HL Deb 13 March 1986 vol 472 cc744-52

7 p.m.

The Lord Chancellor

My Lords, I rise to move that this Bill be now read a second time.

The Bill is very technical. It gives effect to the recommendations of the Law Commission's Report on Land Registration, No. 125, together with small amendments to take account of the recent extension of the "right to buy", brought in in 1984 and now consolidated in the Housing Act 1985. That report is the first in a projected series of four reports in which the Law Commission is examining certain aspects of the law of land registration which may need to be brought up to date. The intention is to make the system of registration easier to understand and operate. If it succeeds in this purpose, the Bill will benefit both solicitors and members of the public who use the system and the Land Registry, and the staff of the Land Registry who serve them.

The benefits of the registered system of conveyancing are, I think, not in doubt. But it has to be admitted that the Act of 1925, which is the governing statute, is not particularly happily drafted. There are many obscurities and anomalies, and it is a tribute to the Land Registry over sixty years that they have managed to operate it as satisfactorily as they have. The present Bill deals with three areas of the law which are considered at present to be unsatisfactory: the conversion of title, the registration and protection of leases, and the method by which the priority of dealing in certain equitable interests in registered land is determined. I shall deal with each of these in turn.

I turn therefore to the conversion of title. It is a fundamental feature of English land law that title to land is relative rather than absolute. Thus, two or more people may have some sort of title to the same piece of land, and one person's title may be good against all the world except somebody else with a better title.

The registered system reflects this relative nature of the subject by providing for various classes of title. It also provides for the conversion (or, better still, the upgrading) of one class to another. There are four classes of registered title: absolute title, good leasehold title, possessory titles and qualified title. Three of these classes—the absolute, the possessory and the qualified—may each be either freehold or leasehold. Thus, there are in fact seven different categories. Absolute title is of course the best kind of title to have, and it attracts the full indemnity provisions of the Act. Good leasehold title is granted to a tenant where the quality of the landlord's title cannot be ascertained. Possessory title is given where the title may be subject to the possibility of some other third-party claim. A qualified title is subject to some specific and identifiable defect which is recorded on the register.

The existing provisions for upgrading inferior classes are extremely difficult to interpret. They are contained in Section 77 of the Act of 1925. Clause 1 of this Bill supplies a completely new Section 77. We trust it is much simpler and much more logical. If the clause is passed, all conversions will take place either on transfer for value or on any other occasion on application or at the instance of the registrar. Inferior freehold title may be converted to absolute title if the registrar is satisfied as to the title. Inferior leasehold title, including good leasehold title, may be converted to absolute leasehold title if the registrar is satisfied as to the title and as to any reversionary title. Possessory title may be converted without documentary evidence after 12 years' registration. In the case of possessory freehold, it will be conversion to absolute freehold; and in the case of possessory leasehold, to good leasehold.

I come now to the registration and protection of leases. Clause 2 of the Bill deals with the registration and protection of leases. In the Act the treatment of leases is complex. Broadly speaking, in order to qualify for registration, a lease must be for more than 21 years and must not be inalienable; that is, it must not contain an absolute prohibition on dealing. If it satisfies these conditions, and is granted out of registered land, then it must be registered. If however it is granted out of unregistered land, its registrability depends on a variety of factors, including the length of the lease, the length of its unexpired term and whether or not the land is in an area of compulsory registration.

If the land is in an area of compulsory registration, and if the lease is granted for a term of 40 years or more, or is assigned with 40 years or more to run, it must be registered on grant or assignment; otherwise, the transfer will be void as to the legal estate. If it has more than 21 years to run, it may be registered. If it has 21 years or less to run, it cannot be registered. In non-compulsory areas the position is even more complicated, but again there are leases which must be registered, or may be registered, or cannot be registered.

It would be impossible to eliminate all these complexities, but Clause 2 has the effect of establishing a single period of more than 21 years by reference to which the registrability of the great majority of leases may now be determined. The clause enlarges the category of compulsorily registrable leases by including leases granted for a term of more than 21 years or assigned with more than 21 years to run. This brings leases granted out of unregistered land into line with leases granted out of registered land, which are compulsorily registrable if they are for a term of over 21 years.

