THEUNREGISTEREDSYSTEM
Rights to land may be divided into rights of ownership of the land and
incumbrances, or rights which are claimed over the land of another (such as
a right of way). The LPA calls the former estates; and the latter, interests.
(1)
ESTATES
Estates (ownership) may then be divided into commercial interests and family interests. Commercial interests are those which a person would
expect to acquire on the property market. There are two: either he will want to buy the outright ownership of the land, or he will be looking to rent the land, so that, in effect, he pays merely for the use and enjoyment of the land. In either case, he expects a secure title. The need for security indicates
legal, as opposed to equitable, ownership: legal rights are good against the
whole world. So there are two legal estates.
Instead of creating directly an absolute ownership of land, corresponding to the absolute ownership of chattels, the 1925 legislation creates such an ownership indirectly by adapting the fee simple and defining the fee simple absolute in possession accordingly. The language and form of freehold tenure are retained, but the substance is absolute ownership – or very nearly.
The concept of a legal lease neatly meets the need for a secure right to use and enjoyment, but the commercial requirements are diverse. Some want to rent a home by the week. Some want a short term; some, a long term. Some want to rent the land and buildings; some want to rent the ground and build their own houses. Conveyancers need very long leases for technical reasons. The solution was to define term of years absolute so widely as to encompass every foreseeable commercial need.
All other rights of ownership were shunted into Equity. Property law has to serve social needs as well as commercial needs, and there is a family need to be able to create life interests or determinable interests or suchlike. The entail, too, fulfilled an important social function in 1925: it provided hereditary land to support an hereditary peerage. Moreover it is, generally speaking, inexpedient to abolish any property interest overnight. Property is a long term investment, and people will have ordered their affairs on that assumption. So the 1925 legislation tended to preserve all property rights then existing, but transmute them into a more convenient form.
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The problem with these family (and other non-commercial) interests is that they tend to clutter the title and make it less marketable. The problem is solved by making them all equitable, so that they can exist only under a trust, and then by providing, broadly speaking, that the mechanism of
overreaching shall operate in relation to any trust of land. Overreaching, it
will be remembered, is a device for shifting equitable interests out of the land and into the purchase moneys. Provided he pays his money to at least two trustees (or a trust corporation), the purchaser takes a clean title to the land, free of any family interests; the family interests are preserved, but they are transferred into the purchase moneys instead. Overreaching is thus a means of reconciling family need (which prefers fair treatment to commercial efficiency) and commercial need (which demands an easily marketable title).
(The comment may be made in passing that overreaching occurs in other cases too: notably on a sale by a mortgagee (lender) in the event that the borrower defaults on his repayments, on a sale by a personal
representative in the course of administering the estate of a deceased person,
and on a sale by order of the court.)
(2)
INTERESTS
It is less easy to explain the rationale of the 1925 legislation in relation to incumbrances. There are three relevant classifications: commercial or family; legal or equitable; non-registrable or registrable. The three classifications overlap to a considerable extent, but they do not coincide. The common ground across the three classifications is that most incumbrances which have a commercial use or value are legal rights. They are, therefore, of their very nature good against the whole world, irrespective of notice or registration – they are non-registrable.
Five classes of right conform to that thesis:
• easements (rights of way, etc) and profits à prendre (shooting rights, etc),
provided they are of a commercial nature; that is to say, provided they are
perpetual (equivalent to a fee simple absolute in possession) or for a fixed period (term of years absolute). Easements for life are equitable; • rentcharges, subject to the same proviso, that they must be perpetual or
for a fixed term. A rentcharge or fee farm rent, it will be recalled, is a periodic payment secured on land, and payable to someone other than a landlord;
• legal charges – the most common form of mortgage (see Chapter 14); •miscellaneous statutory charges – the most common examples used to be
land tax and tithe rentcharges, but both have been abolished;
• rights of entry attached to a legal lease or a legal rentcharge; that is to say, any right to repossess the land in the event that a leaseholder defaults on his obligations under a lease or in the event that a freeholder fails to pay his rentcharge.
