The Registrar of Title does not register equitable interests in property. Such interests are recognised by the courts and are enforceable, usually by legal proceedings against the registered (legal owner). Under the general priorities principles, equitable interests are vulnerable to overreached on a sale by the legal owner to a bona fide purchaser for value without notice.
Under Registration of Title legislation, the purchaser takes free of unregistered rights and interests, other than those categories, which affect registered land without registration.
The principle has been further extended in the Conveyancing and Land Law Reform Act 2009. Both registered and unregistered title land, held under an express or deemed trust (most land with multiple interests) may be sold by two trustees or a corporate trustee, free of all equitable and unregistered interests. They are thereby overreached, irrespective of whether the purchaser has notice to them unless they are registered.
Some types equitable interests when perfected are capable of registration. The ability to perfect depends on the nature of the interest or right concerned. In most cases, equitable interests are unperfected and not registrable. The rights of transferees and chargees under unregistered documents may be perfected by registration. Until then, the rights are equitable and vulnerable to being defeated by the transfer or other disposition by the registered owner.
Other rights are incapable of protection until a court declaration or Land Registry ruling is made on foot of an application to assert and prove the relevant interests or right.
The Land Registry may protect equitable interests indirectly. A caution or inhibition may be placed on the folio which gives indirect protection for the right or interest concerned. A caution gives temporary protection only. It requires a warning only of a proposed dealing by the registered owner. The right may require to be asserted in a legal action if the registered owner seeks to deal with the land in breach of the right or alleged right.
Equitable interests include the following:
- a contract for the purchase of land,
- a contract for a mortgage,
- rights of successors on death,
- rights under an unregistered disposition,
- rights under trusts.
It is in the nature of some equitable rights that they arise in circumstances that may be disputed. In such cases, the right or interest may require to be determined in court proceedings. If the relevant right has not been asserted and established or requires the consent of registered owner which is not forthcoming, a caution may be granted pending resolution of the litigation.
If the caution relates to an interest in part of the registered title only, it must be separately identified.
Evidence must be lodged by an affidavit showing that there is a presumptive or prima facie right which may be enforced against the registered owner. A person who lodges a caution without reasonable cause may be obliged to pay compensation to a person who suffers loss, typically the registered owner.
Where an application to deal with the land or discharge the caution is lodged, a warning is issued to the person who lodged the caution. If he does not respond, the caution will lapse and be deregistered. If he requests continuation or objects to the registration of an adverse dealing, he will need to furnish proof that steps have been taken generally by way of litigation) to assert claim protected by the caution.
In the case of a transfer to a person who gives no value, such as a donee of a gift, judgment mortgagee, vesting in a bankruptcy trustee, the caution will generally be left in place. A person who does not purchase and gives no consideration takes subject to any unregistered rights affecting the title.
Registration will be frozen until the cautioner proceeds to court to establish his right. If proceedings are not commenced within a reasonable time, the caution will be cancelled.
Inhibitions and Priority Searches
An inhibition is a restriction on transfer. It protects unregistrable and unregistered rights that may not mature for some period. It prevents dealing the registered title, subject to a condition, such as the consent of a third party. It is designed to protect longer-term rights which may not mature for some period.
A classic example is an interest of beneficiaries under a trust. The inhibition would protect against transfer by a trustee registered owner. Such an inhibition will be usually entered with the consent of the registered owner.
Where registration is sought without the consent of the registration of the registered owner, the registrar investigates the position in respect of inhibitions. An inhibition may be entered on foot of an application, by the registrar. The registrar may make such inquiries as he sees fit. The registrar may refuse to enter an inhibition without a court order. A court-order inhibition requires variation by court order.
An inhibition may protect rights of residences. It may protect the petitioner for bankruptcy in the period before adjudication and registration of an adjudication of bankruptcy. It may protect an Optionee. A right of residence may not be protected by an inhibition as it is a registrable burden.
