PROPERTY LAW

LECTURE: WEEK 3 & 4

READING MATERIAL:
SUBJECT GUIDE: CHAPTER 2
MARTIN DIXON: CHAPTER 3
 UNREGISTERED LAND

At present, two systems of land conveyancing are in operation in

England and Wales, the unregistered and the registered system,
albeit that the unregistered system is becoming rarer and rarer.
The fundamental distinction, therefore, that every student of
property law must draw since 1st January 1926 is between the
two systems of land.
The system of registered land is governed by the Law of Property
Act 1925, the common law and the Land Registration Act 2002.

Unregistered land is governed by the Law of Property Act 1925,

common law and the Land Charges Act 1972. Most important of
all, the two systems are mutually exclusive. This means that land
falls into one system or the other, but never both at the same
time.
 When title to land is not registered, it is known as unregistered
land. Since there is no record which contains a definitive account
of the owner or of the different estates and interests which exist
on a piece of land, the purchaser of any interest or estate in
unregistered land must satisfy himself on two accounts before
entering into any transaction:

I. That the vendor is in fact the actual owner of the title to

property and
2. The property is free from any third party rights.
 TITLES IN UNREGISTERED LAND

To determine true ownership in unregistered land, the purchaser

must investigate and examine the relevant title deeds stretching
back over a period of at least 15 years. This 15 year requirement,
laid out by s 23 of the Law of Property Act 1969, has been kept
as it is believed that the purchaser will generally be able to
discover most of the proprietary estates, interests and charges
affecting his vendor’s land by examining documents stretching
back over this period.
Where the purchaser, in the process of this exploration, finds the
good root of title i.e. an unbroken chain of dealings leading to his
vendor, the purchaser may safely complete the transaction by
paying over the money and taking the conveyance of the
unregistered estate.
 ENFORCEABILITY OF THIRD PARTY RIGHTS

As for the second requirement, determining any third party rights

in unregistered land, there were two basic principles that existed
before 1925.
I. All legal interests in land were binding on the world. The third
parties legal rights would automatically take priority over the
purchaser of the land.
2. Equitable rights were binding on all persons except a bona fide
purchaser of a legal estate for value without notice of such
equitable rights: the doctrine of notice. Thus where the doctrine
of notice applied, the purchaser took free of the third parties
rights.
 The doctrine of notice came in time to be appreciated as being
uncertain and capricious in its operation. It was a source of
problem both for the holder of the equitable interest and the
purchaser of the land as it allowed the vendor or owner of the
property to exercise fraud with the view to defeat the third party
right.
One of the primary and most important aims of the 1925 reforms
was to bring certainty and stability to the status of third party
rights in land. There are two reasons for his:
1. The potential purchaser of land needs to know with as
much certainty as possible whether any person has
enforceable rights over the land and the extent and nature
of those rights.
2. The owner of those rights needs to be sure that his or her
rights will be protected and remain enforceable if the land
over which they operate is sold or otherwise disposed of.
 With this aim in mind, the impact of equitable rights on
purchasers of unregistered land was reorganized by the legislation
that took effect on 1st January1926.
Equitable rights were divided into two categories:

REGISTRABLE RIGHTS OVERREACHABLE RIGHTS

 Registrable equitable rights are now governed by the
Land Charges Act 1972
(LCA 1925 has been abolished and superseded by the LCA
1972)

Overreachable equitable rights are now governed by the

Law of Property Act 1925
 REGISTRABLE EQUITABLE RIGHTS

Registrable equitable rights comprise those equitable rights

which require registration as land charges under the Land
Charges Act 1972 (LCA 1972). Land charges are defined in the
LCA and the majority of equitable rights over unregistered land
fall into this category including equitable easements, equitable
mortgages, equitable leases, restrictive covenants and estate
contracts.
In order to bind a purchaser of unregistered land, a land charge
must be registered in the appropriate way. Failure to register the
land charge when required renders the interest void against a
purchaser of land (s 4 LCA 1972).

This present structure leaves no room at all for the doctrine of

notice in respect of interests that qualify as land charges, for that
doctrine is replaced by the system of land charge registration.
Given that the majority of equitable rights in unregistered land
are land charges, this means that the doctrine of notice is almost
redundant as a feature of modern land law.
The registration of land charges has absolutely nothing to do with
registered land. It refers to an independent system under the
Land Charges Registry that operates only within the field of
unregistered conveyancing.
 The machinery of the LCA is straightforward. The owner of a
third party right which constitutes a land charge is required to
record or register his interest in the land charges register along
with the name of the estate owner. For example, if Steve Rogers
owns an equitable lease on land belonging to Tony Stark, the
lease must be entered on the register indicating that it is on Mr.
Starks land.
 When a person wishes to purchase unregistered land, he will
make a search of the land charges register to determine the
existence of any registered land charges. The name based system
means that the purchaser must make an official search against the
names of all previous estate owners revealed in the root of the
title in order to discover whether any charges have been
registered.

