Land Registration Bill [H.L.]

HL Deb 30 October 2001 vol 627 cc1301-90

3.15 p.m.

Report received.

Clause 3 [When title may be registered]:

Baroness Buscombe moved Amendment No. 1: Page 2, line 24, at end insert "and if the final period of right to possession expires more than fourteen years after the date of the application under subsection (2)

The noble Baroness said: My Lords, in moving Amendment No. 1, I wish to speak also to Amendments Nos. 7, 22, 33 and 78. These amendments relate to non-continuous leases and situations when title may be registered. The purpose of the amendments is to achieve consistency and to avoid clogging the register. We believe that non-continuous leases should only be registrable if they are to last for at least 14 years. A discontinuous lease is one granted, for example, for a fortnight each year. A number of timeshare developments have been documented in this way, but the system could conceivably be used in other ways, for example, to let out a site for a regularly visiting fair. In a VAT case it was held that the length of a lease for a week a year for 80 years was a lease for 80 weeks.

The Bill provides that all discontinuous leases should be registered. This threatens to clog the register to no good purpose. On the other hand, to apply the general time qualification, even if it is as low as seven years, would exclude almost all such leases from registration. Our suggestion, therefore, is to consider how distant is the final date when the tenant would be entitled to take possession; that is, the beginning of the last week or fortnight. If that is as distant as the normal period of qualification for registration, the non-continuous lease would be registrable. There is an additional reason for making this amendment. If, contrary to policy, the parties to a lease wanted to register a lease for less than 14, or, indeed, seven years, they could do so by creating a lease with a short break in it, for example, one day. That would make it non-continuous and, on the current proposals, registrable. Again the register would be unnecessarily and unjustifiably clogged.

It was common to let grazing tenancies for just less than a year to avoid the effect of the Agricultural Holdings Act. Theoretically the tenant was not entitled to occupy during the gap between two tenancies. Nevertheless, it was far from unknown for animals to remain on the fields continuously. Who can say that mid-tenancy breaks inserted to make a lease registrable would not be treated with the same disregard?

Without Amendment No. 33 very short leases, for example, a cottage rented for a week at Easter or at half-term, should be registered—a situation which is surely not intended. I beg to move.

The Parliamentary Secretary, Lord Chancellor's Department (Baroness Scotland of Asthal)

My Lords, as the noble Baroness, Lady Buscombe, said, the amendments deal with discontinuous leases. But I wonder whether the noble Baroness is labouring under some misapprehension. There is no compulsion to register a timeshare lease granted out of unregistered land unless the lease is a lease for more than seven years which would make it compulsorily registrable under Clause 4.

Amendment No. 1 seeks to reduce the number of timeshare leases which can be voluntarily registered by imposing the condition that the periods let by the lease must continue for over 14 years before registration is allowed. That would not only complicate the Bill, but would reduce its helpfulness, as no one would be compelled to register a discontinued lease of less than seven years. It would create further and more serious complications by introducing an arbitrary distinction between leases that qualified for registration and those that did not, given the enormous range of permutations of the time allocation.

Amendment No. 7 would amend Clause 4 to apply the compulsory registration provisions to discontinuous leases that continue for more than 14 years. Amendment No. 78 would make the necessary parallel change in relation to grants by the Crown for demesne land. We suggest that the amendments are not needed to clarify how the length of timeshare leases are calculated, because the basis of calculating the length of discontinuous leases has already been judicially determined in the now well known case of Cottage Holiday Associates Ltd v Customs and Excise Commissioners.

That case made it clear that if a property was let for a holiday every year for 80 years, the length of the lease was determined by totalling the periods of entitlement to occupy the property. Amendments to Clauses 4 and 15 are therefore unnecessary to clarify the legal position.

As to whether a longer period is needed for registrable leases, in those cases in which a lease is employed in timeshare arrangements, it normally involves the letting for a set number of weeks each year over a period of years. If the letting period is, say, half a year, the lease will need to exist for 14 years to be compulsorily registrable. If the letting were for three months, it would need to last for 28 years to be compulsorily registrable. The shorter the letting period in the year, the less likely it is for the existence of the lease to be readily discoverable by inspection, yet the longer the duration of the arrangement entered into by the parties.

We think that there is already a robust scheme in being that would mean that such leases would not be compulsorily registrable, although they could be voluntarily registered if that is what was needed.

The noble Baroness said that Amendment No. 22 was needed to address an inconsistency in the drafting of the Bill. I hope that I shall be able to convince your Lordships that the amendment is not necessary.

On Amendment No. 33, so far as leasehold estates are concerned, the requirement to register an interest created out of unregistered land under Clause 4 takes effect when the lease is granted for more than seven years and applies whether or not the lease is discontinuous. The amendment would amend Clause 4 to apply the compulsory registration provisions to discontinuous leases granted out of unregistered land that continue for more than 14 years. The timeshare arrangements normally involve letting for a set number of weeks each year over a period of years. As I said earlier, if the letting period is, say, half a year, the lease will need to exist for 14 years to be compulsorily registrable. The compulsory registration requirement for discontinuous leases granted out of unregistered land will bite when the period let under the lease exceeds seven years.

I suggest that the Bill strikes the right balance between voluntarily registrable timeshare leases and those that must trigger the registration process. I understand the concern of the noble Baroness about the register becoming clogged up, but we do not believe that it will, because of the way in which the registration will operate, with voluntarily registration for any period, but compulsory registration for the specific period of seven years. A lease that ran for one week a year would need more than 100 years before it became compulsorily registrable. That may well help the noble Baroness to understand that we have struck a proper balance between the two. I hope that she will not feel it necessary to press her amendment.

Baroness Buscombe

My Lords, I thank the Minister for her full response to the amendments. I entirely accept her comments, which were very reassuring. The example that I used in relation to the VAT case complements the examples that she gave, in that a lease of one week a year for 80 years counts as a lease for 80 weeks. On that basis I am reassured and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Buscombe moved Amendment No. 2: Page 2, line 29, after "is" insert "only

The noble Baroness said: My Lords, this is a very brief amendment and it is probably self-explanatory. A person who contracts to buy and pays without taking a transfer for whom the owner would hold as bare trustee should be entitled to apply to register. The person who contracts and pays for the property should be the person who registers, not the bare trustee. We hope that the amendment makes that clear. I beg to move.

Baroness Scotland of Asthal

My Lords, the amendment would change Clause 3(6) to allow a person to apply for registration of title to an estate if his right to apply is based on his rights under a contract of sale. The effect of the subsection is clear. If a contract has been completed by a conveyance or transfer, the application will be based on the fact that the estate is in fact vested in him and the qualification will not apply. However, if the contract has not been completed for some reason, the buyer under the contract cannot apply for registration purely on the basis of that contract.

In that situation, if the seller will not execute a conveyance in favour of the buyer, the aggrieved buyer can compel him or her to do so, if need be by seeking a judicial order for specific performance of the contract. Once that conveyance has been executed, the buyer should register it because it will be subject to the compulsory registration requirements found in Clause 4.

I listened carefully to the noble Baroness and I appreciate her concern to clarify and alleviate the position of a would-be buyer who has been caught in that way. I certainly share the wish to avoid litigation when possible, but the amendment would not make the situation clearer. Indeed, I regret that in a number of ways it would be likely to make matters worse. It could be taken to undermine the current structure of conveyancing in England and Wales. Arguably, as a result of the amendment, if a person contracted to sell unregistered land and the buyer paid the whole price, it would be unnecessary for the seller to execute a conveyance to complete the sale. The buyer would be entitled to register without more. I am sure that the noble Baroness does not intend that.

That is open to profound objections on a number of grounds. First, there would be no conveyance of the legal estate, which would lead to some difficult issues of unresolved priorities between the parties, including difficulties arising because of a technical conveyancing doctrine called merger.

Secondly, the amendment would be likely to change the role of the Land Registry, embroiling it in contractual disputes between buyers and sellers, with buyers trying to register contracts where the seller disputed h is or her liability to convey the land and usurping a role that belongs to the courts.

Thirdly, the amendment would create major practical difficulties for the collection of stamp duty. There would be no instrument of conveyance for stamp duty purposes and the contract would not attract stamp duty, at least without potentially very complex changes to the stamp duty legislation. Some would argue that that might be the purpose of the amendment, but I understand that that is not the intention of the noble Baroness.

In the light of that explanation of the problems that we think would arise from the amendment, I hope that the noble Baroness will feel able to withdraw it.

Baroness Buscombe

My Lords, I thank the Minister for her response. The amendment was tabled at the suggestion of the Law Society, which felt that the position was unclear. I hope that, as a result of what the Minister has said today, the Law Society will feel that the situation is now clear. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 [When title must be registered]:

3.30 p.m.

Baroness Buscombe moved Amendment No. 3: Page 3, line 13, leave out "seven" and insert "fourteen".

The noble Baroness said: My Lords, in rising to move Amendment No. 3, I shall speak also to Amendments Nos. 6, 18, 21, 31, 36, 37, 38, 40, 47 and 77. I shall speak separately, albeit within this grouping, to Amendment No. 47, but perhaps I may first refer to all the other amendments. The amendments are designed to reinstate the proposal in the consultative document that the length of lease which must be registered should be reduced from 21 years, as at present, to 14 years rather than to seven years, as proposed in the Bill.

Perhaps I may briefly remind your Lordships what we on these Benches said in Committee. We said that it is acknowledged in paragraphs 117 and 314 of the report that on consultation there was no consensus for an immediate reduction to seven years. The amendment seeks to reduce the immediate change in the law and to impose a smaller initial burden on the property industry, the conveyancing profession and the Land Registry's resources than would the proposal in the Bill. If experience of that limited change suggests that a further reduction is desirable and will not overstretch the industry, the professions and the registry, it will then be possible, after consultation under Clause 5(4), to make that reduction by order.

The proposal to make all seven-year and longer leases compulsorily registrable represents a major change in the law. We believe that it will cause equally major changes in practice, all of which are, we still believe, best introduced by stages, thereby enabling the industry and the professions to become familiar with the new system without undue pressure and enabling any problems which may emerge to be tackled before they become widespread. Any leaseholders who wish to apply for voluntary registration of seven-year leases will be able to do so under Clause 3(3) if they believe that the benefits of registration are worth having.

We believe that the shorter the term of a lease, the smaller the benefits of registering it become because the fact of registration makes a difference only on a dealing with a lease. It is no cheaper or easier to grant a lease which will be registered than one which is not. The shorter the lease, the less likely it is that the tenant will assign it or under-let. If he does, the main things that the assignee or under-tenant will want to see are the lease and the property itself.

We believe that it is not usual practice to make elaborate investigations of the title on the grant or assignment of short leases at full rents. In relation to a transfer of land subject to a lease, the transferee will want to see the lease and evidence of any assignments of it which are normally registered with the landlord and to check that the tenant is complying with the lease. All of that can be equally easily verified, whether or not the lease is registered.

We believe that the reduction in the length of registrable leases from 21 to seven years in a single step will impose considerable burdens on the industry, the profession and, indeed, the registry. If the Act itself specifies seven years and significant practical problems ensue, there will be no remedy short of further primary legislation. On the other hand, if the Bill specifies 14 years with a power to shorten the period by order under Clause 5, it will be possible to avoid at least the worst risks of the industry and the registry being snowed under by making whatever reductions seem desirable when experience shows that it is practicable. If Her Majesty's Government's hopes are justified, that may be quite soon, but the amendment is an insurance against the other possibility.

Perhaps the Government can tell us how many leases of between seven and 14 years are likely to be registrable and how that figure is arrived at. Perhaps they can also assure us that, from the beginning, the registry will be able to cope with the workload without difficulty with paper rather than electronic conveyancing and tell us what the fees for registering a seven-year lease will be. If they can do so, we believe that that will allay some, but not all, of our concerns.

With particular regard to Amendment No. 47, given that the Bill makes leases over a certain length registrable and shorter leases overriding interests, as set out in Schedule 1, paragraph 1 and Schedule 3, paragraph 1, we believe that it is logical that no notices should be registrable for, leases up to that length. Otherwise, the effect will be to increase the burden of formalities on taking a lease of a term between three years and the registrable term. I beg to move.

Baroness Scotland of Asthal

My Lords, I hope that I shall be able to reassure the noble Baroness in relation to this matter, not least because the registry has been fully involved in the working behind the Bill and has a deal of confidence in it. However, one could almost be forgiven for thinking that the registration of leases and perhaps, indeed, registration in general was a dead-weight burden on home owners and businesses which had no compensating benefits. However, I must reassure the House that the Government are dedicated to modernising public services, better regulation and reform of the law. We see the progressive extension of registration over the past century as one of the great success stories in law reform and public services. The comments that I shall make in relation to this section relate to all nine amendments because there is a common theme.

Of course, registration has its costs. The conveyancer will have some additional work and, as the noble Baroness rightly says, the registry's fees are to be borne in mind. However, in relation to the total cost of the conveyance, let alone the commercial value of the transaction, those are both minor matters. We expect that well organised conveyancers will prepare material for registration as they go along. The Government's estimates, which have not been challenged, suggest that less than an hour's work is involved in preparing an application. The registry's typical fee for a commercial short lease would be of the order of £100. For even the largest transactions involving millions of pounds, the maximum fee is £600.

The benefits of the initial investment will be repaid amply during the lifetime of the lease. Where the lease is unregistered, any significant subsequent transaction will require all the initial conveyancing work of establishing the title from the head lease and from the lease itself to be redone completely afresh. That effort is not necessary where the lease is registered because, of course, the work has already been done once.

It is not only major transactions that are made simpler, quicker and cheaper. Where the lease permits it, the granting of rights over the land are easier, too. Particular concerns have been raised in relation to bringing agricultural leases within the registration scheme. Issues such as the right to grant rights of way or shooting or fishing rights become much easier in a registered system. The Bill also significantly improves the protection which can be given to the second group of rights.

Against that background, we would certainly argue that the extension of registration to more leases and, indeed, probably to all written leases—that is, leases granted for three years or more—is to be regarded with positive enthusiasm. That is certainly the advice of independent experts. The Law Commission's and Land Registry's joint report recommends those extensions as a strategy. The distinguished public servant who carried out the five-year review of the registry's functions saw the economic and practical benefits as so great that he recommended that all written leases should be made registrable at once. The Bill, of course, takes a rather more cautious view.

The noble Baroness raised the issue of burdens on the market as being a good reason to go slowly. From what I have said, it is obvious that the Government are very conscious of the possibility that registration may bring some additional burdens to the market. It will also be obvious from what I have said that the additional work needed for registration when a lease is being prepared should be very small in relation to the entire transaction. There has been no suggestion whatever that conveyancers would have difficulty in absorbing those additional tasks.

There may, at first blush, appear to be grounds for having some greater reservations about the Land Registry's ability to cope with increased work. Making leases over seven years registrable would add more than 5 per cent to its annual workload. Making all leases registrable would add more than 10 per cent. Issues of feasibility have, therefore, been considered carefully during the preparation of the Bill. The registry is confident that its modernised system could absorb the extra work that would result from leases over seven years being registrable immediately the Bill is implemented. It sees no difficulty in reducing the period still further in the short term.

The Land Registry has shown itself to be an organisation that exists to help business—it helps with and does not hinder the business of selling and buying land. There is much that it can do to help conveyancers and customers. For example, it can help with difficult registrations, when documents are voluminous or incomplete or where there are many registrations of a similar kind.

I hope that my remarks have reassured the noble Baroness that this is not an area in which it is necessary to go more slowly than our current rate. I hope that she will feel minded to withdraw the amendment.

The Earl of Caithness

My Lords, can the noble Baroness explain a little further how the Government arrived at the figure of seven? As my noble friend Lady Buscombe said, the consultation document did not contain an agreed figure, although the Minister was increasingly enthusiastic about the three-year period, which we discussed in Committee. If that is such a desirable period, why have the Government decided to backtrack from the Minister's enthusiastic support for it? When she said that the Land Registry could move from the seven-year period to the three-year period, I believe that she added that it could do so in the short term. What does that mean in her book?

Baroness Scotland of Asthal

My Lords, I was trying to strike a balance between caution and enthusiasm. The noble Baroness outlined her concerns about whether the registry could cope and about how quickly it could do so. In that regard, the way in which we proceeded was judicious. The most important thing was for the proposal to work on the ground, to work well and efficiently and to inspire confidence. Some would argue—rightly so—that the registry put the "C" into "caution". It has indeed been very cautious. It is cautiously optimistic that the move from seven years to three years would be possible in the short term. Obviously, it will be able to go much more quickly once e-conveyancing is on stream. It currently has to consider whether it would be possible to increase the workload by 5 per cent, which is necessary in order to conduct conveyances for seven years within the current framework; it is confident that it can do that. It is not necessarily as confident that it could immediately and practically deal with a reduction to three years. That may be possible, but it would be far more risky and would not be as cautiously prudent. The registry has been very prudent in the advice that it has given. All noble Lords want the proposal to work well and smoothly and to be without difficulty. Confidence will breed greater confidence and we shall be able to go more quickly in the long term.

Baroness Buscombe

My Lords, I thank the Minister for her response. I heard clearly what she said—much of it was said in Committee. We are in an interesting situation. We are all in touch with experts in the field but there is clearly a difference between those with whom we are talking and those to whom the Government are talking because those with whom we are talking—senior representatives in the property industry and related professions—do not share the confidence that the Land Registry will be able to cope with what is in its view a dramatic change. In that case, we feel that 14 years would be a much more sensible period for the time being.

I shall think carefully about the Minister's remarks. I shall discuss the matter further with those with whom we are in consultation before deciding whether or not to return to the point on Third Reading. On that basis, and for the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.45 p.m.

Baroness Buscombe moved Amendment No. 4: Page 3, line 19, at end insert ", unless at that date the person to whom the grant is made is the tenant of the whole of the land comprised therein for a term which is not registered (and is not subject to the requirement of registration) and will expire on or after the date on which the estate granted will take effect in possession".

The noble Baroness said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 32 and 42.

The amendments are designed to remove the need to register a lease that takes effect in possession more than three months after it is granted, if it is not otherwise required to be registered, in a situation in which it is a renewal of an existing lease to a tenant who is already in possession.

We made the reason for making such a "reversionary" lease very clear in Committee. That reason is given in paragraph 3.32 of the report. It is that if that is not registered, a buyer of a landlord's interest may not be able to find out about it before the term actually begins because the tenant would not be in possession. As we said in Committee, that objection does not apply when the reversionary lease is a renewal to an existing tenant. In that situation there is no practical need for such a lease to be registered merely because it does not take effect immediately. As the Bill stands, a renewal for a year—or for an even shorter period—that was granted during the midsummer in relation to a lease that will expire at Michaelmas would be registrable and, as we said, a trap.

We have taken notice of what the Government said in Committee in response to our proposals about the need to reduce inquiries relating to matters that are not on the register. The amendments are therefore restricted to a reversionary lease to a tenant whose existing lease is not subject to registration. We accept that a tenant who is within the registration system can fairly be required to register a renewal.

When the tenant is not already within the system, we think that the balance of advantage is emphatically on the side of the amendments. A buyer of the landlord's interest will have to check what the tenant's rights are. It is no real burden for such a buyer to have to ask not only, "Is this the lease?" but also, "Is there any other relevant document?".

A tenant renewing a comparatively short lease may well do so without specialist advice. The Bill as it stands would create a very significant trap. If the renewed lease is registrable but unregistered, it will always be overridden by a disposition of the landlord's interest not only before it falls into possession but at any time thereafter during the renewed term.

Paragraph 1(a) of Schedule 3 will stop a registrable reversionary lease from ever being an overriding interest in the common situation in which the landlord's interest is registered. I beg to mow.

Baroness Scotland of Asthal

My Lords, before I respond to the amendments, I say to the noble Baroness that we thoroughly appreciate the hard work that has been done by all Members of the House in relation to the Bill. If, in relation to these amendments or any others, she feels that it would be helpful, when we have completed the Report stage, for there to be a meeting with Ministers or with officials, I should be more than happy to facilitate that. We may be able to give greater information that would allay her concerns. I say that generally and in relation to any amendments with which 'we shall deal this evening and not simply in relation to the amendments that we have already considered.

As the noble Baroness said, Amendments Nos. 4 and 32 seek to exclude leases of a particular kind from compulsory first registration if the landlord's title is unregistered. Those are, of course, reversionary leases when the lease is a renewal and the tenant under the lease is also a tenant under an existing lease of the type that is set out in the amendment. Amendment No. 42 seeks to provide that such leases should be capable of being protected by actual occupation and so override registered dispositions.

Noble Lords will recall that in Committee we debated similar amendments. The difference in this context is that the tenant's existing lease must also be one that is not registered or subject to the requirement registration. Our view of such amendments. despite the noble Baroness's eloquence, has not, I am afraid, changed since our debate in Committee. Noble Lords may recall that in Committee I mentioned that existing provisions in the Bill will give effect to a recommendation in the Law Commission and the Land Registry joint consultative document that was unanimously supported by all those who responded to it.

The amendments would place an unreasonable burden on the intending buyers. They would have no way of knowing from the register that the reversionary lease existed and would have to inquire of an existing tenant in circumstances where they might not expect to have to incur that additional step; for example, where they have had produced to them by the seller the tenant's existing lease which makes no option of, say, an option for a further grant.

If, as can happen with estates of some size, the intending buyer is purchasing a portfolio of properties, the problem could be magnified. With the advent of electronic conveyancing, the number of inquiries should be kept to a minimum, so that a buyer can rely as much as possible on the entries in the register. Where such a reversionary lease is not on the register, an intending buyer of, say, the freehold reversion will not know from the register of the existence of the lease. Furthermore, the fact that a new lease taking effect more than three months in the future has to be registered enables the buyer to protect his or her position by registering an estate contract or by making a priority search under Clause 72.

The Bill seeks as far as possible and practicable to make the register as comprehensive as possible, particularly with the advent of e-conveyancing. The proposed amendments would hinder that objective and make the law more complicated, by excluding from the category of reversionary leases in Clause 4 or Clause 27 certain leases by reference to the status of the tenant under the lease.

Another if perhaps less-serious problem is the possibility that the first lease dealt with under the subsection could, in theory, also be a reversionary lease of some sort. If that were the case, the tenant would not be in occupation under either lease. That would only multiple the problems facing the prospective buyer.