Those five are commercial, legal and non-registrable. The other half of the common ground across the three classifications is that most incumbrances of a family or non-commercial nature are equitable and registrable. In principle, equitable incumbrances should bind the whole world except a BFP. But the doctrine of notice is unreliable and, therefore, commercially inefficient: it depends upon an ex post facto assessment of what a reasonable purchaser would or ought to have discovered – perhaps many years before. Therefore, once again, the 1925 legislation transmutes the old law into something more workable. The owner of a relevant incumbrance is expected to register it at the Land Charges Registry, and any purchaser is expected to search that register. As a general rule, if a registrable incumbrance was registered at the time of his purchase, then a purchaser is bound by it – whether he searched the register or not; whereas, if a registrable incumbrance is not registered, a purchaser for value takes free of it – even if he knew of its existence. Notice becomes registration. Instead of speculating about the assumed state of mind of the hypothetical reasonable purchaser, it is a simple matter to check the actual state of the register on any particular date.
The general thesis then has to be qualified. In the first place, there are some incumbrances which are commercial and legal but unexpectedly
registrable. The prime example is a puisne mortgage, which is defined as a
legal mortgage not protected by the deposit of title deeds. In effect, it means a second or subsequent mortgage. The perceived mischief is that, if he does not register them, the rights of a second mortgagee (lender) can easily be overlooked. He does not have the title deeds (the first mortgagee keeps them); he is not usually found in possession of the land; there is nothing to indicate to the world at large that there is a second mortgage outstanding. Requiring him to register cures the practical difficulty – but it creates a doctrinal oddity: here is a legal right which is not good against the world unless it is registered.
Then there are some rights which are commercially valuable, but which are equitable only. Prominent among these is the restrictive covenant. A restrictive covenant, it will be recalled, is a promise given in a deed
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which limits the use of one piece of land for the benefit of another (for example, a promise by a neighbour not to use his land otherwise than as a private dwellinghouse). It is, in substance, the equivalent of an easement, but it is an equitable creature, it emerged comparatively late in conveyancing history, and it has always been classified separately from easements. Being a valuable commercial right, it might have been converted into a legal interest in 1925, but it was not. The suggestion was considered too revolutionary at the time (although the Law Commission has subsequently revived it). Ergo, the restrictive covenant, despite being commercially valuable, is equitable and (usually) registrable.
There are other commercially valuable rights which, for various reasons, remain equitable and registrable; for example, equitable mortgages, or proprietary rights arising under a contract for an interest in land.
A third complication is that there are some equitable incumbrances which, contrary to the general scheme of things, remain unregistrable. The implication is that the untidy doctrine of notice still applies in these circumstances. Two important instances are restrictive covenants which were imposed before the end of 1925, and restrictive covenants in leases. It would have been unrealistic to expect all the owners of existing freehold restrictive covenants to rush off to register their covenants at the start of 1926, so the scheme of registration was not made retrospective in that respect. Leases were excluded because registration would, in most cases, be a waste of time. The purchaser of a term or of a reversion expectant on a term invariably inspects the lease itself. He therefore sees the actual covenants, and registration would be superfluous in those circumstances. But there are some awkward cases which do not conform to that theory. Suppose the lessor covenants with the lessee to restrict the user of the
lessor’s adjacent land. That is a covenant in a lease and so not registrable.
But a purchaser of the adjacent land would not routinely see the lease, and might even be unaware of its existence. He might well be a BFP, and there is little the lessee can do to protect his covenant in those circumstances.
Other examples of equitable, non-registrable rights may be found which tend to undermine the 1925 scheme. The scheme suggests that, subject to carefully limited exceptions, all equitable interests in land should be either overreachable or registrable. However, since 1925, the courts have sometimes discovered or invented new equitable interests which fall into neither category. Therefore, the doctrine of notice applies to them. That might be commercially inconvenient, but justice is sometimes inconvenient – and, in any event, the inconvenience is mostly minor.