On Monday 3 August the new Land Registry procedures for early registration came into force. The basic aim of the new procedures is to ensure that applications for registration are completed as quickly as possible. The new policy applies in all situations where an application for discharge of whole has been made with another application and proof that a charge was been discharged has not been provided.
Previously when an application was made (Form AP1), the Land Registry treated it as three distinct applications; an application for discharge of the existing charge, an application to complete the transfer by registration, and an application to complete the new charge by registration. Problems arose if there was difficulty in obtaining proof of satisfaction of the existing charge. The result could be that not only the application for discharge would be cancelled but also the applications to register the transfer and the new charge.
The Land Registry felt that this system was unfair in circumstances where the transfer and new charge were capable of completion by registration as cancellation may risk a loss of priority. They believed that dispositions should be reflected in the register as soon as possible after they had taken place.
The Land Registry consulted with a number of key stakeholders including the Law Society before the changes were made. The Law Society recommended rejecting the proposal and the Council for Licensed Conveyancers supported this view.
The Law Society’s rejection was based on the following arguments, all of which relate to what would happen if the new proposals were accepted:
- It would reduce the impetus for the creation of an electronic system of discharge, transfer and new charge, where the proposal would fit in well;
- It would remove the major driver for solicitors and conveyancers to adopt a voluntary system of full e-conveyancing;
- It would be an opportunity wasted which could be used to improve this part of the system. Instead the proposal will perpetuate and entrench the problems arising from some lenders not adhering to their redemption statements or delaying in producing discharges;
- The proposals could jeopardise the system of ‘chains’. The Law Society believes that the old practice of treating all three applications as conditional on each occurring was the correct system;
- The new system would risk making conveyancing more expensive, stressful and complicated for consumers which is against express government policy. Once the seller has paid the lender the amount specified to discharge the mortgage, they are entitled to have the charge discharged. It is not in the public interest for the register to show that a seller has a mortgage remaining registered against their property once they believe it has been redeemed. It is not in the interests of the buyer to have a charge against their property which they have no knowledge of. From the register alone the solicitor/conveyancer may not be in a position to advise the buyer as to how long the older charge might remain extant on the face of the register;
- It would militate directly against the development of a fully functioning and efficient e-conveyancing system by incorporating poor practice into the system;
- It would ensure what a wholly disproportionate amount of the costs arising from the failure of the prompt issue of discharges is borne of solicitors/conveyancers. It would not encourage lenders to discharge promptly, but in fact could have the opposite effect. There is also a risk that the seller’s charge will not be vacated and will remain on the register for quite some time. This will cause delays and costs at a later date then the buyer comes to sell the property. The issue as to how the buyer’s solicitor will actually know the charge will be removed will also arise. They would have to keep searching the register, which in turn increases costs; and
- It would deny the unique position that the Land Registry is in to improve the system for all participants. The new lender who would be registered would, in reality, not be able to exercise its power of sale. If the buyer defaults under the new mortgage provided by the new lender, the rules of priority would mean that the with the seller’s charge remaining on the register, the seller’s lender would have priority. The perceived benefits for the Land Registry would not materialise either. Instead of requisitions about missing evidence of discharge there will be requisitions about evidence of removal of restrictions.
Notwithstanding the objections, the Land Registry has introduced the changes and the Law Society has produced a Practice Note to assist on this subject