I readily accept that in certain circumstances the reversionary lease that will be required to be registered may be short. But it is a matter of balancing that against the benefits to buyers and others of a more comprehensive register. Although the noble Baroness points to short leases being caught, the amendments would catch also relevant leases not exceeding seven years. The discovery of such a reversion by a buyer after completion of the purchase would cause him or her financial and emotional distress. In light of that explanation, I invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, I thank the Minister for her kind invitation to a meeting following Report stage. I would welcome that opportunity and will be in touch with her office. We are extremely supportive of the Bill and it is our intention to get the legislation as right as possible. This is, in many ways, the most important new piece of land law since 1925 and it is an awesome responsibility on our part—being aware that it could remain on the statute book for such a long time.

It is certainly not our intention to place an unreasonable burden on the intended buyer, or to increase the opportunities to increase that burden where a portfolio of leases is contemplated. I am concerned about a number of issues to which the Minister responded, where another trap could be created. I would like carefully to consider those issues and perhaps we could address them in a meeting after this evening. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lester of Herne Hill

My Lords, Amendment No. 5 is the first of several amendments in the name of my noble friend Lord Goodhart. He has asked me to apologise to the House for his absence and to explain that he cannot be here because he is, appropriately enough, arguing a stamp duty case in Hong Kong.

As a rule, I do not usually speak in the House on subjects that I do not understand and of which I have no experience. I see the noble and learned Lord, Lord Brightman, in his place—which inhibits me even more than listening to the Minister and the noble Baroness, Lady Buscombe. My noble friend Lord Goodhart was kind enough to leave me a note on Amendment No. 5 which I shall now read: Suggest don't move it. It is a very technical point and not all that important. I have read Amendment No. 5 three times and agree with my noble friend. Therefore, it will not be moved.

[Amendment No. 5 not moved.]

[Amendments Nos. 6 and 7 not moved.]

Baroness Buscombe moved Amendment No. 8: Page 4, line 11, at end insert— subject to subsection (3), "transfer" has the same meaning as "convey" in the Law of Property Act 1925 (c. 20);

The noble Baroness said: My Lords, the amendment relates to a dealing with unregistered land, whereby such a dealing leading to compulsory registration of title can still be done in the old form with a conveyance rather than a transfer. It should be made clear that compulsory registration still follows.

Traditionally, land then unregistered was transferred by a conveyance. The abbreviated and modernised transfer form was introduced for registered land and has recently been redesigned. To encourage modernisation, it has for a long time been the case that unregistered land that would be registered immediately after a transfer transaction can be transferred by using a transfer in registration form.

However, it appears that under the Bill, it will continue to be in order for unregistered land to be transferred by a conveyance—even though compulsory registration of title will follow. It is therefore necessary to make clear that when the Bill talks about a transfer when dealing with the triggers of compulsory registration, that includes a conveyance. I beg to move.

Lord Bassam of Brighton

My Lords, the noble Baroness suggests what amounts to a drafting change to Clause 4, which sets out the events that will trigger compulsory registration of title to an interest in land. That provision has been drafted in a very different style to the existing legislation, which talks of "qualifying conveyances" and "qualifying assignments". In listing the various events, the draftsman has used the term "the transfer" as a noun, to signify that an interest in land is transferred.

There are other instances in the Bill where the phrases "a transfer" or "the transfer" are used, such as in Clause 27. Thus "the transfer" indicates just that—the fact of the transfer of the estate or interest. There cannot be a transfer unless it meets the requirements for the conveyance of a legal estate that apply under general law. The relevant requirements are laid down in Section 52 of the Law of Property Act 1925. For example, for the purposes of Clause 4(1)(a)(i), a transfer will necessarily have to be made by a deed. However, a transfer by way of assent under Clause 4(1)(a)(ii) will be made by signed writing in accordance with Section 36(4) of the Administration of Estates Act 1925.

I hope that explanation reassures the noble Baroness that the Bill already meets her concern and that she will feel able to withdraw this clever drafting amendment.

Baroness Buscombe

My Lords, I thank the Minister and would like to think about his response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

4 p.m.

Clause 5 [Power to extend section 4]:

Baroness Buscombe moved Amendment No. 9: Page 4, line 29, at end insert "the Rule Committee and

The noble Baroness said: My Lords, in rising to speak to Amendment No. 9, I shall speak to Amendments Nos. 10, 108, 110 and 112.

Two aspects within this group of amendments relate specifically to Clause 5. The first relates to the rule committee and whether or not it should be consulted as regards the Lord Chancellor's power to amend Section 4. We feel, in essence, that the rule committee should be consulted before the Lord Chancellor exercises that power. The second aspect is that it is important that where the Lord Chancellor exercises his power under Clause 4, his order should be approved by each House of Parliament.

I take the first aspect in relation to the rule committee in a little more detail. If the Lord Chancellor believes that the powers conferred by Clause 5 should, for whatever reason, be invoked, why not consult the rule committee in addition to others that he may think appropriate? This is an issue discussed at some length in Committee. It remains our contention that if we are to have a rule committee, we should have a committee that has broad powers and a strong remit in order to allow it to be used to good, practical effect by the Lord Chancellor of the day to ensure that the right decisions are made.

I echo the words of the Minister when she said in Committee, Confidence in the system is necessary. Once that confidence has been established, it will be possible for the Lord Chancellor of the day to look again at whether a further reduction is merited, but that would be done at a time that was in line with what the market, the profession and the registry could tolerate with ease".—(Official Report, 17/07/01; col. 1395.)

We believe that the rule committee would be ideally placed, given its constituents, to signal to the Lord Chancellor when that time may be right.

Amendments Nos. 10, 108 and 110 are designed to prevent the rule-making power being used to introduce compulsory registration of five-year and shorter leases without further parliamentary consideration. Five-year leases are common. They are usually occupational, business, residential or farming leases and are not assigned anything like as frequently as longer interests. So there is no pressing, practical need to register them, either to ensure that a purchaser of the superior interest finds out about them, or to make it easier to buy and sell them.

We believe not only that five-year and shorter leases are predominantly granted to tenants for their own occupation throughout the term and are rarely assigned or under-let, but also that when such a transaction takes place, the tenant holds all documentation of relevance to the assignee or under-tenant and would still do so if the lease were registered. So the benefits to the parties from registration are small.

The Government said in Committee that registration of short leases would enable information to be collected which would be useful in creating transparency in the market. Even if it is accepted that there is a connected purpose within the Long Title of the Bill, nevertheless making tenants register and pay fees for the privilege in furtherance of what the Government present as a general public interest, would amount to levying taxation. If it is permissible to comment on that, I suggest that that would be a wholly unjustifiable stealth tax. I beg to move.

Lord Lester of Herne Hill

My Lords, I rise briefly to support what has been said. This is not a matter of technical conveyancing; it is a matter of parliamentary accountability and common sense about good governance. The Bill already contemplates that the Lord Chancellor will consult those he deems appropriate. It is sensible therefore that there should be at least an undertaking that the rule committee should be one of those to be consulted.

Baroness Scotland of Asthal

My Lords, this is an important issue and, with the leave of the House, I shall take a little time dealing with the amendments. It is an issue which troubled the noble Baroness in Committee and this may be a good opportunity to try to lay some of the concerns to rest. I shall therefore speak to Amendments Nos. 9, 10, 106 (the government amendment) and 107 to 112. These amendments deal with the consultation required in the preparation of the delegated legislation under the Bill and the parliamentary scrutiny which such legislation should receive.

Amendment No. 9 requires the Lord Chancellor to consult the rule committee before adding new events to trigger compulsory registration. That would be an important issue. As I acknowledged in Committee, members of the rule committee will undoubtedly have a valuable contribution to make to any consultation processes undertaken in respect of secondary legislation under the Bill. That contribution will be increased by Amendment No. 106, in the name of the Lord Chancellor, which is in response to suggestions made during Committee. It will add a person nominated by the Royal Institution of Chartered Surveyors which, on reflection, I am sure is the right body to nominate a surveyor of the right breadth of experience, and a person with knowledge of consumer affairs, to the rule committee. I am glad to see the noble Earl in his place to hear me say that.

But when consultees are listed in the statute, there is a temptation to limit the consultation process to those people or to treat their contributions as carrying greater weight than those from other people. That would be inadvisable when a large number of interests will need to be taken into account in the preparation of rules, as most certainly will apply here.

While I willingly undertake to ensure that the members of the rule committee are included in any consultation process under Clause 5—I agree with the noble Lord, Lord Lester, that that is a good thing to do—it would not be appropriate or desirable to highlight this one particular group by mentioning them on the face of the Bill.

Similar arguments apply to Amendment No. 112. That amendment would bring rules under Clause 93 and paragraphs 1, 2, or 3 of Schedule 5 within the definition of land registration rules, and therefore make them subject to the scrutiny of the rule committee. I am very happy to make a commitment that the rule committee will be consulted on those rules, like the many other groups whose views will be sought on these important questions. But the procedures for land registration rules envisage close working between the registry's draftsmen and the committee, often as a substitute for wide external consultation.

That will not be the case here. There will be a wider degree of consultation and, under the government amendments to which I shall turn shortly, a wider degree of consultation and scrutiny than usual for the rules on electronic conveyancing. I therefore suggest it is not necessary, and perhaps not appropriate, to consider them formally as land registration rules. They are of their own kind entirely, and wide consultation and the general confidence of conveyancers will be essential to their success.

I listened carefully to what the noble Baroness said in relation to her amendment to Clause 5, which would require approval by affirmative resolution for any order reducing below five years and one month the length of leases which are subject to compulsory registration, and on Amendment No. 110 which would make further rules and orders dealing with electronic conveyancing subject to affirmative resolution. Those amendments need to be looked at in the light of the amendments standing in the name of the Lord Chancellor to Clause 125. They show that the Government have been very willing to consider advice from the Delegated Powers Scrutiny Committee and comments in Committee.

In Committee I undertook to bring forward amendments which would modernise the rule-making powers under this Bill. Those suggested might be modelled on the parliamentary procedures for amending rules of court, which are the most directly comparable rules and which have the advantage of having been subject to recent parliamentary debate. As a result of the amendments, the rules, regulations and orders to be made under the Bill will now fall into four distinct categories.

First, the rules under Clause 93, the power to require simultaneous registration—in other words to make electronic conveyancing compulsory—and the rules under paragraphs 1, 2 and 3 of Schedule 5 in relation to network access agreements, are to be subject to an affirmative resolution procedure.

Secondly, all land registration rules, as defined in Clause 129(1), are to be subject to a negative resolution procedure, after having been considered by the rule committee. The negative resolution procedure will also apply to rules made under Part 2 in relation to the procedure and practice for adjudicator proceedings, under Clause 108 in relation to references to the adjudicator on objections and, under Clause 119, the forwarding of applications to the Register of Companies. There are no other rule-making powers in the Bill.

Thirdly, regulations under paragraph 5 of Schedule 9, which deals with a vacancy in the office of adjudicator, are to be subject to a negative resolution procedure. Regulations under Clause 99, dealing with a vacancy in the office of registrar are, by contrast, to be laid before Parliament after being made. That difference in treatment arises because the main functions of the adjudicator are judicial, which have not hitherto been subject to specific parliamentary approval, and the approach for both groups is in line with the procedure for making the rules of court.

The remaining orders under the Bill are made under Clause 5(1), providing for the creation of a new trigger for compulsory registration; Clause 62(9), enabling alterations in the time period for upgrading title without production of further evidence; Clause 80(4) which fulfills the rule of Clause 5(1) in relation to demesne land, and Clause 116 dealing with adjusting the qualifying term of leases and Clause 127 permitting the extension of the scope of land registration to internal waters. They will all be subject to a negative resolution procedure. We suggest that that provides a firm and clear basis for the scrutiny of secondary legislation.

I turn to the suggestion made by the noble Baroness that any order reducing the length of lease which would be registrable below five years should be subject to the affirmative resolution procedure. In dealing with the amendments which we have already discussed, which would make leases of 14 years and above compulsorily registrable, rather than leases of 7 years and above, I have sought to set out why the Government think that that extension of registration is a positive measure for conveyancers and their customers. I have explained the benefits that will flow from the change, and the comparatively small costs and additional burdens of work which will result.

From these Benches, the only issue which seems to us to raise genuine questions of public concern is whether the length of leases could be further reduced without imperilling, through additional workload, the Land Registry's excellent service to all of its customers. That is an issue which Ministers will consider anxiously before making any order under the Bill.

Any additional concerns will be identified by the consultation which the Bill requires under the order before the order can be made. That consultation will be carried out carefully. I have been happy to commit to that being on a wide basis. However, I have to say that I see little additional benefit that would be served by incurring the delay of having to seek affirmative resolution as well.

The noble Baroness also suggested that rules under Clause 93 specifying which types of dispositions are covered by the requirement for simultaneous registration rules under paragraph 103 of Schedule 5 in relation to network access agreements, fees, district registry orders and commencement orders should be subject to affirmative resolution; in other words all the orders which extend the scope of the registration process or otherwise adjust time periods specified in the Bill.

I have referred to the government amendments that would increase the level of parliamentary scrutiny for most of the delegated legislation made under the Bill. The amendments would make the rules relating to electronic conveyancing and network access agreements subject to affirmative resolution procedure. Those rules are already subject to a condition that the Lord Chancellor must consult before making them. Taking those two elements together—the electronic conveyancing system and the rules relating to its introduction—will be subject to checks and controls throughout their development, over what will be, no doubt, a relatively long period of time.

There are also duties to consult before exercising order-making powers in Clause 5, the power to extend compulsion, and Clause 116, the power to reduce the qualifying term. The order-making powers in Clauses 80(4) and 127 mainly affect the Crown Estate. Therefore, a requirement to consult widely or to submit a draft to Parliament would be inappropriate. Neither would it be necessary for such scrutiny to be applied to the order reducing the length of time after which title will be upgraded under Clause 62.

We also propose that orders made under Clause 1127, which relates to internal waters, should remain subject to a negative resolution procedure notwithstanding the comment of the Delegated Powers and Regulatory Reform Committee that no parliamentary procedure is customary with provisions of that kind. Such orders are wholly novel in relation to the registration of land, and might conceivably affect the rights of those with an actual or wished-for interest in the land underlying territorial waters, which suggests that some degree of parliamentary scrutiny is appropriate. There are no other order-making powers in the Bill.

As I have indicated, these modernised rule-making powers are modelled on the rules of court. We believe that they strike the right balance between, on the one hand, the level of parliamentary scrutiny needed to oversee the novel aspects of matters such as the introduction of electronic conveyancing and, on the other, the additional burdens that such procedures will place on the noble and learned Lord the Lord Chancellor. I therefore commend them to the House. In the light of what I hope was an exhaustively full explanation, and in the light of the commitments given regarding consultation, I invite the noble Baroness to withdraw her amendment.

4.15 p.m.

The Earl of Caithness

My Lords, I thank the Minister for her comments on Amendment No. 126. I am particularly pleased that a person nominated by the Royal Institution of Chartered Surveyors will now be on the rule committee. I was also pleased with her comments on affirmative resolution with regard to e-conveyancing. I should like to read the rest of her comments because I do not think that I agree with all of them. However, that is certainly a matter we can discuss between now and another stage.

Baroness Buscombe

My Lords, first, I thank the noble Lord, Lord Lester of Herne Hill, for his support for the amendments. I echo the words of my noble friend Lord Caithness. We welcome the clause as proposed in Amendment No. 106 to add to the rule committee a member of the Institution of Chartered Surveyors. I, too, shall need to read with great care the Minister's comments and the detail she gave on this important matter, for which we are extremely appreciative, and about which, as the Minister knows, we have considerable concern.

I turn to the rule committee and the Minister's comments regarding the need to consult a large number of interested parties. However, surely that process should not be compromised in any way by the existence of the rule committee. The process of working and consulting with the rule committee should be in concert with and should complement the process of consulting large numbers of interested parties in relation to any changes to the law which the noble and learned Lord the Lord Chancellor may feel appropriate. With earlier amendments we discovered that the Government and Her Majesty's Opposition were both in consultation with different, albeit equally renowned, experts in this field. That demonstrates the need for us all to be sure. Indeed, the Lord Chancellor of the day needs to ensure that he or she consults widely given the complexity of the subject and the many interests which should be considered when important decisions are made with regard to this legislation.

We welcome the Government's response to our concerns in Committee, as far as it goes. I echo the words of my noble friend Lord Caithness: I may not agree entirely with all that the Minister said or believe that she has gone far enough for our liking. With regard to electronic conveyancing, we are pleased with the decision to look to affirmative resolution procedures. I shall consider in detail what the Minister said in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 10 not moved.]

Clause 6 [Duty to apply for registration of title]:

Baroness Buscombe moved Amendment No. 11: Page 4, line 33, leave out "must, before" and insert "has until

The noble Baroness said: My Lords, in moving the amendment, I speak also to Amendment No. 12.

The Bill appears to impose a duty to register title to a registrable estate but no direct sanction follows, which appears to make the duty toothless.

The position is, however, the same as it now is. If a title which should be registered on the first registration is not registered, the transaction unravels and the buyer who fails to register does not get the title to the property which he should have had. The amendment suggests rewording which is more consistent with that carrot approach rather than waving a non-existent stick.

In practice, if a buyer applies for a first registration out of time, the registrar makes an order permitting registration as a matter of course. In consultation with the Law Society, we can confirm that none of the experienced conveyancers on the society's specialist committee could recall any case in which this has ever caused any difficulty. I beg to move.

Lord Bassam of Brighton

My Lords, I have listened carefully to what the noble Baroness has said in moving and speaking to the amendments. In short, it is suggested that the Bill's approach should be to identify clearly which of the parties for the transaction has the obligation of registering it; and having put that responsibility on the new owner should leave it to him or her to suffer the consequences of failure to comply.

We cannot agree. The consequences of failing to register are serious not only for the buyer of the new property but also the seller. That is because the effect of failing to register a transfer of property is that the legal title which is passed by the disposition returns to the seller. It does not, however, return absolutely. The seller holds the land only in trust for the buyer who has failed to register the property. The seller's position is, therefore, an awkward one, subject to a large number of obligations to the errant buyer. It is our contention that it is unreasonable for him or her to be put in that position.

I would therefore argue that it is more appropriate to put the buyer under a clear legal obligation to complete the transaction. It is indeed true, and has been argued, that there is currently no way to enforce the carrying out of that obligation. Some steps towards it may be possible in the future because the completion of the process by registration may well become an enforceable requirement of a network access agreement. And in the absence of a practicable way of forcing the buyer to complete the transaction, the existence of an obligation to have completed registration may well help a seller in the event of litigation.

There is one further argument against the amendments. It is that the wording in the Bill follows exactly the existing legislation, the effect of which is generally understood and accepted. Introducing any change would run the risk, I suggest, of introducing confusion. For those reasons I invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, I thank the Minister for his response which has reassured us. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 12 not moved.]

Clause 8 [Liability for making good void transfers etc.]:

Baroness Buscombe moved Amendment No. 13: Page 5, line 26, at beginning insert "(1) Subject to subsection (2),

The noble Baroness said: My Lords, in moving the amendment, I speak also to Amendment No. 14. They relate to liability for making good void transfers under Clause 8.

The purpose of the amendment is such that where the grant of a mortgage, with or without a transfer to the mortgagor, leads to compulsory registration, the practice is for the mortgagee to apply for registration because he has the title deeds to protect his security. The consequences of a late application for registration could be serious for the mortgagor but are beyond his control.

Although it seems unlikely that failure to effect first registration will cause difficulty, we are proposing that the consequences should fall on who is actually responsible. When someone buys property with the help of a mortgage, the mortgagee will immediately take the deeds as his security. In practice, therefore, it is the mortgagee who must deal with registration (although the responsibility may appear to be the mortgagor/buyer's). If the mortgagee overlooks the matter, or worse, it is right that he is the one who is liable for any loss. I beg to move.

Baroness Scotland of Asthal

My Lords, the first amendment makes Clause 8 subject to a further subsection and the second introduces that subsection.

Clause 8 deals with the liability for the cost of transferring, granting or creating the legal estate again, in the event that the previous disposition has become void through want of registration. That clause imposes the obligation on the buyer or the mortgagor in all cases.

We doubt that that is a sufficient reason for changing the long-established situation under which responsibility for meeting liability should fall primarily on the buyer or the mortgagor. As a matter of fact, it appears that that is where most problems seem to arise. It is that party who is in possession of the title documents vesting the legal estate in the land in the name of the person who should be registered as proprietor of that estate. In fact, this clause reflects the current provision of the Land Registration Act 1925 set out in subsections (8) and (9) of Section 123A.

Although not expressly stated as in the earlier provision, there is nothing in the Bill which prevents that liability being placed elsewhere on agreement between the parties. Indeed, there will usually be discussions between a buyer's advisers and those acting for the lender during the conveyancing process about the post-completion submission of a single application to the Land Registry covering all aspects of the transaction.

We would also suggest that even if the liability falls more often in current practice on the mortgagee rather than the mortgagor, now is not the time to make changes to reflect that practice. As noble Lords are no doubt already aware, conveyancing practice will change dramatically within the next few years. It could well be that the registry will receive electronic documents and applications through the network system as a result of the release of the individual elements of the overall transaction by the various parties. It may well be, therefore, that the authority for the individual amendments being made to the register will come from different parties. Those decisions are for the future. The important thing is that the wording of the clause does not preclude this as it merely states a default position.

What I respectfully suggest is the most appropriate way forward at present is to leave the imposition of the primary legislation where it currently falls, but without restriction on the ability of the parties to reallocate that liability in individual cases.

In the light of what I have said, I therefore ask the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, I thank the Minister for her full and eloquent response. I almost entirely understood what she had to say; I am reassured; and on that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 14 not moved.]

4.30 p.m.

Baroness Buscombe moved Amendment No. 15: Page 5, line 33, at end insert— ( ) For the purposes of section 12A of the Stamp Act 1891 (c. 39), an instrument to which section 7(1) applies shall be treated as having been accidentally spoiled.

The noble Baroness said: My Lords, this is a probing amendment, which would ensure that if an instrument were avoided by a failure to apply for registration, the stamp duty paid on it could be used on any replacement instrument executed to give effect to the original transaction. The Bill contemplates that, in some cases—we agree that they are likely to be rare—a second instrument may be executed to replace one that was ineffective because it had not been registered.

In Committee, the Minister said that she would investigate the issue and return to it on Report. We want to ensure that this point is not overlooked.

Lord Bassam of Brighton

My Lords, the noble Baroness is right. The amendment was tabled in Committee and we agreed carefully to consider it. If the responsible estate owner fails to apply for first registration of title within the period of registration stipulated in Clause 6, the transfer, grant or creation of the legal estate becomes void as a result of the application of Clause 7(1). It is therefore necessary for the legal estate to be re-transferred, re-granted or recreated by a new and additional document.

