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Baroness Scotland of Asthal: The noble Lord will know how much it will pain me to disagree with him, but I fear that on this occasion I must. He will also know that in relation to person B the licensee would not have a property right; he does not have it now and will not have it in the future. That is the short answer in relation to his proposition, but I want to explore the point because the noble Lord has, with his usual cogency, put it well.

The fundamental objective of the Bill is to achieve a situation in which, under the system of electronic dealing with land that it seeks to create, the register should be as complete and as accurate a reflection of the state of the title to the land at any given time as is practicable--that point has been made several times but it bears repeating--so that it is possible to investigate title to land on-line with the absolute minimum of additional inquiries and inspections.

One of the main functions of the Bill is therefore to cut back on overriding interests as far as that can be achieved. Any interest which can bind subsequent buyers without being clear from the register adds to the difficulties of the transaction. If the interest is capable of being protected in other ways, it should not be an overriding interest.

Accepting the amendment would add a further overriding interest to those which already exist. It would require a buyer to make inquiries not only of the person in actual occupation, but also of any person from whom he or she holds the land by way of lease or licence. That is a significant extra burden for anyone and it would significantly undermine the objective of being able to do so on line.

That is why the Law Commission consulted on this issue with a provisional recommendation that the rights of those entitled to rents or profits should cease to have an overriding interest. Its recommendation was strongly supported by those who responded.

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It may be worth noting that the first registration of a leasehold estate in circumstances where the superior titles are not themselves registered and were not deduced to the register on that first registration will be reflected in the class of title which the registrar gives to that leasehold estate. Usually, the lease will be registered with good leasehold title. That means that in any subsequent dealings with that leasehold estate any disponee will necessarily be alerted to the fact that one or more superior titles are not registered.

It is possible that this explanation might not entirely satisfy the noble Lord and he may believe that some difficulties remain. However, I hope that he will agree that it is of fundamental importance to the main objectives of the Bill that overriding interests should be reduced, in so far as that is possible, that his amendment would have the effect of adding an undesirable and not, perhaps I may respectfully say, an entirely necessary interest to what should be a very select category indeed.

Even though, as always, I find it interesting to listen to the noble Lord, I hope that in the light of that explanation he will feel able to withdraw his amendment.

Lord Goodhart: I am grateful to the Minister. I recognise that a licence is not technically an interest in property, but it is a kind of interest which in certain circumstances can be binding on the owner of the property.

I recognise and agree with the principles behind the desire of the Law Commission to restrict the number of overriding interests. However, I believe that from time to time the fact that we have removed any rights from the person, as against the owner, who is in receipt of rents payable by the occupier may lead to an untidy situation. If and when problems arise, they may have to be sorted out by the courts and in the circumstances I shall read what the Minister said. It is possible that I shall not want to take the matter further, but I shall not give an undertaking to that effect now. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Lord Geddes): I must advise the Committee that if Amendment No. 15 is agreed to, I cannot call Amendment No. 16 because of pre-emption.

Baroness Buscombe moved Amendment No. 15:

    Page 45, line 12, leave out sub-paragraph (2).

The noble Baroness said: In rising to speak to Amendment No. 15, I shall speak also to Amendments Nos. 16, 54 and 55. These amendments are designed to elucidate further the meaning of "actual occupation" by ensuring that an occupier's protection is not jeopardised by a temporary and fortuitous absence at the relevant moment. Its continuing connection with the land remains apparent on inspection.

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The meaning of "actual occupation" and of the definition in terms of physical presence is discussed in paragraph 8.22 of the report. It appears that an occupier's physical presence is intended to include presence by "his or her user" of the premises.

The case law on "actual occupation" under the present legislation indicates that occupation can include "making use" of the premises. However, the new legislation--this Bill--amends the law fundamentally in many respects. It is a new land registration code rather than a consolidation and on this point it uses the expression "physically present", which is not in the existing Act. It is therefore not at all certain that the case law on "actual occupation" will be applied to the new wording.

Occupiers' interests are a significant part of the system, particularly in connection with mortgages of residential property. It is therefore important to clarify their scope as fully as possible rather than to leave the matter to be litigated by people of modest means.

The wording of the amendments may not be ideal and I hope that the Minister will appreciate the fact that they were prepared under some pressure of time. They may not include the case where, for example, someone may be using the land but inspection alone does not show whether the disponer, the registered proprietor or someone else is doing so. We believe that it is important to explore the point and further the principle of including additional elucidation in the Bill. I beg to move.

5 p.m.

Baroness Scotland of Asthal: Although I am unable to accept these amendments, I wholeheartedly agree with the noble Baroness that it is important to explore these matters. We have listened very carefully to the points that she raises and shall consider them fully. However, for the reasons that I shall give, we do not believe that these amendments help to resolve the matter. With the leave of the Committee, I shall give a fairly full response to the issue at this stage because if we are to look at the matter together that may be of assistance.

