1925 Land Legislation, notice, formalities and overreaching

(1) to simplify (though not necessarily cheapen) land conveyancing

(2) to introduce transparency through title registration

(3) to protect certain forms of disorganised or vulnerable interest

(4) to foster free alienability

Goals (3) and (4) don't sit comfortably together

Goal (1) was probably accompanied by obj of making conveyancing cheaper but this was not achieved (solicitor fees)

Two ways this was attempted: abolishing old doctrine of estates and introducing a system of land title registration

Title by registration

• attemps at e-conveyancing (still not functional)
• complications in systems of registered and unregistered title co-existing
  • unregistered system kept because:
    • burden on Land Registry
    • many weren't confident about abandoning onld system --> not convinced new and untested system would work 

The system did not make conveyancing cheaper --> solicitor fees were increased because learning the new legislation was costly for lawyers and so they passed these costs on 

Industrialisation and geographical mobility

Many land owners died in WW1 --> inspection of title deeds often not possible as had been hidden away and couldnt' be found --> would have been such a problem if land registration already existed

1925 legislation introduced 'overriding interests' --> to achieve objective (3) --> capacity to bind not affected by whether they are registered or not

General rule with interests in land is that if they can be registered but aren't, they won't bind a disponee for value

ss28-29 LRA 2002

• only interests which can bind a disponee are registered interests and overriding interests
• interest which should be registered but isn't registered doesn't bind a disponee for value even if the disponee has notice of it 
• Parliament's objective in enacting these provisions was to make doctrine of notice irrelevant to modern land law --> hasn't worked out this way 

Notice --> reasonable person would have known or discovered that fact

Reasonable person --> person who acts with care/perspicacity necessary in the context

Standard/level of care changes in different contexts

Authorities suggest taht notcie means actual knowledge  --> this seems harsh/unreliable but likely to continue since concern is to protect disponee

Etridge exception

• 2 conditions
  • relationship between A and B must be non-commercial
  • transaction must be 'not to the advantage' of B
• where consent to postpone right flawed because of vitiating factor and the 2 conditions are met, a disponee bank will automatically have notice of the flaw in your consent unless it arranges for you to have independent legal advice

Good system of land law will optimise the capacity of people to exchange land with one another

Land register supports this goal --> you'll be more confident about buying an estate in land if there's an accessible register which tells you who holds title to that land, and which tells you about all interestsin the land apart from those whic should be obvious from physcial inspection of the land itself

2 further requirements to facilitate free alienability of land -->

(1) deed requirement

(2) concept of overreaching 

Formalities = where the will has to be evinced in a certain way

Main kinds of formality in land law:

• writing, isgned by conferor (on his bhealf, or by an agent) with or without a requirement of witnesses
• deed, a piece of writing that declares itself to be a deed that is signed by conferor (or by an agent) witnessed and delivered (essentially accompanied by some overt acknowledgement of binding effect, either immediate or conditional

Overall balance of advantages and disadvantages of formalities depends on likely compliance

Generally formality requirements and their interference with possessions of those affected by them are generally satisfactory as proportionate under ECHR First Protocol Article 1

Purpose of formalities

• (1) Certainty (that deal happened, as to details, encourages parties to considera ll final points of deal in completing formalities)
• (2) Improve quality of intention (encourage parties to think seriously about what they're doing, in semi-public even may help to avoid vitiating facts to consent)
• (3) Make trasnactions more visible to parties not involved in its making but with interest in knowing about it or its effects 

(1) and (2) 
- satisfied but all kinds of formalities; deeper concern = liberal concern to maximise autonomy

(3) --> not fulfilled by writing and deeds; various considerations ranging from desirability of effecient market, to aims of wehter tax is at issue, to communitarian notions yielding the idea that a country's citizens all have a stake in teh land

Can be injurious --> sacrificing privacy; idea that someone may be stopped from achieving his final aim by his non-compliance with a formality requirement offends liberal idea that he should be able to do as he likes

To give right in land in a way that takes effect after death --> must use will

NOrmally has to be in writing, signed by A and 2 witnesses

Rules well-calculated to promote thoughtfulness on testator's part, ensure accurate description and keep him free from immediate pressure

'probate' --> opening deceased will to public inspection to further promote visibility

Conferment Inter Vivos - the rules

To give legal right in land:

• usually must used deed
• in most cases the conferral must be registered with Land Registry

To give equitable right in land:

• must do so in writing
• no further requirement of registration

Registrable disposition --> must be registered to take effect at all, if not then simply ineffective

All other rights in rem in land can and should be registered too so as to ensure that they bind a disponee of land --> but failure to register them does not leave them simply ineffective

Distinction between legal and equitable rules 

• historically significant difference between behaviour of legal and equitable rights
• today nothing in difference between them to imply that they should be subject to different formalities
  • substantive differences have largely disappeared
    • both types of right in registered land only bind a disponee if registered or qualify as an overriding interest
  • some distinction preserved in how each type qualifies as an overriding interest --> but relatively few, largely unjustifiable and destined for eventual extermination

Deed or writing? --> very little difference --->

Completion by registration

Desirable because it promotes visibility (and at an early stage)

3 weaknesses with current regime:

• applies only to conferrals of a limited set of rights, not to every conferral to which formality requirements are appropriate
  • only applies to legal,  not equitable, rights --> should be applied to all conferrals
• responsibility of conferee
  • does not provide the boons such as clarity and good quality of intention on part of conferor --> but requirement of deed addresses this deficiency 
• through Land Registry --> time lag/'registration gap'
  • during this time benefits of registration are not forthcoming
  • requirement of deed removes part of problem, but it doesn't guarantee to make the right visible to TP

