Registration Gap or Registration Crater?
Friday, 19th May 2017
The recent High Court of Baker and Another v Craggs has brought the registration gap back into the limelight and at a time when the Land Registry's reported average completion times for transfers of part is 67.71 working days, it's a reason for concern.
The Charltons sold farm land to Mr Craggs in January 2012. Mr Craggs' transfer was submitted for registration in February 2012, well within the period of priority over any subsequent applications which was conveyed for his benefit by his solicitors' pre-completion official search. Failure to satisfy a requisition raised by the Land Registry resulted in this application being cancelled and Mr Craggs was not then registered as proprietor until 16 May 2017.
In the meantime, the Charltons transferred a barn to the Bakers, with the benefit of a right of way over the yard that had been sold to Mr Craggs. The Bakers were registered as proprietor of their property with effect from 20 February.
When Mr Craggs' title was registered on 16 May, it was registered subject to the previously registered right of way in favour of the Bakers. Mr Craggs was unaware of the right of way and tried to prevent the Bakers from exercising it.
An interest in land which is compulsorily registrable subsists as an equitable, rather than a legal, interest in land until its registration. When the dispute ultimately ended up in the High Court, it was held that although Mr Craggs had had an overriding interest in the yard at the time of the Bakers' purchase (as he had an equitable interest and was in actual occupation), this was overreached by the Charltons' acquisition of a legal easement over it. The judge took the decision that the grant of an easement was considered to be a legal interest for the purposes of overreaching an equitable interest, a decision not seen before.
This case is a good reminder that until registration the buyer does not have legal title to the land or interest that they have acquired. It is only on completion of registration that legal title will pass from the previous owner to the buyer - and so, as can be seen, this is where the increase in the length of the registration gap can have dangerous results. In comparison, the legal title to unregistered land passes immediately on completion of the transfer and will remain with the buyer provided that they apply for registration of the transaction within two months. If they fail to do this, the legal title reverts to the previous owner (although the registrar may in some circumstances extend the two month time limit).
Could legal title to registered land not pass at completion in the same way? Logically it could but we imagine that it would be a little more complicated, for example because until the title register has been updated (following an application to the Land Registry by the buyer), it would not fulfil its role of reflecting the ownership of legal title to all registered land.
A key point about the case is the fact that Mr Cragg's first application was cancelled. All parties agreed that had Mr Cragg's first application been successful then he would have acquired a legal interest in the land prior to the transfer to the Bakers, and his land would not have been subject to the right of way in their favour.
Understandably, the Land Registry cannot allow applications to sit on their system for months whilst waiting for issues to be resolved, as the inevitable backlog and the registration gap would continue to grow out of control. At the same time, however, acquisitions of legal interests need to be protected. The priority period conveyed by an official search of the title register is intended to do just that, but with the completion of applications for registration taking an increasing amount of time it is questionable whether it is still as effective.
Whilst Baker v Craggs does have a slight comedy of errors feel about it, due to it not being noticed that the right of way should not be granted over land which had already been sold and the delay in satisfying the Land Registry's requisition, it does leave it open for debate whether it is right to say to purchasers that they become the owner of the property on completion of the transaction. Although the Land Registration Act 2002 states that those who are entitled to be registered as the legal proprietor may exercise the owner's power as if they are the registered proprietor, the registration gap appears to be turning more into a registration crater.