Stamp duty should not have to be paid on both the original document that dealt with the transaction and the subsequent, replacement document. I am therefore delighted to be able to confirm that the Stamp Duties Management Act 1891 already addresses that issue. Section 9 of that Act states that, subject to the production of evidence as to the facts, and to compliance with stamp duty regulations, allowance is to be made by the Commissioners for stamps spoiled in certain situations. Section 9(7)(d) then explains how such an allowance is to be made, by providing that, Allowance is to be made when an instrument executed by any party thereto becomes void for want of registration within the time required by law". I can therefore reassure your Lordships that no amendment needs to be made to the Bill, as the necessary provision is already made by existing legislation. I trust that, with that warm reassurance and careful recollection of Victorian legislation, the noble Baronness will feel able to withdraw her amendment.

Baroness Buscombe

My Lords, I thank the Minister for his reassurance, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Freehold estates]:

Baroness Buscombe moved Amendment No. 16: Page 7, line 20, at end insert ", or, as the case may be, the other persons.

The noble Baroness said: My Lords, I shall speak to Amendments Nos. 16 and 17 together. The provision is intended to cover cases in which the proprietor has no beneficial interest and in which he shares that interest. Without the words that the amendments would insert, the provision appears to apply only where the proprietor has no beneficial interest. The amendments are drafting amendments with grammatical purpose, so we hope that the Government will respond positively.

Baroness Scotland of Asthal

My Lords, I thank the noble Baroness for her assiduous consideration of grammar in tabling the amendments. On this occasion, it is unnecessary further to clarify the Bill as drafted. In our view, the clauses as drafted are clear. Clause 11 states: If the proprietor is not entitled to the estate for his own benefit, … then, as between himself and the persons beneficially entitled to the estate, the estate is vested in him subject to such of their interests as he has notice of'. Clause 12 states: If the proprietor is not entitled … solely for his own benefit, then, as between himself and the persons beneficially entitled to the estate, the estate is vested in him subject to such of their interests as he has notice of'. The amendments are therefore unnecessary. The clauses are considerably clearer than Sections 5(c) and 9(d) of the Land Registration Act 1925, which they replace. Those sections do not suggest that there are two different situations to consider. The clarity sought by the noble Baroness through the amendments is already achieved by the clauses as drafted. With that reassurance, I invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, I thank the Minister for her response. The fact that the clauses as drafted may be clearer than the related sections of the 1925 Act does not necessarily make them clear; they may be only an improvement. I will re-read the clauses and the Hansard report of what she had to say, to reassure myself that the amendments are unnecessary. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 [Leasehold estates]:

[Amendment No. 17 not moved.]

Schedule 1 [Unregistered interests which override first registration]:

[Amendment No. 18 not moved.]

Baroness Buscombe moved Amendment No. 18A: Page 46, line 10, leave out from "occupation- to end of line 11.

The noble Baroness said: My Lords, in moving Amendment No. 18A, I shall speak also to Amendments Nos. 20A, 41, 43, 44 and 45 and refer to government Amendments Nos. 19 and 43.

On Amendments Nos. 18A and 20A, a person in actual occupation of land who possesses an interest under a trust of land is entitled by virtue of his occupation to protection in respect of that interest. Paragraphs 2(1) of Schedule 1 and 2(1)(a) of Schedule 3 withhold that protection if the person in actual occupation is entitled to an interest under a strict settlement.

When we moved the amendments in Committee, we saw no justification for the discriminatory treatment of the beneficiary under the strict settlement, and we see none now. We accept that under existing legislation, interests under strict settlement do not constitute overriding interests. But, as the Law Commission pointed out at paragraph 2.69 of its third report on land registration in 1987, the distinction in the treatment of beneficiaries under strict settlements and beneficiaries under trusts of sale—now trusts of land—was probably unintended and was in principle unjustifiable. In the recent consultative document, at paragraph 563, the Law Commission and the Land Registry both readily accept that rights under strict settlement should be capable of existing as overriding interests. We agree wholeheartedly with that view.

There is a further important consideration to which the Law Commission refers in its 1987 report. The strict settlement was the classical type of landed settlement, designed to preserve family estates from generation to generation. In that context, the need to protect the beneficial interests of persons in actual occupation will seldom, if ever, arise. However, one unintended consequence of the Settled Land Act 1925 has been the unintentional and informal creation of strict settlements in circumstances in which the machinery of the Act is inappropriate and often not properly implemented.

In that context, the exclusion of beneficiaries under strict settlement who are in actual occupation of land is capable of operating unjustly. For example, a widow entitled to a life interest in the former matrimonial home under the will of her husband will be entitled to protection if in actual occupation only if the property were subject to a trust of sale. In the absence of that magic formula, which may well have been omitted in a handmade or informal will, the widow will be entitled to no protection. When she is evicted, it will be cold comfort to her to know that she is one of comparatively few people who will be affected by the abandonment of the Law Commission's recommendation to extend the protection to persons in her position.

The fact that a widow under a strict settlement unintentionally created by a homemade will is one of a diminishing band is not a good reason for depriving her of the protection of the law, which the law accords to someone with almost identical rights under a trust of land.

I want now to refer briefly to Amendments Nos. 19 and 43, tabled by the Government. They appear to replicate the amendments which we tabled in Committee. We congratulate the Government on bringing them forward at the Report stage, albeit under their name. They are most welcome.

I now turn to Amendments Nos. 41 and 44. In Committee, there was a discussion on the exact shades of meaning of the word "obvious" and of our suggested alternative, "apparent". We want to close off the unmeritorious argument that, although someone's occupation or, under paragraph 3 of Schedule 3 an easement, would have come to light on a reasonably careful inspection, it would not have been obvious and therefore not binding because the person undertaking the inspection would have had to think about what he saw in order to realise what the position was.

We believe that the reformulated amendments now proposed will avoid both that possibility and the semantic points raised in Committee. The amendments now have the simple effect of making an occupation or an easement binding if someone inspecting with reasonable care would find it. And common law principles will continue to govern what is a "reasonably careful inspection". Our reasoning is the same as, we believe, the Government's thinking in adopting our suggestion of deleting Schedule 1, paragraph 2(2) and Schedule 3, paragraph 2(2); that is, that in this area it is correct to rely on the interpretation which has been settled by the common law.

I now turn to Amendment No. 45. It is similar to an amendment we tabled in Committee, slightly redrafted to clarify its purpose. The point we want to deal with is that an inspection of land may show a used pathway across it or a window overlooking it. However, it will not be possible to say merely from looking at the land whether whoever uses the path or receives light to the window is entitled to do so as of right under an easement, or merely has the landowner's temporary or revocable permission to do so. We suggest that in such circumstances, a reasonably careful inspection should include asking whatever questions arise naturally from the facts observed.

The Government's reference in Committee to the case of Yandle v. Sutton and to patent defects in title appears to indicate that in their view as the Bill stands not only the relevant activity but also the fact that it is "as of right" and not merely permissive has to appear from mere visual inspection or be a "necessary" consequence of what is found by such inspection. If so, the saving for easements which would be revealed by inspection will never apply to anything, because merely looking at a path does not reveal whether anyone has an easement to use it.

The effect will be that paragraph 3(1)(b) appears to promise but does not deliver and even a clear but undocumented right of way over a well defined route will be lost on a sale of the land affected unless the person having the right can prove that it was used at some time in the previous year. I beg to move.

4.45 p.m.

Lord Bassam of Brighton

My Lords, the majority of these amendments relate to how obvious occupation has to be to constitute an overriding interest. In discussing them, it is my intention first to discuss the Government's Amendments Nos. 19 and 43, and then move to discuss Amendments Nos. 41 and 44 and finally Amendment No. 45. After that I shall discuss Amendments Nos. 18A and 20A, which relate to settled land and the rights of those in actual occupation.

As regards Amendments Nos. 19 and 43, concern was expressed during Second Reading and in Committee as to the meaning of "physically present" in relation to the protection of an interest by a person being in actual occupation; so that the interest overrides first registration or a registrable disposition. At that stage, the Government undertook to consider further. We have concluded that the proper course is to remove the partial definition of "actual occupation" in paragraphs 2(2) of Schedules 1 and 3. By doing so, I am pleased that we have adopted the approach contained in two of the amendments brought forward by the noble Baroness, Lady Buscombe, in Committee.

At present, paragraph 2(2) of each schedule provides that for the purposes of those paragraphs, a person is to be regarded as in actual occupation of the land only if he or she, or his or her agent or employee, is physically present there. "Actual occupation" is a term used in the existing legislation at Section 70(1)(g) of the Land Registration Act 1925. There is no statutory definition of the term but key elements of it have been explained by case law.

The intention behind the provisions in paragraphs 2(2) of Schedules 1 and 3 to the Bill was to codify certain of those key elements. They were, first, that there must be physical presence on the land of some kind, not just entitlement. Secondly, that physical presence does not have to take the form of residence. It might, for example, take the form of using a workshop. Thirdly, that physical presence does not have to be continuous. A person is no less in actual occupation if he or she only sleeps in the house and is out to work during the day. Finally, that the actual occupation may be that of the person who has the right, or it may be that of his or her agent or employee.

The Government do not seek to change any of those key elements provided by case law. However, we have concluded that there is a real risk in trying to add the glossing words "physically present". The additional words might create new scope for argument, and for expensive litigation, about the extent to which they might have been intended to alter the meaning of "actual occupation" as interpreted by the courts.

I turn to Amendments Nos. 41 and 44. The common thread of these two amendments and the Committee debates is the test to be applied in deciding whether something is patent 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 second, the test is in relation to legal easements and profits à prendre.

The amendments tabled in Committee sought to replace the word "obvious" with "apparent". These amendments seek to replace the words "obvious on" with "disclosed by", a reasonably careful inspection. The overall aim is to reduce interests which override registration as far as practicable and to ensure that they are restricted to interests which it would be impracticable or impossible to register.

I think it is agreed that if a buyer knows of a legal easement or profit because it is patent, then he should be bound by it. Such easements will be discovered from a reasonably careful inspection of the property and the seller would not be under a duty to disclose them. Secondly, any legal easement or profit which is not known to the buyer and is latent should not bind the buyer (although there should be an exception where the right has been exercised in the past year). This protects buyers from undiscoverable easements and profits, which are virtually impossible to get rid of once established.

The noble Baroness considers that the words "disclosed by" will achieve our common objective better than "obvious on". While I am grateful to her for that suggestion, I believe that little may turn on the different phrases. Noble Lords will recall that earlier and in Committee I referred to easements that will be discovered from a reasonably careful inspection. However, I am not aware of any judicial gloss on the word "discovered", while the term "obvious" has been the subject of considerable judicial use. It seems to us that the wisest course, and the one that makes our intentions clearest, is to echo language that is already familiar in case law.

The Oxford English Dictionary also suggests that "obvious" may be, as we would wish, a bit clearer and more evident than "disclosed". I would be worried in this difficult area, which has been the subject of much litigation in the past—no doubt also in future—to rely on very fine shadings of semantics. I very much welcome the thought which has gone into the noble Baroness's amendment. I agree that there is the finest of shadings between the rival versions. I would certainly hesitate to argue strongly for the original wording were it not for the closer correspondence to other areas of the Bill and the cases. On that basis I suggest to your Lordships' House that on balance it is the one to be preferred. The debates on these topics have undoubtedly been useful for this difficult area. They alone will, I hope, have done much to clarify the intention of Parliament in the event of a dispute.

As to Amendment No. 45, in debating Amendments Nos. 41 and 44 I said that if buyers knew of a legal easement or profit because it was patent they would 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 amendment seeks to spell out that if it is obvious that there has been activity on the land, or advantage enjoyed over it, the buyer will take it subject to the easement or profit, whether or not that is disclosed. The test of what is "obvious" on a reasonably careful inspection is to be interpreted as the case law relating to the question of a patent defect in title, namely one that does not have to be disclosed to a buyer of land prior to contract. In the leading case the learned judge said: I think [the purchaser] is only liable to take property subject to those defects which are patent to the eye, including those defects which are a necessary consequence of something which is patent to the eye". Therefore, if it was patent to the eye that, say, a private right of way existed the disponee would be bound even if he did not know the particular right under which the way was used or who all the users were. A legal easement will override a registered disposition if it is one that a seller of the land burdened by it would not have to disclose before contracting to sell the land. If the amendment was accepted there would be a danger that that simple test, which is perfectly familiar to conveyancers, might be obscured.

I turn finally to Amendments Nos. 18A and 20A. When we debated the same amendments in Committee the Government said that they had considerable sympathy with the arguments which the noble Baroness had advanced for removing the exceptions for settled land in the Bill as it currently stood. However, having considered the matter further, and despite the very eloquent arguments advanced by the noble Baroness, we believe that the Bill is right to continue the present position. We take that view because one of the aims of the Bill is to keep the number of overriding interests to a minimum given the responses to the 1998 consultation paper, and there appears to be no evidence that the present provision has caused hardship.

In its 1998 consultation paper the commission originally suggested that the right of a beneficiary under the Settled Land Act 1925 should cease to be, as now, simply a minor interest and become an overriding interest on first registration and in relation to registrable dispositions. Although comparatively few people responded on this point, most thought that these rights should not be overriding. Since 1996 it has been impossible to create new settlements under the 1925 Act as a result of the Trusts of Land and Appointment of Trustees Act 1996. This will, therefore, be an issue of rapidly diminishing significance. Consultees thought it very curious that the commission should seek to improve the protection of such rights and extend the scope of overriding interests at this stage when the general view was that the range of overriding interests should be cut back.

Any settlements of registered land expressly created before 1997 should have been protected by the entry of the prescribed restrictions on the register. The Law Commission, therefore, thought it likely that little or no hardship would be caused by the abandonment of the recommendation. It is therefore recommended that there should be a continuation of the present situation under which a beneficiary under a settlement cannot protect his or her interest by virtue of his or her actual occupation of the settled land.

In the 75 years since the Land Registration Act 1925 came into force the present situation does not appear to have caused any problems, and I am not aware of any case where the lack of protection as an overriding interest has prejudiced a beneficiary under a strict settlement. While what I say must in part be speculation, it would not surprise me if a reason for this is that the beneficiary, who would normally be in possession, is the tenant for life (in the technical sense) and normally he will be the registered proprietor (the trustees of the settlement usually being registered only if they are the statutory owners where there is no tenant for life).

I apologise for the length at which I have dwelt on these amendments, including those tabled by the Government, but I believe that it is important to deal in some detail with the various concerns raised by the noble Baroness. I hope that she will, therefore, be able to withdraw her amendment.

Baroness Buscombe

My Lords, I thank the Minister for his full response to the various amendments that we have tabled. He should make no apology for the length of his response given the importance of the various issues which have been raised. Interestingly, the Minister referred to the Oxford English Dictionary. When considering the word "obvious", I looked at a different version, namely the Pocket Oxford English Dictionary. That dictionary refers to something that is seen or realised at first glance. Our concern is that if something is not seen at first glance the occupier will lose all his rights, whereas if something is reasonably disclosed—in other words, second glance—the occupier's rights are safe. We wonder whether this matter may see the light of day in the courts given that we are looking at similar dictionaries with different interpretations.

I hear what the Minister says in relation to the issue of settled land which is dealt with in Amendments Nos. 18A and 20A. I hope that the Minister is right that there is no need to be concerned about the type of person to whom I referred, for example the widow who is entitled to a life interest in the former matrimonial home. Under her husband's will she is entitled to protection if in actual occupation only if the property is subject to a trust of sale. We shall read with considerable care the Minister's response in Hansard before deciding whether to return to this matter or to regard it as another issue that we may raise with the Minister after this evening. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bassam of Brighton moved Amendment No. 19: Page 46, line 12, leave out sub-paragraph (2).

On Question, amendment agreed to.

5 p.m.

Lord Lester of Herne Hill moved Amendment No. 20: Page 47, line 7, at end insert— 15 A right acquired under the Limitation Act 1980 (c. 58) before the coming into force of this Schedule.

The noble Lord said: My Lords, in moving Amendment No. 20 I should like to speak also to Amendments Nos. 46 and 119 which are consequential. The Bill as it stands will in some circumstances divest the title of those who have already acquired an indefeasible title by adverse possession. We believe that that is wrong. My noble friend Lord Goodhart raised this issue in Committee on 17th July (at cols. 1398 to 1399 of Hansard). Having heard the response of the noble Baroness, my noble friend indicated that he might wish to return to the subject at Report stage.

My noble friend raised two issues on that occasion: first, the effect of the Bill's provisions on those who have already acquired title to land through adverse possession; and, secondly, whether the Bill is compatible with the right to peaceful enjoyment of property which is protected by Article 1 of the first protocol to the European Convention on Human Rights and, in British law, by the Human Rights Act 1998. That intervention was particularly important because on the face of the Bill the noble and learned Lord the Lord Chancellor had, as the noble and learned Lord was obliged to, signed a compatibility statement under Section 19 of the Human Rights Act. We very much hope that the Minister will clarify those two issues in her reply.

As explained by my noble friend Lord Goodhart, under present law, adverse possession extinguishes the title of a previous owner after 12 years; that is, it extinguishes the title and the original owner no longer has any title to the land.

My noble friend also explained that we do not object to the new procedure in Part 9 and Schedule 6 for acquiring title by adverse possession when adverse possession has lasted for fewer than 12 years after the date at which the Bill comes into force. As my noble friend said, that is in line with the well-established principle that limitation periods can be changed without being treated as retrospective alteration of existing rights.

But what of the situation where the existing 12-year period for acquiring title by adverse possession has already been completed when the Bill comes into force? The adverse possessor will have acquired an indefeasible title; that is, a right to the enjoyment of the property.

Under Clause 11(4)(c), adverse possession binds the estate on first registration only if the freehold proprietor—the person with the paper title or the person acquiring the title—has notice. That requirement for notice is new. In the absence of notice, the indefeasible property right of an adverse possessor will be overridden by operation of the Bill. Perhaps the Minister can confirm that that is the position.

Paragraph 7 of Schedule 12 to the Bill, read with Clause 131(2), deals with this issue. It gives three years' grace for someone who claims to have acquired a title which extinguishes that of the first registered proprietor to protect his rights by registration.

Under existing law, Section 15 of the Limitation Act contains a 12-year limitation period for actions to recover land, including rights acquired by adverse possession. Therefore, under present law someone who believes that he or she has acquired title by 12 years of adverse possession is given 12 years to vindicate that property right.

In response to the noble Baroness, Lady Buscombe, the Minister explained that: Under the Bill a squatter's rights will override first registration only if the squatter is in actual occupation. Squatters who are no longer in actual occupation will therefore no longer fall within the protected category when the new law comes into force. That could involve some unfairness. Paragraph 7 therefore provides for the existing regime to continue for three years. That will allow sufficient time for squatters who have extinguished the title of the paper owner but who are no longer in actual occupation to make application for registration of title".—[Official Report, 17/07/01; col. 1400.]

In answer to my noble friend Lord Goodhart, the Minister explained that a three-year grace period for someone who claims to have acquired a title by adverse possession is, not a particularly onerous price to pay".—[Official Report, 17/07/01; col. 1401.]

The problem is that the three-year grace period is rigid and inflexible. It cannot be extended to allow for special cases of hardship, such as mistake or disability. Perhaps the Minister can confirm that there is no flexibility.

The heading before paragraph 7 of Schedule 12 refers to what are described as "Former overriding interests". The Bill seeks to convert existing indefeasible property rights into precarious rights. The rights are dependent on an uncertain application to the registrar within a fixed time limit of only three years. Perhaps the Minister can also confirm that that is correct.

There may well be cases of individual hardship where because of the complexity of the law of adverse possession and the lack of sufficient publicity about the effect of the Bill in this area, or for any other reasons, individual property rights will be taken away unfairly. The Government plainly cannot devote the kind of resources needed to warn squatters who acquire indefeasible title by adverse possession and are therefore no longer squatters but true owners. Unless the Bill is modified, either in the way proposed by the amendment, or, if that is too radical, in some other way designed to deal with the problem, to allow some exceptional discretion for hardship cases, it will become the courts' duty under the Human Rights Act to read safeguards into the Bill after costly and protracted litigation. Surely it would be preferable for Parliament to include sufficient safeguards against the unfair taking of property which could, and I think will, arise in some exceptional cases.

Therefore, we ask the Minister to deal with these points, which were raised both under the convention and generally in Committee, either in her reply today, or, if that is not feasible, in writing in sufficient time for us to consider the matter at Third Reading. I beg to move.

Baroness Scotland of Asthal

My Lords, I straightaway welcome the noble Lord, Lord Lester, to the fray in relation to this issue. In Committee I tried to touch the heart of the noble Lord, Lord Goodhart, by some heart-rending examples, but I see that, by the fact that this issue has returned, I left his heart totally unmoved.

In the debate on the Bill so far, I have rarely found myself wholly out of sympathy with any of the amendments and improvements suggested by the noble Lord, Lord Goodhart. Notwithstanding the eloquence and poignancy of the comments made by the noble Lord, Lord Lester, I find that, on this occasion, I am most unusually out of sympathy. Although I understand the concerns that have given rise to the present amendments, this is one of the areas where we think that the current balance struck by the Bill is preferable to the suggested changes. Our interpretation is that the Bill merely removes protection if the title is not asserted within three years.

The difference in our respective positions can be shortly put. The noble Lord, Lord Goodhart, is anxious to give greater protection to squatters who have acquired rights under the existing law to apply to be registered as proprietors of land. The noble Lord thinks that possibly failure to do so might be at some risk of challenge under the Human Rights Act.

We, however, think that the greater protection which the Bill gives to registered owners is wholly appropriate in the context of a system of registered land where the title to land depends on registration rather than occupation. We also think that the changes we propose to the existing law are entirely proportionate to the issues involved, and therefore consistent with the convention rights, and, in accordance with that, we have been able to sign the certificate pursuant to Section 19.

On this occasion we make no apology for wanting to strengthen the position of registered owners. Each year the Land Registry receives over 20,000 applications for registration based in whole or in part on adverse possession. In about three-quarters—15,000—of those cases, the applicant is successful in supplanting the previous owner. Many cases are disputed and are the subject of court proceedings or hearings before the Solicitor to the Land Registry or one of his deputies. Around three-quarters of Land Registry hearings involve squatting, and in around 60 per cent of cases, the squatter succeeds in whole or in part. I need hardly remind the House of the time, money and anxiety which those disputes will have cost the former owner, as well as the loss of the land itself. The Bill offers the opportunity to reduce those figures very substantially, and I respectfully suggest that it would be a serious matter if that opportunity were to be lost.

