind it has been recommended that the register cannot be rectified to correct a mistake if over 10 years have passed since that mistake occurred. This new time limit will not apply if the registered proprietor caused, or contributed to, the mistake by fraud or by lack of proper care or if the former registered proprietor remains in possession of the land.
Protection of interests
Ensuring that the interests of a third party are fairly balanced against the interests of a registered proprietor remains a challenge. A unilateral notice is used by a third party, commonly a lender, to protect the priority of its interest against any subsequent registerable dispositions. A benefit of the unilateral notice, as proposed to an agreed notice, is that it can be registered without the consent of the registered proprietor.
There is currently no requirement for a third party to provide supporting evidence of the validity of its interest as part of an application to register a unilateral notice. All that is necessary is for the third party to show that its interest in one which can be protected by way of a unilateral notice. The Law Commission’s view is that this should remain the position with one notable exception: if a subsequent registerable disposition has occurred since the date of the creation of the third party interest, then the third party will now be required to provide evidence to show that its interest should still be afforded protection by way of notice.
The cancellation of the unilateral notice is the primary safeguard for the registered proprietor against spurious applications. The Law Commission recommends that if an application is made to cancel a unilateral notice then the beneficiary of the notice must produce, within 30 business days, supporting evidence to satisfy the registrar of the validity of the interest claimed. Furthermore the proposed procedure for the objection to cancel a unilateral notice will apply to unilateral notices registered before the implementation of these new procedures.
Prevention of fraud
The Act introduced measures to tackle identity fraud however, a recommendation has been made to increase the duty of care placed on conveyancers in respect of identity checks. Furthermore, and perhaps most importantly, a breach of a duty of care by a conveyancer may enable the Land Registry to recover any indemnity paid to the injured party from the conveyancer. It is also proposed that the Land Registry be given enhanced powers to enforce mandatory requirements, subject to further consultation, in respect of identity checks.
Other points to note
The Law Commission has suggested a total of 53 recommendations including;
- compulsory triggers for the registration of mines and minerals
- priority rules governing unregistered land to continue even after compulsory first registration has been triggered
- further clarification of owner’s powers
- limited powers for proprietors and mortgagees who have been registered by mistake
- an amendment to limitation period start dates
- that further powers be granted to the First Tier Tribunal in respect of boundary disputes
- an amendment to the rules on adverse possessions.
The aim of the Law Commission, by its own admission, was not to reformulate the Act. The purpose of this review has instead been to refine parts of the legislation in line with the ever changing economic climate. We welcome any amendments to the law which enhance the clarity and transparency of property transactions and, whilst improvements will no doubt be required in the future, these are proactive and promising proposals which will benefit individuals and the industry alike.