Chapter 6: Enforcement of interests over unregistered land

Question 1

1. Introduction to enforcement over unregistered land

Unregistered Land

Answer 1

Unregistered land: Unregistered land is simply land that has not been registered at the Land
Registry.

Question 2

HM Land Registry

Answer 2

According to HM Land Registry, over 85% of the land in England in Wales is now registered land.
The majority of land you will deal with in practice is therefore registered. However, given there is
still a proportion of land that remains unregistered, it is important you understand the system of unregistered land works. You were introduced to the system of unregistered land in Chapter 1.

Question 3

Enforcement rules

Answer 3

In this chapter, we will explore the enforcement rules. This is relevant to:
(a) New owners of unregistered land – what interests will they be bound by on completion?
(b) Interest holders who have an interest over unregistered land – how do they protect their
interest?

Question 4

1.1 Title deeds

Answer 4

In unregistered land, the title information (ie who owns the property) is contained in various old paper title deeds which show:
* The history of the land;
* Who has owned the land;
* How the beneficial title is held where there are co-owners;
* What rights benefit and/or burden the land

Question 5

1.1 Title deeds

Answer 5

In unregistered land, the documentation is held by the right holder, not by a centrally
administered authority.
As the seller may have lots of old title deeds of varying degrees of usefulness relating to the
property, they must only select those which contain relevant detail about the property and then
make a copy of these documents. This bundle of relevant copy documents is called an epitome of
title. On a sale, the seller is required to show the epitome of title to the buyer. This is called
deducing title.

Question 6

1.1 Title deeds

Answer 6

On completion, the seller hands the originals over to the buyer. The buyer then needs to send
these original documents to the Land Registry so the land and the buyer’s ownership can be
registered for the first time.

Question 7

1.2 Enforcement of legal and equitable third-party rights in unregistered land

Answer 7

Purchasers will need to ascertain if there are any third-party proprietary rights which could bind
them as the new owner of the unregistered land following completion. In order to do this a purchaser needs to identify whether any legal or equitable interests exist.

Unlike registered land, there is no central register which contains details about the interests that
benefit/burden a piece of land. Instead, a buyer of unregistered land must conduct extensive
searches to ascertain what rights exist. There are different rules depending on the nature of a right and the year it was created.

Question 8

1.3 Pre-1926 position

Answer 8

Prior to 1926, the principle of whether a right would be enforceable against a third party was simple (in theory, not practice!) and depended upon whether the interest was legal or equitable in
nature.

Question 9

1.3.1 Legal interests

Answer 9

Legal rights: bind the whole world
This is the historical maxim from the case of Mercer v Liverpool, St Helen’s and South Lancs
Railway Co [1903] 1 KB 652.
Before 1926, where a person held a legal interest over land, they would be able to enforce that interest against anyone who came to own or occupy that land. This would be the case even if that new owner did not know, or should not have known, about the interest prior to the purchase.

Question 10

Example: Legal rights

Answer 10

If a person enjoyed a legal right of way across a garden (a legal easement), they would be able to
exercise that right, no matter who came to occupy or own that garden, simply because the right
of way was legal.

Question 11

1.3.2 Equitable interests

Answer 11

Unlike legal interests, before 1926, equitable interests were not automatically binding on a
successor in title to the land affected. Equity would only intervene and enforce an interest against a successor to land, where the successor’s conscience had been affected in some way, making it just for them to take the land
subject to that interest. Principally, this was where the successor was aware of the interest upon
purchase, or should have been aware in the circumstances.

Question 12

1.3.2 Equitable interests

Answer 12

However, where the successor was a bona fide (good faith) purchaser for value of a legal estate
in the land without notice of the prior interest (otherwise known as equity’s darling), they would
take the land free from that interest.

This method of enforcement is known as the ‘doctrine of notice’ although that is a rather
misleading simplification that underplays the important role, in particular, of obtaining a legal
estate for value in the formulation of equity’s darling. The doctrine of notice meant that buyers had to make extensive investigations and enquiries to flush out any equitable interests that burdened the land.