If a search is made in the proper manner – against the correct

name and in respect of the land described in the title deeds – an
official search certificate is issued and the purchaser may rely on
that as a conclusive document. A defective search cannot be
relied upon.
 The interests registrable as land charges are those equitable
rights that have an adverse effect on the value of the land or the
enjoyment of it. There are six classes of registrable land charges
that are defined in s 2 of the LCA 1972. If an interest falls
outside these classes, it is not registrable as a land charge. Of the
six classes, the most important ones are as follows:

1. Class C
2. Class D
3. Class F
 CLASS C

Class C is one of the most important classes of land charges. It

encompasses interests that can have a profound effect on the land
over which they exist. Most of them are rights that control the
owners use and enjoyment of the land and detract from its market
value. Class C is divided into four subclasses. The three
important ones are:

Class C(i) Class C(iii) Class C(iv)

Puisne mortgage General Equitable Estate Contracts
Charge
 PUISNE MORTGAGE: Class C(i)

This charge provides an unusual example of a legal interest which

is registrable under the LCA 1972.

This type of mortgage is a legal mortgage that is not protected by

a deposit of title deeds with the lender. It is usually a second legal
mortgage of the property, whereby the title deeds have already
been deposited with the first mortgagee. The puisne mortgagee
is unable to enjoy the security provided by being in control of
title deeds, and is thus offered the alternative security of being
able to register his mortgage as a land charge notwithstanding
that it is legal. If the puisne mortgagee registers his interest as a
class C(i) charge, it is binding on all purchasers of the land.
 GENERAL EQUITABLE CHARGE: Class C(iii)

This class includes all equitable charges which do not fall in any
other category for e.g. an equitable mortgage. It is not a
completely open-ended category as certain equitable rights are
specifically excluded from the category. The excluded rights that
cannot be entered are:
1. Interests of beneficiaries arising under a trust
2. And any charge secured by the deposit of documents
 ESTATE CONTRACTS: Class C(iv)

Estate contracts are enforceable agreements to convey a legal

estate in land. This class includes all equitable interests that are
equitable because of a failure to observe the proper formalities
that would have constituted them as legal rights. So equitable
leases are registrable as class C(iv) land charges as they result
from an enforceable contract to grant a legal lease as are equitable
mortgages. Other examples include contracts to sell such as an
option to purchase land and a right to pre-emption, also known as
a right of first refusal.
• OPTION TO PURCHASE: an option to purchase is a right to
buy another’s land within a fixed period of time. For example,
A, the owner of land, offers to sell his land to B. B is given six
months to accept or reject the offer. This forms an estate
contract in favour of B if the agreement is in an enforceable
contract under s 2 LP(MP)A 1989.

• RIGHT OF PRE-EMPTION: a right of pre-emption is a right

to be the first person to whom an offer for the purchase of land
is made. For example, A, the owner of land, promises B that if
A ever decided to sell his land, B will be the first to receive an
offer. This will give B the right to be the first one to accept or
refuse the offer. This forms an estate contract in favour of B if
the promise so made is in an enforceable contract under s 2
LP(MP)A 1989.
 CLASS D

Class D is divided into three sub-classes. The two important

ones are:

Class D(ii) Class D(iii)

Restrictive Covenants Equitable Easements
 RESTRICTIVE COVENANTS: Class D(ii)

This class comprises any restrictive covenants or agreements

which are restrictive of the user of the land made either on or
after 1st January 1926. The category does not include those
covenants or agreements made between landlord and tenant.
Thus those covenants made before 1st January1926 and those
made between landlord and tenant cannot be protected under the
system established by the LCA 1972. The two excluded rights
are not registrable rights.

How will an owner of these excluded rights protect such a right

against prospective purchasers of land?
 EQUITABLE EASEMENTS: Class D(iii)

This class consists of all equitable easements, rights, privileges

and profits which are created on or after 1st January 1926. This
category does not include easements by estoppel. They cannot be
protected by registration under the LCA 1972. Thus those
easements made before 1st January1926 and those easements
made by estoppel cannot be protected under the system
established by the LCA 1972. The two excluded rights are not
registrable rights.

How will an owner of these excluded rights protect such a right

against prospective purchasers of land?
 CLASS F
MATRIMONIAL HOME RIGHTS

This class consists of matrimonial home rights which are given to

the spouse/civil partner (who is not a co-owner of the house).
Protection of the right gives the spouse priority to occupy the
house as against any purchaser. Entry of such a right does not
convert the occupational right into a proprietary right. Rather, it
simply gives the occupation precedence over that of a subsequent
purchaser for social and policy reasons. The right is treated as
being equivalent to a proprietary right.

