The essential attributes of a land registration system
Published 13 Mar 2017
The mirror principle states that the details on the register must be an exact reflection of the land itself. If the land is subject to one restrictive covenant, there is one restrictive covenant on the register. The point is that anyone who enters into a transaction for the land will know what the situation is regarding ownership. Is this ideal scenario present in England and Wales? The difficulty is the existence of ‘overriding interests’. These are rights that are not present on the register but are nonetheless binding. They distort the mirror image and prevent a perfect reflection. Traditionally, numerous interests have existed. There is no doubt that the Law Commission has made perfect reflection a priority; it was held up as a “guiding principle” , and in 1984 they proposed to “close the cavernous crack in the mirror…”
In spite of these good intentions, overriding interests are still in existence. Section 29(1) of the Land Registration Act 2002 retains the effect of overriding interests and although certain interests have been erased , Schedule 3 to the Act provides four separate categories of overriding interests that will bind even if not on the register. Thus the register is not a perfect reflection of reality.
It is clear that the mirror principle is not entrenched in the England and Wales system because of the existence of overriding interests.
This states that purchasers should not have to look beyond the register to investigate ownership; any beneficiaries remain behind the curtain, invisible to the purchaser. The main reason for introducing this principle was to avoid the complications of having to deal with many beneficiaries to a trust. The aim is to simplify transactions and a purchaser of land is said to ‘overreach’ the beneficiaries.
Unlike the mirror principle, the land registration system in England and Wales has gone a long way to satisfying the curtain principle. Section 26 of the Land Registration Act 2002 grants a purchaser good title to the land, so long as the provisions of the Law of Property Act 1925 are complied with. Any dispute of concerning the sale will be between the trustee and beneficiary, with no involvement of the purchaser.
This though is where the difficulty arises. In a perfect system, the purchaser should remain cloaked by the curtain whenever a situation with a trust arises. However this is not the case. In certain circumstances the purchaser will have the blindfold removed and have to deal with individuals who are not listed on the register, in effect looking behind the curtain.
The Law of Property Act 1925 requires that the purchaser deals with two trustees in order for overreaching to succeed . If there is a single trustee then the trust cannot be overreached and the purchaser must deal with the beneficiaries . While the policy of this legislation is understandable , the result is to defeat the curtain principle.
Thus, while the curtain principle is entrenched in the land registration system, the exceptions to overreaching prevent the principle from absolute application.
The final principle is insurance. Even a perfect system of land registration may contain errors and the indemnity principle requires financial compensation to be provided to those who suffer through errors. For example, if a restrictive covenant is left off the register, the purchaser should not be bound (under the protection of the mirror principle) but the innocent who has lost rights should be compensated by the state.
This principle has been the most closely observed in England and Wales. Schedule 8 of the Land Registration Act 2002 provides for compensation and the Land Registry web-site confirms that the insured value of land exceeds £1,300 billion. This is evidence that the basic indemnity principle does exist as a characteristic of land registration in England and Wales.
The principle is not immune from imperfections. The existence of an error does not entitle a party to compensation; damage and loss must be shown. Any stale claims may be barred by the statute of limitations and compensation avoided. However, this does not defeat the existence of an indemnity mechanism; it merely goes to the individual characteristics of that mechanism.
An examination of land registration in England and Wales demonstrates that all three of the crucial principles of mirror, curtain, and indemnity are present to a degree. The former two traits though are tainted in character and reform is needed to purify them.