Question 13

1.4 Post 1926: registration and the ‘stop gap’ solution

Answer 13

The solution to eradicate the inadequacies of this pre-1926 method of enforcing interests was
registration. If an interest is registered, then a buyer can readily discover it, and the registration
system assures the interest holder that their interest, once registered, cannot be defeated by a buyer. At the time of its introduction in 1925, it was readily understood that registration would not occur overnight.

Question 14

1.4 Post 1926: registration and the ‘stop gap’ solution

Answer 14

So, what method of enforcement should apply to interests attaching to land that remains unregistered for the time being? It was clear that the pre-1926 mode of enforcement (the doctrine of notice) should not continue as it stood.

The solution was found in a mixture of pre-1926 rules of enforcement and partial registration. Since some of the old doctrines from pre-1926 were going to be relied upon, the distinction between legal and equitable interests remains significant.

Question 15

1.4 Post 1926: registration and the ‘stop gap’ solution

Answer 15

This stop-gap solution was intended in 1925 to be temporary, lasting only a few years until all land in England and Wales was registered. As we know, this has not been the case. Whilst it is true that the majority of titles to land are
registered (and this has increased markedly since the passing of the LRA 2002), the time has not yet arrived where we can abandon this ‘temporary’ system completely.

Question 16

1.4 Post-1926: registration and the ‘stop gap’ solution

Answer 16

Although registration was made compulsory in 1990, some unregistered land has not been sold since that date so a trigger to register has not occurred. Until such unregistered land is sold, the
priority and protection of interests will still depend on the unregistered principles. After that sale, however, the land will be put into the registered system.

Question 17

1.5 Post-1926 position

1.5.1 Legal interests

Answer 17

The position stayed the same as pre-1926. A legal right, such as an easement created by deed or legal lease, will continue to bind the whole world. There is no need for the legal interest to be registered or any notice to be served upon
anyone. There is an exception to this which is a ‘puisne’ mortgage (a second legal mortgage) which must
be registered as a Land Charge (see below)

Question 18

1.5.2 Equitable interests

Answer 18

The majority of equitable interests created post 1926 will need to be protected by way of a land
charge, under the Land Charges Act (LCA) 1972. Unfortunately, not all equitable interests can be protected under the LCA 1972. The doctrine of notice therefore continues to apply for:
* Equitable easements and restrictive covenants created before 1926;
* Equitable interests in a trust of land that have not been overreached.

Question 19

1.6 Compulsory first registration of unregistered land

Answer 19

Once completion has taken place, the buyer of the unregistered land must register it at the Land
Registry for the first time. This is compulsory first registration under LRA 2002, s 4. Failure to register the land means that legal title (the legal ownership) will revert to the seller after two months. Once land has been registered for the first time, it is then governed by the registered land system.

Question 20

1.7 Summary

Answer 20

• Unregistered land is land that has not been registered at the Land Registry. This means the
  information about the land is not recorded centrally, but contained in various old title deeds.
• Prior to 1926, legal interests over land would always be binding. However, equitable interests
  would not be binding on ‘equity’s darling’.
• Equity’s darling is a purchaser of the land who has acted in good faith and does not have
  notice of the interest. This required a purchaser to undertake extensive investigations of a
  piece of land.

Question 21

1.7 Summary

Answer 21

• Post 1926, legal interests remained binding over everyone. For equitable interests a ‘stop gap’
  solution was introduced which requires the majority of equitable interests be protected by way
  of a land charge.
• Equitable easements and restrictive covenants created before 1926, and equitable interests
  under a trust cannot be protected by a Land Charge and remain subject to the doctrine of
  notice.

Question 22

2. Land charges

Answer 22

The majority of equitable interests created after 1926 over unregistered land will need to be
protected by way of a land charge, under the LCA 1972. There is one exception to the rule that only equitable interests are registered as land charges, and that is a puisne mortgage. A puisne mortgage is a second legal mortgage.