This entry is an unusual example of the law allowing priority to a

merely personal right on land.
 EFFECT OF REGISTRATION

Sec 198(1) LPA 1925

When a land charge is correctly registered, it is deemed to

constitute actual notice to the world. Whether the purchaser
actually knew about the right or the registration is irrelevant. It is
the fact of registration that makes the right binding on the
purchaser of land. The register of land charges is a public record
and open to all. Thus the purchaser can apply for a search
anytime without the prior consent of the owner.
A search certificate containing all the land charges on the estate
is communicated to the purchaser. The searcher is entitled to
depend upon its accuracy since s 10(4) of the LCA 1972 says
that such a certificate is conclusive. Thus if the certificate
mistakenly fails to reveal a registered charge the purchaser will
take free of the charge, leaving the owner of the charge free to
sue the registrar personally for negligence.
 EFFECT OF NON-REGISTRATION

S 199 LPA 1925

The general rule is that failure to register a land charge does not
affect its validity between the parties that created it. However,
failure to register a land charge destroys its validity against any
future purchasers of the land. For example, if P purchases A’s
land upon which B has a registrable, but unregistered land charge,
P will take free of B’s right even if P had notice or knowledge of
B’s right at the time of sale.
The precise effect of non-registration of a registrable land charge
depends on the class the charge falls under.
• C(i), C(iii) and F: by virtue of ss 4(2), (5) and (8) LCA 1972,
the precise rule applicable to these land charges is that if these
charges are not registered, any purchaser giving valuable
consideration will take the property free of charge. Valuable
consideration can be money, money’s worth or marriage
consideration.

• C(iv), D(ii) and D(iii); s 4(6) LCA 1972 provides that if any of
these land charges are not registered, any purchaser of a legal
estate for money or money’s worth will take free of the charge.
 HOLLINGTON BROS V RHODES

L made a contract to lease his property to T. T’s lease should

have been registered as a C(iv) charge under the LCA. T failed to
register it. L sold his land to P.

L P

T
P was able to show that (1) he was a purchaser and (2) he
purchased a legal estate from L. P was free of the tenants lease i.e.
it was not enforceable against P.
 MIDLAND BANK TRUST CO V GREEN

V gave his son B an option to purchase V’s farm. B’s estate

contract should have been registered as a C(iv) charge under the
LCA. B failed to register it. V sold his land, which was worth
£40,000 for a mere £500 to his wife P, with the express
intention of defeating his son’s estate contract.

V P

B
 The mother and son fell into a dispute over the enforceability of
the option. The matter reached the House of Lords with three
points for consideration:

1. Was the option to purchase void against the mother (P) for non-
registration?
2. Was her consideration of £500 money or money’s worth?
3. Did it matter that she had actual knowledge or notice of the
son’s option?
 Lord Wilberforce explained the position as follows;

1. According to s 199 of the LPA 1925, any registrable land

charge that is not correctly registered under the relevant class is
void against subsequent purchasers of the legal estate.
2. Despite the views of Lord Denning, it was held that the court,
in accordance with the general laws of contract, could not question
the adequacy of consideration. Thus the consideration simply had
to be sufficient. The court emphasised however, that nominal
consideration would not be considered sufficient. The court
considered £1 as nominal consideration.
3. Only the state of the register is important after the LCA. The
state of mind of the purchaser and her knowledge of any third party
interests on land is irrelevant.
 Thus, as P was able to show that;

(1) she was a purchaser giving money or money’s worth and

(2) she purchased a legal estate from V,

she was free of the son’s registrable but unregistered estate

contract i.e. it was not enforceable against her.
 OVERREACHABLE EQUITABLE RIGHTS

The process of overreaching applies to protect the family or

private interests of beneficiaries behind a trust.
 WHAT IS A TRUST?

A trust arises when the documentary ownership (the legal

ownership) and the actual benefit of the property (the beneficial
or equitable ownership) belong to two different parties. A trust
can arise either at the behest of the owner of land or because the
law imposes a trust in that particular situation.

OWNERSHIP

LEGAL TITLE EQUITABLE TITLE

(TRUSTEE) (BENEFICIARY)
 A beneficiaries equitable interest is not a registrable interest. It
cannot be entered in the land charges register. This is because
the law intends for all beneficial interests to be removed from the
land upon a sale to the purchaser.

