Land charge

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In unregistered conveyancing, third party interests in land can be protected by registering a charge against the proprietor of the land. Indeed, they must be registered as charges, or they will be lost in certain metas of sale. Certain interests in land are subject to the doctrine of notice, which binds a subsequent owner except a bona fide purchaser without notice.

A land charge under the 1972 Act is completely different from a local land charge.

The fact that the registration is against the proprietor, not the property, has caused enormous problems over the years. This is because many people use different names, or variants of their names, at different times. Worse, a trivial spelling mistake can cause a search to come up clear, when there are interests that are binding on the purchaser.

The set of interests that consitute land charges is defined by the land charges act (1972), which divides them into six classes (A-F). Some of these classes are encountered only rarely. Here is a summary of the more common interests, and the effect of non-registration.

  • Puisne mortgage: C(i)
  • General equitable charge: C(iii)
  • Estate contract: C(iv)
  • Restrictive covenant: D(ii)
  • Equitable easement: D(iii)
  • Spouse's right to occupy the home: F

The fact that a charge is registered is technically only a matter of notice. The purchaser is deemed to have notice of a registered charge, whether or not it is valid and enforceable. The Registrar does not even attempt to certify the accuracy of a charge. If a search of the register turns up a charge, the putative purchaser has the option of investigating the validity of the charge, or not going ahead with the transaction. However, if the purchaser and seller have already made a contract, the fact that a charge is registered against the estate does not necessarily mean that the purchaser can rescind the contract (unless there is specifically a condition to that effect). If the charge genuinely represents an Encumbrance, then it is possible that the contract may be set aside, if the seller can produce the thing he has offered to sell (i.e., an unencumbered estate). In short, the register of land charges gives notice of potential encumbrances on a seller's title -- it does not create or certify encumbrances, and the usual rules of contract formation are not affected.

The register is conclusive as to the presence of notice, even if the purchaser did not even do a search of the register. This is reasonable, as without this stipulation purchasers could simply neglect to search, and then claim that they had no notice of a charge. However, a particularly striking stipulation of the 1972 Act is that registration is conclusive of notice, even if there is no way the purchaser could have found the charge! Remember that the charges register goes back much further in time than the age of the good root of title that the purchaser is entitled to expect (currently 15 years). Because charges are made against estate owners, not the land itself, a 15-year series of title deeds may well not reveal the names of everyone against whom a charge may be registered. This is rather unfavourable to the purchaser, who may find himself saddled with a restrictive covenant or easement that he could not possibly have discovered from the register. There is a scheme for compensating people who fall victim to this trap but, in practice, it has been invoked very rarely.

If a charge should have been registered, and was not, then the purchaser of an estate is deemed not to have notice, even if he had. Remember that registration=notice. No registration, no notice. The courts have sometimes tried to find ways around this rather inequitable rule (see, for example, Midland Bank v Green (1981)), but it is now generally held to be the correct interpretation of the Act.

A purchaser for money or money's worth must offer something of measurable financial value for the land. A 'purchaser for value' must offer something that is recognized as valuable by the courts, but need not be financial. The only example likely to be encountered, and even then only rarely, is marriage consideration.

If the 1972 Act does not state that that the unregistered interest is lost to a purchaser of the 'legal estate', then it must follow that the interest is lost to the purchaser of any interest, including an equitable one. This means, for example, that if a mortgage lender has an unregistered puisne mortgage, and the mortgagee grants a further equitable mortgage to another lender, then the second lender will take priority over the first.

Land and Property Law