Question 23

2. Land charges

Answer 23

A first legal mortgage over unregistered land is protected by the depositing of the title deeds with the mortgage lender (the mortgagee). It is not possible for a second legal mortgage to be
protected this way because the title deeds are already held by the first mortgage lender. For this reason, a second mortgage holder must protect their interest by the entry of a land charge. Interests that can be protected by entry of a land charge:

Question 24

Puisne mortgage (ie second or subsequent legal mortgage)

Answer 24

Class C(I)

Question 25

Estate contract (eg a contract to buy land, an option agreement, or a contract to have a lease granted over land)

Answer 25

Class C(IV)

Question 26

Restrictive covenant created after 1926

Answer 26

Class D(II)

Question 27

Equitable easement created after 1926

Answer 27

Class D(III)

Question 28

Spouse’s matrimonial right of occupation

Answer 28

Class F

Question 29

Family Law Act 1996

Answer 29

The only equitable interests that cannot be protected by way of a land charge are interests in a
trust of land and equitable easements and restrictive covenants created pre-1926.
Note. A spouse’s matrimonial right of occupation is not an interest in the land. It a statutory right,
for a non-owning spouse, to occupy the family home under the Family Law Act 1996.

Question 30

2.1 The effect of entry of a land charge

Answer 30

Once the land charge is entered on the Land Charges Register, the interest will be binding on a
purchaser (LPA 1925, s 198). This is so irrespective of the state of the purchaser’s knowledge.
This overcomes the uncertainty associated with the old doctrine of notice, at least in respect of
those interests which are able to be protected by a land charge.
Of course, entry of a land charge does not guarantee the validity of the interest in question, so
that if something is protected which is not actually an interest in land, protection by entry of a
land charge will not confer validity on it.

Question 31

2.2 The effect of non-entry of a land charge

Answer 31

LCA 1972, s 4 explains the effect of non-entry in respect of each land charge. Although different
terminology is used depending on the land charge in question, the effect of this provision is that
non-protection of an interest will make it void against a purchaser of the land, but not against a donee ie someone who is gifted or who inherits the land.

Question 32

Key case: Midland Bank Trust Co Ltd v Green [1981] AC 513

Answer 32

Facts: In 1961 a tenant farmer (Geoffrey Green) was granted an option by his father (Walter) to
purchase an unregistered farm in Lincolnshire. The son did not protect the option by land charge.
Six years later the father, intending to deprive his son of the option, sold the land to his wife
(Evelyne) for £500.

The farm had a market value of £40,000. On discovering the sale to his mother, the son attempted to exercise the option. Both the son and the mother had died before
the case reached the House of Lords who had to consider whether the option was binding on the mother’s estate. At first instance the court found in favour of the mother’s estate; that decision
was reversed on appeal to the Court of Appeal.

Question 33

Key case: Midland Bank Trust Co Ltd v Green [1981] AC 513 Judgement

Answer 33

Held: Entry onto the register, or failure to do so, is conclusive as to notice, regardless of any knowledge the purchaser may have of any rights existing over the land. It did not matter that the consideration was nominal, the mother was still a ‘purchaser’ and she was not therefore bound by the option, which should have been protected by a Class C (iv) land charge.

Question 34

Legal Principle

Answer 34

The state of the purchaser’s knowledge is irrelevant.

Question 35

2.3 Entering a land charge

Answer 35

The land charge is entered against the name of the landowner at the time the right is granted/created LCA 1972, s 3(1). The name to enter the land charge against, is the name in the title deeds, rather than the name as it may appear in other contexts, such as a birth certificate.
Should the land charge be entered against an incorrect name (for example, because there has
been an omission of one of the estate owner’s names which appears in the title deeds), the
protection is a nullity.

Question 36

Example

Answer 36

In the case of Diligent Finance Co Ltd v Alleyne (1972) 23 P & CR 346 a Class F land charge was
registered against Erskine Alleyne. His full name, as appearing in the title deeds, was Erskine
Owen Alleyne. It was held that a clear search against the full name allowed a later mortgagee to take free from the spouse’s right of occupation as the Class F land charge was void.

Question 37

Example

Answer 37

To discover the existence of a registered land charge, a search must be made of the register
against the full name(s) of the estate owner(s) as spelt in the title deeds. In view of the provisions of LPA 1925, s 198(1) (entry of a land charge is notice to all persons for all purposes), a search should be made, wherever possible, against all previous estate owners back
to 1 January 1926. This is a cumbersome process when investigating title of unregistered land.

