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Baroness Buscombe: My Lords, I welcome the Government's amendments.

On Question, amendment agreed to.

Clause 23 [Owner's powers]:

5.45 p.m.

Baroness Buscombe moved Amendment No. 26:

"( ) A charge by way of legal mortgage created by an owner gives the mortgagee the protection, powers and remedies provided by section 87 of the Law of Property Act 1925 (c. 20), despite the fact that an owner does not have power to create a mortgage by demise or sub-demise."

The noble Baroness said: My Lords, in moving Amendment No. 26 I speak also to Amendment No. 27 and the government Amendment No. 113.

The Bill proposes to take away the power to create a mortgage by demise. This is a useful and welcome modernisation. However, as currently drafted, it leaves a query. How does one define what a legal charge is when what it is said to be equivalent to can no longer be created? Our amendment is intended to overcome any illogical impasse.

The Government have responded to this concern which we first raised in Committee with their proposed Amendment No. 113. While we support Amendment No. 113 in principle, we believe that our amendment is preferable as it resolves the problem more directly and simply. The Government's amendment is unnecessarily complex and may even be technically defective as the difficulty does not arise from any change to Section 87 of the Law of Property Act 1925 made by Clause 23(1)(a), which is the basis on which the Government's amendment proceeds. Clause 23 does not affect the meaning of Section 87 but provides that a registered proprietor cannot make a disposition of the kind to which Section 87 refers. I beg to move.

Baroness Scotland of Asthal: My Lords, government Amendment No. 113 and Amendment No. 26 have been drafted to address the same issue although the approach used is somewhat different. I am disappointed that the noble Baroness does not appreciate the elegance of our solution. However, I may be able to persuade her of that in due course. I shall deal with the amendments together.

Clause 23(1)(a) states that an owner's powers to deal with a registered estate do not extend to the creation of a mortgage by demise or sub-demise. As your Lordships will recall from Committee, that is a simplification of the existing law, introduced because those methods of creating mortgages are not used any more. I very much appreciate the welcome that the noble Baroness gave to that change.

Noble Lords opposite helpfully spotted that Section 87 of the Law of Property Act 1925 provides that a mortgagee of a charge expressed to be by way of

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mortgage has the same protection, powers and remedies as a mortgagee by demise or sub-demise. The amendment should make the intended effect abundantly clear.

However, we respectfully suggest that it is necessary to retain the reference to the creation of mortgages by demise or sub-demise, as that will still be possible in relation to unregistered land. It is beyond the scope of the Bill to legislate in respect of such land.

We prefer our amendment to Amendment No. 26, as it inserts a new subsection directly into Section 87 of the Law of Property Act 1925. It would be more helpful to insert the new subsection directly into the section whose interpretation it is designed to assist.

Amendment No. 27 deals with a related matter. Clause 23(2) lists the powers that an owner of a registered charge has to deal with that charge, which will no longer include the possibility of creating a mortgage by demise or sub-demise. The appropriate way of securing a mortgage over registered land is to create a charge. The Bill also simplifies the powers of the chargee to deal with his charge. After the Bill comes into force, the appropriate way to do that will be by way of sub-charge. The amendment would allow the chargee to create a charge by way of a legal mortgage over the charge as well by way of a sub-charge. That would add an unnecessary complication.

The important issue as a matter of substantive law is not the mechanism by which the sub-charge is created but its effect and the powers that the sub-chargee may have. Those are dealt with in Clause 53. There should be only one way of creating a charge over a charge, and that is by creating a sub-charge, as is currently prescribed in Rule 163(1) of the Land Registration Rules 1925.

Amendment No. 27 is therefore unnecessary and undesirable. It is better for the Bill to set out one clear and easy method of mortgaging the indebtedness under a charge, which is a sub-charge. On that basis, I invite the noble Baroness to withdraw her amendment in favour of ours.

The Earl of Caithness: My Lords, I regret that the Minister has not convinced me this time. I have listened with care to what she has said before and agreed with most of it, but I found the arguments of my noble friend Lady Buscombe in favour of Amendment No. 26 more powerful than the Minister's in support of Amendment No. 113.

Will the Minister be kind enough to take the issue away and have another look at it before Third Reading? It is important to get this aspect right.

Baroness Scotland of Asthal: My Lords, I have said that we shall consider any position, but we have given the issue a lot of thought. We thought, perhaps naively, that Amendment No. 113 might give noble Lords opposite a little pleasure. I am disappointed that we seem to have failed in that regard. I hope that on mature reflection the pleasure will manifest itself.

Baroness Buscombe: My Lords, I thank the Minister for her response. I also thank my noble friend Lord

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Caithness for preferring our Amendment No. 26. I have listened with care to the Minister and I, too, am not convinced that her amendment is preferable to mine. I, too, would greatly appreciate it if the Government could think again about our arguments on Amendment No. 26 versus Amendment No. 113. I accept with pleasure that the Minister is responding to our concerns, but I should like her to consider whether our track is preferable. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 27 not moved.]

