- Care must be taken when applying for the entry of a notice or a restriction against someone else's property
- If the application is made "without reasonable cause", the applicant may be liable in damages for any loss suffered
- However, the application will be justified if the applicant has a reasonably arguable claim to be entitled to the interest which it is seeking to protect - even if it turns out to be wrong
Adverse entries on a register of title can delay or even stymie a sale of a property. It is for this reason that section 77 of the Land Registration Act 2002 provides that a person must not, without reasonable cause:
- apply for the entry of a notice or a restriction on the register
- object to an application to the registrar.
A person who contravenes section 77 is liable in damages for breach of statutory duty to any person who suffers loss as a result.
Fitzroy Development Ltd v Fitzrovia Properties Ltd
In Fitzroy Development Ltd v Fitzrovia Properties Ltd, the parties entered into a conditional agreement for the sale and purchase of a property. The buyer registered a unilateral notice at the Land Registry against the seller's title, to protect the buyer's interest under the agreement.
One of the conditions under the agreement was not satisfied by the requisite date, and the seller served notice rescinding the agreement. The seller applied to the Land Registry for removal of the notice lodged by the buyer. The buyer objected to the seller's application, contending that, in the circumstances which prevailed, the seller had not been entitled to terminate the agreement. The seller claimed that the buyer was in breach of section 77 of the 2002 Act, and was liable in damages as a result.
The court ruled that, while the contract remained in being, the buyer was entitled to protect its rights under it by the registration of a unilateral notice. Although the court found in the end that the seller had been entitled to terminate the contract, it also considered that the buyer had had a reasonably arguable case that the agreement remained in being.
On that basis the court held that the buyer had reasonable cause to continue to have the benefit of the unilateral notice, pending the determination of the dispute about whether rescission had validly occurred.
Following the resolution of that dispute in its favour, the seller was entitled to have the notice removed. However, there was no breach of section 77, with the result that the seller was not entitled to damages under that section.
Things to consider
There are very few reported cases on section 77. In Anderson Antiques (UK) Ltd v Anderson Wharf (Hull) Ltd, the court found that a company did not have reasonable cause to register a unilateral notice against a title. Both the company itself, and also its director who had made a statutory declaration in support of the claim, were found to be potentially liable in damages for breach of statutory duty.
One of the reasons that there are so few cases on section 77 is perhaps because most contracts will make express provision for the removal of entries at the Land Registry in the event that the contract is determined. One of the curious features of this case is that the agreement did indeed contain such a provision. The judge noted that the seller could have enforced this, since it was an unqualified obligation. It is not clear why the seller chose to use section 77 instead.
Another option open to a seller which finds itself in this situation would be to make a direct application to the court for the removal of the unilateral notice. The court may allow the notice to remain on the title pending the trial of the substantive issue between the parties, but will usually require the beneficiary of the notice to give an undertaking in damages.