Clause 3 removes the bar to the registration of inalienable leases, that is, as I have said, leases containing an absolute prohibition against dealing. The reason why these leases have not in the past been registrable is, no doubt, because it was thought that they were unlikely to change hands. But the Law Commission pointed out that leases which are expressed to be inalienable may in fact be transferred if the landlord waives the prohibition. The Law Commission concluded that there was no good reason for excluding them from registration. Clause 3 will permit their registration.

Clause 4 deals with the protection of leases which are not registrable. There are certain classes of interest, known as overriding interests, which are protected notwithstanding that they do not appear on the register. At present leases for 21 years or less are protected in this way only if they are granted at a rent and without taking a premium (or, as it is technically termed, a fine). This means that gratuitous leases and leases granted at a premium are not at present protected as overriding interests. The only way in which they can at present be protected is if the tenant takes steps to have their existence noted against the landlord's title.

The Law Commission saw no good reason for precluding such leases from the category of overriding interests. Consequently, as a result of Clause 4, such leases will be treated in the same way as other leases. If they are granted for 21 years or less they will be overriding interests.

I may summarise the effect of Clauses 2, 3 and 4 in this way: henceforward the great majority of leases for over 21 years will be compulsorily registrable on grant or assignment; leases for 21 years or less will be overriding interests, and will therefore be protected even though they do not appear on the register.

Clause 5 achieves the abolition of the Minor Interests Index. It is a basic feature of land registration that equitable interests should not appear on the register. The register is concerned with legal ownership rather than beneficial or equitable ownership. However, the Land Registration Act 1925 provides a system whereby dealings in certain equitable interests, categorised as "minor interests", should be recorded off the register. This record is contained in an index, which is called the Minor Interests Index. The priority of such dealings is determined by the date on which the applications for entry in the index are received by the registrar.

In the standard textbook on the subject, Ruoff and Roper on Registered Conveyancing, the Minor Interests Index has been described as "valueless". In practice it is largely ignored. At the time of the Law Commission's report fewer than 100 entries had been made in the previous 20 years and there had been fewer than 50 searches.

The Law Commission concluded that the Minor Interests Index should be abolished. Instead it recommends that the good old rule known as the rule in Dearle v. Hall (1828) 3 Russ. 1 should apply to dealings in equitable interests in registered land in the same way that it applies to equivalent interests in unregistered land and personal property. Under this rule the priority of dealings in such interests is determined by the dates on which notice of them is given to the trustees of the fund.

So far as existing entries in the index are concerned, Clause 5 provides that these too should now be subject to the rule in Dearle v. Hall. Priority will depend on the order in which notice of an application for an entry in the index was issued by the registrar to the trustees. Anyone who, as a result of the clause, suffers loss because of the alteration in priority or otherwise will be entitled to be indemnified out of public funds.

This may seem to be a somewhat unexciting Bill, but the changes which it makes are useful and will be welcomed by all those who are concerned in the conveyancing process. I accordingly ask this House to give it a Second Reading. I beg to move.

Moved, That the Bill be now read a second time.—(The Lord Chancellor.)

7.11 p.m.

Lord Mishcon

My Lords, the Law Commission has been very useful, as one would expect it to be, in regard to matters affecting property law and land registration. Indeed, between the years 1970 and 1976 it produced four excellent working papers, and now we are considering the Second Reading of a Bill which emanates from a report of the Law Commission which was printed in the Commons in October 1983. I mention that because the noble and learned Lord has often pointed out to the House so correctly that to get a slot into the programme of legislation for recommendations of the Law Commission is not an easy matter. It has taken some two and a half years for that slot to be achieved, and from these Benches I should like to congratulate the noble and learned Lord on having achieved it even at this date. I also believe that your Lordships would want to thank the Law Commission for the useful work that it has done which has produced undoubtedly a very useful Bill.

It is a technical Bill, but it happens to deal with matters that affect little people very often in the case of the transfer of their homes. The easier the machinery is for that to be done, the more economical it can be and the less trouble it is when those vital transactions in the life of the average human being take place. I welcome every one of the provisions of the Bill without exception, but I should not be sincere with your Lordships if I were to say that the profession of which I have the privilege to be a member is altogether happy with the state of the registration of land.

One useful thing that has been accomplished over the years is the setting up of the joint advisory committee between the Law Society and the Land Registry. That has achieved a lot. I know that the Law Society and my colleagues in the profession are grateful for that ability to discuss problems which exist in regard to land registration. But even more than the technical points cleared up by the provisions of the Bill is the anxiety that many of us have (and it is an anxiety which is placed upon the shoulders of, I repeat, many people to whom a transaction in regard to their home is so vital) about the delays which in some areas take place in land registration.

