Unregistered land: Land charges

Nature of land charges

Land charges consist of those interests in land which are set out in LCA 1972 (which replaced LCA 1925). Only interests which are included on the list in the ACT are land charges. Interests which do appear on the list should be protected by registration on the Land Charges Register, which is one of the five different registers kept by the Land Charges Department (LCA 1971, s. 1).

Class of land charge

Land charges are divided by the 1972 Act into six classes (A to F) and certain of those classes are further subdivided.

Classes A and B

There are not particularly common. They consist of charges on land arising under statutory provisions.

Class C

This class is subdivided into four subclasses. Before considering these in detail it is important to note that rights of a type which fall within this class are registrable as land charges only if they were created on or after 1 January 1926 or, more unusually, if the right was created before that date but was itself transferred to some other holder at a later time.

  1. Class C (i), the puisne mortgage  The puisne mortgage is defined in LCA1972, s.2(4), as a legal mortgage which ‘is not secured by a deposit of documents relating to the legal estate affected.’ If the mortgagee does not take the deeds, the mortgage is a puisne mortgage and should be registered as a land charge.

  2. Class C( ii), Limited owner’s charge This is a land charge which arises when a tenant for life or statutory owner under the SLA 1925, or another person with a similar interest, has paid inheritance tax under the Inheritance Tax Act 1984. Such persons may have a right to charge the repayment of the tax against the land and that right is a land charge.

  3. Class C (iii), general equitable charge This class of land charge forms a kind of ‘dustbin’ category. Into this class fall all equitable charges on property which are not specifically excluded from Class (iii) by the Act itself. Charges excluded in this way, and therefore not registrable as land charges include:

  1. any charge which is secured by a deposit of documents relating to the legal estate affected;

  2. interests arising under trusts;

  3. any charge which falls into another class of land charge.

  1. Class C (iv), estate contract  An estate contract is any contract to convey or create a legal estate in land, or any option to purchase a legal estate or any right of pre-emption in respect of a legal estate. Thus in addition to contracts for the conveyance of a fee simple, and contracts for the grant or assignment of a lease, this class of land charges includes options to purchase the fee simple, and options contained in leases. Various statutes have added to this category of land charges: for example, the Landlord and Tenant (Covenants) Act 1995, s.20(6) provides that a request for an overriding lease may be registered under the LCA 1972 as if it were an estate contract.

Even where an option has been registered as a Class C (iv) land charge, it has been suggested that there is a need for further registration of an estate contract after notice has been given to exercise the option. However, it was held in Armstrong and Homes Ltd v Holmes [1993] 1 WLR 1482 that there is no need for further registration: the registration of the option gives sufficient warning to any other prospective purchaser of the estate, and any conveyance to such a purchaser will be subject to the estate contract which arises from the option.

Class D

Class D is divided into three subclasses.

  1. Class D (i), Inland Revenue charge This is a land charge which arises in favour of the Inland Revenue when a liability to pay inheritance tax in respect of land has not been discharged.

  2. Class D (ii), restrictive covenants This class comprises any covenants or agreements which are restrictive of the user of land. An example would be a covenant, entered into in 1940, not to keep pets on a particular property. The same covenant would not be a registrable land charge had it been created in 1920.

  3. Class D (iii), equitable easements This class consists of any easement, rights or privileges affecting land which were created on or after 1 January 1926, and which are equitable only. Equitable profits a prendre fall within this definition. It should be noted that legal easements or profits are not registrable as land charges.

Class E

These are very rare and consist of annuities created before 1926 and which are not registered on the register of annuities.

Class F

This class consists of ‘home rights’ which were first created by the matrimonial Homes Act 1967 and are now contained in the Family Law Act 1996 (as amended by the Civil Partnership Act 2004). These rights exist only in relation to couples who are legally married and to civil partners, and give a spouse or civil partner, who is not a co-owner of the matrimonial home, the right to occupy the home owned by the other spouse or civil partner.

All these classes of charge are important to a purchaser, who may find that the property which he is purchasing is less attractive or perhaps totally valueless to him because it is subject to a land charge.