The three amendments seek to enhance the position of a squatter who, before the Bill comes into force, has already acquired title to unregistered land by adverse possession or who is entitled to be registered as the owner of registered land of which he or she has been in adverse possession. Perhaps I may refer to such a squatter as one with an acquired right.

Under the amendments, an owner on first registration or one who was registered as a result of a registrable disposition—such as a transfer—for valuable consideration would take subject to the acquired right of a squatter without any time limitation. In order to show that we consider that the Bill in its present form provides a fairer balance between the rights of a squatter with an acquired right and a registered owner, I propose to explain the provisions of the Bill and to compare them with the position if the Bill were amended as sought by the noble Lord, Lord Goodhart.

Under the Bill, there will be transitional provisions that protect a squatter with an acquired right and permanent provisions that may provide protection. The transitional provisions differ depending on whether the land is registered when Schedules 1 and 3 come into force, if the land is not then registered, but becomes registered within three years, the squatter's acquired right will override the registration, whether or not the proprietor has notice of it and whether or not the squatter is in actual occupation.

If the land is registered after the three-year period then the permanent provisions apply and the first proprietor will only take subject to the squatter's acquired right if he or she has notice of it or if the squatter is in actual occupation. If the land is already registered when Schedule 3 comes into force, then the squatter's acquired right will override any disposition registered during the three-year period, whether or not the squatter is in actual occupation.

After the three-year period, or during it if' the acquired right-affected land was first registered during the three-year period, a disposition for valuable consideration when registered will be overridden by the squatter's acquired right if the squatter is in actual occupation so that paragraph 2 of Schedule 3 applies. In general, the difference is that after the three-year period a squatter with an acquired right will, under the Bill, have his or her right protected if he or she is in actual occupation or, additionally, in the case of first registration, if the registered owner has notice of the right. Under the amendments, however, he or she will have his right protected, even if he is not in actual occupation; and protected indefinitely. That would be the effect of the proposed amendments.

Although we have listened with care to the argument put forward by the noble Lord, Lord Lester, in amplification of the argument put by the noble Lord, Lord Goodhart, on this point, we continue to think that the amendments would give excessive and unjustified protection to a "disappearing squatter"; that is, a squatter who has been in adverse possession, has then ceased to occupy the land and has also failed to apply for registration as proprietor while protected under the transitional provisions. A disappearing squatter would indeed have continuing rights over the land within the existing law.

But the current law rests on wholly different principles from the ones which the Bill seeks to introduce. Under it, a possible title to land is derived from occupation of whatever length. The current law allows both concurrent and competing claims to arise through occupation. There is plenty of scope for dispute as to which claim is the best, and plenty of scope for litigation. That is bad enough, but the current position also gives rise to a situation in which a new owner can suddenly become aware that his or her right has been undermined by a claim of which he or she knew nothing, arising from someone with no discernible connection to the land. It is perfectly possible that a person who has no notice of the squatter's acquired right may have been registered and, out of the blue, becomes aware that he or she is subject to the squatter's claim.

As I said in Committee when similar amendments were debated, in our view, the Bill strikes a fairer balance than that which would be effected by these amendments between those with an acquired right and registered owners. It does so by substituting a new and far clearer set of principles. Under the Bill, where the land has been registered, the register will be the primary determinant of who owns the land, subject only to the special circumstances dealt with in Part 9 and Schedule 6 of the Bill.

We believe that the amendments would shift two careful balances in the Bill. First, they would reduce significantly the protection that the Bill gives to the rights of registered owners. Secondly, squatters who have acquired rights will have the benefit of the transitional arrangements to be found in Schedule 12, whether or not they are in actual occupation of the land. The rights of anyone in actual occupation of the land will form a permanent feature of the Bill and will override both first registration and subsequent registered dispositions of the land under Schedules 1 and 3.

Those who have once squatted on land but have subsequently left will not be permanently protected. This is only in part because of a wish to preserve the rights of registered owners. It is fundamental to the Bill that the register should give the clearest possible picture of the rights and obligations to which the land is subject. Undoubtedly that will facilitate e-conveyancing. Rights should have overriding status only when it is impracticable or impossible that they should be registered. The transitional provisions will give a period of grace during which it will be possible for a squatter with an acquired right to protect his or her right by registration. We suggest that it is not a particularly onerous price to pay for that protection.

In the debate in Committee the noble Lord, Lord Goodhart, raised the issue of the limit on such acquired rights not being ECHR compliant. Noble Lords will appreciate that when the transitional periods no longer apply, squatters' acquired rights will not come to an end; they will continue. It is the protection as an interest which of itself overrides first registration or a registered disposition for valuable consideration which will come to an end. Even then, the acquired right will become protected only in the rare cases where the squatter is no longer in actual occupation and/or—in the case of first registration—the registered owner does not have notice of the right. We believe that these provisions are a proportionate remedy which must be balanced against the interests of a prospective buyer.

However, the permanent continuation of the transitional protection suggested by the amendment would create very significant practical problems for buyers. They would run the risk of finding themselves bound by the rights of squatters, where the squatter is no longer in actual occupation. The chances of ascertaining that someone had acquired a permanent right, hidden from the register, from past occupation would, in many cases, diminish to nothing. I suggest, therefore, that the noble Lord's proposal would in fact significantly damage the structure of the Bill. In the future it would put prospective buyers under a burden of risk that is unreasonable.

In the light of that explanation, I hope that the noble Lord, Lord Lester, on behalf of the noble Lord, Lord Goodhart, will feel able to withdraw his amendment.

5.15 p.m.

Lord Lester of Herne Hill

My Lords, before the Minister sits down, perhaps she could clarify one matter after her very helpful response. Does she accept that having a rigid three-year time limit for registration during the so-called "grace period" could lead to extreme and rare cases of injustice, whether through mistake, lack of capacity or otherwise, because of the inflexibility of the three-year period? Does she accept that there could be such cases, or is that a false point?

Baroness Scotland of Asthal

My Lords, it would be very unlikely because in that kind of situation we would be dealing with people who have acquired rights in relation to the land but are not in occupation of it; who have perhaps left the land for a period of three years or more. They would have a three-year period in which to register their rights.

While the noble Lord was on his feet, I was trying to think of a situation where someone who had squatted on land of that kind might be disadvantaged. I could not immediately think of an example where that would apply. The whole purpose of giving the three-year period of grace to someone who is not in occupation is that it is quite a long period for a person who may have acquired a right in a property at some stage to register that right.

There is also the difficult question of balancing the rights of a bona fide purchaser for value who has no means of identifying that someone may have at some stage acquired an interest in the land. One can imagine a situation, perhaps, where someone has squatted on the land unknown to the otherwise bona fide owner for a period of 12 years and has left the land for a significant period. The land is then sold to a bona fide purchaser for value, and neither the original owner nor the subsequent purchaser have had any notice at all of that squatter's acquired right.

Under the new situation we are trying to create—where registration will be the proof of title and entitlement to land—giving such a person with an acquired right a three-year period to register that right is not unreasonable. It is a proportionate response which balances the rights and duties one has to both the purchaser and the potential squatter who may have acquired a right unknown to the original owner and the subsequent bona fide purchaser for value. That is the situation with which we are dealing.

As I explained, it is a much easier situation where you have someone who has acquired title and is still in occupation. Clearly, that is discoverable. I hope that I have explained why we think that a different regime of protection is appropriate for such a person as opposed to a person who is not in actual occupation.

Lord Lester of Herne Hill

My Lords, I am grateful to the Minister for both her general response and for the way in which she has responded to my request for further information.

I should make it clear that there is complete agreement that this is a rational and sensible scheme in general. It will be a great improvement on the existing situation. However, what is still troubling me—one will need to read very carefully what has been explained so fully by the Minister—is the transitional problem.

The Minister refers to some people as "squatters", which immediately makes one less sympathetic to them than to anyone else. On the other hand, whatever you call them, they are people who have acquired indefeasible property rights equally as good as the rights of the original owner. They have for 12 years—openly, not secretly, without violence and not deceitfully—treated the land as their own, and it has become theirs as a matter of the law of real property. Now the law will come in, as I understand it, and divest some of those people, whether they are in occupation or not, of their rights—I may have misunderstood—unless they apply within the three-year grace period. This is in order that the register can be used to represent the reality and create greater legal certainty.

My lingering concern is that with a rigid three-year grace period of that kind, and with the law being so complicated and the new Bill being so fundamentally different from the old regime, there will be people ignorant of the consequences. They may not even know that they have acquired title through 12 years' adverse possession. They may, through mistake or lack of capacity, not be able to take decisions during that time, and there will be no discretion—as there is normally with a limitation period—to take account of exceptional circumstances.

I understand perfectly that the moment you put in a discretion you create some uncertainty, but if you have no discretion and then you have a hard luck case, the concern remains that it will be said that property rights are being taken away unfairly. One will then finish up with litigation, not about the proportionality and rationality of the scheme in general but about the rigidity and inflexibility of the formula that will be introduced. It is fairly well known in case law from the European Court of Human Rights that rigidity and inflexibility are regarded as showing a lack of proportionality because one cannot deal with the particular hardships of individual cases.

I hope that that point will be considered before Third Reading. I am sure that my noble friend Lord Goodhart will then decide whether to come forward with a narrower amendment to give a discretion in very exceptional. cases. Having said all that, I thank the Minister again and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 20A not moved.]

Clause 15 [Right to lodge]:

[Amendments Nos. 21 and 22 not moved]

Clause 13 [Cancellation]:

Viscount Bridgeman moved Amendment No. 23: Page 10, line 11 at end insert— ( )For the purposes of subsection (2), consent given for a limited period is to be ignored after the period has expired.

The noble Viscount said: My Lords, in moving Amendment No. 23, I shall speak also to Amendments Nos. 48, 49 and 51.

Amendment No. 23 seeks to address the case where a landowner may consent to the registration of a caution against first registration to protect a time-limited interest—for example, an easement granted for a specified term. If the consent is granted only for that specified period, there is no reason why the landowner should not apply for the caution to be cancelled once that period has expired.

An interest in land may be granted for a limited period—for example, a right of way for access to a quarry for a period intended to be while stone working continues; or to a tip until such time when it will be full. Where such an interest is protected, we feel it is unnecessary that, once the period has ended, the person entitled to that interest, who will no longer be concerned, should have to take any part in any further procedure. Similarly, where consent is needed, it should be possible for a person with a limited period interest to give it for that period. Amendments Nos. 48 and 51 relate to limited period interests.

Amendment No. 49 is a new amendment. It is tabled to deal with an issue which was discussed in Committee. Paragraphs 6.22 to 6.31 of the report describe the system in the Bill and indicate that it is intended not only to allow the entry of so-called "agreed" notices which are not in fact consensual (paragraph 6.24), but to go further and prescribe by rules that certain interests can be protected only by "agreed" notices, without any specific procedure for cancellation on the proprietor's application (paragraph 6.25), giving "matrimonial home rights" as an example.

The Government indicated in Committee that the ordinary procedure by way of rectification will be available if such an "agreed" notice is disputed. That may sometimes be a sledgehammer to crack a nut, but it is much better than no nutcracker at all. However, it would be wrong in principle to allow entries to be made without the proprietor's consent, possibly even without his knowledge, and without giving him an opportunity to resolve the applicant's claim where it is disputed.

Clause 32(3) provides that a notice does not validate an interest but does protect its priority if it is valid. A so-called "agreed" notice in respect of a claim which is in fact disputed will be a serious interference with the registered proprietor's ability to deal with his land—any prospective purchaser will insist on having the entry "cleared off", which may be a protracted process if it arises out of a dispute between the proprietor and the applicant. The amendment now before the House will ensure that the registered proprietor always knows of any "agreed" notice entered without his actual consent, so that, if he thinks fit, he can immediately take steps to clear it off by applying for rectification. The object is to ensure that this remedy, which the Government acknowledge should be available, can always be effectively exercised. I beg to move.

5.30 p.m.

Baroness Scotland of Asthal

My Lords, these amendments deal with cautions and notices. In relation to the first amendment, it may be helpful if I start my response to the noble Viscount by agreeing with him that the detailed arrangements for giving effect to the Bill will need to take account of the circumstances set out in the amendment and with what he has said. I do not, however, believe that it is necessary to amend the Bill to secure that, and that it is preferable to leave this issue, and no doubt many others, to be covered in the more flexible provisions of rules.

Amendment No. 48 seeks to remove any possible doubt that the consent given to the entry of an agreed notice under Clause 34 can be for a limited period. This might be the case when the interest being protected by the notice is time-limited in some way. Rules made under Clause 39 can make provision about the form and content of notices on the register to make this clear. But the amendment itself is unnecessary.

Amendment No. 49 seeks to ensure that the registrar serves notice of the entry of an agreed notice when the proprietor of the land or charge affected applies or consents to its entry or when the registrar is satisfied of the applicant's claim. This might occur when, for instance, the registrar is satisfied that the registered proprietor has granted the applicant an option over the land or when an entry confirming the existence of a matrimonial home right is requested.

I can confirm that at present the registrar does serve notice on the registered proprietor of any such applications and that he does serve notice on any other persons whose rights are protected on the register if those rights might be affected by the action he is taking.

I can confirm that it is also intended to use the general rule-making powers contained in Schedule 10 to the Bill for the purpose of setting down the minimum requirements in this regard. Such rules will be looked at by the Land Registration Rule Committee and will be subject to the negative resolution procedure. The detailed provisions adopted in relation to the giving of notice in specific circumstances are not a matter for the Bill.

I hope that these explanations and undertakings have reassured the noble Viscount to an extent where he will feel able to withdraw the amendments.

Turning to Amendment No. 51, the amendment to Clause 36 provides that an agreed notice may be removed in particular circumstances—namely, when time-limited consent to the registration of the notice has run out. While I agree that it would be appropriate to update the register and remove the notice when the underlying interest has expired, I suggest that the amendment is unnecessary.

As I have said, notice entered on the register does not affect the validity of the underlying interest which it protects. If the underlying interest has expired, then the notice, even if still present on the register, will have no legal effect. This would be the case whether or not the consent given to the entry of the notice was time-limited.

Whenever the interest protected by an agreed notice has come to an end, either through time limitation or determination for other reasons, the owner may apply to the registrar for the register to be updated by the removal of the notice. The registrar has power to update the register under paragraph 5 of Schedule 4.

For these reasons, we respectfully suggest that no amendment is needed to the clause as drafted and I invite the noble Viscount to withdraw the amendment.

Viscount Bridgeman

My Lords, I am grateful to the Minister for her comprehensive reply, in the light of which I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Bridgeman moved Amendment No. 24: Page 10, line 15, after "period" insert "(not being less than seven days)

The noble Viscount said: My Lords, in moving this amendment, perhaps I may speak also to Amendments Nos. 52 and 57.

These amendments specify a minimum period which must be allowed to the recipient of a notification for him to respond and protect his rights. Such provisions can in effect have substantive results, since such a person may lose his rights if the period is too short for an effective response.

We have taken note of what the Government said in Committee about what is practicable and about the risk of impeding transactions by allowing objectors longer periods than necessary to respond to notices. The amendments as now formulated set the minimum period at seven days, the minimum under the present rules. Anything less would be liable to give objectors—and, if their objections are justified, their property rights—insufficient protection by requiring them to respond in a time-scale which did not allow them to take effective advice on what will often be a highly technical matter. Alternatively, in some cases too short a response period would increase delays by generating "holding" objections which would not have been made if more time had been available. I beg to move.

Baroness Scotland of Asthal

My Lords, Amendments Nos. 24, 52 and 57 share a common theme, and I shall therefore deal with them together. That theme is the inclusion of a statement on the face of the Bill of minimum periods of notice that can be specified in certain rule-making powers.

The first amendment provides that at least seven days' notice is given to a cautioner of an application to cancel his caution against first registration. The second deals with the notice period given to the beneficiary of a unilateral notice of an application for its cancellation; and the third with the period of notice given to the registered proprietor to object to third party applications to make entries on their title.

I agree that the right to object in these situations is an important right for the persons whose interests are protected by registration and that, accordingly, sufficient time must be given for the right to object to be exercised. This issue was first raised in Committee, where the suggested notice period was 28 days.

My concerns about the suggestion then were twofold. I suggested that this is a matter better dealt with in the rules. More practically, it seemed to me that 28 days would in some circumstances be too long. The essence of my worries about these amendments have similar elements.

First, and practically, the minimum period of notice put forward in these amendments is seven days, which is shorter than the period of 14 days currently given, and—if it became general practice—may be too short. Now, there is automatically added to that 14-day period a seven-day period given under the deemed delivery provisions to allow for the notice to be received through the post.

As I said in Committee, our first thoughts are that the current rules are broadly right, and there is no intention to change the deeming provisions or the periods of notice in the foreseeable future. However, the Bill is laying down the framework for land registration for a considerable time to come, and will do so in the most dynamic period in the development of land registration services since the 1925 property law reforms.

I am therefore strongly of the view that the Bill should not restrict the ability of my noble and learned friend the Lord Chancellor, with the assistance of the Rule Committee which advises him, to make the right decision in rules for the length of these notices as circumstances change from time to time. I am thinking particularly of the time when e-conveyancing comes fully on stream. I have come to this view for a variety of reasons: first, the minimum period for objection to the removal of a caution against dealings under the current system is set out in rules and not on the face of the Land Registration Act 1925; secondly, if anything, complaints from conveyancers and other users of the registry is that notice periods are too long rather than too short; thirdly, modern technology, as I mentioned earlier, is moving towards faster and more efficient communication; and, finally, improvements needed to reduce the length of the home buying process and to introduce electronic conveyancing point to generally shorter timescales for all stages of the process. We all know how quickly and dramatically this area has developed in relation to what one could have reasonably expected only a few years ago.

While a seven-day minimum period may seem necessary now, there is no way of knowing if that will continue to be the case in the future. Therefore, we respectfully suggest that the amendments are unnecessary in that land registration rules may specify minimum notice periods and these will be approved by the Land Registration Rule Committee and following amendments that will be introduced today subject to the negative resolution procedure. They are also undesirable as they potentially impose restrictions on a future which we cannot reliably predict.

With that assurance that these issues will be addressed on the face of the rules in a way which will respond to the needs of conveyancers and their customers, I invite the noble Viscount to withdraw the amendments.

Viscount Bridgeman

My Lords, I am most grateful to the Minister for the careful consideration she has given to the points and for her explanation, in the light of which I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22 [Supplementary]:

Lord Bassam of Brighton moved Amendment No. 25: Page 11, line 10, leave out "his personal representative" and insert "such other person as rules may provide

The noble Lord said: My Lords, I shall take the amendments in numerical order. As to Amendment No. 25, Clause 22 serves a simple purpose and as originally drafted mirrors that which is already to be found in the existing legislation. Cautions can remain on the register for a considerable time. It is therefore sensible to enable personal representatives of someone who lodged the caution but has since died to be able to take action in respect of it. However, the personal representative is not the only person who may "stand in the shoes" of the cautioner as time goes by. Government departments might change their responsibilities, an owner of land might become bankrupt, utility companies might be reconstructed. In any of these situations, unlike on a sale, it may be difficult for those acquiring the interest to have sufficient information to be able to update the register entry.

This amendment is designed to modify the clause to provide for rules to specify who may be regarded as the cautioner for the purpose of objecting to the removal of the caution, or indeed for seeking its withdrawal. The purpose of the clause is thereby widened to cover a larger group of persons who might legitimately be entitled to the benefit of the caution. In the light of those comments I commend the amendment to the House.

Turning to Amendments Nos. 50 and 53, Clauses 35 and 36 make provision for unilateral notices. Amendments Nos. 50 and 53 relate to the same issue, the identity of the person who can remove or object to the removal of a unilateral notice, and, therefore, I shall deal with them together.

Subsection (3) of Clause 35 specifies that the person shown on the register as the beneficiary of the unilateral notice can apply for the removal of the notice. Clause 36 makes provision for challenging the entry of a unilateral notice by applying for its cancellation. Subsection (4) of Clause 36 originally defined the beneficiary who could object to the cancellation of the notice to mean the person shown on the register as the beneficiary of the unilateral notice.

There is no intention to change the current approach adopted by the Land Registry in relation to the removal of cautions against dealings, which your Lordships will recall is being replaced by the unilateral notice system. The registry will currently allow a caution against dealings to be removed at the request of a personal representative of the cautioner and, in appropriate cases, their trustee in bankruptcy or statutory successor. The registry will also allow such persons to object to the cancellation of a caution against dealings if they show reasonable cause. However, there is potential to construe these clauses as originally drafted as intentionally more limiting, linking as it does the ability to apply for the removal of the notice to the name specified on the register. These amendments allow rules to be made which specify in some detail who additionally may apply for the removal of the notice or object to its removal. The rules will have the added advantage of in built flexibility to modify and improve that detail in the future. In light of the comments I have made, I commend these amendments to the House.

As to Amendments Nos. 74 and 76, Clause 73 sets out the means by which an application to the registrar may be challenged. Apart from two minor exceptions, anyone can object to such an application. As originally drafted, the two exceptions were, first, on application to cancel a caution against first registration, only the cautioner or his personal representative may object; and, secondly, on application to cancel a unilateral notice only the beneficiary of the notice may object. Amendments to both Clauses 22 and 36 have widened the category of persons who can object to such applications to include all other persons who are specified in rules. These amendments to Clause 73 are consequential amendments which reflect those earlier changes.

No detailed consideration has yet been given to the content of those rules. However, leaving these details to rules will enable careful thought—and no doubt further representations—to be given to the practicalities of the various situations that might arise. Where common situations arise, it might prove possible expressly to address the situation on the face of the rules, listing specific persons who will be able to apply. Equally, the rules may say instead or as well that objection may be made by any person who satisfies the registrar that they should be entitled to object. I commend the government amendments to the House. I beg to move.

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: Page 11, line 20, at end insert— ( ) 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 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 subchargee 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 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.

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 he 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.

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.

Baroness Buscombe

My Lords, I thank the Minister for her response. I am somewhat disappointed by it but am much reassured by the fact that she said that only the heads of content are to be contained in the disposition. However, I should have preferred—I believe it to be the simpler route—that she had accepted the amendment and left out altogether the words "and content". However, the Minister has certainly reassured us in some detail, and that will be clear for all to see in Hansard. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 26 [Protection of disponees]:

Baroness Buscombe moved Amendment No. 30: Page 12, line 12, after "this" insert "or any other".