I hope that your Lordships will forgive me and be patient with me. I shall not read out a whole lot of figures, but I must do something of that kind in order to make the point that I want to make, and there are few opportunities to discuss conveyancing in your Lordships' House and certainly the machinery of it. These are figures given by the Land Registry and printed in the Law Society Gazette. I shall just deal with the figures over the four quarters of 1985 and show your Lordships, if I may, the terrible disparity among what happens in the various district registries.

I start with the first quarter of 1985, January to March, and I am dealing with working days. For first registration of a title Croydon achieved 24 working days; Tunbridge Wells achieved 85. There was an average over all the district registries of 48. The victor in transfers of part and disposals of first leases was Swansea, with 29 working days. What is wrong with Tunbridge Wells I cannot tell your Lordships, but again it comes bottom of the league with 103. A victory is achieved by Plymouth in dealings of the whole part with 10 working days. On that occasion Croydon was at the bottom with 26; Tunbridge Wells escaped with 22.

For the second quarter, from April to June 1985, on first registration Croydon emerges again as the best with 30; Tunbridge Wells has 74. On transfers of part and disposals of first leases, Nottingham is the victor with 37 working days; Tunbridge Wells has 92. Again in dealings of the whole, Tunbridge Wells is the worst but one with 30 working days, against the best of 11, which was achieved again by Swansea. I thought that that would bring joy to my noble and learned friend who is sitting behind me, and I shall bring out Swansea on every conceivable occasion that I can.

For the quarter July to September 1985, on first registration Croydon was again the best with 28 working days; Tunbridge Wells had 85. On transfers of part and disposals of first leases, Peterborough and Plymouth share the victor ludorum with 40; Tunbridge Wells has 106 working days. I have never represented Tunbridge Wells in any shape or form in Parliament or otherwise, and therefore I continue without any personal hardship. Here again in dealings of the whole, the figure for Tunbridge Wells is the second worst with 35 working days, against Durham which achieves 12.

I bring your Lordships up to date with the last quarter of 1985. For first registration Croydon is the best with 30 working days, and Tunbridge Wells the worst with 95. On transfers of part and disposals of first leases, Peterborough and Plymouth both achieve 42 working days and are the best; Tunbridge Wells has 105. In dealings of the whole, the best is Durham with 14, and second worst is Tunbridge Wells with 40.

I hope that your Lordships will forgive me for having read out those figures to show the sheer dreadful disparity between the number of working days as between the best district registry and the worst. Your Lordships will wonder, as I do, what is happening in Tunbridge Wells.

If I were to leave the matter at that, your Lordships would wonder whether the short speech that I am making is as constructive as it should be. I say that something has to be done in regard to the administration here. Whether it is that the districts are understaffed, or that they ought to be recognised, I do not know; but I throw out a purely personal suggestion if I may. It may have its difficulties. County courts have a geographical area to cover and one would have thought that in a county court it would be very suitable—this is, however, a personal view—to have a land registry office which need only be staffed by a few in order to look after the area covered by that county court. We might then have more uniformity of time which is being taken—in some cases, lamentably taken—in regard to the work of the land registry.

There is one more thought that I venture to put to your Lordships on this Bill. Should an occasion be taken to try to harmonise the law and practice relating to the conveyance of land, and especially of homes, in the EC? And should we take a leading part in trying to effect that harmonisation? Would that not be another suitable subject for the Law Commission or for one of your Lordships' committees that sit in regard to EC laws and practice to investigate?

I repeat, as I said at the beginning, that this is a welcome Bill. It deals with a few technical but important matters. However, the situation in regard to the registration of land, with regard to the disparity of time taken in various district registries, and the length of time taken by some, cannot be ignored on one of the rare occasions when we discuss the conveyancing of land.

7.24 p.m.

