No one could argue that the e-Discharge is not light years ahead of the former process of obtaining and registering vacates of mortgages or Deeds of Release, which often had practitioners waiting for, or taking, months or years to furnish, or receive. Now, one simply completes a QED request, sends it to the lender and before you know it the register is updated and a comforting e-mail or letter pops into your inbox to let you know the relevant charge has been cancelled. Wonderful! Or is it?

Perhaps not if you act for a vendor as mortgagee whose power of sale has arisen under a charge, pursuant to Section 62(9) of the Registration of Title Act 1964 (the “1964 Act”). Usually, in sales of registered properties by mortgagees the power of sale is contained in a charge in favour of the mortgagee registered as a burden on a Land Registry folio. Transfer of the property is by Form 24, which will cancel the relevant charge and will overreach all estates, interests, burdens and entries puisne to the charge.

The Form 24 is an important mechanism for the mortgagee that not only cancels the charge under which the power of sale arises but also clears the title of any subsequent charges or burdens so that an unencumbered title may be assured to the purchaser. Very often where a sale is by a mortgagee it is because the loan secured by the charge becomes distressed and in such circumstances there are often subsequent charges registered on the property by other creditors.

The underlying charge that gives the power of sale to the mortgagee is therefore crucial to such sales. There have, however, been many incidents of such charges being cancelled by way of e-Discharge before the Purchaser’s solicitor has submitted the Deed of Transfer to the Land Registry. In these cases, of which seventy or more have resulted in applications to court to reinstate charges, the Land Registry has rejected the application to register the Purchaser’s interest on the grounds that where a charge is cancelled at the request of the registered owner of the charge ‘thereupon the charge to the extent so noted ceases to operate’ (Section 65(1) of the Registration of Title Act 1964) and that on subsequent lodgement of the transfer there was no longer a mortgagee within the meaning of Section 62(6) of the 1964 Act who could transfer the property pursuant to Section 62(9) of the 1964 Act.

The Land Registry has indicated that in these cases it has been necessary for Purchasers to apply to the Circuit Court to rectify the register in order that the charge can be re-instated and cancelled properly, that is as part of the process of registering the Form 24 Transfer to the Purchaser. Obviously, any such application to the Courts would be time-consuming and costly.

In a recent instance of these circumstances it was submitted to the Land Registry that at the date of the transfer the registered charge was entered on the register and in view of the conclusiveness of the register (Section 31 of the 1964 Act), the Land Registry must effect registration on lodgement of the deed of transfer in the prescribed form. It was further submitted that the effect of Section 62(9) of the 1964 Act is mandatory on the Land Registry. If the registered owner of a registered charge transfers the property in pursuance of Section 62(6), when the charge was entered in the register, then the Land Registry is under a clear statutory duty to register the prescribed deed of transfer.

The Land Registry rejected these submissions and insisted that under Section 62(10) of the same Act, where a Lender exercises its power of sale, the charge is cancelled by operation of law on the registration of the transferee. Section 62 becomes inoperative if a charge has been discharged prematurely by e-discharge.

Further complicating this particular instance was the existence of a judgement mortgage registered subsequent to the prematurely cancelled charge, which meant that any solution, other than an application to court would have to deal with the rights of the judgment creditor.

Further submissions were made to the Land Registry wherein it was posited that section 90 of the 1964 Act, confers certain rights on a transferee who is entitled to be registered as owner. Under section 71(2)(c) of the 1964 Act, the puisne judgment mortgagee takes subject to all unregistered rights and the right of the Purchaser under the Form 24 is just such a right.

These submissions were also rejected by the Land Registry who insisted the only remedy was an application to court pursuant to Section 31(1) of the Registration of Title act, 1964 and Order 96 of the Rules of the Superior Courts to re-instate the charge.

The solution in the instant case was to have a fresh Form 52 charge executed by the original borrowers. Because the fresh Form 52 was executed to secure loan monies advanced prior to registration of the judgment mortgage it was in order to lodge it for registration and at the same time to seek registration of an entry of a note of the priority of the fresh Form 52 charge over the judgment mortgage. The application was successful and the Form 24 was registered.

In cases such as these the Land Registry has three options available to it:

  • It may accept lodgment of the application for registration of the Form 24. It is open to it to serve notice on all parties appearing on the register whose interest has been affected and in the absence of substantive objection to proceed to register the applicant.
  • It may refer the matter to Court pursuant to Section 19(2) of the Act of 1964. This would enable clarification of an important point of law relating to the effect of Sections 31 & 62 of the 1964 Act.
  • It may make an order refusing registration which order can be appealed to the court pursuant to Section 19 (1) of the 1964 Act.

Lenders and their advisors should beware when transferring as Mortgagee by Form 24. There is no requirement for an e-Discharge and Purchasers from Mortgagees should beware that delay in submitting the Deed of Transfer to the Land Registry can have onerous consequences. It will not always be possible to have a new Form 52 executed and the alternative is an expensive application to Court.

In these cases the principal cause of the problem is the inadvertent submission of an unnecessary e-Discharge to the Land Registry but a significant contributing factor is the hare and tortoise-like juxtaposition of the electronic discharge and the paper Transfer. e-Conveyancing promises much that will benefit the legal profession and its clients but a little e-Conveyancing can be a dangerous thing.