HC Deb 30 July 1975 vol 896 cc2005-20

10.30 a.m.

The Parliamentary Secretary to the Law Officers' Department (Mr. Arthur Davidson)

I beg to move, That the Chairman do now report to the House that the Committee recommend that the Local Land Charges Bill [Lords] ought to be read a Second time. As the Committee will appreciate, the Bill is designed to reform a technical area of land law, which serves a public need. It is an important area of land law. It implements the recommendations of the Law Commission's Report on Local Land Charges and substantially reproduces the draft Bill annexed to that report. Perhaps at this stage I may pay tribute once again to the Law Commission for producing an excellent report and a draft Bill which is another step in clarifying, simplifying and rationalising the law and making it easier for ordinary members of the public to understand and benefit.

The local land charges system has its roots in the last century when local authorities started to obtain statutory powers to carry out certain works on land and to recover the cost of doing so by means of a financial charge over that land. These local charges are of a public nature and are usually distinguishable from ordinary land charges, such as restrictive covenants and other charges or burdens on land which are enforceable by private individuals. Local land charges are registrable in registers kept in the offices of local authorities and ordinary land charges are registrable centrally by the Land Registry.

The legal consequences of registration, or lack of registration, however, are substantially the same for both types of charge: purchasers are bound by a charge which has been registered and take the land free of any charge which has not been registered. The law relating to both types of land charge was consolidated by the Land Charges Act 1925. Since then, various improvements to the ordinary land charges system have been made, culminating in the Land Charges Act 1972, which consolidates the law with regard to ordinary land charges. The development of the local land charges system, on the other hand, has been in a more piecemeal and patchwork fashion. Its parent enactment is the sole surviving part of the Land Charges Act 1925, now set out in Schedule 4 to the 1972 Act.

The 1925 Act is largely geared to the financial charges to which I have referred. But since 1925, registration in the local land charges register has been adopted by numerous statutes as a convenient device for notifying purchasers of matters which are not true local land charges in the sense I have indicated. Many of these are restrictions or burdens created by Government Departments or other public bodies. The formulae appearing in these statutes are by no means uniform, and over the years complications have set in. Although the system was examined by the Stainton Committee in 1952, its report has lain largely dormant and I am sure the Committee will appreciate that a proper overhaul of the system is long overdue. It has been neglected by successive Governments. This Bill now meets that need.

I shall briefly outline the principal changes to be effected by the Bill. Clauses 1 and 2 redefine local land charges by positive and negative categories. It is sometimes difficult to determine whether a matter is registrable and to know the consequences of registration or non-registration. Clauses 1 and 2 help to dispel these doubts for, broadly speaking, the Bill applies a new framework to everything which is a local land charge and this framework does not apply to anything which is not a local land charge.

Clause 3 has the effect of transferring to the local authorities themselves the present responsibility for registration imposed upon individual officers. It also makes flexible provision for the form in which the index to the register may be kept.

Clause 5 imposes appropriate duties on authorities to register charges or, as the case may be, to apply for them to be registered. The clause helps to clear up the obscurity of the present law about the duties of authorities in registration and provides a firm basis for the new and crucial provisions about compensation contained in Clause 10, to which I now turn.

Clause 10 provides that failure to register a local land charge, or failure to disclose a registered local land charge, will not affect its enforceability but will entitle the purchaser in certain circumstances to compensation. The Committee will appreciate that the existing position regarding failure of registration and disclosure is one of confusion and uncertainty. Many registrable matters bind a purchaser even if they are not, in fact, registered and the purchaser may have no redress despite the tact that he was kept in ignorance of the charge when he searched the register.

Even where the purchaser takes free of an unregistered charge, his protection may be an illusion since the local authority is often free to re-impose the charge. Yet where the charge cannot be re-imposed, a project of public importance or indeed, of importance to an individual in the long run may be frustrated through a technical failure in the registration system.

This state of affairs is plainly unsatisfactory. What is needed, and what Clause 10 provides, is a rational solution to the problem of balancing the public interest in the enforcement of a charge against the need of the innocent purchaser to be compensated for loss resulting from a failure in the system, and not due to any failure of his.

The other provisions of the Bill, to which I need not refer, either re-enact existing law or make minor modifications. I hope that I have given a general picture of the Bill and I commend it as a useful measure of reform.

10.38 a.m.

Mr. Graham Page (Crosby)

I, too, wish at once to pay a compliment to the Law Commission on its report, which has been of great help to any one coming fresh to the Bill and trying to see what reforms are advised and how they have been drafted.