Question 38

2.4 Summary

Answer 38

• Land charges are a means of protecting the majority of equitable interests created over
  unregistered land post 1926.
• The Land Charges Register is a mini scheme of registration that therefore applies to
  unregistered land only.
• The holder of an equitable interest created post 1926 must register the correct land charge (eg
  Class C(IV) for an estate contract) against the name (as it appears in the title deeds) of the
  unregistered landowner of the burdened land.

Question 39

2.4 Summary

Answer 39

• Correct registration of a land charge constitutes ‘actual notice’ and means the equitable
  interest will be binding on a third party.
• Failure to register a land charge correctly means it will not be binding on a purchaser of the
  land. Actual knowledge is irrelevant. It would still, however, be binding on someone who is gifted or inherits the land.
• A purchaser of unregistered land must do a full search of the Land Charges Register against
  the full names of all estate owners as spelt in the title deeds in order to discover the existence
  of any equitable interests.

Question 40

3 The doctrine of notice

Answer 40

The enforceability of certain equitable interests in unregistered land depends on the doctrine of
notice. Before 1926, the doctrine of notice applied to the enforceability of all equitable interests in the
land. Since 1926, the doctrine of notice only applies in respect of:
* Equitable easements and restrictive covenants created before 1926.
* Equitable interests in a trust of land that have not been overreached and therefore the interest has not transferred from the land to the purchase money

Question 41

Assessment focus point

Answer 41

Remember, overreaching is a concept that applies whenever there is a trust of land. It is not a
feature of one system. Where the land held on trust is unregistered, there is no means of alerting a buyer to the existence of the trust to trigger overreaching ie in the unregistered land system, there is no equivalent of a restriction that exists in the registered land system.

Question 42

3.1 Equity’s darling

Answer 42

Under the doctrine of notice, an equitable interest over the land is binding on anyone except
‘equity’s darling’. ‘Equity’s darling’ is a ‘bona fide purchaser for value of a legal estate without notice’

Question 43

A buyer has to prove all of these elements to be ‘equity’s darling’.

Answer 43

• Bona fide: means the buyer must act in good faith
• Purchaser: means any person who acquires an interest in the land otherwise than by
  operation of law (obtaining land upon intestacy would be an example of operation of law)
• Value: means money or money’s worth or future marriage (including nominal consideration, as
  the adequacy of the value is not investigated)
• Legal estate: means a freehold or leasehold estate (or, for this purpose, a charge by way of
  legal mortgage)
• Without notice: means without any of the three kinds of notice described on the next page:
  actual, constructive or imputed notice

Question 44

3.2 Notice

Answer 44

To be equity’s darling, the purchaser of the land must be ‘without notice’. Notice can be actual, constructive or imputed.

Question 45

3.2.1 Actual notice

Answer 45

The purchaser actually knows of the equitable interest.

Question 46

3.2.2 Imputed notice

Answer 46

This is notice received by the buyer’s agent, for example the solicitor on a land purchase.
Where the agent has notice, whether actual or constructive, of an interest, that knowledge is
imputed to the buyer

Question 47

3.2.3 Constructive notice

Answer 47

A purchaser will be fixed with constructive notice of an interest if they fail to pursue a line of enquiry which ought reasonably to have been made. For example, if a purchaser is aware that there are, or may be, covenants restricting the use of the land but fails to discover their exact content; they will nevertheless take the land subject to such restrictions as may exist. The obligations on a purchaser to make enquiries is limited to making a proper investigation of the title deeds, and making a proper inspection of the land.

Question 48

3.2.3 Constructive notice

Answer 48

When checking the land, the purchaser must take care to see who has use of the land.
For example, is there any evidence of worn tracks which may suggest a right of way? If yes, who is
using that right of way?
The purchaser should also ensure that that it makes enquiry of all the occupiers of the land.
Where the purchaser discovers that it is not dealing with the legal owner, the purchaser should
enquire of that person what interest, if any, they hold in the land.

Question 49

Example: Constructive notice

Answer 49

In the case of Hunt v Luck [1902] 1 Ch 428 the presence of a tenant on the land placed the purchaser on constructive notice of the tenant’s leasehold interest.

