P.C.B.

2003, 3, 210-213 (Cite as: )

Page 1

P.C.B. 2003, 3, 210-213 Private Client Business 2003 The Land Registration Act 2002 Alison MacLennan 2011 Sweet & Maxwell and its Contributors Subject: Charities. Other Related Subject: Real property. Trusts Keywords: Charity trustees; Land registration; Limitations; Sale of land; Trustees powers and duties Legislation cited: Land Registration Act 2002 Charities Act 1960 s.26 *210 Charitable trustees need to understand the possible impact of the Act . The objective of the Land Registration Act 2002 (the Act) is to extend the land registration system whilst making the information on the register more accessible via electronic means. Electronic conveyancing is also to be introduced. Eventually it should be possible to state that the register is a complete and accurate reflection of the state of the title to the land at any one time. Title should thus be easier to investigate and deal with. The importance of an entry on the register will be increased and the importance of actual possession or occupation of the land is similarly decreased. The impact of the Act on charities Charity trustees ought to be aware of the main features of the Act some of which will affect the administration of the charity's land. There are five main features of the Act: 1. The circumstances giving rise to the requirement of compulsory registration are increased and voluntary registration is encouraged. 2. The type and number of overriding interests are reduced and some such as e.g. manorial rights will only subsist for 10 years after the coming into force of Schedules 1-3 to the Act. 3. A system for the introduction of electronic conveyancing is introduced and for some time there will be parallel systems of registration during the transition phase from paper based conveyancing to electronic. 4. The law on adverse possession is substantively altered and a procedure by which the adverse possessor can establish title is *211 instituted. There is a positive obligation on the adverse possessor to serve a notice on the registered owner. Once the matter has been adjudicated, the effect of adjudication is that the adverse possessor is entered on the register as owner. A successful claim to adverse possession now acts to confer title on the possessor rather than simply debar the right of the owner to enforce ownership rights against a squatter. 5. A new Office of the Adjudicator to Her Majesty's Land Registry is established to adjudicate disputes con-

2011 Thomson Reuters.

P.C.B. 2003, 3, 210-213 (Cite as: )

Page 2

cerning registered land. The Act concerns registration of unregistered legal estates in land, rentcharges, franchises, profits a prendre in gross or any other interest or charge which subsists either for the benefit of or the is a charge on an interest to the title which is registered. Other interests which can be created by a disposition of an interest the title to which is registered are also included in the scope of the Act. Registration Voluntary first registration of interests in land is encouraged and any person who has an estate vested in him or if he is entitled to require title to be vested in him may apply. Section 3 of the Act allows voluntary registration in general terms. The section is subject to exceptions, but the exceptions are circumstances where compulsory registration is required under s.4 of the Act. Any transfer of a qualifying estate will trigger the obligation to register under s.4 of the Act. Qualified estates are either unregistered freehold estates or a leasehold estate in land held for a term which at the time of transfer has more than seven years to run. A transfer can include a transfer for valuable consideration, or by way of gift, or pursuant to an order of the Court or by the creation of a protected first legal mortgage of a qualifying estate. The greatest impact of the registration requirements may well be on the granting of shorter term commercial leases. The current 21 year threshold is significantly reduced and many more leases will become registerable. Administratively, charities may like to consider the costs of registration and perhaps create express terms in any lease whereby the costs of first registration are to be met by the lessee. This may become economically efficient, as it is proposed that the fees for voluntary registration may be set at a lower level than in circumstances where registration is compulsory. Whilst the Act does not make registration mandatory (in the absence of a disposition), there is a general bias towards registration. Of particular importance to charities holding land are the provisions of ss.15 to 22. The owner of land is assumed to have a power to make a disposition of any kind permitted by the general law in relation to an interest of that description (other than a mortgage), and also the power to charge the estate at law with the *212 payment of money. Under s.24 a person is entitled to exercise the owners powers if he is the registered proprietor or entitled to be registered as proprietor. New powers? It may be thought or argued that these general sections confer powers on charity trustees in all circumstances. Trustees who might therefore be otherwise forbidden by the constitutution of the charity may assume that they now have a power of sale or to mortgage where none previously existed. This is not the case at all and any limitation on the trustees' powers in dealing with the land ought to be noted on the register. The onus is on the trustees to note where land forms part of permanent endowment or cannot be used or applied other than in furthering the charity's objects. Interestingly, the Trustees of Land and Appointment of Trustees Act 1996, s.6 similarly grants a general power on trustees of land, but s.6(7) provides that the general power there should not be exercised in contravention of any other enactment, rule of law or equity or in contravention of the an order of the Court or Charity Commissioners. This Act thus recognises implicitly that charity trustees cannot simply be granted an unfettered right to dispose of charity land. The same acknowledgement is missing in the Land Registration Act 2002. If there is no limitation which is registered or otherwise imposed by the Land Registration Act 2002, a third party purchaser will take the

2011 Thomson Reuters.

P.C.B. 2003, 3, 210-213 (Cite as: )

Page 3

estate free of any such limitation which could affect the validity of the disposition. It is only the third party purchaser who is to be regarded as released from an unregistered limitation on the disposition of charity land. A trustee who transfers land which was subject to a limitation which was not registered, will be personally liable for any loss resulting from a breach of trust. The need to approach the Charity Commission for authority in the form of an order under s.26 of the Charities Act 1960 still exists. Similarly constitutional changes granting increased powers to dispose of charity land will also continue to require Charity Commission consent or the making of a scheme. Protection of trustees The protection of trustees in circumstances where a charity owns land and the trustees' powers are limited is to be by notice or restriction. Cautions against dealings and inhibitions are to be abolished. A restriction would be the most appropriate form of ensuring a wide range of limitations affecting trustees powers are protected. Any person may apply for a restriction to be registered. After receiving notice of the restriction trustees may apply to the Registrar to have the restriction removed if such restriction is unjustified. The ability to apply for such a restriction is, however, subject to the provisions of s.77 of the Act. *213 Generally any person lodging a caution, applying for a restriction or objecting to registration must not exercise their rights without reasonable cause. This section is intended to impose a duty on objectors to those who may suffer damage in consequence of its breach. In other words, if an objector does not have reasonable grounds to object and the charity is caused loss (such as the lost value in property), the objector may have to compensate the charity if it is found that he acted unreasonably. The new procedure and rules in the Act apply only to registered estates. The provisions of the Limitation Act 1980, s.15 are disapplied in the case of registered titles. It will be significantly easier to protect against claims for adverse possession if an estate is registered. If the estate is registered, the adverse possessor must notify the owner of his occupation of the land; once it has been determined who is the owner of the land, the owner is obliged to take positive action to regain possession of the land. If an estate is unregistered, the Limitation Act 1980 continues to apply. Trustees might be advised that if there is a perceived danger of adverse possessors in charity property voluntary registration of the charity's interest would be advisable. Conclusion The Land Registration Act 2002 will have a great impact on many aspects of the transfer and holding of estates in land and charities will be affected to the same extent as all owners. I have attempted only to highlight areas of specific concern to charities, as a full treatment of the Act is impossible in an article. In my view the general power to dispose of estates in land creates a risk that charity trustees may assume that any limitations under which they operate have been swept away. This is not the case and Charity Commission consent for a scheme will still be required in some cases. END OF DOCUMENT

2011 Thomson Reuters.