Workshop: Restrictions on a registered title when dealing with residential property

It is important to know what a restriction is and its effect. The Land Registry Practice Guide 19 is an essential tool for any practitioner when dealing with restrictions. The guide states that "restrictions prohibit the making of an entry in respect of a disposition or a disposition of a specified kind. The prohibition may be indefinite or for a specified period and it may be absolute or conditional on something happening". It is easy to see from this description how important and powerful a restriction can be as it can limit the powers of the registered proprietor when dealing with its own property.

Section 40(1) of the Land Registration Act 2002 defines restrictions as: "an entry in the register regulating the circumstances in which a disposition of a registered estate '¨or charge may be the subject of an entry '¨in the register".

More often, you will be faced with restrictions where there is a mortgage lender either as a buyer, to ensure that the standard restriction is registered or, as a seller when you need to comply with the standard restriction in order to sell the property. In the latter example, usually the act of redeeming the mortgage and obtaining the relevant form of discharge is enough for the Land Registry to remove the restriction.

Usually, a restriction will not bind the proprietor of an existing charge. However, there are occasions where this will happen. In addition, there may be an occasion when a restriction will remain on the title despite a change in ownership and as such it is important to ensure that you review the wording of a restriction carefully before proceeding with your sale or purchase.

An application for a restriction is usually made on form RX1 and must be accompanied by full details of the required restriction. The person making the application must have a sufficient interest in the property in order to successfully register the restriction. Such interests include beneficial interests under a trust of land or a person who has applied for a freezing order and a person with the benefit of a charging order.

There are exceptions to the rule for using the Form RX1 and it is important that you make yourself familiar with them from the Land Registry Practice Guide.

In the case of Jayasinghe v Liyanage [2010] EWHC 265 (Ch) the applicant applied under section 42(1) of the Land Registration Act 2002 for an entry of a restriction against the registered title on the grounds that she was the sole beneficiary under a resulting trust in her favour. The respondent objected and claimed that the application was a fiction. The Chief Land Registrar referred the matter to the Land Adjudicator and after a two day trial he directed the cancellation of the application on the basis that the applicant's evidence was unreliable. This case turned on its facts and it became clear that the applicant had played a part in the management of the property (which was an investment by the respondent) but had made no financial contribution to it and so, she had no interest in it.

Restrictions may be removed voluntarily by the interested party; by an application if the restriction is no longer required (anyone can do this); the Land Registry may do this if it is clear that it is no longer necessary (i.e. as with the redeemed charge); or where the Land Registry are satisfied that the property is no longer subject to a trust.

Land Registry Practice Guide 19 can '¨be found on the Land Registry website '¨and, as stated above, is an essential guide to the application and removal of restrictions. However, it is always important when faced with a restriction to ensure that the wording either is appropriate for your purpose or does not prevent or make more difficult the desired outcome for your client.