Registration of title and protection of interests - Methods to protect and enforce third-party interests

Learning Outcomes

After studying this article, you will be able to explain the core principles of the Land Registration Act 2002 as they relate to the protection and enforcement of third-party interests in registered land. You will be able to identify and distinguish between registrable dispositions, overriding interests, and protected interests (notices and restrictions), and apply the rules for priority and enforceability of third-party rights against purchasers. You will also understand the practical steps required to protect an interest and the consequences of failing to do so.

SQE1 Syllabus

For SQE1, you are required to understand the registration of title and the protection of third-party interests in registered land. Focus your revision on:

• the three core principles of land registration: mirror, curtain, and insurance principles
• the categories of registrable dispositions, overriding interests, and protected interests (notices and restrictions)
• how to protect and enforce third-party interests, including the use of notices and restrictions
• the rules of priority and the consequences of failing to register or protect an interest
• the significance of actual occupation and the requirements for overriding status
• the process and effect of overreaching in registered land.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is an overriding interest, and how does it differ from a notice in the context of registered land?
2. Which interests must be protected by entry of a notice on the register to bind a purchaser for value?
3. What is the effect of actual occupation by a person with a proprietary interest at the time of a registered disposition?
4. How does overreaching operate to protect a purchaser from certain equitable interests?

Introduction

The Land Registration Act 2002 (LRA 2002) sets out the modern framework for the registration of title to land in England and Wales and the protection of third-party interests. For SQE1, you must be able to identify the main categories of interests in registered land, understand how they are protected, and apply the rules that determine whether a purchaser is bound by a third-party right.

The LRA 2002 is built on three main principles:

Key Term: mirror principle The register should reflect, as far as possible, the totality of rights and interests affecting a registered title, so that a purchaser can rely on the register as a complete statement of title.

Key Term: curtain principle Certain equitable interests, especially those under trusts, are kept "behind the curtain" of the register. Purchasers deal only with the registered legal owner and are not concerned with hidden equitable interests, provided statutory requirements are met.

Key Term: insurance principle The state guarantees the accuracy of the register. If a person suffers loss due to a mistake or omission in the register, they may be entitled to compensation (indemnity).

Categories of Interests in Registered Land

Registered land law divides interests into four main categories:

1. Registrable dispositions – interests that must be registered to be legal and to bind third parties (e.g., transfers of freehold or leasehold, legal charges, express legal easements).
2. Overriding interests – certain rights that bind a purchaser even if not entered on the register, provided they meet statutory criteria.
3. Protected interests (notices) – interests that are not registrable dispositions or overriding interests but can be protected by entry of a notice on the register.
4. Restrictions – entries in the register that regulate how the registered proprietor can deal with the land, often to protect beneficiaries under a trust.

Registrable Dispositions

Certain transactions must be registered to take effect at law and to bind a purchaser. These include:

• transfers of freehold or leasehold estates
• the grant of a legal lease for more than seven years
• the grant of a legal charge (mortgage)
• the express grant or reservation of a legal easement.

If a registrable disposition is not registered, it will only take effect in equity and may lose priority to later registered interests.

Key Term: registrable disposition A transaction that must be completed by registration to be legal and to bind a purchaser (e.g., transfer of a registered estate, legal charge, express legal easement).

Overriding Interests

Overriding interests are rights that bind a purchaser even though they are not entered on the register. The main types are:

• legal leases granted for seven years or less (Schedule 3, para 1)
• interests of persons in actual occupation (Schedule 3, para 2)
• certain legal easements and profits created by implication or prescription (Schedule 3, para 3).

Key Term: overriding interest A right that binds a purchaser of registered land even if not entered on the register, provided it falls within a statutory category (e.g., actual occupation, short legal lease).

Protected Interests: Notices

Interests that are not registrable dispositions or overriding interests can be protected by entry of a notice in the charges register. Examples include:

• equitable easements and profits
• restrictive covenants
• equitable mortgages
• estate contracts (options, rights of pre-emption)
• home rights.

A notice does not guarantee the validity of the interest but ensures that it will bind a purchaser for value if properly registered.

Key Term: notice An entry in the charges register protecting a third-party interest so that it binds a purchaser for value.

Restrictions

A restriction is an entry in the proprietorship register that limits how the registered proprietor can deal with the land. Restrictions are commonly used to protect the interests of beneficiaries under a trust and to ensure that overreaching occurs on a sale.

Key Term: restriction An entry in the proprietorship register that prevents registration of a disposition unless specified conditions are met (e.g., payment to two trustees).

Priority Rules and Protection of Interests

The LRA 2002 sets out rules for determining which interests bind a purchaser. The key rules are:

• A purchaser for value takes subject to:
  • registered charges
  • interests protected by notice
  • overriding interests.
• Unprotected interests (notices not entered) will be lost against a purchaser for value unless they qualify as overriding interests.
• Overreaching can remove certain equitable interests from the land and transfer them to the sale proceeds if the purchase money is paid to at least two trustees.

Key Term: overreaching The process by which certain equitable interests (e.g., beneficial interests under a trust) are removed from the land and transferred to the purchase money when paid to two trustees.

Worked Example 1.1

A is the registered proprietor of a house. B has a beneficial interest under a trust and is in actual occupation. A sells to C, who pays the purchase price to A and a second trustee. Is C bound by B's interest?

Answer: No. Overreaching has occurred because the purchase money was paid to two trustees. B's interest is transferred to the proceeds of sale and does not bind C.

Worked Example 1.2

D is the registered proprietor of land. E has an equitable easement, protected by a notice in the charges register. D sells to F, a purchaser for value. Is F bound by E's easement?

Answer: Yes. The notice ensures that E's equitable easement binds F.

Worked Example 1.3

G is the registered proprietor of a flat. H has a beneficial interest under a trust but is not in actual occupation. G sells to I, who pays the purchase price to G alone. Is I bound by H's interest?

Answer: Yes, if H's interest is not overreached and does not qualify as an overriding interest, I may be bound if H is in actual occupation. If H is not in occupation, I may take free of the interest.

Protecting Third-Party Interests: Practical Steps

To ensure an interest is protected and enforceable against a purchaser, the correct method must be used:

• Register registrable dispositions (e.g., transfers, legal charges, express legal easements).
• Enter a notice for other interests (e.g., equitable easements, restrictive covenants, estate contracts).
• Ensure beneficiaries under a trust are protected by a restriction.
• If relying on actual occupation, ensure the interest-holder is physically present and their occupation is obvious on inspection.

Exam Warning

If an interest is not protected by registration (notice or restriction) and does not qualify as an overriding interest, it will be lost against a purchaser for value. Do not assume that actual knowledge by the purchaser is enough—statutory protection is required.

Revision Tip

Always check the register for notices and restrictions and make enquiries about occupiers to uncover possible overriding interests.

Summary

Key Point Checklist

This article has covered the following key knowledge points:

• The LRA 2002 is based on the mirror, curtain, and insurance principles.
• Registrable dispositions must be registered to be legal and to bind a purchaser.
• Overriding interests bind a purchaser even if not entered on the register, provided statutory criteria are met.
• Protected interests (notices) must be entered on the register to bind a purchaser for value.
• Restrictions regulate dealings with the land and protect beneficiaries under a trust.
• Overreaching removes certain equitable interests from the land if purchase money is paid to two trustees.
• Failure to protect an interest by registration or occupation may result in loss of priority against a purchaser.

Key Terms and Concepts

• mirror principle
• curtain principle
• insurance principle
• registrable disposition
• overriding interest
• notice
• restriction
• overreaching