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Baroness Scotland of Asthal: We would argue that Clauses 46(3) and 72(4) operate as safeguards. I also invite the noble Baroness to look at Clause 65, which refers to Schedule 4. She will know that it is possible to apply for alteration of the register under Schedule 4,
which is on page 49 of the Bill. I suggest that those three clauses together give the assurance that both the noble Lord and the noble Baroness seek.
Viscount Bridgeman: I am grateful for that full explanation and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 49 [Tacking and further advances]:
Baroness Buscombe moved Amendment No. 69:
- Page 20, line 2, at end insert--
The noble Baroness said: The amendment is designed to ensure that the new and improved tacking rules apply uniformly in favour of the proprietor of a registered charge against all other interests in the land which are created subsequently, of whatever sort, and whether they are substantively registered or protected by notice. It is important to make it clear how far a chargee may tack as against the holders of derivative interests which are not charges, for example, tenants or contracting purchasers, because their interest in the proprietor's equity of redemption entitles them to redeem the charge. They may wish to do so in order to avoid being sold up by the chargee if the proprietor fails to repay what he owes. To give effect to their rights to redeem, it is necessary to work out how much of the amount secured in favour of the chargee has priority to their interests. I beg to move.
Baroness Scotland of Asthal: I hope that I can assist the noble Baroness. I can deal with paragraph (a) of the amendment relatively briefly. It is intended to apply the provisions relating to further advances to all subsequent charges. However, we respectfully suggest that this is already the effect of Clause 49(1) because it refers to a subsequent charge. Clause 129(1) defines a charge as
With regard to paragraph (b) relating to further advances to all subsequent dispositions, it is not clear which dispositions are covered. For example, is the paragraph limited to registrable dispositions, or will, say, a contract for the sale or an option on such dispositions be covered? It is difficult to see how the amendment will work. In any event, it appears to be unnecessary.
Let us suppose that Miss Smith charges her land. The legal charge is registered and she subsequently grants Mr Brown an easement over the land. Clearly, if Miss Smith fails to keep up with her mortgage payments, the lender can exercise its power of sale and sell free of Mr Brown's easement. But let us also suppose that there is a further advance, subsequent to the grant of the easement, and Miss Smith then repays what was due under the legal charge at the time of the grant of the easement, but not under the further advance. The chargee could still sell free of Mr Brown's easement. In other words, the lender will always have priority for everything that is advanced under its legal charge over any subsequent disposition that is created after the legal charge.
I am assuming that if disposition includes a subsequent registered disposition, the legal charge is registered before then. The lender could ensure that such a legal easement is not entered as benefiting another registered estate and that it was not the subject of a notice against the borrower's title. That could be done by the legal charge providing that a restriction should be entered in the ownership part of the register, prohibiting the registration or noting an easement without the lender's consent.
If the amendment were capable of working, it would go beyond the provisions of the present Act and could lead to injustice, particularly as there would be no provision for the person granted the interest under the disposition to serve notice on the proprietor of the charge even if it were practicable.
I hope that that helps to explain why we say that it would not be a helpful amendment and that the noble Baroness will feel able to withdraw it. I hope that I have dealt with the concerns that she expressed.
Baroness Buscombe: I thank the Minister for her full response to the amendment. On reflection we almost questioned ourselves whether paragraph (a) of the amendment was strictly necessary in view of the definitions of "charge" and "registered charge" under Clause 129(1). We were more hopeful about paragraph (b), but having listened to the Minister, I would now like to consider what she has said. For the time being, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 50 [Overriding statutory charges: duty of notification]:
Baroness Buscombe moved Amendment No. 70:
The noble Baroness said: This amendment would require the registrar to give notice, to the persons affected, of a claim that a statutory charge had priority over existing entries where priority is unclear or disputed, as may happen. Paragraph 7.38(2) of the Report refers to the existence of situations in which the relevant statute makes no express provision as to priority. If the proprietor, and especially chargees with
Baroness Scotland of Asthal: I understand the reasons for tabling these amendments as it is important to have clarity as to what these provisions mean. I hope that I can again assist the noble Baroness. It seems that the amendment's intention is to relieve the registrar of the need to satisfy himself that the statutory charge has postponing effect before giving notice. I see that the noble Baroness is nodding.
Clause 50 is an important provision relating to the interaction of the different statutes. Statutory charges arise over a person's land. For example, a local authority may carry out work to protect public health or safety and then charge the land so that the money can be recovered. The charges arise under a variety of statutory provisions, and those provisions govern whether or not a charge has priority over existing interests in the land.
Clause 50 ensures that where the priority of existing rights is affected, the people affected are told of the application to register the statutory charge. They can then respond if they feel that the statutory charge has not arisen or they do not believe that the charge affects the priority in the way indicated.
I am able to reassure the noble Baroness that the clause as originally drafted will operate to cover the situation envisaged by the amendment. It is also open to those affected, even at a later stage, to contest the issue of priority should that become material to them. That would be achieved by an application for rectification of the register.
As I say, I quite understand why the noble Baroness and those opposite have tabled the amendment. It is helpful for us to have clarification on how the Government believe that the measures interact. On that basis, I invite the noble Baroness to withdraw the amendment.
Baroness Buscombe: I thank the Minister for that very helpful clarification of Clause 50 on that particular point. I have pleasure in withdrawing the amendment.
Amendment, by leave, withdrawn.
Clause 51 [Effect of completion by registration]:
Baroness Buscombe moved Amendment No. 71:
The noble Baroness said: This amendment, in relation to Clause 51, is a technical amendment. We hope to prevent any difficulty or confusion arising from the fact that the meaning of a charge by deed by way of legal mortgage is not directly defined by the Bill but must be derived from Section 87(1) of the Law of Property Act 1925. That section specifies the effect of
There appears to be a logical difficulty in defining the effect of a permitted dealing with registered land in terms of the effect of a disposition of a type which is not permitted. I beg to move.
Baroness Scotland of Asthal: The Government believe that this amendment raises an interesting point on the wording of Section 87(1) of the Law of Property Act 1925. As Members of the Committee will know, that subsection puts a mortgagee in the same position as if there was a mortgage by demise or sub-demise. As the Bill abolishes mortgages by way of demise or sub-demise, it is a good idea to amend that subsection if suitable wording can be devised. I shall return to that point on Report. I am most grateful to the noble Baroness for bringing that matter to our attention.
I turn now to the amendment. Clause 23 abolishes mortgages by demise and sub-demise. The Law Commission's consultation exercise found that they are no longer used. If that is the case, then there is no need for the saving provision proposed by the amendment.
There is also a more important issue. Clause 23 should not be robbed of its teeth. If such mortgages cannot be granted then they should be completely ineffective. They should not be given legal effect because they have been inadvertently registered.
I invite the noble Baroness to withdraw the amendment but obviously we shall return to the matter at a later stage.
"( ) This section applies to the priority of further advances on the security of a registered charge--
(a) as against a subsequent charge notwithstanding that it is either registered or protected by a notice under section 32, and
(b) as against any other subsequent disposition, notwithstanding that it is either registered or protected by such a notice, as it applies to the priority of such advances as against a subsequent charge."
"any mortgage, charge or lien for securing money or money's worth".
It therefore appears that paragraph (a) of the amendment is unnecessary.
Page 20, line 7, after "effect" insert ", or is claimed by that person to have effect,"
Page 20, line 17, at end insert "(no account being taken for the purpose of this section, and of section 87(1) of the Law of Property Act 1925 (c. 20) as applicable for the purpose of this section, of the prohibition in section 23 of this Act of the creation of mortgages and sub-mortgages by demise or sub-demise)"
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