Lord Wilberforce

My Lords, since my noble and learned friend Lord Denning, whose name is down on the list of speakers, has had to leave the Chamber, perhaps from these Benches I might be permitted to add a very few words in welcoming this Bill. I am sure that all your Lordships, lawyers or not, would wish to thank the noble and learned Lord on the Woolsack for having introduced the Bill with such gusto, and even apparent enjoyment. That perhaps prompts the thought—it is a glimmer of hope—that he might be tempted to emulate his great predecessor, the Earl of Birkenhead, and attempt a redrafting of the law of property in just such simple and popular language as the noble and learned Lord used in expounding the tortuosities of this Bill. We are very grateful for having these difficult matters explained to us so clearly.

Perhaps I may make three points very briefly. The first is to endorse wholeheartedly what has come from the noble Lord, Lord Mishcon, about the necessity to speed up the process of registration. I have often spoken on the subject in this House. I believe that I did so on the first occasion on which I had the privilege of addressing the House. I know that the noble and learned Lord on the Woolsack has used his influence and such money as he can get to improve the staffing in the registration offices in order to complete (as should have been completed years ago) the process of registration of land in this country. If we are to follow the suggestion which came so happily from the noble Lord, Lord Mishcon, that we should try to harmonise the conveyancing laws with the EC, a necessary step would be completion in this country of the total process of registration—something to be devoutly wished for.

The second point relates to Clause 4 of this Bill, which deals with overriding interests. That is section 70 of the 1925 Act. As the noble and learned Lord on the Woolsack, the noble Lord, Lord Mishcon, and your Lordships know, there is outstanding a problem in relation to overriding interests. That is the problem thrown up by the case of Boland—the case of the occupying wife, or the occupying mistress—which has been held by a decision of this House to amount to an overriding interest, thereby greatly complicating the process of conveyancing. There is an outstanding problem there. The situation is not satisfactory. A Bill was introduced a little time ago but the Law Society found it too difficult and one is still in the process of hoping that somehow, by collaboration between the Law Society and the Lord Chancellor's department, some progress may be made on this. It ought not to be left where it is. The situation is unsatisfactory. Admittedly the pre-existing Bill did not quite solve the problem, but there ought to be some other way out.

The third point relates to Clause 5, which introduces the case, dear to the hearts of all equity practitioners, of Dearle v. Hall. It had a humble origin in 1828 in a decision of Sir Thomas Plumer. It has since then received more exalted approval. It was approved in this House by Lord Lyndhurst, a Lord Chancellor who has a particular claim on our affection at the present time because he married while on the Woolsack. He approved this case in the House of Lords; but Lord MacNaghtan said that it created more injustice than it had cured, so perhaps it has not an altogether untarnished reputation.

If we have time and the luxury to indulge ourselves at Committee stage, we may be willing to debate whether it is desirable to refer to this somewhat tarnished case by name in Clause 5, or whether we should simply refer to the section in the Law of Property Act, Section 137, which, while setting out the principle of the case, does not refer to it by name. I can see a very pure discussion between various sides of this House as to whether we should leave in the reference to Dearle v. Hall or whether we should take it out. At any rate, it is very nice to see it there, and I have no doubt that the principle which Clause 5 adopts of applying it to the minor interests which would otherwise be on the minor interests index is a perfectly sound one.

This is a good and useful Bill. It will simplify many titles. We are very grateful to the Government for having found time to bring it before the House, and most particularly grateful to the noble and learned Lord for the patience and clarity with which he has commended it to us.

7.28 p.m.

The Lord Chancellor

My Lords, I should like to thank both noble Lords who have participated in this debate. I should like to begin by endorsing what the noble Lord, Lord Mishcon, said about the usefulness of the Law Commission, although this is a fairly humble example of that usefulness.

I think that the greater part of the speech of the noble Lord, Lord Mishcon, was concerned with the disparity, as he saw it, in the time to dispose of business. There is a dark side and a brighter side to this. One does not forget that there are three million applications to the land registry every year for official searches, and two million applications a year for registration. If one looks at what one would have thought, if one had simply listened to the figures of the noble Lord, Lord Mishcon, was the unhappy state of Tunbridge Wells when compared with the comparative bliss of Durham, this is not really due to inefficiency on the part of the land registry. It is because land is so popular in Tunbridge Wells and so relatively unpopular in Durham, and there are fewer conveyances.

If that had been a stable situation over the years then it would have been fairly easy to deal with by having an enormously big registry in Tunbridge Wells and a very much smaller one in Plymouth, or some of the other places. However, in fact it has not been stable. There have been record intakes, which have been particularly evident in the South, and that of course includes Tunbridge Wells. Conveyancing activity is high and the record intakes have led to an imbalance between various offices in different parts of the country. I can assure the noble Lord, Lord Mishcon, that efforts are being made to restore the balance and to reduce completion times overall.