Clause 24 [Right to exercise owner's powers]:

Baroness Scotland of Asthal moved Amendment No. 28:

    Page 11, line 36, leave out subsection (2).

The noble Baroness said: My Lords, Clause 24 deals with the identity of the persons entitled to exercise owner's powers in relation to a registered estate. The clause states that both the registered proprietor and a person entitled to be registered as proprietor can exercise those powers, although the exercise of the rights by a person who has not yet been registered is made expressly subject to rules. The amendment deletes that rule-making power from Clause 24.

Your Lordships will recall that the wide drafting of the rule-making power gave rise to some concerns in Committee. It was suggested that the power could be used effectively to remove the rights altogether. I therefore undertook to clarify the intended use of the power and to come back with an appropriate government amendment on Report.

The intended use of the power is as stated in that earlier debate. It is intended to deal with the manner in which the rights to deal with the land are exercised and does not seek to restrict the actual powers of disposition. Under the present system, rules stipulate that the person who is entitled to be registered must use the same forms as he would use if he were the registered proprietor, and specifies the evidence of his right to be registered that must accompany the application. It is envisaged that very similar rules will be made following the enactment of the Bill.

That clarification of the intended use of the power shows that the general rule-making powers contained elsewhere in the Bill will be sufficient to achieve that more limited purpose. The rule-making power has therefore been deleted rather than amended. On that basis, I ask that the amendment be accepted. I beg to move.

Baroness Buscombe: My Lords, we on these Benches welcome the amendment, which substantially accepts the point that we made in Committee that rules as to the exercise of proprietor's powers should relate only to the form of dispositions and should not be able to limit the substantive scope of what a proprietor can do. The amendment is welcome.

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We believe that effectively the same point arises on our Amendments Nos. 29 and 103, which we shall deal with next, so we very much look forward to what the Minister has to say on those. I hope that she will be able to be positive.

On Question, amendment agreed to.

Clause 25 [Mode of exercise]:

Baroness Buscombe moved Amendment No. 29:

    Page 12, line 3, leave out "and content"

The noble Baroness said: My Lords, I shall be brief. As I have just said, we believe that this point relates to Amendment No. 28, with which we have just dealt. The purpose of our amendments is that the content of registrable dispositions should not be prescribed by rules. The content will be determined by the particular terms of each individual transaction. We believe that there is no reason why the contents should be prescribed by general rules, as it will vary widely, depending on the individual terms of each transaction.

We should also remember that freedom of contract makes the United Kingdom an attractive place to do business and that it should not be constrained unnecessarily. The amendments are intended to protect that point. In essence, the form is fine but the content could easily be construed as meaning "more than is necessary". The content is, and should remain, a matter for the parties. I beg to move.

6 p.m.

Baroness Scotland of Asthal: My Lords, I hope that I shall be able to give the noble Baroness some reassurance. I shall deal first with Amendment No. 29. Clause 25 relates to the way in which an owner can exercise his power to deal with a registered estate or charge. A registrable disposition will have effect only if it complies with detailed rules. The amendment put forward by the noble Baroness seeks to limit the rule-making power to the form of a registrable disposition.

As mentioned in Committee, this clause will be a very important provision as we move towards electronic conveyancing. Under the system which is now being drawn up, and as some of your Lordships have seen, the form of a disposition may become merely the completion of fields on a computer screen. If, or rather when, that model becomes a reality, it will be necessary to ensure that the type of content to be entered into the necessary fields is prescribed in order to ensure the proper operation of the system.

But even the current initial models of conveyancing which have been prepared provide for a wide choice in the substantive import of the content of each field or for conveyancers to be able to tailor entries to take account of the peculiarities of a property; for example, by entering the details of a restrictive covenant. That gives an idea of the balance which must be struck in the next stages of the preparation of the system between sufficient consistency to ensure the smooth working of the system and flexibility sufficient to capture the myriad circumstances required for all the property transactions which the system must handle.

30 Oct 2001 : Column 1347

There will be ample consultation on the detail of the system. The rules which will finally prescribe the shape of the documents will themselves be the subject of consultation before they are laid before the rule committee. Those processes will provide plenty of opportunity to identify and remove any prescription which inadvertently would reduce the range of options that conveyancers need to have at their disposal.

In short, there is no intention to curb the owner's powers to deal with the registered estate beyond what is necessary to make the system work effectively. Neither is there any intention to prescribe anything other than the heads of content to be contained in a disposition. The detailed terms of the disposition will, as now, be a matter of negotiation between the parties, and responsibility for the detailed drafting will, as now, be firmly with the parties' legal advisers. I hope that what has been said has reassured the noble Baroness and that she will feel able to withdraw the amendment.

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