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Lord Goodhart: Having heard that response, I wonder whether the Government should not think again. Where one has a short and non-registrable lease, for example for a period of three years, that lease may well contain easements over, for instance, common parts of a block of flats, or something of that kind. Does the Minister suggest that those have to be registered?
The Earl of Caithness: I am grateful to the noble Lord, Lord Goodhart, who has put the point better than I did. I was trying to think of an agricultural situation in which there was a three-year lease and any easement created under it would cease at the end of that short lease. What interest would there be to declare in such a case?
Baroness Scotland of Asthal: I understand what the noble Lord, Lord Goodhart, says about short, non-registrable leases for less than three years. He knows well that they do not have to be produced in writing.
The Earl of Caithness: None of us in the Committee is against what the Government are trying to do. We are all aiming for the same solution. The problem comes when we look at the nitty-gritty and suddenly see some anomalies that could be enormously expensive to try to operate and would not be practical. I am grateful to the noble Baroness for promising to have another look at the issue.
Baroness Buscombe: I thank the Minister for her response and am grateful to the noble Lord, Lord Goodhart, for his support for our request that the Minister consider those points with care. I am also grateful to my noble friend Lord Caithness for his intervention.
As I said earlier, while we support the principle of having the most comprehensive registration possible, we have to be practical and regard must also be given to cost. The noble Lord, Lord Goodhart, gave a perfect example of easements over common areas in a block of flats. That helps to show how the burden could outweigh the benefit.
We would very much appreciate it if the Minister could reconsider those points. We shall consider them as well and probably return to them on Report. On that basis, for the moment I beg leave to withdraw the amendment.
The noble Viscount said: I shall speak also to Amendment No. 47. As always, we are attempting to be helpful. We contend that Clause 30(2)(b) is unnecessary and therefore possibly misleading. The point is a technical one, but I shall try to put it briefly. The grant of a charge of a lease is a disposition of the lease, so the result of Clause 29(2)(b) is that the charge itself takes effect subject to the burden of any interest incident to the lease. If the chargee then deals with the
Clause 30(2)(b) is therefore otiose and its presence in the legislation risks giving rise to a misconceived argument that it must mean something. The meaning of Clause 29(2) has to be restricted to leave room for Clause 30(2)(b) to operate. I beg to move.
Baroness Scotland of Asthal: I am always delighted to accept any assistance that the noble Viscount, Lord Bridgeman, wishes to give me. I also accept that this is clearly a complex and technical area. Perhaps we can scout it together.
Clause 30(1) provides that a registered disposition for value of a registered charge has effect to postpone any interest affecting the charge at the time of the disposition if the priority of the interest is not protected at the time of registration.
Clause 30(2) lists the conditions that have to be met in order for the priority of an interest to be protected. Paragraph (a) lists three conditions that apply in any case. Paragraph (b) specifies a condition that must be met in the specific case of a disposition of a charge over leasehold land. Taken together, the amendments would remove paragraph (b). I hope to convince the noble Viscount that it serves a purpose.
The point is perhaps best made by way of an example. Let us say that X has a charge over a leasehold interest. That lease contains a restrictive covenant in favour of the landlord; X then transfers his charge to Y for value. Under Clause 30(1), the registration of the transfer of the charge has effect to postpone to the interest under the transfer any interest affecting the charge at the time of the transfer whose priority is not protected at the time of registration.
The restrictive covenant was an interest affecting the charge at the time of the transfer, so the question is whether, for the purpose of Clause 30(1), the priority of the restrictive covenant is protected at the time of the registration. The priority of the interest is protected if it falls with Clause 30(2).
In principle, the transfer of the charge should not affect the priority of the restrictive covenant in the lease. However, a restrictive covenant in a lease cannot be the subject of a notice in the register, as outlined in Clause 33(c), so Clause 30(2)(a)(i) cannot apply. The correct result is achieved by subsection (2)(b). The charge transferred relates to a leasehold estate. The burden of the restrictive covenant is incident to that estate.
I said at the beginning that this was a complex and technical area. I hope that the noble Viscount will feel that my explanation has shed some light on how it is envisaged that the clause will work overall. It has a purpose. One has to track it through, but we respectfully believe that it works and is necessary. I hope that the noble Viscount will feel able to withdraw his amendment.
Viscount Bridgeman: I am most grateful to the Minister for the lucidity with which she has explained this abstruse subject. I shall read Hansard carefully. In the meantime, I beg leave to withdraw the amendment.
The noble Viscount said: In moving Amendment No. 51, I shall speak also to Amendment No. 57. These amendments are designed to strengthen the protection of occupiers' rights and patent easements, which, in principle, are intended to be protected under the Bill, on dispositions of the land affected. If a purchaser is supposed to inspect land carefully and to be bound by what he finds, he should take subject to everything which is apparent on such an inspection and should not take free from something merely because it may not be "obvious" if, nevertheless, a careful inspection would show it.