The Parliamentary Secretary fell, I suggest, into the same error as the noble and learned Lord the Lord Chancellor when he presented the Bill in another place. As the noble and learned Lord is a Government spokesman, I believe that I shall be in order in quoting him. He said: My Lords, this is a technical Bill designed to improve one part of our conveyancing machinery, itself a technical field. I apologise to noble Lords for inflicting such a monstrous technicality on the House at this hours."—[Official Report, House of Lords, 24th June 1975; Vol. 361 c. 1374.] I only pause to comment that the hour was only 7.28 p.m. which is hardly monstrous to us. It is not just a monstrous technicality. Local land charges and the local land charges registry are a necessary and common obstacle in the purchase of a home, and, indeed, in the purchase of any property.

I may be going back in history, but 50 years ago it was not usual to find that one's house was encumbered by some local land charge. Nowadays it would be extraordinary to find that it was not encumbered by a local land charge. Fifty years ago, until the great law of property reform was carried through in 1925, one did not even bother to search in the local land charges register before signing the contract, the major local search between contract and completion, until the case of re Forsey and Hollebone's Contract to which the Law Commission referred. I recollect that when I was a student I had a limerick about it, which I shall not repeat in this Committee. That case came along and, as the commission described it By virtue of section 198 of the Law of Property Act 1925, registration of a local land charge … constitutes actual notice of the charge to all persons and for all relevant purposes. Thus the good lady who entered into a contract in that case, entered a contract which said "free of encumbrances". Between contract and completion her solicitor made the search and discovered that there was a land charge register, and she was bound by it.

That was in 1927, and thereafter the practice was always to search in the local land charges registry to see whether there was a land charge on the property before entering into a contract to purchase. There gradually grew up the practice from the realisation that the local land charges register did not disclose everything. Local authorities had a habit of making proposals which did not require registration until they reached an advanced stage. Purchasers were buying property relying on the local land charges search and then finding between contract and completion that the local authority had carried out some proposal, perhaps after completion, to build a road through the back garden, or something of that sort.

So there grew up the practice of what the Law Commission calls supplementary inquiries, commonly referred to as inquiries with searches. These were inquiries of the local authorities to discover whether there was anything which would encumber the title to the property which did not, at that stage, require registration.

I shall return to those supplementary inquiries later, because they are not dealt with in the Bill and I intend to suggest that perhaps they should be so dealt with. I have not declared an interest, but I suppose it is obvious that I am a solicitor. Solicitors were brought up on the strict rule that if it is not registered, it is void. If it is registered, it is valid without necessarily knowing anything about it.

A person dealing with property is assumed to know the contents of the Local Land Charges Register and there for buys with notice of any encumbrance that was on that register. The result is that if a local authority fails for some reason to register a local land charge, or if there is some mistake in the search which does not disclose a local land charge which has been in fact registered, that local land charge is void and the public lose.

The Law Commission is weighing the advantages and the losses here. Should we continue to force this loss on to the public by reason of some error in not registering the local land charge, or is there some other way to compensate the purchaser or other person dealing with the land who did not know about the local land charge, when it is discovered that the property should have been made subject to a local land charge?

The Law Commission came down on the side of compensation for the purchaser rather than invalidation of the charge.

One might have said that this was a little unfair to the purchaser. It might be asked why should not the public be the losers as it was their agent, the local authority, which failed to make the registration. But the Law Commission comes out firmly as saying that compensation is sufficient, that there is no need to invalidate the charge and that compensation may be paid to the person for the fact that it is there without his knowing that it is there, or without his having an assumed knowledge that it is there. So in Clause 10, as the Parliamentary Secretary has said, compensation is provided for any error or any failure to register or to notify the registration of the local land charge.

But the Law Commission and the Bill go on to divide local land charges into two categories, one which might be called land charges proper and the other, as the Parliamentary Secretary said, items which are not true land charges. I am very doubtful about this division. I lean towards registering everything in the local land charges registry so that anybody dealing with a property will be able to see to what the property is subject. To have certain encumbrances on the property kept off the register considerably confuses the matter.

I should not wish to bring some of the items enumerated in Clause 2 on to the Local Land Charges Register. Indeed, a prohibition or restriction … between a lessor and a lessee obviously remains within the lease and does not need to be registered. The item to which I draw particular attention is in Clause 2(e), which removes from the register something which is already placed on the register, namely, the planning restrictions.