The noble Baroness said: My Lords, Amendment No. 30 relates to Clause 26. I shall set out its purpose. Although it may be the intention to reflect limitations of owners' powers on the register, if a qualification is omitted from the register in error, it is against public policy to legitimise dispositions which statute has made void. There are, for example, restrictions on dispositions by local authorities and by charities. Subsection (3) appears to mean that someone would otherwise acquire a good title.

The Bill seeks to protect people who take a transfer of registered land when it is apparently valid on the face of the register. While that is undoubtedly useful, it must surely be against policy that it should overrule statutory restrictions imposed on particular landowners. The important point here is that the register would normally reflect such restrictions, but, in practice, one must deal with the cases in which that safeguard fails.

Restrictions are placed on certain disposals by charities, by local authorities and by registered social landlords. In those cases, we believe that it is extremely important that human error is allowed for. In essence, it is, in our view, simply wrong to write off a qualification of an owner's powers on the registrar in the event that the registrar makes a mistake. I beg to move.

Baroness Scotland of Asthal

My Lords, although I have listened very carefully to what the noble Baroness has said, we have considerable concerns about this amendment. We believe that there are two substantial objections to the amendment. First, it would undermine the fundamental objective of the Bill. Secondly, it would make a substantial change in the existing law. Perhaps I may deal with each aspect in turn.

Clause 26 is one of the clauses which embody the fundamental objective of the Bill. In their joint report, the Law Commission and the Land Registry recommended that that objective should be: that, under the system of electronic dealing with land that [the Bill] seeks to create, the register should be a complete and accurate reflection of the state of the title of the land at any given time, so that it is possible to investigate title to land on line, with the absolute minimum of additional enquiries and inspections". Thus, to achieve the objective, it is important that any limitations on the powers of the owner to deal with the land or a charge must either be the subject of entries on the register or the limitations must be imposed by the Land Registration Bill itself. One implication of that approach is that it suggests that Parliament should avoid legislation which could affect owners' powers, except, of course, by way of amendment to this Bill, should it become an Act.

The amendment runs directly against that. It seeks to widen the limitation so that the powers of an owner can also be limited by other statutory provisions. If the amendment were agreed, it would undermine the fundamental objective and would do so in a way which would have a direct and practical effect on potential buyers. People dealing with the title would need to consider what, if any, statutes might impose a limitation on those powers. They would then need to investigate to see whether that was the case. That would detract from the completeness and clarity of the register of title. We believe that that can be described as the argument of principle against the amendment.

The other argument—that it makes a significant and undesirable change in the existing law—is very largely a question of practicality. The clause as drafted codifies the existing law and practice. I invite your Lordships in particular to remember the comments of Lord Justice Peter Gibson in the well known case of State Bank of India v. Sood. He said: It is fundamental that any registered proprietor can exercise all or any powers of disposition unless some entry on the register exists to curtail or remove those powers". Therefore, the register is already conclusive as to the existence of any such limitations, and a sale made beyond the powers of the current owner already cannot be undone. So far as land registration is concerned, it simply is not contrary to policy, as the noble Baroness argued, for dealings with land which are contrary to the general law or contrary to statute to be rendered irreversible by a change in registration.

We respectfully suggest that the solution proposed by the amendment is far worse than the problem. Creating a novel situation in which a buyer would have to check that a proposed disposition was within the powers of someone who purported to be the owner would add significantly to the delays and to the costs of conveyancing. It will be difficult to prepare a detailed checklist of the circumstances where there might be room to doubt the actual powers of the owner, and the legal position could very often be obscure. All buyers would have to consider whether there was any possibility of those circumstances applying to their transaction. Where that appeared to be possible, they would be put to the trouble and expense of attempting to ascertain the actual extent of the seller's powers. In the worst circumstances, they would get that wrong. They would then be confronted with the prospect both of losing their land and of protracted and expensive litigation against the person who purported to have sold it to them. That would not be a change for the better.

That is why the Government prefer the simplification of the existing law that will be effected by the Bill. That will reduce the ways in which questions can be raised about owners' powers to dispose of land. Limitations on powers can now be recorded by procedures involving both restrictions and inhibitions. Under the Bill it will be possible to record limitations on powers only by restriction, which will give a clear and certain picture. In the absence of a restriction reflecting the limitation on the owner's powers, a sale or other transaction could not be challenged. That gives buyers the protection that they need.

It worth noting that someone who had bought land in such a transaction might also be accountable in equity for having received something that was transferred by an illegal transaction if they were aware of the impropriety. That is the right way to deal with any problems that might arise—it is preferable to creating a:substantial and universal new burden on buyers, which would undoubtedly give rise to many hard cases.

It is intended that current Land Registry practice will continue after the Bill comes into force, and it is right that it should do so. Third parties should be able to look to the register—and to the register alone—to determine what limitations exist on the owners' powers to dispose of their interest. I therefore invite the noble Baroness to withdraw her amendment.

Baroness Buscombe

My Lords, I thank the Minister for her very full response. I am sorry that she raised such a wholehearted objection to the amendment. We on these Benches felt confident that this was a good point to make. However, I am much persuaded by what she said and shall read it with care in Hansard. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27 [Dispositions required to be registered]:

[Amendments Nos. 31 to 33 not moved.]

6.15 p.m.

Viscount Bridgeman moved Amendment No. 34: Page 12, line 38, at end insert "or one granted or reserved by an instrument creating a term of years absolute which is not registered or required to be registered".

The noble Viscount said: My Lords, in moving this amendment, I shall speak also to Amendments Nos. 35 and 39. The amendments are intended to ensure that easements and rights of entry for short terms of years do not have to be registered or noted on the title to the servient land where they are created by short leases that are not themselves registrable.

We have taken note of the point that the Government made in Committee; namely, that it is undesirable for there to be easements and so on that cannot readily be discovered. We accept that a tenant who acquires an express easement by a transaction that is separate from his lease can fairly be asked to register it. However, if an unregistrable lease itself grants or reserves an easement, a buyer of the reversion will anyway have to look at the lease and will see the easement, so it is entirely right for the easement to be binding on him.

However, as the Bill stands, such easements will be registrable under Clause 27(2)(d). By Clause 27(1), they will not operate as law unless registered against a landlord's title. I refer to paragraph 7(2)(a) of Schedule 2. Therefore, on a subsequent dealing with the landlord's title, there will not be overriding interests under paragraph 3(1) of Schedule 3 because that applies only to legal easements. By contrast, implied easements, including continuous and apparent easements, and rights of way of necessity, will operate as legal easements without being registered, because paragraphs (d) and (e) of Clause 27(2) refer to "express" grants. Implied easements will be overriding interests when the land over which they are exercised is sold.

Let me give an example. Consider two flats on opposite sides of the landing on the upper floor in a block. Both are let for a term that is not long enough to make the leases registrable. One of them expressly grants the tenant the right to use the lift and staircase, but the other is silent on that point. Neither tenant registers anything. As the Bill stands, if the landlord sells the block, the first tenant's right of access, although clear in his lease, will not bind the buyer, whereas the second tenant's rights will be perfectly good over both the lift and the stairs, although they are not mentioned elsewhere. That is absurd.

I suggest to the Minister that to justify such an absurdity along the lines that -are suggested in paragraph 6.11 of the report by the Law Commission and the Land Registry adds something that will encourage tenants to register short leases voluntarily and is machiavellian. I beg to move.

Baroness Scotland of Asthal

My Lords, I say straightaway that it is certainly not the Government's intention to be machiavellian. I hope that when I deal with our view of the matter I shall make that clear.

Amendments Nos. 34 and 35 relate to interests which, when granted out of registered land, are required to be completed by registration. Amendment No. 39, as I understand it, is purely a consequential amendment on them. I will therefore deal with them all together.

Amendment No. 34 deals with the category of interests that are set out in Clause 27(2)(d). That category of interests relates to easements and profits à prendre as described in Section 1(2)(a) of the Law of Property Act 1925. They include both profits à prendre which are attached to land and those which exist independently of any land. Profits à prendre in gross are registrable in their own right for the first time as a result of the Bill's provisions.

The subsection certainly contains one exception. Where the interest is capable of registration as a right in common, it should be registered under the Commons Registration Act 1965, not under the land registration system. The amendment seeks to add a further exception—it seeks to exclude from the requirement to complete by registration an easement or profits à prendre which are contained by way or grant or reservation in a lease which is not, and does not have to be, registered.

The amendment goes against the fundamental objective of the Bill, which is that, where possible, any matters that affect that registered estate should be apparent from the register of title, thereby minimising the additional inquiries and inspections that have to be made. There should be excepted from registration only those matters where there is good reason to do so. In our view easements and profits à prendre that are contained in leases that are carved out of registered land do not fall within that category.

There are several reasons why that is so. First, easements granted or reserved for a term of years—however short—must be granted or reserved by deed. That is so even though the easement forms part of the arrangements arising from the grant of a lease of less than three years, which does not itself need to be in writing. Secondly, while the existence of a short leasehold interest is often apparent because the tenant is in actual occupation of the land, the fact that the arrangement includes an easement is not so apparent. In our view, therefore, the creation of that exception would undermine the transparency of the burdens affecting the land that this Bill seeks to bring about.

Amendment No. 35 seeks to make a similar exception to the interests that fall within paragraphs (b) and (e) of Section 1(2) of the Law of Property Act 1925. Those are less common in practice. While the paragraphs cover both rent-charges issuing out of land and also rights of entry that are exercisable over a legal lease or a legal rent-charge, in practice that exception is likely to be relevant only to a right of re-entry under a lease. The same considerations apply. If those matters were contained within a lease that would not otherwise be registered, they should be recorded on the register of title.

Amendment No. 39 makes consequential amendments to Schedule 2(7), which sets out the registration requirements in respect of matters falling within the two paragraphs of Clause 27 that are the subject of the two amendments. Schedule 2(7)(3) is worthy of note in that context, as it goes some way to address the concerns raised by Amendment No. 35. That paragraph states that rules may specify how the normal registration requirement will be modified in relation to a right of entry over or in respect of a term of years absolute". The reason for that rule-making power is that currently the benefits of re-entry rights under a lease are not recorded on the title to the reversion to the lease. Although that practice may change in future, the power to modify the requirement means that the current position can be maintained for the present.

The clause and the amendments deal with the very edge of what is possible in registration. We will of course consider whether anything can be done. Frankly, at this stage we are not optimistic but we will look at the matter again. In light of those comments, I invite the noble Viscount to withdraw the amendment.

Viscount Bridgeman

My Lords, any implication that Machiavellianism was going on must of course be withdrawn. I am most grateful for the Minister's attention to our carefully structured example and look forward to further correspondence. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 35 to 42 not moved.]

Schedule 3 [Unregistered interests which override registered dispositions]:

Lord Bassam of Brighton moved Amendment No. 43: Page 49, line 32, leave out sub-paragraph (2).

On Question, amendment agreed to.

[Amendments Nos. 44 to 49 not moved.]

Clause 35 [Unilateral notices]:

Lord Bassam moved Amendment No. 50: Page 15, line 37, after "notice" insert ", or such other person as rules may provide,

On Question, amendment agreed.

[Amendments Nos. 51 and 52 not moved.]

Clause 36 [Cancellation of unilateral notices]:

Lord Bassam moved Amendment No. 53: Page 16, line 11, at end insert ", or such other person as rules may provide

On Question, amendment agreed to.

Clause 37 [Unregistered interests]:

Baroness Buscombe moved Amendment No. 54: Page 16, line 19, at end insert "after giving notice to the person who appears to the registrar to be entitled to the benefit of that interest

The noble Baroness said: My Lords, the effect of the registration of a notice of an overriding interest in Schedule 3 is to cancel the automatic protection of its priority in Clause 29(2)(a)(ii). It is only right that the beneficiary should be warned that a notice is to be registered. The general principle must surely be that where somebody is deprived of a right, he ought at least be given notice of the fact.

Amendment No. 54 is substantially the same as government Amendment No. 55—which we welcome in response to our concern in Committee that the beneficiary of the interest might be unaware of its change of status. While we are in principle supportive of the government amendment, ours is preferable—in part, because the substance of what is required is in the legislation itself rather than in rules.

More importantly, because Amendment No. 54 requires notice to be given before the entry is made, that will facilitate the cheap and speedy resolution of any question that may arise as to whether and on what terms an entry should be made. The government amendment appears to have the effect that notice will only be given after the entry has been made. We look forward to the Minister's reassurance. I beg to move.

Lord Bassam of Brighton

My Lords, I believe that I will be able to provide the reassurance that the noble Baroness seeks. We are approaching the same problem in not dissimilar ways but perhaps with greater flexibility. Amendment No. 54 seeks to make the service of a notice on the person entitled to the benefit of the overriding interest a prerequisite to the noting of the interest on the register under Clause 37.

Government Amendment No. 55 provides that, when making the entry, the registrar is obliged to serve notice of that fact on persons specified in rules. As the entry of the notice can occur without a specific application, there will be occasions when the registered proprietor will need to be informed. Rules would be the most appropriate way in which to make provision for informing the beneficiary of the interest because of the difficulty in identifying the owner of that overriding interest or in discovering a current address at which they can be contacted.

The use of rules also provides the flexibility needed to improve the provisions if difficulties are experienced in implementing them. In light of those comments and the noble Baroness's welcome for the government amendment, I hope that she will feel able to withdraw Amendment No. 54. If she continues to have concerns, we will be happy to listen when the important meeting to discuss some of the minor irritations in the Bill takes place.

Baroness Buscombe

My Lords, I thank the Minister for his response. I should have made it clearer that I welcome the government amendment in principle but prefer ours m practice. On the basis of the Minister's comments, l beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bassam of Brighton moved Amendment No. 55: Page 16, line 19, at end insert— (2) The registrar must give notice of an entry under this section to such persons as rules may provide.

On Question, amendment agreed to.

Clause 44 [Obligatory restrictions]:

Viscount Bridgeman moved Amendment No. 56: Page 18, line 20, after "restrictions" insert ", if any,

The noble Viscount said: My Lords, this probing amendment is to clarify that no restriction needs to be entered where co-proprietors are beneficial joint tenants. The amendment is intended to ensure that the legislation cannot be read as making it mandatory for the rules to require a restriction in some form to be entered in all cases of co-proprietorship—even where the co-proprietors are beneficially entitled as joint tenants and no one else has any interest—so that the survivor will be entitled to the whole land.

In those circumstances, there is no need for a restriction to make sure that the general law is observed. Under the present rules, no restriction is required. I beg to move.

6.30 p.m.

Baroness Scotland of Asthal

My Lords, I can reassure the noble Viscount that the intention is to replicate the current arrangements. No restriction is entered in cases where both the legal and beneficial interests are held by the trustees as joint tenants because the survivor of them can deal unrestrictedly with the legal interest in the land as the sole owner of it.

Rules will therefore only be made under this clause to address the other situation in which co-ownership occurs. The amendment seeks to make it clear that only such restrictions as are to be prescribed by the rules need to be entered in the circumstances the rules provide. In our view that is implicit in the permissive way in which the rule-making powers have been formulated, though I agree with the noble Viscount as to the situation that would be achieved as a result of the making of rules under this clause.

In our view, therefore, the amendment is unnecessary, although I can understand it being raised as a probing device. In the light of those comments, and my reassurance that there is no intention to change the current practice, I invite the noble Viscount to withdraw the amendment.

Viscount Bridgeman

My Lords, in light of the reassurances given by the Minister, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 45 [Notifiable applications]:

[Amendment No. 57 not moved.]

Clause 46 [Power of court to order entry]:

[Amendments Nos. 58 and 59 not moved.]

Clause 54 [Proceeds of sale: chargee's duty]:

Lord Bassam of Brighton moved Amendment No. 60: Page 21, line 10, at end insert "immediately before the disposition on sale

The noble Lord said: My Lords, Clause 54 is an important new provision. It affects the exercise of a mortgagee's duty when applying proceeds of sale of registered land; that is, when he has sold the property to repay the moneys due to him and there is a surplus left over. This clause states that a person shall be taken to have notice of anything in the register.

This provision is needed because of a legal technicality, otherwise entries on the register would not count as notice for this purpose. Under the present law, a chargee should pay any surplus to the chargor unless he has been notified of the existence of a subsequent charge. Clause 54 changes the law and, as a result of the provision, the chargee will have to consult the register to determine who is entitled to the surplus. This will impose no significant burden as it is an easy search to do.

However, the clause as originally drafted does not specify when such an inspection must be undertaken. When the property is sold by the chargee, the buyer will apply for registration of his title. In registering the buyer's title, the Land Registry will remove the entry relating to the charge of the chargee who sold, and also entries relating to any subsequent charges on the register. This means that if the chargee searches at the time when he is ready to release surplus funds, some time after the sale has occurred, the entries disclosing the existence of the other charges may already have been removed. The advent of electronic conveyancing could heighten the need for the inspection of the register to have occurred before the sale goes through.

In order to make it clear when the inspection of the register must have occurred, Amendment No. 60 specifies that it is the moment immediately before the disposition on sale. I beg to move.

Baroness Buscombe

My Lords, I rise to speak to Amendment No. 61 and also refer to the Government's Amendment No. 60.

We believe that these amendments overlap. To some extent we welcome the Government's amendment and believe it is right as far as it goes; but we believe that Amendment No. 61 is preferable because it restricts the matters of which the mortgagee has notice to those registered in relation to the mortgaged property plus anything of which he has express notice.

Amendment No. 60 leaves him on notice of anything in "the register", which means the whole of the register maintained by the registrar under Clause 1(1). Clause 129(1) defines the register as meaning the "register of title", without any qualification such as, "unless the context otherwise requires". That means that under Clause 54, with the government amendment, a selling mortgagee would be on notice of any entries anywhere in the register; for example, as to bankruptcy of the mortgagor—even if they were not recorded against the title with which the mortgagee was dealing and he did not actually know about them.

On Question, amendment agreed to.

[Amendment No. 61 not moved.]

Clause 55 [Local land charges]:

Baroness Buscombe moved Amendment No. 62: Page 21, line 12, after first "charge" insert "for value

The noble Baroness said: My Lords, I can be extremely brief. The purpose of Amendment No. 62 is to ensure that this provision only applies to monetary charges. Some local land charges have no monetary value. We would like to know from the Government whether or not the clause is meant to apply to them. I beg to move.

Baroness Scotland of Asthal

My Lords, Clause 55 relates to the registration of local land charges. Local land charges are registered under a separate registration system maintained by local authorities. A search of the local land charge register forms part of the local authority search undertaken at the beginning of the property-buying process. Local land charges bind the land irrespective of whether or not they are recorded at HM Land Registry.

Local land charges arise under the Local Land Charges Act 1975 and its predecessors. They also arise under other statutes if that intention is expressly stated. They often cover charges securing the payment of money, but can also involve, for instance, restrictions on the use of land in a national park.

Clause 55 is only aimed at those local land charges which give rise to a charge over the property. Its purpose is to make sure that when a local or other public authority has the rights of a chargee to dispose of the property, that is recorded on the face of the register before the right is exercised. The reason for that is to ensure that the land register is as complete a record as possible of the powers of disposal that exist in relation to the land and to give confidence to the buyers from those authorities by focusing attention on the familiar land register rather than the local land charges register.

This clause is in fact a restatement of the current law. Section 59(2) of the Land Registration Act 1925 states that before a land charge, which is a charge to secure money, is realised, it must take effect as a registered charge under the Land Registration Act.

I hope that my explanation reassures your Lordships that the clause operates in the same way as existing law and in accordance with the aims of the amendment. In the light of that explanation, I invite the noble Baroness to withdraw the amendment as being not necessary to achieve the intended purpose.

Baroness Buscombe

My Lords, I thank the Minister for her response. I am disappointed that Amendment No. 62 does not take preference but I have been somewhat reassured by her words. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 60 [Boundaries]:

Baroness Buscombe moved Amendment No. 63: Page 22, line 15, leave out "may" and insert "shall

The noble Baroness said: My Lords, the rules for fixing boundaries are well established, though little used. Amendment No. 63 seeks to ensure that that continues.

The overwhelming majority of property boundaries shown on land registry plans are subject to the general boundaries rule; that is, they are approximate. That flexibility is valuable. At least one US state abandoned registration of title early in the 20th century because fixing precise boundaries was found to be impractical. However, the procedure for fixing boundaries—that is guaranteeing what is shown on Land Registry plans—is well established and sometimes useful. We believe, therefore, that it is important that it remains.

The Law Society therefore proposes the amendment we have tabled, such that there should be a duty to make rules for that purpose, rather than making it discretionary. The report states that fixed boundaries may become more common, particularly where adverse possession proceedings succeed in boundary areas. I beg to move.

Baroness Scotland of Asthal

My Lords, as the noble Baroness said, Amendments Nos. 63 and 64 affect Clause 60. Therefore, I shall deal with them together. Amendment No. 63 changes the permissive nature of the scope of the rules. It makes it essential if rules are made for them to cover certain aspects.

The rules covering this area and any other areas of land registration will be approved by the rule committee, and, following a government amendment, will be subject to the negative resolution procedure. There will therefore be a large degree of scrutiny as to the matters which they contain.

These land registration rules will form part of a substantial body of rules affecting all and every type of application and procedure under the land registration system. As happens now, the way in which the applications are conducted may be governed by general purpose rules, and only certain limited aspects peculiar to the determination of boundaries will be recognisable as rules made under Clause 60. The answer to the question, "Will fixing procedures continue?" is "Yes". They may be little used now because of the cost of the procedure, but the techniques will be improved, which may make them easier and cheaper in due course.

The style of drafting adopted throughout the Bill—indeed, the general practice when conferring a power to make rules—is to make it possible for rules to cover certain items but not to require rules to be made for any specific purpose. In our view that is the correct approach, to give the noble and learned Lord the Lord Chancellor maximum flexibility to adapt the rules as the registry embarks on major changes towards electronic conveyancing.

The current intention is to make rules dealing with all of the headings set out in the clause. However, we should not place any artificial limitations on the registry's ability to adapt its procedure in appropriate ways, which we cannot at present envisage. I therefore believe that the amendment is undesirable.

I turn to Amendment No. 64, which arises from a concern raised by the noble Lord, Lord Goodhart, in Committee. The concern was in relation to applications to be made under Clause 60 and one or two other provisions in the Bill. It was not totally clear that the applications were to be made to the registrar. The main reason for the concern arose from the effect of Clause 73(7). Under that subsection, only objections to applications made to the registrar can be heard by the adjudicator.