Paragraphs 8.61 and 8.62 of the report, Land Registration for the Twenty-First Century: A Conveyancing Revolution, appear to use the words "obvious" and "apparent" as though they mean much the same thing. But that is not necessarily correct. In ordinary language, something is likely to be "obvious" if it will be seen even by someone who does not set out to look for it; whereas something which may have to be looked for, and will be found if looked for, will ordinarily be described as "apparent" on inspection. That is the best way to formulate the test which the report proposes. According to the last sentence of paragraph 8.62, consultation produced support for the proposal that,
Baroness Scotland of Asthal: The common thread of the first and third amendments in this group--Amendments Nos. 51 and 57--is the test to be applied in deciding whether something is patent or apparent on a reasonably careful inspection. In the first amendment, the test is in relation to whether a person's occupation is obvious and, in the third, it is in relation to legal easements and profits a prendre.
We have of course canvassed some of this ground already. Members of the Committee will recall that we considered the application of a test in connection with the rights of those who are in actual occupation or "physically present". These amendments again raise the question of how far the Bill needs to go in setting out how the tests are met.
The existence of overriding interests is an unsatisfactory, but nevertheless necessary, feature of the land registration system. One aim of the Bill has been to review all the categories of interest which have this overriding status and to assess whether and to what extent those interests should retain that privileged status. The overall aim is to reduce such interests as far as practicable--I believe that we said that earlier this evening when dealing with some of the previous amendments--and to ensure that they are restricted to interests which it would be impracticable or impossible to register.
By replacing paragraph 3 of Schedule 3, the amendment proposes that all legal easements and profits a prendre should have that status. Underlying the amendment is a justified concern that it should not be possible to avoid the burden of legal easements and profits a prendre that have effect at law. We absolutely understand the motivation behind that. However, I can reassure the Committee that that was never the intention of paragraph 3.
Perhaps I may explain in some detail to the Committee the restrictions contained in the paragraph as drafted and the reasons for them. I hope that in so doing I shall be able to reassure Members of the Committee that there is no reason to have concerns about the limitations that have been imposed.
Before doing so, perhaps it would be convenient for me to set out yet again some of the principal aims of the Bill. The intention is that as much as possible of what is known about a property should be readily available on the register and, ultimately, online. The register should become as complete a record as possible of the matters affecting a property so that a buyer is not bound by something of which he had no knowledge. That is the thrust behind all the rules.
The second point is that if the disponee, or buyer, knows of the legal easement or profit because it is patent, or obvious, then he will be bound by it. Such easements will be discovered from a reasonably careful inspection of the property, and the seller will not be under a duty to disclose them.
The third point indicates the other side of the coin. Any legal easement or profit which is not known to the buyer and which is latent should not bind the buyer. That protects buyers from undiscoverable easements and profits--a point of some importance as it is virtually impossible to dispose of an easement or profit once it has been established. However, there is an exception to this last principle. Many Members of the Committee will know that any easement which has been used within one year before the disposition will bind a disponee even though it may not be obvious to
The combined effect of those elements of paragraph 3 is to prevent a buyer being bound by a right of which he was unaware, which he could not have found out by inspection and which was not shown to have been exercised within the previous 12 months.
Perhaps I may say that this is a sensible point at which to strike the balance between the rights of the landowner and the person who has the benefit of the easement. We have tried to strike that balance throughout the Bill but at this point we say that it is of equal importance. After all, the person with the right over the property can always apply to note that right on the landowner's title for all to see so that no disponee is unaware of its existence. Even in relation to unregistered land, a person can apply for a caution against first registration so that the right is taken into account when the legal estate is registered for the first time.
The purpose behind the limitations is to encourage the creation of a straightforward form of standard inquiries before contract. That will prompt sellers to disclose the easements and profits of which they can reasonably be expected to know while at the same time protecting easements and profits which are not known to the landowner but which are in regular use.
Therefore, the paragraph as drafted represents a major element in the aim to make the register the determinant of title and of the rights and obligations to which the land is subject. If the amendment were accepted, it would blur greatly the careful distinctions that we seek to draw between the increasingly divergent systems of registered and unregistered conveyancing. We genuinely believe that it would work against the overall objectives of the Bill. We are confident that that is not the intention of noble Lords who tabled the amendment, although it may be the consequence.
I turn to the first and third amendments in the group. I regret that I do not see any reason for changing the word "obvious" to "apparent" in either paragraphs 2(1)(c)(i) or 3(1)(b) of Schedule 3. The issue is whether the occupier's occupation is patent. In determining whether something is patent, the courts have asked whether it is obvious, as in the case of Ashburner v. Sewell. The cases do not use the word "apparent". We are trying to use terminology that is already well known and well understood because we know of the difficulties that arise when diverging from terminology that is in use and accepted.
That introduces a set of connotations that do not--I say this with the greatest respect--help the definition for land lawyers and others who will struggle with this matter in due course. In view of the fact that the amendment would not improve the drafting--I say this respectfully and gently--I urge the noble Viscount to withdraw the amendment.
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