The doctrine of notice for purchasers of land today

This is a question about the doctrine of notice or, the purchaser known as ‘equity’s darling’ (as they are sometimes referred to). In order to critically evaluate the validity of the view expressed by the writer in the question, it is will be necessary to: a) understand the doctrine of notice and its historical development and, b) determine whether the current position of the law and the applicability of the doctrine of notice is pertinent for purchasers of land today.

In addition to these elements, it will also be necessary to factor in some understanding of the way that land is registered in the United Kingdom, as well as the problems incurred through that land which remains unregistered and how various attempts (through statute) over the years have tried to tackle this problem. It is from these, that the doctrine of notice has its very origins.

It is naturally of some considerable importance to apprise the different types of equitable interests in real property as it these which purchasers of land are interested in and, moreover, how to protect those interests.

Determining exactly what one’s interests in real property are however, is more difficult than at first it might seem, and therefore an understanding of precisely how equitable interests are formulated, listed, charged and notified is essential.

Finally, a passing acquaintance with where the law is likely to go in the future with hints at bills and up-and-coming statutes will help in our overall understanding of the issue.

Argument

The German philosopher, George Wilhelm Friedrich Hegel (1770-1831) once famously said: “The only thing we learn from history is that we never learn from history”1.

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This undoubtedly holds true for the natural course of human nature – often so quick to condemn things to the past when they no longer seem applicable; such is the case with the doctrine of notice.

A ‘doctrine’ is a belief, a system of beliefs or a fundamental principle that is accepted as authoritative by a person or a group of people2. To have ‘notice’ of something is to be aware that it exists3. In relation to property law in particular, the idea of giving notice is therefore usually associated with a burden on the title, i.e. generally, there will be equitable interest(s) associated with that title for which the owner (or future purchaser) of the title requires (or would at least like to have) notification of.

An ‘equitable interest’ is a right ‘in personam’ [Latin: directed towards a particular person] which can enforced, if considered fair. On the surface, this would seem to be a sensible and indeed desirable set of circumstances from which both the owner of the title or any future purchaser of that title could benefit; after all, is it not the case that as much information as possible is a good thing when one is dealing with the purchase of land?

Therefore, by definition, the ‘doctrine of notice’ is an accepted authority whereby information is (or should be) given to the owner of a title in land (or the future owner of that title) of any equitable interest(s) that may be associated with that title.

When we are talking about unregistered land, historically the purchaser was always bound by legal estates and interests in the land – this comes from the Latin ‘in rem’, a term describing the power a court may exercise over property, either real or personal. However, when buying unregistered land, the title the purchaser obtains is essentially only ever as good as that which the vendor has: ‘Nemo Dat Quad Non Habet’ – One cannot give what one does not have! “The problem in land law is to achieve a balance between the interests of a purchaser on the one hand (in the broad definition of the Law of Property Act 1925 [s.1(3)]4 including a lessee and a mortgagee), and those of the owner of an equitable interest in the land on the other hand”5.

The modern day perception of the doctrine of notice has its roots in the ancient idea of ‘equity’s darling’, which has become known as the bone fide purchaser rule, or a ‘bone fide purchaser for value without notice, actual, constructive or imputed’. This is a term used in the law of real property to refer to an innocent party who purchases property without being given (any or all) notification of third party claims that may exist in relation to the title in that property. Such a person must acquire the title to that property ‘bona fide’ [Latin: In good faith], and have purchased it for actual consideration in economic terms i.e. for money, rather than as a beneficiary of a gift or a trust (which would be nominal consideration). Indeed, James LJ stated6 that the plea of purchase for valuable consideration without notice was “…an absolute, unqualified, unanswerable defence”7.

“Equity’s darling may well have been originally designed to promote the ideas of substantive justice; but in reality, and to use an equally revered metaphor of Trust Law, she was very much ‘money’s mistress'”8. In other words, the doctrine of notice was developed to ensure that the owner of the legal title would be aware of all the equitable interests associated with that title, thereby not becoming encumbered by them, and that it was in the interests of both contracting parties (seller and buyer) that notification of such equitable interests be given. Such was the aim of the Land Charges Act 19259.

This is a very important consideration in law because, if such a person purchased a property free of those interests, and, more importantly, can show that they were genuinely unaware of any third-party interests in the land, then those third party equitable interests are effectively extinguished. This leaves the erstwhile owners of such interests with only one course of action left open to them – an action in court against whoever granted them the equitable rights in the first place (which in itself can often prove complicated, as equitable interests such as easements, rights, privileges, co-ownership interests10, lodgers and joint tenants11 etc., are often granted as part of a beneficiary e.g., such as in a will. The person(s) who granted these interests may in fact be deceased!).

There are a couple of exceptions worthy of note: a) if the equitable interest(s) in question have been entered on the Land Charges Register12, then they will bind a future purchaser with or without notice having been given, and, b) if the purchaser has received constructive notice of the equitable interest(s) prior to the purchase then a court will usually deem that person to have received notice of all such equitable interest(s) (basically, they knew that third party(s) had equitable interest(s) in the land, but chose to ignore them, or, pretended not to have knowledge of them at all).