In the light of the debate, we have looked again at the various provisions. I am pleased to be able to table amendments which will, I hope, make abundantly clear how applications should be made and what is to happen in the event of a dispute. Rules made under Clause 60 must specify that applications for determination of fixed boundaries dealt with in those rules are applications to the registrar.

In the light of those comments, I invite the noble Baroness to withdraw her amendment.

Baroness Buscombe

My Lords, I thank the Minister for her full response. I feel reassured and, on that basis, beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.45 p.m.

Baroness Scotland of Asthal moved Amendment No. 64: Page 22, line 22, at end insert— ( ) Rules under this section must provide for applications for determination to be made to the registrar.

On Question, amendment agreed to.

Clause 62 [Power to upgrade title]:

Viscount Bridgeman moved Amendment No. 65: Page 23, line 6, at end insert— ( ) In the case of a registration made pursuant to an application under paragraph 1 of Schedule 6, subsections (4) and (5) shall apply as if the number of years stated there was two.

The noble Viscount said: My Lords, the purpose of Amendment No. 65 is to provide that if someone in adverse possession can apply after 10 years occupation and obtain a possessory title, he should have to wait only a further two years to upgrade the title.

Paragraph 1 of Schedule 6 states that a person in adverse possession may apply to be registered as the proprietor of the estate after 10 years. Clause 62(4) and (5) state that a possessory title entered in the register as possessory will be absolute (freehold) or good (leasehold) after 12 years. That means that it would take 22 years in which to obtain full title rather than the present 12. The amendment reduces the present number of years from 22 to 10. I beg to move.

Baroness Scotland of Asthal

My Lords, it appears that there may be a misunderstanding of the effect of a squatter's application under paragraph 1 of Schedule 6 to the Bill being successful. That may have arisen because it has been Land Registry practice in the past to register the squatter under a new title. That was sometimes a possessory title, even when the land squatted against was registered with absolute title.

Under paragraph 4 of Schedule 6 the successful squatter is registered as the new registered owner of the existing registered estate against which the application was made. The squatter's own title is not registered; it is extinguished under paragraph 9(1). That means that in most cases the squatter will be registered with absolute title because the former registered owner will have been registered with absolute title.

The squatter will be registered with possessory title only on those rare occasions when the former registered owner was registered with possessory title. It will therefore be rare that the newly-registered squatter has to consider the upgrading provisions relating to possessory titles in Clause 62. I hope that that explanation will serve to remove the general concerns expressed by the noble Viscount.

However, it might assist the House if I explain how the amendment would work in the comparatively rare circumstances where a squatter became a registered owner of a possessory title because the estate squatted against had such a title. A possible example of such circumstances would arise where A dies owning at her death an unregistered freehold estate; her executor cannot find the deeds and assumes that they are lost. Within a few weeks of A's death the executor applies for voluntary first registration on the basis that the deeds are lost. A possessory title is approved. Unknown to the executor the deeds are in the custody of a lender who has a first legal charge, created before such charges triggered first registration. As the executor has a possessory title, he is subject to the legal charge.

Three years after registration, a squatter applies for registration of part of the land, based on 10 years' adverse possession. She is successful and is registered in place of the executor in respect of that land. Under the amendment, the squatter could apply for the upgrading of the possessory title to absolute freehold immediately because the title has already been registered for at least two years.

If the effect of the amendment had been that in such circumstances the squatter could apply for upgrading two years after her registration in place of the executor, she would again be placed in a stronger position than, say, a buyer who would have to wait a further seven years. I hope that that clarifies the situation.

Viscount Bridgeman

My Lords, I am grateful to the Minister for her explanation. I am particularly grateful for her clarification by way of that example. In the light of that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 64 [Use of register to record defects in title]:

Baroness Scotland of Asthal moved Amendment No. 66: Page 23, line 34, leave out "has become" and insert "is

The noble Baroness said: My Lords, in Committee, the noble Baroness, Lady Buscombe, moved an amendment, the purpose of which was to make clear that where a defect in the title had arisen, it could be recorded on the register only if, at the time that the making of an entry was proposed, the defect still existed.

I accepted a need for an amendment and the principle behind it and undertook to introduce a government amendment on Report. Amendment No. 66 fulfils that undertaking. It makes it clear that the right to determine must still be exercisable when the registrar considers the matter by replacing the words "has become exercisable" with "is exercisable". I am grateful to the noble Baroness for her suggestion land commend the amendment to your Lordships.

Amendment No. 67 proposes the deletion of Clause 64. This clause deals with a situation not currently catered for under the land registration system where something happens in the course of the ownership of the property that itself makes the title bad. This occurs in only a limited number of situations and in most of those situations there are already simple and well-developed practices for protecting buyers of the land affected. In such cases there is no need to record the defect in title in the register.

Perhaps I may explain how the clause will work using two examples. One example is on the assignment of a lease. There is a risk that the assignor is in breach of covenant and that the landlord will, therefore, be able to exercise his or her right to re-enter and determine the lease. However, where a landlord accepts rent from a tenant whom he or she knows to be in breach of covenant, he or she will be taken to have waived the breach of covenant. Conveyancers take advantage of this principle and require the assignor of a lease to produce the last receipt for rent prior to the assignment. This creates a rebuttable presumption that all the covenants and provisions of the lease have been fully performed. Because there is already a procedure for dealing with this situation, we respectfully suggest that there is little point in empowering the registrar to enter on the register the fact that the lease might be determined.

Rules are likely to confine the exercise of the power to those cases where there is presently no established procedure for dealing with the problem and in particular to cases concerning rent charges. My first example may suffice. I could give noble Lords a second example but I think that the first probably clarifies the position.

This clause is also needed to help achieve one of the principal objectives of the Bill: to create a conveyancing system in which title can, so far as possible, be investigated online by computer. It follows from this principle that every effort should be made to make the register as conclusive as to title as is practically possible. That includes recording the fact that the right to determine the estate has become and is still exercisable.

An obvious objection to this new duty is that it will not be easy to enforce. A solicitor or licensed conveyancer will be very reluctant to inform the registry of a defect in his or her client's title, particularly where it is one that could lead to the determination of that client's estate. However, the move to electronic conveyancing will provide a means of enforcing such obligations via network access agreements. Under the system of electronic conveyancing that is to be created under the Bill it will be solicitors or licensed conveyancers acting for buyers who will actually carry out the process of registration. They will do so in accordance with the terms of a network access agreement with the registry that may require them to disclose specified information. They are likely to know far more about the conveyancing transaction than the registry does at present when documents are submitted for registration. They may, therefore, know the facts that make a title bad even though these will not necessarily appear from the conveyancing documents that, under present arrangements, would be sent to the registry for registration.

I hope that that explanation will have convinced the House that the clause fulfils an important purpose. It introduces a useful and flexible procedure which can be initiated by application or as a response to events which have come to the attention of the registry or the court. I beg to move.

Baroness:Buncombe

My Lords, first, perhaps I may say how much we welcome the Government's response to the concerns we expressed in Committee by bringing forward Amendment No. 66. The Minister has answered a number of questions which I had proposed to ask in relation to Amendment No. 67. On that basis, I am pleased to say that I shall not move Amendment No. 67.

On Question, amendment agreed to.

[Amendment No. 67 not moved.]

Clause 66 [Inspection of the registers etc]:

Viscount Bridgeman moved Amendment No. 68: Page 24, line 8, after "document" insert "other than a lease or charge

The noble Viscount said: My Lords, in moving the amendment, I speak also to Amendment No. 69. Amendment No. 68 is intended to address concerns about confidentiality. It is to restrict the availability of information that individuals may consider private or that companies may consider commercially confidential.

Land Registry records have been open to general inspection for less than 20 years. At the time the change was made, removing confidentiality, an undertaking was given to safeguard the privacy of people's private and commercial information by not disclosing the contents of leases and charges. The Administration of Justice Act 1982 contained express provision to that effect. In consultation with the Law Society we wish to ensure that that distinction is maintained. I beg to move.

Baroness Scotland of Asthal

My Lords, Clause 66 is an important provision of the Bill. It replaces and extends the scope of Section 112 of the Land Registration Act 1925. Section 112 in its present form was substituted by the Land Registration Act 1988 which first made provision for an open register, as the noble Viscount indicated. The open register is an essential element in the move to a system of electronic conveyancing under which virtually all entries can be made online.

Clause 66 provides that, subject to any exceptions and the provisions specified in rules, anyone may inspect and make copies of the register of title together with any other documents either referred to in the register or kept in relation to an application affecting that register.

At present the current legislation excepts leases or charges from inspection or from making copies. Under the new clause these provisions will be modified—but only modified—to conform with the policy of the Freedom of Information Act 2000 and data protection principles.

Amendment No. 68 seeks to reproduce the current position where leases and charges are automatically and permanently excluded from the list of documents which are available to the public as of right. This would offend the principle underlying the 2000 Act: that the information should be made publicly available unless there are good reasons why this should not be so.

There are also strong arguments relating to the property market in favour of wider publication. Although I have not looked back at the earlier debates on this subject, I have little doubt that very similar concerns to those raised by the noble Baroness were raised a decade ago in relation to opening the register. But I am happy to say that the Land Registry reports to me that it received virtually no complaints about the way in which information about sales was published in the register.

It does, however, tell me that its users are very keen indeed to see an extension of the information which it is able to provide about the state of the property market and changes in it. The consultant who carried out the quinquennial review of the Land Registry's work reported that there was particular enthusiasm among users at the prospect of wider information on leasehold property. That would shed light on commercial property transactions and so foster a free and competitive market. Providing information in a form which permits valid comparisons to be drawn, however, may require rather greater public access to information to ease terms and conditions than we have been used to. But we are told that the commercial property market thinks that it would be very much in the public interest for such material to be available. There does not seem to be conflict on that.

However, there are two Important exceptions to the right to information. These protect comrnercially sensitive information and private information. These safeguards are sufficient to protect parties to leases and charges from commercially sensitive terms being released to third parties. Rules made under the Bill to govern the publication on the register of information would need to take account of those principles, and will of course be the subject of extensive consultation, as well as consideration by the Rule Committee. It appears unlikely that they could—initially, at least—permit disclosure of amounts borrowed by individuals, but it may be that other information included in the charge should be published. In future, greater openness in relation to borrowing may become acceptable. On that basis, I ask the noble Viscount to withdraw Amendment No. 68.

I have already dealt with the major question addressed by Amendment No. 69—whether or not leases and charges should automatically and permanently be excluded from disclosure—and argued that such an approach would be contrary to the intent of the Freedom of Information Act 2000. Amendment No. 68 deals with a subsidiary question.

Clause 67 deals with a specific aspect of the provision of official copies of the registers and supporting documents and restates the existing law. It provides that when such official copies are supplied, they can be produced in a court of law as if they were original documents. It is an important provision to support the conclusive nature of the register and the documents referred to in it. It also has enormous practical benefits, avoiding the unnecessary production of originals held by the registry that could be mislaid while outside the registry's custody.

The amendment seeks to limit the ability of a litigant to produce an official copy of a lease or charge in court in place of the original. I suggest that the amendment is misplaced. The question of whether a copy of the lease or charge should be released to a third party is entirely separate from the question of whether the official copy document should be treated as admissible in evidence as if it were the original. It is desirable that an officially issued document be so admissible.

In the light of those comments, and with electronic conveyancing in mind, I invite the noble Viscount to withdraw the amendment.

7 p.m.

Viscount Bridgeman

My Lords, I am most grateful to the Minister for reporting to us on her inquiries with the Land Registry. In the light of her reassurances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 67 [Official copies of the registers etc]:

[Amendment No. 69 not moved.]

Clause 71 [Duty to disclose unregistered interests]:

Baroness Buscombe moved Amendment No. 70: Page 25, line 27, at beginning insert "( I) Subject to subsection (2).

The noble Baroness said: My Lords, I can be brief in speaking to Amendments Nos. 70 and 71. We believe that no one should be obliged to give information that he does not have or could not reasonably obtain, especially if failing to fulfil the obligation may prejudice him in later proceedings about the accuracy of the register. Obviously, if the information that he supplies is patently deficient, the registrar will make an appropriate entry on the register. It is clearly reasonable that an applicant for registration should make full disclosure. The consequences of not disclosing something that should have been disclosed are serious. The applicant may not qualify for an indemnity if, as a consequence, the register is wrong. However, we are keen to ensure that, in fairness, such consequences should not follow from the applicant failing to disclose something that he neither knew nor could reasonably have known. I beg to move.

Lord Bassam of Brighton

My Lords, I shall deal with both amendments together. Your Lordships will already be aware of the Bill's fundamental objective, which is to create a register viewable on-line that, at any given time, is as complete and accurate as possible a reflection of the state of the title to the land, to minimise the need for additional inquiries and inspections. To help to achieve that laudable objective, all express dispositions of registered land will have to be appropriately protected on the register, unless there are good reasons for not doing so.

Clause 71 creates for the first time a duty to disclose interests which are overriding, either on first registration or on disposition of registered land, and are therefore binding on the proprietor even though there is no entry on the register. That will help the register to become as complete a record of title as is reasonably practicable, and to achieve our aims and objectives.

The amendments would make it clear that the obligation imposed under the clause extends only to such as information as falls within the actual knowledge of the applicant or that that person could reasonably have obtained. I am pleased to be able to say that the clause applies to the disclosure of interests as provided for in the rules, and that it has always been our intention to make the position outlined in the amendments clear in those rules.

It should be noted that the registrar will wish to enter in the register only such rights as are clear and undisputed. Such rights would be revealed in any preliminary inquiries and searches, such as a conveyancer already makes at the beginning of the conveyancing process on behalf of a purchaser. There is no intention to impose on conveyancing practitioners a greater burden to investigate matters affecting the land than they already carry in representing their clients' interests. I hope that those reassurances will enable the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, it is regrettable that the Government feel unable to accept our amendments. However, I feel somewhat reassured by what the Minister has had to say, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 71 not moved.]

Clause 72 [Priority protection]:

Baroness Buscombe moved Amendment No. 72: Page 25, line 40, after "register" insert ", whether or not for value.

The noble Baroness said: My Lords, I shall be even briefer. The amendment would simply ensure that all applications were protected, not just those for value. I beg to move.

Baroness Scotland of Asthal

My Lords, I shall emulate the brevity of the noble Baroness. I assure your Lordships that we intend to apply the clause to any application, whether or not of value, to which a priority period is attached.

Baroness Buscombe

My Lords, on that basis, I wish that the Minister would accept the amendment. However, as she is clearly not inclined to do so, with some sadness I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 [Objections]:

Baroness Buscombe moved Amendment No. 73: Page 26, line 32, leave out from "only" to "may" in line 33 and insert "a person who can demonstrate that he is entitled to be the benefit of the caution

The noble Baroness said: My Lords, I shall try again, and shall speak to Amendments Nos. 73 and 75 together. Simply put, their purpose is to ensure that all those who are entitled to the benefit of the caution, in addition to personal representatives, may object to an application to cancel a caution. Indeed, Amendment No. 75 would ensure that all those entitled to the benefit of the notice may object to an application to cancel a unilateral notice. I beg to move.

Baroness Scotland of Asthal

My Lords, government Amendments Nos. 74 and 76, which we have already debated, deal better with the issue than would these amendments. The government amendments address the concerns raised by Amendments Nos. 73 and 75, but have the advantage of retaining a degree of flexibility further to clarify the application of Clauses 73(2) and 73(3) in rules. For that reason, I invite the noble Baroness to withdraw the amendment, and commend the government amendments to the House.

Baroness Buscombe

My Lords, I thank the Minister for her response and her reference to earlier amendments that cover rules that may be applied in future. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Scotland of Asthal moved Amendment No. 74: Page 26, line 33. leave out "his personal representative" and insert "such other person as rules may provide

On Question, amendment agreed to.

[Amendment No. 75 not moved.]

Baroness Scotland of Asthal moved Amendment No. 76: Page 26, line 36, after "relates" insert ", or such other person as rules may provide,

On Question, amendment agreed to.

Clause 80 [Compulsory registration of grants out of demesne land]:

[Amendments Nos. 77 and 78 not moved.]

Clause 86 [Bankruptcy]:

Lord Bassam of Brighton moved Amendment No. 79: Page 31, line 6, leave out "limitation under section 284" and insert "effect

The noble Lord said: My Lords, Amendments Nos. 79 and 80 amend the effect of Clause 86 and I shall deal with them together. Clause 86 addresses a situation in which a sole registered proprietor of land or a charge becomes the subject of a bankruptcy petition or a bankruptcy order. The clause ensures that the title registers on which it appears that that individual, the subject of bankruptcy proceedings, is the sole registered proprietor of a registered estate or charge for his or her own benefit contain an entry recording that fact. Such entries are routinely made under the present system.

Under the existing system, when a debtor is adjudicated bankrupt and a bankruptcy order is made against him, the registrar is then required to enter a bankruptcy inhibition which totally blocks any dealing with the property by the registered proprietor until the inhibition is removed. The Bill prospectively abolishes inhibitions and provides instead that the registrar will enter a restriction. A restriction is a more flexible entry than an inhibition and can be used to block all or only some of the owner's powers to deal with the land.

A restriction must be entered in any case where the owner's powers are limited. If no restriction is entered, a person acquiring title from the registered proprietor would take free of any limitation on the powers of disposal.

In the case of the making of a bankruptcy order, Clause 86 as drafted requires the registrar to note the effect of Section 284 of the Insolvency Act 1986 which prevents a sale by the registered proprietor during the period between the issue of the bankruptcy petition and the making of the bankruptcy order, unless sanctioned by the court.

What the amendments do is place the registrar under a wider obligation to reflect the effect of the Insolvency Act 1986 more generally. This means that the registrar must also record the fact that the registered proprietor is unable to deal with the property at all following the vesting of the title to the property and the trustee in bankruptcy. Although this action by the registrar was permitted by other provisions in the Bill and the intention of the registrar from the outset, this fact is now apparent on the face of the Bill.

In the light of those observations and the clarity that the amendments bring, I commend them to your Lordships' House.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendment No. 80: Page 31, line 7, leave out from "(c. 45)" to end of line 8.

On Question, amendment agreed to.

Clause 91 [Electronic dispositions: formalities]:

Baroness Buscombe moved Amendment No. 81: Page 33, line 15, leave out paragraph (c).

The noble Baroness said: My Lords, in moving Amendment No. 81, I shall speak also to Amendments Nos. 83 to 87 and 89. They relate to Clauses 91 and 92 which deal with electronic conveyancing and the land registry network. It is a key area which goes to the heart of the Bill.

As the Government know, we on these Benches are most supportive of the introduction of electronic conveyancing. Our concerns relate to the mechanics of the system and the security of transactions. We note the Government's response to suggestions that we advanced in Committee and we welcome them. However, we continue to have concerns and I shall now turn to some of them in detail.

The system needs to be secure in order to retain the confidence not only of the public in their house-buying processes but of commercial enterprises and inward investors buying factories and offices in England and Wales. Therefore, individuals, firms and companies should not be liable where authority was not actually given.

Organisations which provide electronic access to facilities have developed a practice of transferring to the user of the facility the risk of forgery of the access control code. By way of example, we offer the access terms of the providers of access to the National Land Information System and the statutory terms applicable to the electronic filing of income tax or value added tax returns.

Searchflow, for example, states: The Customer warrants that it/he/she will keep confidential and secure all user names and passwords used in relation to the Services and accepts that use of a user name and password allocated to a Customer shall constitute sufficient authority to the Company to perform the Services and be entitled to payment for so doing".

Teramedia, for example, states: You [the customer] are responsible for all use, activity and charges associated with or arising out of your use of Territorium, including any unauthorised charges or used by a third party using your subscription, user name and/or password".

Another, MacDonald Dettwiler, states: You will be liable for all charges incurred through the use of your TransAction Online Password".

A common feature of all these examples is that if someone other than the user is able to impersonate the user successfully by obtaining control of a copy of the user's access mechanism, the user is either bound by the consequences or carries the burden of rebutting a presumption of responsibility. Access mechanisms may take the form of a user ID combined with a password, or a cryptographic key, or a number of other mechanisms. For the purposes of any practical scheme of electronic conveyancing, all such mechanisms involve supplying the password, key or other security data to a personal computer which forms part of the computer network which also has access to the Internet.

There are no available secure operating systems for personal computers and the security risks to which they are vulnerable are notorious. The risk of surreptitious copying of security information from a personal computer or its subversion to carrying out transactions other than those apparent to and intended by the user are risks which solicitors' firms are in no position either to eliminate or to bear.

For those reasons, we can confirm that, for example, the Law Society would regard it as unacceptable for solicitors to carry the risk of their electronic signature keys being obtained and misused by third parties. The use of presumptions and statutory terms and their contractual equivalents should, in our view, be ruled out by clear statutory language such as we propose. Its effect should be that it is for the relying party to prove that a disputed signature was made by or with the authority of the purported signatory.

In particular, the purpose of Amendment No. 81 relates to the Trustee Delegation Act 1999, which reinforced the two trustee rules in the 1925 legislation by providing that they are not satisfied by a single attorney acting for the only trustees. That consumer protection should not be sacrificed when electronic transfers are executed. The 1925 property legislation put in place some, though we suggest not very effective, consumer protection by ensuring that some transactions can be done only by at least two trustees so that one alone does not have access to someone else's money. The Trustee Delegation Act 1999 sought to bolster this by preventing one person being appointed the attorney of two joint owners (so that one person acted for two trustees and nullified such protection as there was). We seek to ensure that the electronic disposition arrangements do not undermine this recently strengthened consumer protection.

Amendment No. 85 is a probing amendment which seeks to ascertain the Government's reasons for making the system compulsory. Certain of these are understood, especially those relating to a time in the future when perhaps most conveyancers are using this system, but in the early stages who will be the pioneers if they are not able to return to using a paper system when it does not work as envisaged? What will happen by way of back-up when the systems go down? This was a matter to which my noble friend the Duke of Montrose referred in Committee.

I turn to Amendment No. 86 which is a probing amendment to seek confirmation that solicitors/ conveyancers and conveyancers generally will not be obliged to override client confidentiality. I believe that I have covered the gist of Amendment No. 86.

In Amendment No. 89 we propose a new clause after Clause 93, the purpose of which is as follows. The established consumer protection which limits technical land registry work to solicitors and certain other conveyancing professionals should be continued when a land registry network is established. Licensed conveyancers are permitted to undertake the acts authorised by Section 22 of the Solicitors Act 1974 by Section 11(4) of the Administration of Justice Act 1985. All professionals entitled to carry out conveyancing are, therefore, treated equally by this amendment, so extending the consumer benefits as widely as possible.