This group of amendments concerns the issue of "actual occupation". There is another group of amendments concerned with easements which touches upon a similar theme and some of the ground covered now will be revisited then. The interests of persons in actual occupation override both first registration and registered dispositions. There are more exceptions to this category in the case of registered dispositions, but both provisions (in paragraph 2(2) of Schedules 1 and 3 respectively) state that a person is to be regarded as being in actual occupation of land only if he, his agent or employee is physically present there.

These amendments, in the alternative, seek to provide a partial definition of the term "physically present" or remove all references to "physically present" from these provisions by leaving out paragraph 2(2) of each schedule. It may help to allay the concerns that the noble Baroness has raised if I explain the approach that has been taken. The existing

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statutory provision is to be found in Section 70(1)(g) of the Land Registration Act 1925. That provides that the rights of those in actual occupation are an overriding interest. The provision refers to,

    "The rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed".

As many Members of the Committee will be aware, the meaning of those words has been found to be not wholly clear. The phrase "actual occupation" was considered in Williams & Glyn's Bank Ltd v Boland. That case has tested many lawyers for some time. In his speech in that case the noble and learned Lord, Lord Wilberforce, made it clear that the addition of the word "actual" to "occupation",

    "merely emphasises that what is required is physical presence, not some entitlement in law".

The Bill will give statutory effect to that point. If that was not done, there could be a danger that "actual occupation" would be interpreted more widely so as to embrace entitlement to occupation.

An example of where a term has been widened in its interpretation by the courts is "possession" in the context of the right to sue for the recovery of land. It had been thought by many that to sue for recovery the claimant had to be in possession of the land. Many Members of the Committee will be aware, however, that in Manchester Airport Plc v Dutton the majority of the Court of Appeal held that a mere legal entitlement to possession was sufficient. Therefore, the words "physically present" in these sub-paragraphs do not refer to the degree of continuity or permanence that is required to constitute actual occupation. Two of the amendments seek to do that by referring to,

    "had not permanently given up all connection with the land".

In our view, that is not necessary because of the meaning of physical presence and case law concerning actual occupation. The distinction that the sub-paragraphs seek to draw is simply that only a person in actual occupation of land, and with an interest in land, can have an interest that overrides first registration. A mere entitlement to occupy is not sufficient.

The case law on the definition of actual occupation makes it clear that physical presence is required. "Physically present" is not a legal term and so can bear its dictionary meaning. The temptation to try to give some kind of guidance as to how the phrase is to be interpreted is, we confess, considerable. Despite the persuasive arguments that the noble Baroness puts forward, we believe that it is wiser to resist them and not attempt to provide a partial statutory definition of the term "physically present". What constitutes physical presence will depend, as under the present law, upon the nature and state of the property. That is clear from the judgment of Lord Justice Nicholls in Lloyds Bank Plc v Rosset. In that case the majority of the Court of Appeal was of the view that a person could be in actual occupation through his or her agent or employees. The Bill will give statutory effect to that

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view. If as proposed in two of the amendments paragraph 2(2) was omitted from both schedules the statutory effect would not be achieved.

We have not included in the provisions the rights of those in receipt of rents and profits which are within the equivalent provision in Section 70(1)(g) of the 1925 Act, although that is a topic on which there is a further amendment before the Committee. The first amendment in this group seeks to apply the test of physical presence at the time of an event that triggers first registration. First, under Clause 11(4) or Clause 12(4) it is the rights affecting the estate at that time to which the first proprietor is subject. With first registration, the purpose is to establish a baseline for the statutory title, so the registrar looks at the position at the time of the application.

However, the question whether or not the first registered proprietor is bound by an interest that can be an overriding one on first registration will have been determined prior to that date, for example at the time of the event which triggers first registration. Unlike the position where the land is already registered, there is no "registration gap" because the triggering disposition vests the legal estate. In the case of, for example, a legal charge over registered land, the chargee does not have a legal estate until the legal charge is completed by registration, hence there is a gap between the two events.

Secondly, the proposed test could not apply to voluntary first registrations as there is no triggering event. It is hoped that there will be a large number of voluntary registrations once the Bill comes into force. Where first registration is voluntary, the overriding interest may have arisen, or been created, after the first registered proprietor acquired the land but before he or she applied for the registration of the title.

I hope I have explained why we consider that these provisions do not require to be amended as proposed or to be left out of the Bill. However, I have noted the concerns that have been raised this evening. The provisions certainly deal with very complex issues. I undertake to consider the amendments further, in particular in relation to the use of the term "physically present". It may be possible to improve the Bill in the light of the debate; if so, the Government will return to the matter at Report stage. We shall of course be very happy to receive any contributions before that stage to help clarify this matter.

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