This second exception however, can work in both directions of course… if a potential purchaser of real property decides not to bother looking into the details of any equitable interest(s) (should they exist), and later discovers after having purchased the property that such interest(s) do in fact exist, then they have no recourse open to them13 – caveat emptor (another property law doctrine from ancient times) – let the buyer beware!

One very valid criticism of the Land Charges Act system is that because registration is the sole criterion of whether an interest is binding or not [LCA1972 s.4]14, it may operate unfairly i.e. its provisions may be used to deliberately evade interests of which a purchaser has actual knowledge15 (Midland Bank Trust Co. v Green [1981] AC 583)16.

The doctrine of notice applied therefore to the enforceability of all sales of real property until the introduction of the Land Registration Act 1925. This act defined a simple list (LRA1925 s.70(1)) of accepted ‘liability of registered land to overriding interests’ [i.e. when a person buys a legal estate in land which has a registered title, that person would not be bound by any third-party interests in that land unless they were entered on the Land Register, or, were deemed to be overriding]17.

The LRA1925 has now been repealed and replaced with the Land Registration Act 2002, which came into force on 13 October 200318. Intended to simplify and modernise the law of land registration, the LRA2002 still retains overriding interests (although they are now referred to as ‘unregistered interests that override’, but also “…removed the relatively simple definitions found in the old s.70(1) of LRA1925 and replaced it with two statutory Schedules19, one of which (Schedule 3) might well have been written in part by a monkey with a typewriter. Paragraph 3 of the new Schedule 3, on easements, is almost unintelligible unless one knows beforehand what it is supposed to mean”20.

One could be forgiven for being critical at this point in saying that this hardly looks like being a form of simplification, and yet, this is because some of the changes in LRA2002 are very subtle indeed: Firstly, the wording of Schedule 1(2) and Schedule 3(2) ‘so far as relating to land of which he is in actual occupation’ has been inserted to remove the effects of Ferrishurst Ltd v Wallcite Ltd21. In that case the Court of Appeal was faced with the interpretation of LRA1925 s.70(1)(g) and questions raised concerning the ‘exigibility’22 or ‘durability’ of property interests which allowed actual occupation to be enforced against the entire title, rather than the land actually occupied [Controversially, the Court of Appeal ruled that as the option to purchase was over the entire title, the claimant could exercise it over the entire title even though only in occupation of part of the land].

Secondly, there is now a duty on the transferee of a registered title to disclose third party interest(s) affecting the estate (when they apply to be the new registered proprietor) [LRA2002 s.71]; failure to do so does not however render the interest(s) invalid, and in such a case will continue to bind the new owner if the interest(s) qualify under LRA2002 Schedule 3 (although, even some of these so-called ‘sunset’ interests will lose their overriding status 10 years after the Schedule entered force)23.

Thirdly, it was the undoubted intention of the statute makers of LCA1972 and LRA2002 to work towards the implementation of a more coherent system of land registration – one in which all the records of equitable interests, the various charges and other rights held in the land could be made readily available, easily and quickly, thereby aiding the sale and disposition of land. To that end, LRA2002 introduced the possibility of electronic conveyancing (LRA2002 s.91)24, and although the act does have the provision within it for DIY conveyancing through electronic means, we are still some way off e-register terminals at Tesco25.

Perhaps my greatest criticism of LRA2002 however, is that it could have gone so much further towards enforcing the registration of unregistered land – and did not do so. For that to happen, we must all wait for the next ‘big thing’ in land law legislation.

Conclusion

So, where does all that leave us today? Well, in my opinion, the views of the author in the statement are at the very least, far too broad, and, at worst, completely incorrect.

It is true to say that, were all the land in the United Kingdom safely entered as part of the Land Registry, then the doctrine of notice would serve little purpose. However, the stark fact of the matter is that as of 2007, only 85% of the land in the United Kingdom is registered – which of course still leaves a staggering 15% of land unregistered (some 14,200 square miles!)26.

Of course, all that unregistered land is not in one place. We are talking about small patches of land here and there, dotted all over the place (which, none the less, adds up to an area somewhat larger than the Kingdom of Belgium!).

The question consequently, must hinge on whether there is any likelihood of this land ever becoming registered, thus rendering the said doctrine obsolete. This is harder to predict than at first it might seem. As I have already pointed out, the definitive aim of the statute-makers of 1925, 1936, 1969, 1972, 1986, 1988, 1997 and 2002, was to see all land in the United Kingdom entered on the Land Register; but efforts in earlier times27 to co-ordinate a system of land registration had proved just as ineffective as those of the 20th and 21st Century.

Therefore, unless some extraordinarily sweeping piece of legislation is brought into law at some point in the future – legislation which would enforces the registration of all the 14,200 square miles of currently unregistered land – then the obvious conclusion must remain that the doctrine of notice cannot, and indeed should not [yet] be consigned to the history books. It may only serve a limited and rapidly diminishing purpose, but for those who still rely on ‘equity’s darling’, it is a vital piece of British law.

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The doctrine of notice for purchasers of land today. (2017, Dec 06). Retrieved from http://paperap.com/paper-on-doctrine-notice-belongs-history-books-little-significance-purchasers-land-today/

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