One relies on the local land charges register to know whether the property is subject to any planning restrictions. Indeed, one supplements that in the supplementary inquiries by asking the local authority for particulars not only of planning permissions that have been granted but of those refused.

It is important for a purchaser to know the planning history of the property before he buys. If he is hoping to convert a large dwelling house into several flats, it is important to know that a few months earlier an application to do so was turned down. One therefore looks not only for restrictions placed by a planning permission which has been granted, but also for information about planning applications which have been refused.

The Law Commission says that these should not be registered as local land charges. They have to be put in a town planning register which is provided under Section 34 of the Town and Country Planning Act 1971, and the purchaser may look there. The town planning register under that Act is not an efficient register. Local authorities maintain it in varying degrees of possibility of search—they vary from place to place—there is no system of search in the town and country planning register of planning permissions as there is in the local land charges registry.

If in future every purchaser must make his search in the land charges register and then go to the planning register—the register of planning permissions granted—that will duplicate the work and there is no proper machinery by which one can deal with the planning register. All that the planning register has to have at present is a brief statement of the planning application and, finally, lodged somewhere—and in practice I assure The Committee that this is almost impossible to find in the local authority archives—the actual planning permission granted.

I am doubtful whether it is right to remove Clause 2(e) from the local land charges register. The Law Commission advises it on the basis of a case of Rose v. Leeds Corporation many years ago which said vaguely that some of these planning restrictions were not proper for registration as local land charges. I wish that the Law Commission had gone the other way and overruled Rose v. Leeds Corporation and said that these should all be registrable as land charges in future.

I would seek at a later stage in the Bill to offer alternative amendments here, either to have all the planning information as a local land charge, so that anyone wanting to know about the planning need only search one register, or to set up a proper search procedure for the planning register. If we are to rely on that for informing the purchaser, it cannot be left as it is without a proper search procedure. That is one point on the division between "land charges proper" and "not true land charges".

The other point is that there are a number of cases which are omitted from the land charges proper and which a purchaser or a mortgagee dealing with the property would certainly wish to know In particular, there are compulsory purchase orders. I do not think that one would find a compulsory purchase order registered anywhere. After all, that is the most vital information for any purchaser or mortgagee.

Secondly, as at least one hon. Member on the Government side of the Committee will know, we inserted a great many cases of registration as a local land charge in the Community Land Bill. This was the great compromise in that Committee. When the Minister wanted to impose designation of various items, we suggested that he should stick it in the local land charges registry and nobody would know about it. I am not sure how the timing of the Royal Assent to these two Bills will run, but we must take all those matters under the Community Land Bill—if that reaches the statute book—into account. Therefore, I shall wish at a later stage to examine Clause 1 very carefully, as well as Clause 2, to see that Clause 1 includes all that a purchaser or mortgagee would wish to know.

I now return to the supplementary inquiries. As I explained, by making a local land charge search one does not obtain all the information which a purchaser would want about the property which he is purchasing. Therefore, over the years—I used to devise my own supplementary inquiries to the local authorities—the practice gradually grew up covering supplementary inquiries. This was taken over by the Law Society which settled the formal inquiries with the local authority associations. Those inquiries now have two parts. Part I is the ordinary one, and Part II has a lot of out of the ordinary questions for the answers to which one pays a special fee.

The custom and practice of the local authorities in answering these preliminary inquiries is to put a rubber stamp at the bottom of the inquiry saying that the local authority takes no responsibility for the accuracy of the answers.

It is preposterous that a public body should contract out of any liability for negligence in such cases.

In practice, I have had more than one case—I should tot them up to about eight or ten—where that has been stamped on the bottom of supplementary inquiries. Some vital point about, say, a compul- sory purchase acquisition, or road, or some matter seriously affecting the property but not the subject of a local charge has been omitted, or the answers to questions have been wrong. The purchaser has bought the property and in some instances it has become absolutely useless to him, not the sort of property which he wanted to buy. But he has no comeback for the negligence of the local authority in answering those supplementary inquiries.

I should like the answers to supplementary inquiries put on exactly the same legal footing as searches in the register. The local authority answering them should be responsible for negligence and should not be able to contract out by putting a rubber stamp on the bottom of the answers.

I began by saying that this was not really a technical Bill. I hope I have not been too technical about it. It is something which will affect the practice of conveyancing, which for most people is one of the most important events in their lives because it is the procedure whereby they buy their homes.