I am told that the next set of quarterly completion time figures will confirm the reduction of discrepancies. We shall continue to try to cope with the matter. However, there is a brighter side from the point of view of the inhabitants of Tunbridge Wells as regards the time they have to wait for registration. I hope that that time will be reduced and that the inhabitants of Tunbridge Wells will be duly grateful both to me and to the noble Lord, Lord Mishcon, for raising the subject.

I think the noble Lord raised a question about the use of county courts, which, of course, I shall take on board as a suggestion. My present information is that to some extent this may prove to be disproportionately costly when application to ascertain whether the land is registered can be freely made to the district land registry, and happily without paying any fee.

The problem of harmonising the European land law with English land law, based on free and common socage, rather daunts me. As my noble and learned friend Lord Wilberforce has said, it is true that certainly a condition of that would be the completion in this country of the land registration process which has been a Cinderella of governments ever since 1886, or some such time. In the past when there was a purge or a constraint upon manpower or expenditure it was often the land registry which paid a disproportionately high price as a type of Cinderella, while its larger and less attractive sisters elsewhere in the spending departments were spared.

I think that I can safely say without blowing my own trumpet that I have tried to get on with the business of totality of registration. As of now, 80 per cent. of the population of England and Wales—happily I do not have to concern myself with the Northern kingdom—are now catered for in compulsorily registrable areas, and by the end of this year I shall have worked up to 87 per cent. I can assure both the noble Lord and the noble and learned Lord that I take these esoteric parts of my duties quite seriously.

The possibility of then harmonising the law of property in European countries, which I fancy is based on alodial ownership, and our own based on tenure from the Crown with all kinds of graftings on it even since 1925, is a rather pious hope. All the European countries' registration systems were usually originally adopted for the sake of exacting taxation from the unfortunate owners of land, so it follows a somewhat different path. One of the few common law countries to have adopted a system of registration is Australia. I know that my noble and learned friend Lord Wilberforce is a great expert on the Torrens system, which I think was invented by a marine surveyor. That is the system which they have adopted and it is very different from ours and could not be grafted on to it. Land law is excluded from the harmonisation provisions of the European Treaty and I should expect to find myself slightly daunted by the prospect of harmonising ourselves with the Code Napoleon countries on the Continent.

My noble and learned friend rightly moved on from speeding up the process of registration to completion, to Clause 4 of the Bill with its references to "overriding interests". When I saw the report in Boland, I naturally tried to get a reforming Bill which would deal with some at least of the problems involved. It will be within the recollection of the House that I introduced a Bill last Session. However, the Law Society speaking through the eloquent mouth of the noble Lord, Lord Mishcon—who speaks for the Law Society in this House as well as for the Labour Party on legal matters (and I always wonder how he marries the two)—rather abruptly withdrew its consent and signified its disapproval by moving amendments which would have totally destroyed the value of the Bill.

I have often said, and I say again, that law reform is either by consent or not at all. I do not intend to reintroduce this Bill. The Law Commission is working on a further report on overriding interest. I do not think I had better go further into that this evening. So all is not lost. In the meantime I am very grateful indeed to the noble Lord and the noble and learned Lord who have played a part in the debate. I shall take on board my noble and learned friend's fine point on Section 137 of the Law of Property Act and reflect upon it deeply.

I do not think that I am likely to be another Birkenhead in this field of activity. Lord Haldane in his autobiography said that it takes three successive Lord Chancellors to effect an important change in the law, and claimed to be the putative father of the 1925 Act because he had been Lord Chancellor some time around 1911. It certainly was not carried through until Lord Cave's Chancellorship. My father wisely left the subject alone in both of his tenures of office, but I shall certainly reflect deeply upon the need for a new Birkenhead—the only Lord Chancellor ever to have achieved a first in law in the honours school of jurisprudence at Oxford. However, I am not sure that I can offer very much hope for the result of my mediations. I am very grateful to everyone. I beg to move.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

Viscount Davidson

My Lords, I beg to move that the House do now adjourn during pleasure.

Moved accordingly, and, On Question, Motion agreed to.

[The Sitting was suspended from 7.38 to 8 p.m.]