Current legislation restricts the right to do technical land registration work for payment for other people to suitably qualified professionals. Although the restriction appears in the Solicitors Act, licensed conveyancers and others qualified and authorised to do conveyancing are included. We believe it would be wrong if the introduction of electronic conveyancing weakened this consumer protection. Our proposal seeks to extend the current provision to ensure that it covers the new forms of working. The intention, therefore, is to maintain the status quo. I beg to move.

7.30 p.m.

Baroness Scotland of Asthal

My Lords, the difference between noble Lords opposite and the Government may be one of emphasis as opposed to substance. In speaking to Amendment No. 81 I shall speak also to Amendments Nos. 82 to 87 and Amendment No. 89 inclusive. The common theme of this group of amendments is the development and growth of electronic conveyancing. Within this broad theme there are several more specific topics. Amendments Nos. 81, 83 and 84 relate to the creation of electronic conveyancing documents under Clause 91 and Amendments Nos. 85, 86 and 87 to the use of the land registry network referred to in Clause 92. I understand the importance that noble Lords attach to these matters. I hope, therefore, to deal as fully as I can with all the issues that are of greatest concern to noble Lords.

I start with Amendment No. 82. This takes up a point raised by the noble Lord, Lord Goodhart, in Committee. The amendment will extend the application of Clause 91(6) to the authentication of an electronic document as agent by companies and other bodies corporate as well as individuals. For example, a firm of solicitors incorporated as a limited liability partnership will be able to benefit from the deeming provision in Clause 91(6). This amendment removes any artificial and unnecessary limitation on the scope of this clause. I express gratitude to the noble Lord, Lord Goodhart. Although he is not in his place, I hope that he will read my words. I thank him for spotting the point, and I commend the amendment to the House.

Clause 91(6) is also the subject of Amendments Nos. 83 and 84, but before I turn to them I should first like to consider Amendment No. 81. The amendment seeks to amend Clause 91(3). This subsection specifies the conditions that must be satisfied if an electronic document is to be effective under Clause 91. If accepted, the amendment would remove the requirement that the electronic signatures of the persons by whom the document purports to be authenticated must be certified. As such a condition could still be introduced in due course under Clause 91(3)(d), the amendment is clearly intended to probe what certification is intended to entail.

In replying I am very conscious that it is simply not possible to give a detailed account, still less a permanent account, of how certification processes will work in detail. It may, however, assist the House if I first explain the terms "electronic signature" and "certification" as used in this context. Both are taken from the Electronic Communications Act 2000. An electronic signature is so much of anything in electronic form as is incorporated into, or otherwise logically associated with, any electronic communication or data, and purports to be so incorporated or associated for the purpose of being used in establishing the authenticity of the communication or data or its integrity, or both. "Authentication" refers to the process of verifying whether a communication comes from a particular person or other source; whether it is timed and dated; and whether it is intended to have legal effect. "Integrity" refers to the process of identifying whether there has been any tampering with, or other modification of, the communication or data. "Certification" means a statement confirming first, an electronic signature, and, secondly, the means of producing, communicating or verifying the signature, or a procedure applied to the signature which either alone or with other factors is a valid means of establishing the authenticity or the:Integrity of the communication or data signed electronically, or both.

The requirement of a certified electronic signature is a bare minimum. The definition is intended to allow for a multiplicity of forms of electronic signature and certificate, and it is an onerous one. Our present expectation is that electronic signatures will use "dual key", also called "public key", cryptography. It is perfectly possible that in time the market will find better or simpler methods. The requirements to be satisfied in any given transaction will be specified in rules. These rules will undoubtedly change as the market responds to developments in technology.

The essential point is that all these rules will be subject to consultation, because the system which we will put in place must be worked out by extensive consultation with conveyancers and those who will supply the technology to support the system. In the light of this explanation of the approach of the Bill to the development of electronic conveyancing, I hope that the noble Baroness will feel able to withdraw Amendment No. 81.

I turn now to Clause 91(6) and Amendments Nos. 83 and 84. Amendment No. 83 raises the relationship of subsection (6) and Section 7 of the Trustee Delegation Act 1999, while Amendrnent No. 84 seeks to undo the effect of subsection (6). I shall consider them in reverse order. Amendment No. 84 is intended to probe, as the noble Baroness said, the Government's intentions regarding the role of agents within the electronic conveyancing world. Clause 91(6) does not confer authority where none exists. Clause 91 does not create a general presumption of agency; nor does it compel agents to use electronic signatures. It is fundamental to the Government's approach that the electronic conveyancing system must be secure and trusted and that it will be developed in partnership with the stakeholders.

Clause 91(6) is a technical provision intended to remove the need to ask whether an agent had written authority. It is relevant to the statutory provisions that require an agent to be authorised in writing; for example, Section 53(1)(a) of the Law of Property Act 1925 states that no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or—these are the important words—by his agent thereunto lawfully authorised in writing.

Nor will subsection (6) operate in a vacuum. It is likely that, when electronic conveyancing is first introduced, many people will not have their own electronic signatures. They will therefore sign a standard form giving their solicitor or licensed conveyancer express authority to execute any electronic conveyancing documents on their behalf that they have approved. In other words, the only matter that they will be authorising will be the electronic signature on the document. The standard form and the requirements for its use will be specified in the rules relating to the network access agreements under which electronic conveyancing will be conducted.

Amendment No. 84 seeks to undo the effect of Clause 91(6). Essentially the amendment provides that if a document to which Clause 91 applies is authenticated by an agent, the agent will be deemed for the purposes of any enactment to be authenticated as the agent under the written authority of his or her principal if—I repeat, if—the agent had actual written authority to do so or subsequently obtained it. The end result of the amendment would be a regular request for evidence of the authority, making the procedure for electronic conveyancing somewhat less electronic and somewhat more cumbersome than it need be. I hope that in light of those comments the noble Baroness will feel able to withdraw Amendment No. 84.

I now turn to Amendment No. 83. I have listened with great interest to what the noble Baroness has said. However, I shall endeavour to persuade her that the amendment is not necessary and would, if accepted, have an adverse effect rather than providing any useful safeguards.

Section 7 of the Trustee Delegation Act 1999 was enacted by the Government to bolster the protection given to trust beneficiaries. The effect of the section is broadly that the rules of law that at least two trustees must both execute the conveyance and receive the capital proceeds of any sale cannot be circumvented by all the trustees individually delegating their functions to one person under a power of attorney pursuant to Section 25 of the Trustee Act 1925.

I am happy to confirm that Clause 91 will have no effect whatever on the rule that the proceeds of any disposition must be paid to at least two trustees or to a trust corporation. That rule will continue to apply to protect beneficiaries. Nor does the Bill undermine the protection given by the rule that at least two trustees must execute any deed of conveyance.

I shall now explain why the Bill does not adversely affect the operation of Section 7 of the 1999 Act. It is necessary for me to outline certain legal rules by way of background so that Clause 91(6) can be understood properly.

First, Section 1 of the Powers of Attorney Act 1971 provides that a power of attorney must be made by deed. Secondly, it is a rule of common law that only an agent authorised by deed may execute a deed for his or her principal. However, a deed not only has to be executed, but it must also be delivered. At one time, an agent had to be authorised by deed to deliver a deed as well as to execute it on behalf of his or her principal. However, that rule proved to be highly inconvenient in practice, and it was changed by Section 1(5) of the Law of Property (Miscellaneous Provisions) Act 1989. Under that subsection a solicitor, notary public or licensed conveyancer or their agents or employees is conclusively presumed to have authority to deliver a deed in favour of a purchaser. Thirdly, an individual trustee may only delegate the exercise of his or her trustee functions by power of attorney.

Clause 91(5) of the Bill provides that an electronic conveyancing document authorised under Clause 91 is to be regarded for the purpose of any enactment as a deed. That means that the electronic document itself is not a deed and the rules relating to deeds do not therefore apply to it. It will therefore be possible to authorise an agent to sign an electronic document without the need for a power of attorney. That does not however prevent the parties from creating a power of attorney if they want to or from having to do so if there is another rule of law that applies—for example, if a trustee function is to be exercised by the agent. I think that that is as it should be.

As I explained in relation to Amendment No. 84, Clause 91(6) has a limited effect. It is concerned only with evidential requirements and not the substance of the agency relationship. The true effect of Amendment No. 83 would be to extend the application of Section 7 of the 1999 Act to every electronic document made by trustees under Clause 91. It would require every electronic conveyance or transfer by co-owners of land to be electronically signed by two different solicitors even if in the paper world a power of attorney would not have been necessary and so, Section 7 would not have applied. Some might say that this is just a charter for more lawyers to earn more money. I am sure that that is not anyone's intention.

The amendment would significantly and needlessly increase the expense and complexity of conveyancing. It would be at the very least as inconvenient as the old rule that an agent had to be authorised by deed to deliver a deed. Furthermore, it would provide little in the way of additional safeguards. Where trustees are making a disposition, each of them will have to sign a written authority to authorise a solicitor or licensed conveyancer to sign the document electronically on their behalf.

I have sought to reassure your Lordships that the amendment is unnecessary and to explain the reasons that also make it undesirable in the wider context. In the light of those comments, I invite the noble Baroness to withdraw the amendment.

I now turn to Amendments Nos. 85, 86 and 87. The amendments relate to Schedule 5 to the Bill. Amendment No. 85 seeks to remove the power of the Chief Land Registrar to specify, as a condition of access to the Land Registry network, that the network must be used for the transactions specified in the network access agreement. The provision is important because extending the use of the electronic conveyancing system as widely and as quickly as possible will maximise its benefits for practitioners, consumers and the Land Registry.

However, the power is not absolute. First, rules will regulate the terms on which access to the network is authorised. Those rules will only be made following proper consultation, consideration of the possible economic impact of any changes and an affirmative resolution. Secondly, the Land Registry will want to develop the system on an incremental basis with testing and piloting to ensure that the system is robust. It would not be in the interests of the customers or the Land Registry to risk the success of the e-conveyancing project or the integrity of the register by premature implementation. In short, the power in paragraph 2(1)(a) will be exercised only when the time is ripe.

In the meantime, the Government will work with their commercial partners to develop the infrastructure of electronic conveyancing using whatever business vehicles are appropriate to deliver the required outcomes. I cannot, however, emphasise too strongly that the noble and learned Lord the Lord Chancellor and I, and those responsible for detailed planning in the Land Registry, understand that the electronic conveyancing project depends for its success on a partnership with conveyancers. Both sides are confident that it will enable them to give the public a better service. Dragooning conveyancers into electronic transactions before they are ready to do so willingly is unlikely to be productive.

The Bill is intended to create a legal framework in which electronic conveyancing can be fully developed. The fullest development is of course a completely electronic system. The power to require users of the Land Registry network to use the system is a necessary building block. To accept the amendment would be to limit the way in which the system can be developed. In the light of my comments about how the system will be used and developed, I invite the noble Baroness not to move Amendment No. 85.

Amendment No. 86 also relates to the terms of network access agreements. It seeks to delete paragraph 6 of Schedule 5 to the Bill which provides for obligations under such agreements to discharge other obligations. I quite understand that this may appear rather striking, perhaps even startling, but when properly understood and taken in context, I do not think that paragraph 6 is unreasonable. Noble Lords may find it helpful to read the explanation provided in paragraph 13.58 of the recent Law Commission report on land registration. It explains succinctly the purpose of this paragraph and the Government share the views expressed. I commend it to noble Lords.

The rules governing network access agreements will of course be subject to parliamentary approval. The House will be aware that, under government amendments which we shall consider shortly, many of those rules will be subject to an affirmative resolution procedure in recognition of the complex and sensitive material with which they will have to deal. That approval will be sought only after an extensive period of consultation, which must include the professional bodies for conveyancing practitioners.

I hope that my comments have reassured the noble Baroness and that I have said sufficient to satisfy her queries in relation to the matter. I invite the noble Baroness not to move Amendment No. 86.

Amendment No. 87 would remove the deemed authority of an agent acting as an authorised person under a network access agreement to sign—that is, to authenticate—an electronic contract or disposition on behalf of his or her principal. This deemed authority exists only in favour of a third party and only if the agent has expressly claimed the authority in the electronic contract or disposition.

The reason for paragraph 8 of Schedule 5 is that there is no general implied authority that an agent may sign a contract or disposition for his or her principal. This means that where an agent signs as such, the other party to the transaction is entitled to call for evidence of the actual authority under which he or she claims to be acting. The requirement for paper evidence of that authority and its delivery would operate to defeat some of the benefits of electronic conveyancing. That reflects the issue that I raised earlier.

I understand that noble Lords are concerned about fraud, but fraud takes place now. Regrettably, it will not cease simply because conveyancing becomes electronic. When it does affect owners of registered land, their lot is indeed happier than that of many others. The Bill, just as the present law, provides a comprehensive system of indemnity and rectification, supported by rights of recourse to the Land Registry against the wrongdoer. Safeguards have been put in place.

I believe that paragraph 8 is a considered and proportionate measure. It will be of practical benefit and will not expose consumers to undue risk. I hope that, in the light of this explanation, the noble Baroness will feel able not to move Amendment No. 87.

I am cantering towards the end of my remarks. The primary purpose of Section 22 of the Solicitors Act 1974 is to protect the public from unqualified persons setting themselves up to act for the consumer in the conveyancing process. The criminal sanction acts as a deterrent and has been applied only very rarely. Notwithstanding that, there may well be other issues which would need to be addressed in relation to a successful prosecution under Section 22. Those matters can be addressed in the rules which will support the electronic conveyancing process, by regulating the use of network access agreements that govern the conduct of business with the registry electronically.

I mention also Clause (32) in this context because it provides that, when electronic conveyancing becomes compulsory, any conveyancing document which purports to be a disposition of registered land, or a contract for such a disposition, will be effective only if it is in electronic form and communicated electronically to the registrar at the time of completion. When electronic conveyancing is compulsory, network access agreements are therefore likely to be at least as effective a consumer protection mechanism as is Section 22, as well as being a useful additional protection mechanism in the mean time.

If the noble Baroness is not exhausted after having to listen to these long explanations, I invite her not to move Amendment No. 89. I hope that, as is usual, we shall be in total comity on this matter.

7.45 p.m.

The Earl of Caithness

My Lords, before the noble Baroness sits down, I am sure that she appreciates that we shall not be able to respond to all the points she has made in her remarks, but we shall certainly read them in Hansard.

When the noble Baroness commented on Amendment No. 84, she gave a comparable. I did not jot down where that comparable came from, although I did note that when written authority was given in the comparable cited by the noble Baroness, she added the words, "lawfully given". Can the noble Baroness consider whether that could be put into subsection (6) of Clause 91? It would provide a further reassurance to noble Lords on this side of the House.

Baroness Scotland of Asthal

My Lords, I shall take into account the point made by the noble Earl. However, once the noble Earl has had an opportunity to read at a more moderate pace my detailed remarks, I think he will find that the issue is covered. I shall take away the noble Earl's point. I rather doubt whether much amendment will be needed, but I undertake to look at the matter.

Baroness Buscombe

My Lords, I thank the Minister for her extremely full and clear response. I shall not begin to attempt to respond to her remarks, but I thank her for that detailed explanation. It will give all noble Lords the opportunity to consider with care what the Government have to say. This area is extremely important and, as I said at the start of my remarks, it goes to the heart of the Bill.

I echo the concern expressed by my noble friend Lord Caithness about Amendment No. 84. I am not convinced that the point has been dealt with, but I shall read with care all that the noble Baroness has said in response. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Scotland of Asthal moved Amendment No. 82: Page 33, line 23, leave out "an individual" and insert "a person

On Question, amendment agreed to.

[Amendments Nos. 83 and 84 not moved.]

Schedule 5 [Land registry network]:

[Amendments Nos. 85 to 87 not moved.]

Clause 93 [Power to require simultaneous registration]:

[Amendments Nos. 88 and 89 not moved.]

Clause 95 [Disapplication of periods of limitation]:

Baroness Buscombe moved Amendment No. 90: Leave out Clause 95.

The noble Baroness said: My Lords, this amendment concerns the important issue of adverse possession. I should like to draw the attention of noble Lords to paragraphs 10.18 and 10.19 of the Law Commission consultative document, which sets out the commission's conclusions regarding the law of adverse possession. In particular I draw attention to paragraph 10.19(1) and (2) where it states that: (1) A restriction had been entered on the register to freeze all dealings with the registered estate, but the circumstances which made that precaution necessary had subsequently passed; (2) An interest protected on the register by one entry was adequately protected by another". We have no argument with paragraph 10.19(2). However, the proposal, as adopted in the Bill, to recast the law of adverse possession to reflect the principles of title registration causes us real concern.

The law of adverse possession is based on social and economic factors. Surely it cannot matter whether the land to which it relates is registered. Either there are valid social and economic reasons for a particular rule as regards adverse possession or there are not; and those policies, if they exist at all, should apply regardless of registration.

Surely this clause presents a case of the tail wagging the dog. We have here a system of land registration which we like, and in consequence of that the Government have now decided to amend the law on adverse possession to fit with the system. With respect, we believe that the Government ought to decide what is their policy with regard to adverse possession and then make the registration system fit into that. I beg to move.

Baroness Scotland of Asthal

My Lords, I have listened very carefully to what the noble Baroness said on the amendment. I have tried to find some way in which her approach might be said to improve the Bill. On this occasion, I have not been able to find one.

In our submission, accepting the amendment would at best undermine, and probably simply wreck, all the provisions of Part 9. It would therefore destroy one of the major achievements of the Bill, the introduction of a new system of protection against adverse possession, founded upon the principles which govern the ownership of registered land, which gives registered owners far greater protection than ever before. In explaining why, I shall need to cover both the overall approach of this part of the Bill and the effect of the amendment in some detail. I must ask for the indulgence of the House while I do so.

Clause 95 disapplies certain provisions of the Limitation Act 1980 from registered land and registered rent charges. It does this so that a new and better scheme of acquisition of title by adverse possession can be created. The scheme will give greater protection to the registered proprietor. In doing so, it will strike a fairer balance between the squatter and the owner.

The clause lays the foundation for that by making radical changes to the role of limitation periods in determining; title to registered land, which I shall need to explain. Under the current law, there is very little difference of principle between registered and unregistered land in the way in which title to land can be acquired by adverse possession. The 12-year period is, as many noble Lords will be aware, the period specified in Section 15 of the Limitation Act 1980 as the period of time after which no action can be brought in the courts to recover land. Once an action in the courts can no longer be brought, Section 17 of the 1980 Act provides that in most cases the previous paper title is extinguished.

One of the main arguments of policy in the Bill is, in effect, that this similarity of approach for both systems of conveyancing is illogical, and that the one should be clearly separated from the other.

Limitation is absolutely fundamental to the operation of unregistered conveyancing. This is because it depends on proving title by an historical investigation of a chain of ownership, going back to a point, known as a "good root of title", where the right to ownership of the land cannot be brought into question. The present requirement is for a good root of title of at least 15 years. This period has been revised from time to time, but, because title to unregistered land is ultimately based upon possession, it has always borne a close relation to the limitation period applicable to actions for recovery of land.

Indeed, there would be grave danger in any attempt to weaken the link to the limitation period since that would open the prospect of substantially lengthening the root of title that would need to be established. This would make a system which is already expensive and uncertain far more costly and risky. It would also run counter to the longstanding trend of progressive reduction in the length of title that has to be proved.

The whole point of a system of registered land, by contrast, is that title should depend on the register. The whole purpose of the Bill is to ensure that who owns a piece of land and what are their powers, rights and obligations in relation to it, should, as far possible, be established by the register and be immediately obvious from it.

One of the most powerful criticisms of the current registered system in England and Wales is that it does not follow this principle. In a fully developed registered system, the fundamental issue of who owns the land should be as clear as the words on the page or the screen. Because it is made dependent on possession for a specified period, it is still little clearer than it is in the unregistered system. This clause puts that right. It gives the register its proper function of determining title by removing limitation from the ownership equation.

I turn now to the detail of Clause 95. I shall be as brief and as non-technical as the material permits. Subsection (1) contains the basic provision that Section 15 of the 1980 Act will not apply to actions to recover registered estates in land and registered rent charges. It contains one exception. This applies where a charge has been created over the land and the landowner, as the person who created the charge, is in possession of the land. In these cases, the rights of the chargee to recover possession or to foreclose will remain subject to the provisions of the Limitation Act 1980. This is necessary because a charge is both a contract and an interest in land. The chargee therefore has contractual and proprietary remedies against the owner. The exception ensures that the same overall limitation period applies to both sets of remedies.

Subsection (2) of Clause 95 is even more technical. It exempts actions for redemption in relation to a registered estate or a registered rent charge from Section 16 of the Limitation Act 1980. An action for redemption is a legal action to redeem a mortgage by a landowner against a chargee who has taken possession of the land.

The disapplication of the 12-year limitation period is a significant change to the law, but the present position is anomalous. It produces the result that where a chargee has been in possession of land for 12 years or more, the owner loses his or her right to redeem the mortgage. Given the remedies available to the mortgagee, this is an unnecessary extra bonus for a mortgagee. The Bill therefore disapplies Section 16 in relation to registered estates in land or registered rent charges.

Subsection (3) of Clause 95 is a necessary concomitant to subsections (1) and (2). Its effect is that Section 17 of the Limitation Act 1980 will not operate to extinguish the title of a person against whom, under Clause 95, a period of limitation does not run.

The effect of Clause 95 will be to make ownership of registered land more attractive than ownership of unregistered land. The converse, of course, is that unregistered land has been made relatively less attractive than it is at present. Noble Lords may have therefore wondered whether the same provisions could be extended to unregistered land so as to preserve the parity and to avoid further divergence between the two systems of land ownership.

The simple answer is that they cannot. Limitation periods are an essential part of the structure of unregistered conveyancing. Even if they were not, there is no register of owners of unregistered land, and squatters may simply not be able to discover who owns the land that is being adversely possessed. By contrast, the register provides an authoritative public record of ownership of registered land. This gives the new system both its practical and its theoretical base.

Our debates have shown that we are all agreed that the future of conveyancing and land law lies with registered land. Unregistered land has diminished and will continue to do so at an accelerating rate as a result of the Bill. Clause 95 will make an important contribution to that process. As I said, it is fundamental to the new system.

I hope that having heard that explanation—exhaustive as I have found it—the noble Baroness, Lady Buscombe, will accept that registered land is entitled to a life of its own and that the dying hand of unregistered conveyancing should not hold back the future, and so withdraw her amendment. I hope that I have satisfied her. I have fully explained the Government's intentions in relation to adverse possession and the difference between registered and unregistered land.