We have to be careful to see that we are guarding against the prospective buyer buying a pig in a poke. Everything must be done to let him know what encumbrances there are on a property. If there is an encumbrance which is a local land charge, and which ought to be registered as a local land charge but which is not, he should have compensation. It is not merely that it is invalid, which could be settled by compensation.

To that extent I commend the Bill. There are problems that I have briefly mentioned to which I hope we shall be able to find a reasonable solution later.

10.58 a.m.

Mr. Bruce Douglas-Mann (Mitcham and Morden)

Like the right hon. Member for Crosby (Mr. Page), I must declare an interest as a solicitor. I cannot, however, rival his experience either in conveyancing or in Ministerial responsibility for the matters with which this Bill is concerned. I would substantially agree with what the right hon. Member has said about three major aspects of the Bill.

Like him, I agree with the Law Commission's recommendation that it should not be the public who suffer if the local authority fails to register a land charge, but that the charge should remain enforceable although subject to compensation. I have some reservations about whether the level of compensation likely to be available under the provisions of Clause 10 will generally be adequate. This applies to all compensation whether it is for personal injuries or anything else.

In the examples with which I am familiar the effect of a local land charge which has not been registered, or of an incorrect reply to a supplement inquiry, can wholly destroy a purchaser's desire to have that particular house or substantially diminish it without it significantly affecting its market value. There are a great many examples one could cite, mainly the development likely to take place in the immediate vicinity of a house that may not significantly affect the market value, but may significantly affect the desire of the purchaser to have it. As with all such compensation, the only measure of compensation will be the difference between the value of the house with that land charge and the value of the house without it, and the personal preferences of the purchaser will be quite immaterial in that respect.

A much more important point is the exclusion of the large category of items that have been registrable as land charges in the past and that are the very things about which the purchaser of a house wishes to know. Schedule 1 shows enactments which are now excluded from registration. I go back over 20 odd years of practising, not substantially as a conveyancer, but doing a certain amount of it all the time. Very few of the items which have turned up in my local searches and which have ever bothered me are not now excluded from registration as a consequence of the effect of the Bill. Matters like registration under the Highways Act, a charge to maintain roads, registration under the Housing Act of a control order, registration of all the various items set out in Schedule 1, are the very things that one primarily looks for.

I instance under the Housing Act 1974 the declaration of an area to be a housing action area, general improvement area, and so on. That vitally affects a purchaser and those are items which should still be registered on the local land charges register. They are matters which the local authority should be under an obligation to disclose. If it does not disclose them, it should pay compensation in default.

As the right hon. Member for Crosby said, there was a period—it is no longer a practice—when local authorities were taking to replying with a rubber stamp to the supplementary inquiries submitted with local land charges searches saying that they did not accept any responsibility for the accuracy or inaccuracy of the replies. I am glad to say that that has gone by the board. It has gone by the board not as a consequence of any statute, but simply by agreement between the Law Society and the local authority associations. It could be reinstated at any time.

The Bill makes the only statutory obligation the obligation to register a certain very limited class of land charges. I cannot think offhand of what it would be likely to fish up as a consequence of any search under this register. Obviously, there are certain financial obligations which are imposed on property which will remain registrable, but the major issues about what one wishes to know are put into the supplementary inquiries. They are wholly omitted from the Bill and are involved questions to which the local authorities have no statutory responsibility to reply.

I feel considerable anxiety about this aspect of the Bill—the exclusion of the duty to register a very large number of those items which in the past have been local land charges, and the fact that there is no statutory obligation upon local authorities to answer the supplementary inquiries which are submitted by the purchaser or which are frequently submitted by a vendor in anticipation that he will show it to a prospective purchaser. Unfortunately, it is not a very widely accepted practice amongst solicitors acting for vendors when they are proposing to sell property by auction to carry out searches beforehand. The wiser do because it frightens off a lot of purchasers if the searches are not available.

Although it is provided in Clause 10(3)(d) that an official search is material if, but only if—

  1. (i) it is made after the commencement of this Act, and
    2. 2017
  2. (ii) it is requisitioned by or on behalf of the purchaser or …"
is shown to the purchaser before the relevant time, that does not impose the same obligation. Its effect is that responsibility for failure to make a search of the local land charges register carried out by a vendor preparatory to a sale is transferred. It gives the purchaser the right to enforce a claim for compensation.