Question 50

Key case: Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783

Answer 50

Facts: Mr Tizard, the first defendant, held the legal title of the unregistered matrimonial home
(Willowdown House) on trust for himself and his wife, the second defendant. The marriage broke
down and Mrs Tizard moved out of the matrimonial home. She returned to the house in the
mornings and evenings to look after the twin children; getting them ready for school and cooking
them meals. She kept her clothing in three of the four wardrobe compartments in the master
bedroom and also kept toiletries and a dressing gown at the property. She would also stay in the
house overnight when Mr Tizard was away on business.

Question 51

Key case: Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783

Answer 51

Mr Tizard negotiated a loan secured by a legal mortgage with the plaintiff finance company. On
the application form for the loan Mr Tizard described himself as single. When the plaintiff finance
company sent a surveyor to inspect the property, Mr Tizard apologised for state of the property
and explained that he was married but that his wife had left him and was no longer living at the
property.

Question 52

Key case: Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783

Answer 52

The surveyor made no further enquiries, and, on the basis of his report, the loan was agreed and
paid to Mr Tizard alone, therefore not overreaching Mrs Tizard’s equitable interest. Mr Tizard later
emigrated to America with the boy twin and defaulted on the loan.
The court had to consider if Mrs Tizard’s equitable interest in the property under the trust was
binding on the plaintiff finance company. Was the finance company equity’s darling and
therefore not subject to Mrs Tizard’s equitable interest?

Question 53

Key case: Kingsnorth Finance Co Ltd v Tizard [1986] 1 WLR 783 Judgement

Answer 53

Held: The finance company had imputed notice of Mrs Tizard’s equitable interest through the
constructive notice of its surveyor. Although the surveyor did not actually know of Mrs Tizard’s
interest, it would have been reasonable for him to make further enquiries based on what he did
know. The finance company were therefore bound by the equitable interest

Question 54

3.3 Equity’s darling – is the interest then lost forever?

Answer 54

The full rule is that an equitable interest is void against such a purchaser or someone claiming
through them. It follows that once an equitable interest becomes void for want of notice, it cannot be revived so as to bind a subsequent buyer who does have notice of the equitable right, for otherwise equity’s darling might not be able to realise the full value it paid for the land on a subsequent sale

Question 55

Example: An interest cannot be revived once lost

Answer 55

In Wilkes v Spooner [1911] 2 KB 473 a restrictive covenant not to open a butcher’s shop was void for lack of notice. It was not binding on the defendant, a subsequent owner, even though he had notice of the covenant because his predecessor in title was a bona fide purchaser for value without notice, who was not bound by the covenant, and the covenant did not revive when the
land passed to the defendant.

Question 56

3.4 Problems with the doctrine of notice

From the perspective of the buyer:

Answer 56

• The buyer would have to satisfy all the requirements of being a bona fide purchaser for value
  of a legal estate without notice in order to take free from the interest.
• The buyer would need to carry out extensive investigations of both the property and associated documents to find out about existing equitable interests, otherwise it might find itself bound.
• This is time consuming, expensive and may not guarantee discovery of those interests which
  should be discovered.

Question 57

From the perspective of the owner of the interest:

Answer 57

• The interest is fragile because it could be destroyed forever if a bona fide purchaser for value
  of a legal estate without notice purchased the land. This would be through no fault of the owner of the interest and in circumstances where the owner could not have done anything to protect it.

Question 58

Assessment focus point

Answer 58

Remember, a donee (someone who is gifted or inherits the estate) can never be equity’s darling, even if they do not have notice of the interest.

Question 59

3.5 Summary

Answer 59

• Before 1926, the doctrine of notice applied to all equitable interests over unregistered land.
• A purchaser of unregistered land would be bound by an equitable interest unless it could show
  it was ‘equity’s darling’.
• ‘Equity’s darling’ is a bona fide purchaser for value without notice.
• Most purchasers of land can establish they are a ‘bona fide purchaser for value’. However, it is
  harder for a purchaser to establish they are ‘without notice’.

Question 60

3.5 Summary

Answer 60

• Notice can be actual, constructive or imputed knowledge of the equitable interest.
• Actual notice is that the purchaser actually knows of the equitable interest. A purchaser will
  have constructive notice of an interest a prudent person would have found out about. A purchaser will have imputed notice of anything its agent knows about or ought to know about.
• The doctrine of notice now only applies to equitable easements and restrictive covenants created pre-1926 and interests in a trust of land that have not been overreached.