8 p.m.

Baroness Buscombe

My Lords, I thank the Minister for her very full response. This was in a sense a difficult amendment to respond to. We were making a broad point about adverse possession—and one which I hope the Government will take on board to some extent. We believe that the whole aspect of the social and economic reason for a particular rule as regards adverse possession should be carefully considered. That said, we shall read the Minister's remarks carefully in Hansard. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 [Registration of adverse possessor]:

Lord Bassam of Brighton moved Amendment No. 91: Page 56, line 4, after "apply" insert "to the registrar

The noble Lord said: Amendments Nos. 91 and 92 arise from a concern raised by the noble Lord, Lord Goodhart, in Committee. The concern was that in relation to applications to be made under Clause 60, and one or two other provisions in the Bill, it was not entirely clear that the applications were to be made to the registrar.

The main reason for the concern arose from the effect of Clause 73(7). Under that subsection, only objections to applications made to the registrar can be heard by the adjudicator.

In the light of the debate, we have looked again carefully at the various provisions, and I am pleased to bring forward amendments which I hope make it abundantly clear how applications should be made and what is to happen in the event of a dispute. I beg to move.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendments Nos. 92 and 93: Page 56, line 7, after "apply" insert "to the registrar Page 57, line 5, after "unconscionable" insert "because of an equity by estoppel

On Question, amendments agreed to.

[Amendment No. 94 not moved.]

Lord Thomas of Gresford moved Amendment No. 95: Page 59, line 21, leave out paragraph 12.

The noble Lord said: My Lords, my ears pricked up when I heard the Minister say that this is not a charter for more lawyers to earn more money. I note the attempt to streamline and simplify conveyancing. It takes me back to my conveyancing days in the villages of Ruabon and Rhosllanerchrugog, where my dying hand was certainly placed upon the conveyancing of houses in the neighbourhood. The villagers there would fully understand the modern expressions used in the Bill: "incorporeal hereditaments", "franchises" and "profits à prendre in gross"—they talk about nothing else! This is the new modernising language of the Bill.

In the absence of the noble Lord, Lord Goodhart—to whom many tributes have been paid and whose previous suggestions have been accepted by the Government—perhaps I may refer to his Amendment No. 95. The noble Lord raised the necessity of having paragraph 12 in Schedule 6 to the Bill. The point is this: why should time not commence to run for the purposes of adverse possession simply because an estate is subject to a trust? Why should time cease to run if in the course of that time the property becomes subject to a trust?

The trustee is the proprietor for the purposes of paragraphs 2 and 3 of Schedule 6, and thus he or she has every power under these provisions to take action against a squatter, against a person who is seeking to rely on adverse possession against the estate. If he is under a disability—a matter discussed in Committee—the provisions of paragraph 8 of Schedule 6 apply and time will not run against a trustee while he is under that disability. This is an improvement on the existing law that the trustee becomes the proprietor.

It should be entirely irrelevant whether a beneficiary has an interest in possession in the estate. The whole thrust of property legislation over the past 100 years has been to keep equitable interests away from the investigation of title. There can be nothing more frustrating than to have to look into the provisions of trusts under the Settled Land Act—which I am old enough to remember doing in my youth—and to investigate how equitable interests can apply.

Under paragraph 12 of Schedule 6 the practical effect must be that the registrar must make inquiry of every applicant who is relying on adverse possession to ask whether there are any interests under the trust that are not in possession during the period for which he is claiming. I can envisage that question having to be on every form that is sent to the applicant in those circumstances.

Furthermore, if there were proceedings for possession of the estate, the defence of a person to an action for possession under Clause 97(1) would involve an investigation by the court into periods during which the beneficial interests in the trust were or were not in possession. In other words, far from going for the legal title to the land and investigating that—considering who is the proprietor and what is the position of the trustee—the beneficiaries and their position over a period of time would have to be investigated.

Just as the Minister hoped that these provisions for adverse possession would prevent lengthy court cases, the inclusion of paragraph 12 in Schedule 6 could indeed result in conflict and in legal costs. It could indeed make the Bill a charter for more lawyers to earn more money. Although I applaud that in one sense, I am sure that that is not the Government's policy. I beg to move.

Baroness Scotland of Asthal

My Lords, the noble Lord has prompted a helpful discussion on how the Bill's new and radical approach to the law of adverse possession will work. As a fellow lawyer, I welcome him to this particular fray. There obviously cannot be too many of us involved in this debate.

I am considerably tempted by an amendment that would enable a definitive answer as to whether or not a squatter would be entitled to absolute possession by determining a claim against the current beneficiary and trustees rather than against the remainder man.

However, we believe that the Bill as it stands gives the fairer answer. The Bill introduces a new principle; namely, that within a system of registered land it should be the register which determines ownership, not occupation. It should therefore be much more difficult when the Bill is in operation than it has been in the past for a squatter to obtain good title to a property—that is, except where the defences set out in the schedule apply. A squatter will be successful only against a registered proprietor who cannot be bothered to respond to the registrar's notices and take sufficient action to recover possession.

One of the Bill's aims is to make sure that land that is being neglected remains in economic use. It is a sensible derogation from the general principle that registration determines ownership that an owner who is so little concerned with the land as to fail persistently to take the simple steps required to secure possession should yield to a squatter who will.

Matters are inevitably more complicated when land is held in trust and where the ultimate beneficiary of the trust has not yet taken possession. To put it briefly, the difference between us is that the noble Lord believes that the general law of trusteeship provides adequate protection for the interests of the ultimate beneficiary if the trustees and the current beneficiary do not take adequate action to retain the registered interest if there is a claim for adverse possession, We, however, think that more is needed. Certainly we do not dispute that the general law would give the ultimate beneficiary recourse against: a trustee who had been negligent, but establishing that right would almost certainly require litigation. If the claim was unsuccessful as the title to the land had now passed to the squatter, the ultimate beneficiary would be exceedingly unlikely to be able to recover the land. Money rather than land would generally be a second best and it may be a poor second best. In view of what I have said I invite the noble Lord to withdraw the amendment.

Lord Thomas of Gresford

My Lords, there are two points on which we fully support the Government. First, we believe that land should be used economically and, therefore, if a title is to be established by adverse possession it should not have put in its way the technicalities of trust law as the beneficiaries have an adequate remedy against the trustee if he fails in his duty. We also believe, contrary to the submissions—if I may use that word—that were made on the previous amendment, that it is a good idea for registration to be an effective defence against adverse possession and that there should be a difference between registered and unregistered land. As the noble Baroness has said, that would encourage people to register land. I ask the Government to reconsider this issue before Third Reading. If the noble Baroness is prepared to do that, as I hope that she will, I shall withdraw the amendment.

Baroness Scotland of Asthal

My Lords, I indicated earlier that I should be happy to meet any noble Lord to discuss issues still outstanding before Third Reading. However, the matter has been given extensive consideration. It was first stimulated by the extensive intervention of the noble Lord, Lord Goodhart, in Committee. I tried unsuccessfully to touch the heart of the noble Lord, Lord Goodhart, with the plight of the poor remainder man, the orphan thrown out by the squatter who has taken injudicious occupation of the land to no effect. I am happy to consider the matter further but the noble Lord should not be too optimistic in that regard.

Lord Thomas of Gresford

My Lords, if the flint-hearted noble Lord, Lord Goodhart, can prevail upon the tender hearted noble Baroness to reconsider the matter that is enough for me. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 100 [Annual Report]:

8.15 p.m.

Lord Bassam of Brighton moved Amend:ment No. 96: Page 36, line 28, after "section" insert "and may do so".

The noble Lord said: My Lords, Clause 100 deals with the preparation and publication of the annual report on the business of the Land Registry. Your Lordships will recall that we discussed in Committee whether the English used conveyed as naturally as it might do the intended sense.

The amendment makes it clear that there is an absolute obligation on the registrar to publish the annual report and, as a separate issue, that he has the discretion to decide how that publication should be done. This would enable the registrar, as now, to publish hard copies of the report and to place it on the website, or to use some alternative method of publication that might become available in the future.

I believe that the English in the clause is now as clear as it can be and I hope that noble Lords will accept the amendment. I beg to move.

On Question, amendment agreed to.

Schedule 8 [Indemnities]:

[Amendment No. 97 not moved.]

Clause 108 [Functions in relation to disputes]:

Lord Bassam of Brighton moved Amendment No. 98: Page 38, line 41, after "unconscionable" insert "because of an equity by estoppel

The noble Lord said: My Lords, this amendment has already been spoken to. I beg to move.

Baroness Buscombe

My Lords, I wish to speak to Amendments Nos. 98 and 99 as I do not recall that the Minister referred specifically to them. I thought that he referred to Amendments Nos. 91 and 92.

Lord Bassam of Brighton

My Lords, they were in the same group. I did not give as much detail as I normally would in view of the hour.

Baroness Buscombe

My Lords, I appreciate the Minister's position. However, I wished to respond to Amendments Nos. 98 and 99. We feel with regret that those amendments are wrong in principle and that the Bill should remain unchanged.

As the Bill is drafted one of the three sets of circumstances in which an adverse possessor will be entitled to be registered despite opposition by the registered proprietor will be where it is unconscionable of the proprietor to dispossess him (with power for the adjudicator or the court to award the possessor something less than full ownership if that is appropriate in a particular case). "Unconscionable" is not qualified; the possessor can rely on anything which, on established principles of equity, make it against conscience to turn him out.

The amendment seeks to change this by restricting the adverse possessor's right to be registered to a situation in which it is unconscionable to dispossess him because of an equity by estoppel; that is, typically, a situation where the possessor has acted in some way to his detriment in reliance on the proprietor's encouragement or acquiescence. That is the only situation considered in the Law Commission/Land Registry report (in paragraphs 14.36 to 14.42) and there is no discussion of whether a proprietor's claim should be defeated because it would be unconscionable for some other reason to dispossess an occupier. It may not have been appreciated that such a situation could arise.

But in fact an equity by estoppel is not by any means the only basis on which it may be unconscionable, in the context of the regime proposed in the Bill, for a proprietor to dispossess someone whose possession is technically adverse. It could happen that the possessor and his predecessors have been on the land for many years—the scheme of the system in the Bill is that the proprietor does not have to take action with any fixed limitation period—and when a question of his right to be there arises, there is simply no record and no evidence of how the situation arose, for example, if both the original possessor and the original proprietor who let him in have died.

Under the system in the Bill there will be no applicable statute of limitations, so if the question was simply whether it was unconscionable to turn the possessor out, it would be right for the court to apply established equitable principles and conclude that it was unconscionable to do so where the proprietor had delayed so long that the possessor could no longer produce relevant evidence and could not show whether the original occupier had in fact had an equity by estoppel, or indeed whether he had agreed to buy the land and had paid for it. Under the Government's proposed amendments such a possessor will be turned out, even if there is evidence that the original proprietor's successor had said, "I do not know on what basis the occupier is there, but if I wait until after he has died I shall have a better chance of getting the land back because his successor will probably not know either and will be unable to discharge the burden of proving that there is an equity by estoppel".

The Government's amendments ask your Lordships' House (and, if they are accepted, will require the courts) positively to sanction unconscionable claims if they do not fall within the particular category of equity by estoppel. That is wrong.

Lord Bassam of Brighton

My Lords, the Law Commission report which led to the Bill made it clear that the exception that the noble Baroness mentioned arose because of an equity by estoppel, for example, where a squatter has built on a registered proprietor's land in the mistaken belief that he or she owns it and the proprietor has knowingly acquiesced in that mistake. The squatter eventually discovers the true facts and applies to be registered after 10 years. It has, however, become clear that the exception could cover the doctrine of laches; that is, very briefly and in simplified form, the doctrine that the court will not allow the enforcement of an equitable right where the person relying upon it has unreasonably delayed in asserting that right.

Under the Bill adverse possession in respect of registered land for however long is never in itself sufficient. If there was an exception which meant that a squatter could use the doctrine of laches to defeat a registered proprietor's objection, that principle would be severely undermined. Accordingly, Amendment No. 99 will put the point beyond question by making it clear that the only unconscionability covered by the exception is because of an equity by estoppel. Amendments Nos. 93 and 98 follow on from that amendment.

I understand the unhappiness that the noble Baroness has expressed about the government amendments, but we are seeking to clarify the issue and we draw very much on the advice and guidance provided in the Law Commission report.

On Question, amendment agreed to.

Clause 109 [Appeals]:

Lord Bassam of Brighton moved Amendment No. 99: Page 39, line 9, after "unconscionable" insert "because of an equity by estoppel

On Question, amendment agreed to.

Clause 116 [Power to reduce qualifying term]:

[Amendment No. 100 not moved.]

Baroness Scotland of Asthal moved Amendment No. 101: After Clause 119, insert the following new clause— "REPEAL. OF LAND REGISTRY ACT 1862 (1) The Land Registry Act 1862 shall cease to have effect. (2) The registrar shall have custody of records of title made under that Act. (3) The registrar may discharge his duty under subsection (2) by keeping the relevant information in electronic form. (4) The registrar may on application provide a copy of any information included in a record of title made under that Act. (5) Rules may make provision about applications for the exercise of the power conferred by subsection (4).

The noble Baroness said: My Lords, Amendments Nos. 101 and 121 both relate to the repeal of the Land Registry Act 1862. I shall therefore deal with them together.

At first blush, the amendments may look like a radical addition to the Bill, but the repeal will have little or no practical effect for conveyancers and land owners, particularly those with an interest in land that is subject to registration under the 1862 Act. However, it will tidy up the statute book by removing a provision that is now otiose and will also remove a purposeless complication in the Land Registry's internal procedures.

The current land registration system originated in 1875 with the Land Transfer Act of that year. However, there was an earlier, unsuccessful attempt to set up a registration system in 1862. When the current system was introduced, the 1862 registers, which numbered several thousand, were frozen, although there was provision for them to be converted to the modern system. Today there are several hundred registers remaining. However, they are no longer of any use to the conveyancing process for land subject to them. It is for any practical purpose impossible to reconcile the ownership of the land back in 1875 with modern title deeds showing ownership during the past 15 years. I can therefore assure your Lordships that the repeal of the 1862 Act will not prejudice the persons who were registered as owners on those records, nor those whose rights were recorded as burdening the land.

The 1862 Act registers were private and entries on them did not constitute notice to a buyer of the land. Any burdens recorded on those records must bind, the land independently of that registration and would therefore be picked up using modern conveyancing procedures. Additionally, any land ownership rights recorded on the 1862 Act registers that are at odds with the modern title deeds would have been effectively lost as a result of the application of the principles of adverse possession.

However, the records are of significant historic interest. Therefore, while repealing the 1862 Act, the amendments also allow For the registrar to keep the registers as part of the registry's historic records and to provide copies of them to members of the public on application. We are seeking to combine the complete replacement of all past land registration legislation with the preservation of the valuable historic records. I hope that the noble Lord, Lord Thomas, will not weep at their disposal. I therefore commend the amendments to the House as a minor, but valuable, piece of law reform. I beg to move.

The Earl of Caithness

My Lords, I am a little suspicious of the Government on this. If the issue was so simple, why was it not dealt with when the Bill was published? If the 1862 Act is otiose, there seems to be a lacuna within the Government—or perhaps even incompetence—in not including the provision earlier. They all knew the result of the 1862 Act.

The noble Baroness kindly wrote to those of us who are interested in the matter before Report. I have a couple of points arising from her letter. I do not expect an answer now, but I should like her to write to me before Third Reading. She wrote that the registers do not confer any tangible benefits on the registered owner. What about any intangible benefits that there might be? At the end of her third paragraph she says that the registrar will not retain any other responsibilities regarding the 1862 Act regime. What responsibilities will be lost?

Baroness Scotland of Asthal

My Lords, I am happy to do that, but I can reassure your Lordships that the problem was not incompetence on our part but frightening efficiency. (I am glad that approval for that is recorded by amusement in the House.) We want to clear everything. Everything that can be done at this stage should be done to put things in proper order. I had rather suspected that some may weep at losing the antiquity, but I hoped that there would be rejoicing at our efficiency.

On Question, amendment agreed to.

Schedule 10 [Miscellaneous and general powers]:

Baroness Buscombe moved Amendment No. 102: Page 66, line 27, leave out pa ragraph 3.

The noble Baroness said: My Lords, I shall endeavour to be brief. In the usual conveyance a number of covenants for title are implied. These are important covenants because in them the vendor gives warranties as regards his or her power to convey and as to the quiet enjoyment of the property that can be expected by the purchaser.

The precise wording of these covenants has developed over the centuries. They are now set out in Section 77 of the Law of Property Act 1925 and Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994. They have stood the test of time and many lawyers over the centuries. As far as we are aware, there is no need to tinker with them. However, the rule-making power in paragraph 3 of Schedule 10 will allow someone—we know not who—to interfere with these covenants in some way, although we know not how or why.

We should therefore be grateful if the Minister could enlighten us by telling us what rules are proposed, what they will do and why there is any need to do anything. I beg to move.

Baroness Scotland of Asthal

My Lords, in order to respond fully to the concerns raised by the amendment, I shall first briefly try to explain the general purpose behind the use of implied covenants in the conveyancing process and address the way in which the land registration system currently deals with them.

An obligation to deduce title to land in accordance with a contract of sale comes to an end on completion of the sale. Establishing that there has been a breach of implied covenants for title is the only way in which a transferee can seek a remedy for defects in title that emerge after completion.

Covenants for title have been implied since the Conveyancing Act 1881 by the use of certain words in a conveyance, although the parties can expressly agree to modify the terms of the covenant.

Rule 77A(2) of the Land Registration Rules 1925 currently provides that a person will not be liable for breach of most implied covenants in respect of matters set out on the register of title. The Bill addresses this issue by inserting a new subsection into Section 6 of the Law of Property (Miscellaneous Provisions) Act 1994. This insertion does not exactly replicate the existing law, but the law is made clearer, more coherent and more accessible as a result.

The rule-making powers contained in Schedule 10 are fairly limited in scope but important nevertheless. First, rules may be made about the form of any provision in a registrable disposition that modifies covenants implied by Part 1 of the Law of Property (Miscellaneous Provisions) Act 1994. There are already rules under the existing legislation that achieve that end.

Secondly, a power is given to make provision about the application of Section 77 of the Law of Property Act 1925. That section relates to implied covenants on a conveyance of land subject to a rent charge. Although many rent charges will he phased out in 2037 and there are only limited circumstances in which new ones can be created, rules can be made to enable the implication of the covenants to be modified or excluded.

Lastly, rules may provide for how implied covenants are recorded on the register and whether they are to be recorded there. Provision may also be made for the register to be conclusive as to whether or not such covenants have been implied.

These rule-making powers are important. They are designed to ensure that everyone knows when implied covenants have been given in relation to a transaction and whether the statutory form of the covenant has been modified in any way. For that reason, the rule-making powers should remain as part of the Bill. Accordingly, I invite the noble Baroness to withdraw the amendment.

Baroness Buscombe

My Lords, I thank the Minister for her very full and reassuring response. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 103 not moved.]

8.30 p.m.

Lord Bassam of Brighton moved Amendment No. 104: Page 67, line 30, leave out "may".

The noble Lord said: My Lords, this is merely a tidying-up amendment. It removes the first word of paragraph 6(e), which is surplus to requirements. I ask your Lordships to accept the amendment. I beg to move.

On Question, amendment agreed to.

Clause 124 [Exercise of powers]:

[Amendment No. 105 not moved.]

Lord Bassam of Brighton moved Amendment No. 106: Page 42, line 18, after "Conveyancers, insert— ( ) a person nominated by the Royal Institution of Chartered Surveyors, ( ) a person with experience in, and knowledge of, consumer affairs,".

On Question, amendment agreed to.

Clause 125 [Rules, regulations and orders]:

Lord Bassam of Brighton moved Amendment No. 107: Page 42, line 31, leave out paragraphs (a) to (d) and insert—

1. "(a) regulations under section 99(2), or
2. (b) an order under section 99(3), 101 or 111,".

On Question, amendment agreed to.

[Amendment No. 108 not moved.]

Lord Bassam of Brighton moved Amendment No. 109: Page 42, line 37, leave out paragraphs (a) and (b) and insert—

1. "(a) land registration rules,
2. (b) rules under Part 11 or section 119,
3. (c) regulations under paragraph 5 of Schedule 9, or
4. (d) an order under section 5(1), 62(9), 80(4), 116(1) or 127,".

On Question, amendment agreed to.

[Amendment No. 110 not moved.]

Lord Bassam of Brighton moved Amendment No. 111: Page 43, line 2, at end insert— (5) Rules under section 93 or paragraph I, 2 or 3 of Schedule 5 shall not be made unless a draft of the rules has been laid before and approved by resolution of each House of Parliament.".

On Question, amendment agreed to.

Clause 129 [General interpretation]:

[Amendment No. 112 not moved.]

Schedule 11 [Minor and consequential amendments]:

Lord Bassam of Brighton moved Amendment No. 113: Page 68, line 27, at end insert— ( ) In section 87, at the end there is inserted— (4) Subsection (1) of this section shall not be taken to be affected by section 23(1)(a) of the Land Registration Act 2001 (under which owner's powers in relation to a registered estate do not include power to mortgage by demise or sub-demise)."

On Question, amendment agreed to.

Schedule 12 [Transition]:

Lord Bassam of Brighton moved Amendment No. 114: Page 79, line 24, leave out from first "cautions" to end of line and insert "against dealings lodged under that Act".

The noble Lord said: My Lords, again, these are tidying amendments to Schedule 12, which deals with transitional arrangements. I do not believe that the amendments will be controversial. I beg to move.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendments Nos. 115 to 118: Page 79, line 25, after "cautions" insert "against dealings". Page 79, line 25, leave out "in the register". Page 79, line 26, leave out "section 54 of". Page 79, leave out lines 36 to 38 and insert "against first registration lodged under that Act, or any enactment replaced (directly or indirectly) by that Act.".

On Question, amendments agreed to.

[Amendment No. 119 not moved.]

Lord Bassam of Brighton moved Amendment No. 120: Page 82, line 6, leave out "this section" and insert "that Schedule".

The noble Lord said: My Lords, this is a drafting correction. I am sure that your Lordships will be very grateful for that. I ask noble Lords to accept the amendment. I beg to move.

On Question, amendment agreed to.

Schedule 13 [Repeals]:

Lord Bassam of Brighton moved Amendment No. 121: Page 83, line 11, at end insert—

"The Land Registry Act 1862 c. 53.

The whole Act."

On Question, amendment agreed to.