Does that apply to supplementary inquiries? I do not think that it does. Under supplementary inquiries a person's entitlement to recover compensation for mis-information supplied or for the lack of information, lies primarily in contract to the purchaser through his solicitor who has paid a fee for this information and the local authority which has failed to provide it. Therefore, where the purchaser carries out the search that gives him a claim for compensation.

What about the situation in which the vendor has made the inquiries before contract? The purchaser has to rely on the principle of Hedley, Byrne & Co., Ltd. v Heller, which is not a situation the purchaser would reasonably wish to be in. As did the right hon. Member for Crosby, I must apologise to the Committee for involving it in technicalities. But they are important technicalities, potentially affecting 51 per cent. of householders who own their own houses.

I am not at all content that the aspects which I have raised in my remarks have been dealt with adequately in the Bill. I hope that at a later stage the Minister will be able either to satisfy me about them, or to propose amendments which will put my doubts at rest.

11.7 a.m.

Mr. Davidson

Both the right hon. Member for Crosby (Mr. Page), whose experience in these matters is great, and my hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) apologised for dealing with what they said were technical matters, but, as they rightly said, these go to the heart of the Bill and concern every purchaser who wants to make sure that he buys a house unencumbered as far as possible, and at least knows what are the encumbrances. I am sure that, as the right hon. Gentleman said, they are matters to which we shall return at a later stage of the Bill. I hope that the Committee will forgive me if I do not deal with them at length now.

The right hon. Member for Crosby mentioned that the Bill did not deal with a matter to which my hon. Friend also referred, namely, planning inquiries, and that that information is available on special planning registers. I accept that the planning registers are in need of improvement, but at this stage it appears to me and to my advisers that the Bill cannot deal with planning registers.

The right hon. Gentleman hinted that there should not be duplication. In fact planning registers, deficient as they may be, set out details and perhaps they should be more fully dealt with—

Mr. Graham Page

It is not a question of just searching in two registers, as the Law Commission would have us do and as the Bill sets out, namely, to search in the local land charges register and the planning register, but a purchaser must search in a lot of other places. The personal land charge and the land charges registry against the person need to be searched.

If it is a company, the person has to search for the charge against the company. One may even be searching in case of bankruptcy. We do not go back to the old tithe searches, when we used to crawl about the floor in a large room in Red Lion Square, with objects that looked like the curling stones used for the Scottish ice sport. We rolled out a map and crawled across the floor. Thank heavens we have given that up! I do not want to go back to innumerable registers. If we could concentrate on one, it would be a great help.

Mr. Davidson

The Law Commission's object, as the right hon. Gentleman realises was to prevent duplication by taking out of local land charge registers matters which were clearly more fully registered in planning registers. However, since the right hon. Gentleman has said that he intends to return to the matter later, perhaps we can deal with it then.

He mentioned compulsory purchase orders. He is quite right: obviously they have a great effect upon the value of houses and those who are about to buy houses. Certainly there would be a very good case to be made out for making them registerable, but, as he will appreciate, this is basically a structural Bill which does not aim to determine policy about registration matters. I have no doubt that my right hon. Friend the Secretary of State for the Environment will look at the matter and I hope that he will have something to say about it, in which case we shall return to it later.

As the right hon. Gentleman and my hon. Friends will realise, the Law Commission dealt at great length with the subject of supplementary inquiries and took the view that they should not be included in the Bill. As the Bill is based upon the Law Commission's report, I will not go further than what the Law Commission said.

The right hon. Gentleman said how wrong it was that local authorities were not liable for negligence or supplying inaccurate answers. I would refer him

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Goodhew, Mr. Victor (Chairman) McMillan, Mr.
Campbell, Mr. O'Halloran, Mr.
Davidson, Mr. Page, Mr. Graham
Douglas-Mann, Mr. Pavitt, Mr.
Eyre, Mr. Wise, Mrs.
Lewis, Mr. Ron

to paragraphs 78 and 79 of the report, which deal with that matter. While I do not wish in any way to be complacent about it, the picture the Law Commission has painted is that the matter is not as serious, and that the local authorities are not as abandoned, as he has made out.

I do not know whether there are any other points which the Committee wishes to raise, but if there are, perhaps the right hon. Gentleman and my hon. Friend could return to them at the Committee stage.

Question put and agreed to.

Resolved, That the Chairman do now report to the House that the Committee recommend that the Local Land Charges Bill [Lords] ought to be read a Second time.

Committee rose at fourteen minutes past Eleven o'clock.