3 weaknesses would fall away if electronic conveyancing regime were introduced

Electronic conveyancing

System under which parties effect conferral of right by registering it online, directly accessing LR computer files

LRA contains provisions for this system --> but slow progress/long term delay

Benefits

• right's registration would be immediate --> removes registration gap
• registration under conferor's control as much as conferee's --> safeguard quality of conferor's intention
• reason for demanding a deed as well would vanish --> deed requirement not necessary
• could be applied to equtiable rights --> beneficial assimilation of legal and equitable rights

LRA doesn't state which rights would have to be conferred by this system but probably all rights whose conferral is a registrable disposition could be subjected

Contentious issue --> whether or to what extentn system should be applied to rights which are overriding interests --> 

When trustees dispose of piece of property that they hold on trust, the beneficial rights, which would otherwise remain with the property, instead detach themselves from it, so that the disponee cannot be affected by them

Rights then re-attach once more as rights in rem to replacement property that trustees receive from the disponee --> becomes trust property instead 

Trustees power to dispose of land without overreaching would be useless --> beneficial rights would go with property meaning that disponee acquired nothing of value --> no on ewould want to take property from trustees --> bad for the market 

Overreaching allows a disposition of trust property to confer its full value on disponee 

A&B beneficially entitled to proceeds of sale --> presumed 50/50 split --> these are equitable rights in rem interests wich can be registered on LR so as to bind everybody 

Two trustee rule -->

s3(1) LPA --> for overreaching to take effectthe purchase money provided by the disponee has to be paid to at least 2 trsutees 

Legal title can be held by up to 4 co-owners (Trustee Act 1925, s34(2)) --> hwen there's more than two co-owners the rule doesnt necessary lead to a desirable outcome

City of London Building Society v Flegg

• A&B owned a house held on trust for themselves and B's parents, the Fleggs.
• Fleggs had helped to pay towards purchase price
• A&B ran into financial difficulties --> remortgaged house with C (building society) without telling Fleggs
• A&B defaulted on mortgage repayments --> C sought possession to sell --> Fleggs argued their occupation was protected as house held on trust for them
• HL --> when C provided mortgage to A&B it was, in effect, paying money to them for value of the house as two trustees --> all beneficial entitlements overreached
• Fleggs ahd to leave house as it was C's security on mortgage loan 
• F couldn't invoke actual occupation --> only possible where overreaching is impossible 

Power to dispose and overreach will be welcomed if point of trust is to provide money benefits, and often welcomed where it is to provide residence for beneficiary 

Some settlors/beneficiaries wont want their trust land to be tradable --> e.g. ancestral estate

Law has swung between these perspectives but now takes a more middle ground -->

• full provision for disposal and overreachign where beneficiaries want it
• preference to contrary will be given respect, though will sometimes be outweighed
• default rule remains trustees have power to dispose of trust land and to overreach the beneficial interest
• settlors can exclude this power or allow it to stand but stipulate that it cannot be exercised without the consent of one or more identified individuals 

Impropriety --> acting in breach of duties will put trustee in breach of trust 

Restriction -->

• entry on register recording duty
• can be entered only if nature of duty means obedience can be verified easily by LR staff
• duties which cannot be verified by staff at Registry are not entered

Where there is a restriction

• if duty to which it refers is obeyed, disposition goes through and trust rights are overreached
• if not obeyed, disposition is blocked --> no question of overreaching --> land remains with trustees and beneficial rights will continue to bind it in their hands

Where there is no restriction

• where duty has not been recorded by a restriction, regardless of whether it could have been or not
• if obeyed, lack of restriction irrelevant --> disposition goes through and beneficial interests overreached --> more complicated where duty not obeyed

Where no restriction but duty not obeyed

pre-2002 --> dispotiion took effect but sometimes without overreaching

• HL in Williams & Glynn's Bank Ltd v Boland --> overreaching blocked by breach of two trustee rule --> unoverreached right went on to bind disponee 

2002 onwards

• s26 LRA 2002 --> duty unprotected by restriction is to be treated, vis-a-vis a disponee as if it never existed --> disposition takes effect and beneficial interests are overreached despite impropriety 

Possible exception

• consensus amongst commentators that s26 doesn't apply to breach of 2 trustee rule 
• if this is right, pre-2002 position continues to prevail --> disposition takes effect but beneficial rights are not overreached

Does, and should, s26 apply where there is a breach of 2-trustee rule?

• wording of s26 gives little or no support to view that it does not apply to breaches of two trustee rule
• ought such breaches remain outside s26?
  • arguably so  --> such breaches are different 
  • this rule applies to every disposition of trust land and a breach will be obvious to disponee
  • disponee, aware of beneficial interest itself, can also anticipate risk of being bound by it, and act to avert this risk --> additional protection of s26 is unnecessary
  • not only unnecessary but inappropriate --> if disponee can anticipate impropriety in this way, it is right to expect him to play his part in averting it, for the sake of the beneficiary, whom the duty exists to protect
• why do we need s26 to ensure disponee can anticipate difficulty over impropriety?
  • under pre-2002 rule, even if impropriety meant benefiical interest not overreached, interest did not bind disponee unless beneficiary in actual and apparent occupation --> surely this alerted disponee to potential problem? --> 
    • no because disonee could discover beneficiary's occupation but this did not alert him to the impropriety and so the risk of the interest binding him