There are various circumstances in which you may acquire an interest in registered land which does not have to be registered at the Land Registry but may require protection. For instance, if you have issued proceedings for a pending land action you may be wondering how to ensure that the defendant does not dispose of the property to a third party without them being notified of your claim or even how to prevent the defendant from disposing the property altogether.
There are 3 common ways in which a third party can protect its interest. These are:
- Unilateral notices
- Agreed notices
- Restrictions
This article explores the differences between the ways in which a third party can protect its interest, how easy they are to remove, and the protection that the Land Registration Act 2002 affords if there is a rogue entry on a title register that causes you to incur a loss.
Notices
A notice on a title provides a warning to anyone reviewing a property's title register that a third party interest could exist over the property. The existence of a notice does not, however guarantee that the interest is valid or that it even exists.
Notices also give priority to interests that relate to the registration of dispositions for value, such as a legal charge. As such, if the interest contained in the notice is valid, then it will take priority over subsequent dispositions, provided that the beneficiary makes a subsequent application to the Land Registry to register their interest.
There are 2 types of notice:
1. Unilateral notices
A unilateral notice can be registered without the property owner's consent and the applicant does not need to provide any evidence that the interest exists. The applicant or their conveyancer only needs to certify that the interest which the notice purports to protect exists.
Once a unilateral notice has been registered, the property owner will be notified and they (or anyone entitled to be the registered proprietor) can make an application to cancel the notice at any time, thereby requiring the beneficiary to prove that their claim is valid.
2. Agreed notices
An agreed notice can be registered with either the property owner's consent or evidence that the interest exists. The Land Registry will only remove the agreed notice once it is satisfied that the interest it protects has come to an end. If the interest has only partially ended or the Land Registry does not believe that it has ended, then it will make an appropriate entry on the title's register.
Restrictions
Restrictions offer the best protection as they prevent dispositions being made unless the disposition complies with the requirements of the restriction. For example, a restriction may say that no disposition can be registered without the beneficiary of the restriction's consent.
To register a restriction the applicant will need the property owner's consent or evidence that it is entitled to register the restriction.
Anyone can make an application to cancel the restriction, but they must be able to show that the interest protected by the restriction has ended or no longer binds the property for another reason. The restriction cannot be cancelled for any other reason.
If a notice or restriction is wrongfully registered this can limit how the landowner can deal with its property and/or negatively affect other third party interests over the land. This is also a concern as property owners and/or third parties cannot claim an indemnity from the Land Registry if a notice or restriction has been wrongfully registered.
Section 77 of the Land Registration Act 2002
While the Land Registry does not offer an indemnity in respect of incorrectly or wrongfully registered notices or restrictions, the Land Registration Act 2002 states that applicants for notice or restrictions made "without reasonable cause" may be liable in damages. This also applies to anyone who wrongfully objects to the removal of them.
In Godfrey v Torpey [2006] EWHC 1423 (Ch) the applicant had registered a unilateral notice in relation to proceedings that sought payment of an unsecured debt. One of the issues in dispute was whether the property's beneficial interest had been transferred to one of the defendants.
The registered proprietor, who was a defendant in the same claim, objected to the unilateral notice. It claimed that the interest it protected was not a pending land action because the claimant was not claiming an interest in land. The application was refused. It was held that the proceedings were a pending land action because of the issues in dispute.
However, the claimant was required to provide an undertaking in damages to cover any loss which the registered proprietor incurred due to the registration of the unilateral notice, which provided an easier mechanism for compensation than that which is available through the Land Registration Act 2002.
Conclusion
Anyone considering protecting their third party interest in land should seek advice to ensure that it is necessary for their circumstances and take advice as to which is the most appropriate means to achieve this.
Wrongful registrations of notices or restrictions can occur which could cause delays or even prevent deals, so if you are considering selling your property, you should review your title in good time to ensure that any title issues are dealt with promptly.
