How the land lies

From 6 April 2009 there have been two new trust events that trigger compulsory first registration. The first is where a transfer gives effect to the partitioning of unregistered land held in trust among the beneficiaries of a trust. This occurs where land belonging to co-owners is divided up and the parts are allocated among them. For example, if the co-owners are trustees, they may do this by transferring the separate parts of the legal estate by deed to those who are entitled to them. The other new trust trigger is when a new trustee is appointed. In this case unregistered land is usually transferred by the deed of appointment itself or by a separate transfer deed.

If the need for first registration is overlooked, where the transfer relates to the partitioning of property between trustees, the title to the legal estate reverts to the transferor who holds it on bare trust for the transferee. Where the transfer relates to the appointment of a new trustee, the title will revert to the person in whom it was vested immediately before the transfer.

The Land Registry has predicted that these two new triggering events will double the amount of land being presented for first registration during the next five years.

Land Registration Fee Order

Practitioners should also watch out for the new Land Registration Fee Order coming into force on 6 July. The basic fee structure largely remains the same, but there are some new charges and weighty increases across the board.

The Land Registry has acknowledged that the increase in fees is significant, but has sought to justify it on the basis of the considerable reduction in its income due to the current inactive state of the property market and its need to counter this and keep its income to a level sufficient to cover its operating costs.

The 'early completion' policy

The much heralded and widely opposed introduction of the Land Registry's new 'early completion' policy is due on 3 August. This will affect all discharge of whole applications that are submitted to the Land Registry from that day, with any other application, such as the usual registration of a transfer and new mortgage, but without evidence of satisfaction of the existing charge being produced. Under the early completion policy the Land Registry will reject the discharge application; but where possible will complete the other applications, so that the existing charge will stay on the register until evidence of discharge is provided to them.

Clearly the Land Registry will not be able to use its early completion policy if the existing charge is protected by a restriction preventing disposal of the property or registration of a new charge without the mortgagee's consent.

The Land Registry will no longer treat the three applications for discharge, transfer and new mortgage collectively. Where no evidence of discharge is produced, provided there is no restriction on the title preventing a transfer or charge, it will reject the application to cancel the entries relating to the seller's mortgage and will go ahead and complete the registration of the buyer's transfer and new mortgage. The seller's mortgage will remain on the title and will rank in priority to the buyer's mortgage. No longer will extra time be allowed to extend the usual 20 business days' registration period for the provision of evidence of discharge.

Where there is a restriction on the title against any disposal, the Land Registry will reject both the application to register the buyer's transfer and new mortgage. Once they have received evidence of discharge the buyer's solicitors will have to reapply, but will have lost their priority in the meantime. Where there is just a restriction against charging, the Land Registry will reject the application to register the buyer's new mortgage; but will register the transfer to the buyer, so that the register will show the buyer as registered proprietor with a charge in favour of the seller's lender.

Opposition to the changes

The Law Society in opposing the Land Registry's new policy has argued that it is the Land Registry alone which will benefit from its early completion policy by way of the administrative savings it will make. The new policy does not address the fundamental problem of some lenders being slow to provide evidence of discharge after redemption monies have been received by them. The Law Society has proposed that all lenders should commit to a system of producing evidence of discharge within five working days of receipt of the redemption money.

Once the early completion policy is introduced the only way buyers' solicitors can protect themselves fully is to refuse to complete unless they are given a DS1 on completion; but in practice this will be entirely unworkable.

It is hoped that this is not the end of the story as there is widespread and vocal opposition to this change. The Law Society has said it will produce a practice note as soon as possible, but no date has yet been fixed for its release because before issuing the practice note the Law Society must be certain of what the Land Registry's position will be in every scenario that could be affected by the changes.

Steps towards e-conveyancing

For those firms that use information services through Land Registry Direct, it is important to note that during 2009 it is planned to move these users across to the E-Business Services Portal, so that the Land Registry Direct services can be withdrawn in January 2010. Current users have been invited to apply for registration under the new portal scheme coupled with a warning that, as the Land Registry anticipate over 13,000 organisations moving over to the new portal, applications should be made well in advance.

The Land Registry's stated aim is to make gradual incremental steps towards e-conveyancing. This new portal appears to be a major step as the Land Registry's intention is to provide a secure website platform which will form an electronic gateway for all existing and future Land Registry electronic services.

The portal guidance notes are substantial and there are likely to be IT considerations for some firms, so it would be prudent to give this fairly urgent consideration. Also, the Land Registry has announced that, for operational reasons, they will no longer add new or amend existing individual users of Land Registry Direct. It will, however, consider requests to cancel users where there are 'urgent business reasons'. Clearly for purely practical reasons it might also be sensible to move across sooner rather than later.

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