Greater evidence is required to support an inhibition than a caution. In some cases, the position maybe straightforward as the registered owner’s consent is available. In the absence of consent, the applicant must prove his right or interest. If the Land Registry is satisfied that there is a prima facie case, it serves notice on the registered owner giving an opportunity to object. If he does not object, registration will proceed.
The terms of the inhibition will be tendered by the person who makes the application for the protection of the relevant right. It may restrict all dispositions or a certain class of dispositions only. It may require the consent of a particular person or an order of the registrar, in order to allow registration. It may be limited until proof that a certain circumstance no longer applying is furnished.
A priority search freezes the folio for a three-week period. Where the application is lodged within this period by the person who has the benefit of the priority search, it will take priority over any other dealings lodged in the meantime. It is generally entered by a person who has contracted to purchase property and wishes to protect against the possibility of an adverse disposition by the seller/transferor being registered before registration of the transfer deed. The priority search is noted on the folio for the period concerned.
Trusts and Settlements
Trusts are not registered expressly on the registrar. However, they may be protected by cautions and more commonly and appropriately by an inhibition. In the case of a trust, the trustees will generally be registered owners. The trust deed will usually grant the trustee powers to enable him or them to deal with the land by way of sale, mortgage, lease etc.
Where interests in land are held successively, without a formal trust, such as, for example, where there is a life interest and remainder interests, a settlement was deemed to arise under the Settled Land Acts. Under the pre-2009 legislation, the tenant for life in cooperation with the trustees of the settlement had powers of disposition of the land by statute. They may be expanded but may not be reduced by the terms of the settlement. See generally the section on settled land.
Since the 2009 Act reforms all land held under a trust, a settlement, or held by a minor is deemed to be held under a trust of land. The trustee of land is given powers to deal with the land. The objective is to simplify conveyancing. In the case of a transfer by two trustees, most rights are entirely overreached, unless registered.
The Land Registry rules provide for the entry of inhibitions. They may be modified as may is appropriate to the circumstances.
Charitable and Public Purposes
A charitable trust, particularly an older trust, may not have adequate powers of sale. The Charities Act provides for a whitewash procedure, by which the Charity Commissioners may validate and approve a sale, notwithstanding that there is no power in the trust deed. Lands held under a charitable trust may be registered in the names of the trustees, with an inhibition, requiring consent or prior notice to certain parties. This is less necessary where the land is held by a trust company or corporation.
The replacement of new trustees of a trust may be undertaken by powers of appointments in the trust deed or by statute. In this case, trustees, the legal owners would change without any transfer of the beneficial ownership.
The Trustee Appointment Act 1850 provides that the congregation of a society may appoint new trustees of a charitable trust in respect of the following:
- customary property for the promotion of education,
- a chapel, meeting house, or other places of religious worship,
- a dwelling house for the minister of such congregation, with offices, garden, and glebe, or land in the nature of glebe, for his use, or
- a schoolhouse, with schoolmaster’s house, garden, and playground,
- a college, academy, or seminary, with or without grounds for air, exercise, or recreation,
- a hall or rooms for the meeting or transaction of the business of such congregation or society or body of persons,
The Charity Commissioners have the power to appoint new trustees of land, cash and security.
In the earlier part of the last century, the Land Commission made advances to trustees for various purposes including the use of lands for the purpose of tillage. The lands might be held subject on trust to allow the trustees to let power to tenants for such purpose. The scheme could be revoked and the Land Commission or Minister for Lands retained authority to appoint new trustees.
The legislation was re-stated in 1950 to provide that it also applied for the purposes such as gardens for schools, sports fields, parks, pleasure grounds and playgrounds. The Minister can frame and approve schemes for such purposes. The advances could be made to the trustees. Where the scheme is revoked, the lands vested in the Land Commission related to the property discharged from the trust.
The lands may be disposed of for public purposes, e.g. education, recreation etc. It may be vested in fee simple, subject to such rights that may affect it, but freed and discharged from the trusts of the scheme. Under the Land Act 1984, the Minister for Agriculture may appoint new trustees and vest lands for public purposes.