Land ownership in the UK
Land and property ownership involves both legal and beneficial ownership and other rights which should be protected. In England and Wales, two systems of land ownership currently exist: the registered land system and the unregistered land system.
The majority of land and property in the UK is now registered at HM Land Registry. All land which is currently unregistered will eventually become registered.For now, different rules apply to registered and unregistered land.
What is the difference between registered and unregistered land?
Unregistered land is land of which the legal ‘title’ (ie. ownership) is not formally registered with the Land Registry. Instead, evidence of the legal title and related legal interests are the title deeds and documents. There is also the Land Charges Register where specific interests or charges are registered.
The legal title to registered land is found at the Land Registry. The Land Registry maintains a state-guaranteed register that provides conclusive evidence of legal title and other interests affecting the property at any given time. This means that anyone who suffers loss as a result of a mistake on the Register will be entitled to be indemnified by the Land Registry for that loss.
How are third party legal rights protected?
Under the Land Registration Act 2002, third party interests affecting registered land are protected by the entry of a notice or restriction in the Register. Some interests can also be protected by way of cautions against dealings and inhibitions entered on the register. These mean the buyer of the land has actual notice of those interests.
How are third party legal rights protected?
As a general rule, all legal estates and legal interests in unregistered land automatically bind the land over which they exist. This means all subsequent owners and occupiers take (or occupy) the land subject to those legal rights– unless the land is released from a specific interest, such as a right of way.
The only exception is a legal mortgage over the land where the documents of title have not been deposited with the lender.
What are ‘land charges’?
Land charges are third party interests which are entered on a public register under the Land Charges Act 1972 (LCA 1972). The Land Charges Register has 5 registers, and the most common land charges are:
- Class C (i)Puisne Mortgage: a legal mortgage on the property which is not secured by a deposit of title documents
- C (iii) General Equitable Charges
- C(iv)Estate Contract: contracts to buy or sell the legal estate in unregistered land, for instance, at some period of time in the future – the benefit of which needs protecting
- D (ii)Restrictive Covenants: restrictions relating to the use of the property
- D (iii) Equitable easements: rights or privileges affecting the land which are created on or after the 1st January 1926, and which is equitable only (ie. not a legal estate)
- Class F Matrimonial Home Rights: the beneficial right of the property owner’s spouse to remain in the property (this right is also contained in section 30 of the Family Law Act 1966)
What is the effect of registration?
Under section 198 of the Law of Property Act 1925, the registration of an interest in the Land Charges Register amounts to ‘actual notice’ by all parties involved or connected to the property. Therefore, anyone who has actual notice, such as the buyer of the property, will be subject to the interests when the land is transferred.
If the interest is not registered, the interest may be void against subsequent owners. For example, any Class C(i), C(iii) and Class F interests capable of registration, but which have not been, are void against potential purchasers. Unregistered Class C(i), D(ii), and D(iii) interests are generally void against the purchaser of a legal estate for money or money’s worth.
What about residual interests?
A residual interest is an equitable interest which is neither registrable as a land charge nor capable of overreaching (overreaching takes place where the interests of third parties under a trust attach to the sale proceeds). The interest will be in the value of the property, not the property itself.
These residual interests are subject to the doctrine of notice, meaning that they legally bind the whole world except for the bona fide purchaser for value of the legal estate without notice of the equitable interest (known in law as ‘equity’s darling’).
A bona fide purchaser for value means an innocent purchaser who buys the property in good faith, and for value (which does not have to market value). ‘Without notice’ means without actual, constructive or implied notice of the interest. So, for instance, if the reasonable purchaser would have known of the existence of the residual interest, the purchase will take the property subject to it.