In order to remove a beneficiaries interest from the land, the

purchaser can comply with the process known as overreaching.
A purchaser can remove or overreach a beneficiaries interest by
complying with the procedure laid out in s 2 of LPA 1925. This
provides that the equitable interests of a beneficiary can be
removed or overreached from the land if the purchaser pays the
capital money arising out of the sale to two trustees.

Once the purchaser has removed or overreached the beneficiary’s

interest from the land, the purchaser takes free of the
beneficiary’s interest. Meaning that the beneficiary’s interest is
not enforceable against the purchaser or in other words the
purchaser is not bound by the beneficiary’s interest.
 What happens to the beneficiary’s interest after the purchaser
has removed or overreached it from the land?

The equitable interest of the beneficiary shifts from the land to

the money received by the trustee.

The legal owner of the property was first a trustee of land. The
object being held on trust was land. Where overreaching takes
place, the beneficial interest transfers to the money that the
trustee has received from the purchaser. The object of the trust is
now that money.
 Overreaching protects the purchaser from any equitable third
party rights on land. It gives him land that has no beneficial right
on it.

It protects the beneficiary such that the trustee now holds the
money he has received from the sale on trust for the beneficiary.
So for example, if the trustee now decides to buy another house
or any other asset with the money received from the sale, that
house or asset will also be held on trust for the beneficiary.
The requirement of two trustees under s 2 LPA 1925 means that
if capital money is not paid, or if it is paid to only one trustee, the
beneficial interest is not removed or overreached and remains on
the land.

So, where the purchaser buys the land without complying with
the process of overreaching, the beneficiary’s right remains on
land and therefore a dispute as to enforceability can arise
between the purchaser and the beneficiary.

How is such a dispute to be resolved? The 1925 legislation is

silent on the matter.
The 1925 legislation is silent as to the rule of law applicable to
certain equitable rights in unregistered land. You will recall:

1) Restrictive covenants and easements made before 1st

January 1926 and easements made by estoppel cannot be
entered on the register and there is no alternate provision
under the LCA which determines how they should be
protected or enforced against purchasers of land.

2) If a purchaser buys land where a beneficiary has an interest

that has not been overreached, the LPA does not indicate
how to resolve the matter of priority between the purchaser
and the beneficiary.
 These equitable interests are thus by default regulated by the
rule of law that governed equitable rights on land before 1925 i.e.
the doctrine of notice. The assumption is that if the 1925
legislation did not include them, then logically, that means that
the new law does not apply to these residual rights.
 DOCTRINE OF NOTICE

(1) The purchaser must be bona fide. This means that the
purchaser must act in good faith. Smith in his book “Property
Law” suggests that “perhaps the purchase of land for some
improper purpose would prevent the defense of being a bona fide
purchaser from being raised”

(2) The purchaser must buy a legal interest. The general principle
reflected in land law is that “where equities are equal, the first in
time prevails”. Thus where the purchaser buys an equitable
interest in land, the law will apply this maxim and the purchaser’s
equitable interest will be invalid against the first equity. However,
a legal interest has a higher status and greater strength in law.
 (3) The purchaser must give value. This includes “money,
money’s worth and marriage consideration.” Thus the recipient
of property by gift takes the property subject to the equitable
rights which exist even if he is not aware of their existence.

(4) The purchaser must not have notice of the equitable interest.
Notice can be of three kinds. The purchaser must show that he
did not have any type of notice of the equitable interest.
(a) ACTUAL NOTICE: this is where the purchaser has actual
knowledge of the equitable interest. It is immaterial from where
the purchaser obtains his information. He need not obtain it from
a particular source. He may even discover the truth from an
absolute stranger (Lloyd v Banks).
(b) CONSTRUCTIVE NOTICE: when the notice rule was first
created by the courts of equity, clever purchasers soon realized
that they could obtain an advantage if they declined to make any
investigations which might lead to the discovery of equitable
interests. Equity was quick to extend the meaning of notice to
prevent the purchasers deliberately turning a blind eye in this way.
A purchaser would be deemed to know of the interests which they
would have discovered if they had made the usual searches of the
land. The purchaser is thus fixed with constructive notice of all
those matters which a reasonable and prudent purchaser advised
by a competent lawyer would reasonably have inquired about
(Kingsnorth v Tizard).
(c) IMPUTED NOTICE: a purchaser is deemed to have notice of
any equitable interest if his agent has actual or constructive notice.
However this does not apply where the agent himself acts
fraudulently or deliberately conceals encumbrances from his
clients,
 If the purchaser succeeds in establishing all the foregoing
elements of the doctrine of notice, he has an absolute unqualified
and unanswerable defense against adverse equitable claims on
land. This defense is so complete that the mere fact of purchase
for value without notice has the effect of destroying the equitable
rights involved.