Encumbrances (Section C)

Legal charge / MORTGAGE

Original name: A CHARGE BY WAY OF LEGAL MORTGAGE

Definition of this right: Where an owner of real property gives security by deed for the money loaned this usually takes the form of a mortgage on the property. The mortgage/charge allows the lender to realise the security i.e. sell the land if of the borrower (also known as a “chargor” when borrowing money against the security of registered title) defaults on the loan. To be fully effective at law and to allow the lender to realise their security, legal mortgages of registered land must be registered, and are then known as “registered charges” (although often referred to merely as “charges”).

Where a legal mortgage of land is created by a charge by deed expressed to be by way of legal mortgage, the mortgagee will have the same protection, powers and remedies (including the right to take proceedings to obtain possession from the occupiers and the persons in receipt of rents and profits, or any of them) as if—

(a)     where the mortgage is a mortgage of an estate in fee simple, a mortgage term for three thousand years without impeachment of waste had been thereby created in favour of the mortgagee; and

(b)     where the mortgage is a mortgage of a term of years absolute, a sub-term less by one day than the term vested in the mortgagor had been thereby created in favour of the mortgagee.

(section 87 Law of Property Act 1925)

Type of right according to national classification: mortgage deed; legal charge; mortgage;legal mortgage; fixed charge; charge deed.

Observations: Other notices and restrictions relating to a charge will be put in the C register, for instance – an obligation to make further advances, a note of an agreed maximum amount of security (if any), ranking of charges, variation of a charge.

EQUITABLE CHARGE

Original name: EQUITABLE CHARGE

Definition of this right: If a charge is an equitable charge rather than a legal charge, it can still be noted on the register. An equitable charge is a charge lacking one or more of the characteristics of a legal charge, e.g. a defective charging clause, or not signed as a deed or witnessed. Such a charge is not a registrable disposition and may only be protected by way of notice. Sometimes a charge would be effective as a legal charge, but the chargee is unable to register it due to a restriction in the register, which the chargee cannot satisfy. The charge can still be noted in the C register. An equitable chargee does not have all the rights that a legal chargee has, but can go to court for an order for possession and sale if the borrower defaults.

Type of right according to national classification: Charge

Observations: Only an equitable charge of the registered estate may be protected by way of notice in the C register. An equitable charge of a beneficial interest cannot be protected by way of notice (s.33(a), LRA 2002) but may be protected by entry of a restriction in the B register.

1.1. With respect to the mortgage liability, the English & Welsh mortgage system prepares in general three options:

a) Extracts include the global amount including all liabilities due to the loan (loan, interests or other debts). [E.g. The loan is 100,000 € and interest at 20,000 € is agreed. LR extracts indicate that the secured debt is the sum of both concepts, i.e. 120,000€]. (If the parties agree they can use a method of securing priority for further advances, introduced by 49(4), Land Registration  Act 2002. All the parties to the charge agree a maximum amount for which the charge is security and we note this on the register. Subsequent advances by the first chargee will have priority over any subsequent charge up to the sum agreed under the maximum amount agreement, provided that, the maximum amount entry is registered prior to or at the same time as registration of the subsequent charge).

b) Information about sums of money guaranteed by mortgage is not provided by the extracts. [E.g. The loan is 100,000 € but LR extracts will not inform any figures, or at most will inform the fact that the property is encumbered by a mortgage]. (This is the normal way of entering mortgages in England & Wales).

c) In the event that a mortgage guarantees a not monetary obligation (not a loan or other money debt), there’s an identification of this obligation in the extracts. (A mortgage always secures a monetary debt).

1.2. Regular LR information in this system also comprises ordinarily:

a) Name of the mortgagee or creditor
b) Name of the mortgagor or debtor (only so far as they are the registered proprietors so they must have entered into the mortgage, otherwise it cannot be registered as a legal charge. If others have signed the mortgage deed, for instance as guarantors, their names will be visible from a copy of the mortgage deed, which can be obtained for a small fee).
c) Date of the mortgage and date it was registered. Address of the lender. Company number if the lender is a company, and Country in which the company is registered.

However, there should not be expected any information about contract or basis of obligation guaranteed by a mortgage (though a copy of the mortgage deed is retained and is available for inspection and copying), deadline of the loan or credit or other contract which is basis of the mortgage, the deadline of the mortgage or deed whereby mortgage was constituted or awarded (though a copy of the mortgage deed is avaible from the Land Registry for a small fee).

1.3. With respect to the mortgage rank (preference of the mortgage in comparison with other mortgages or encumbrances), this LR system has the following criteria:

a) Mortgage rank depends on date of registration of the mortgage, so whoever may ascertain mortgage rank taking into consideration the information on the date of registration of the mortgage (unless a note on the register states otherwise).

In this LR system these are the following:

EASEMENT

Original name: EASEMENT

Definition of this right: A subjective easement is an encumbrance imposed on an immovable property for the benefit of another belonging to a different owner. The immovable property in whose favour the easement is constituted is called dominant tenement; the property suffering it is the servient tenement. The right may be unlimited in time (freehold) or limited in time (leasehold).

Type of right according to national classification: Rights of way

Observations: There’re many kinds easements in English Law, characterized by their purpose (right of way, right to lay and maintain pipes, wires or cables, rights of overhang, rights of drainage and sewage, right to park a car).

LEASE

Original name: LEASE

Definition of this right: A term of years absolute (Law of Property Act 1925, section 1(1)(b)) granted out of a freehold estate or a leasehold estate.

Type of right according to national classification: Lease to which the superior title is subject.

Observations: A lease is an legal entitlement to occupy and use the land for a limited period of time, granted out of a superior title. A lease of more than seven years will have its own title and register, as well as being noted in the charges register of the superior title.

RESTRICTIVE COVENANTS

Original name: RESTRICTIVE COVENANTS

Definition of this right: A binding promise restrictive of the user of the land that binds the covenantor (the person who made the promise) and also the successors in title, including the owners and occupiers for the time being of the land. The restrictive covenant must be for the benefit or the owners and occupiers of adjoining land (the covenantee). The covenant is said to run with the land.

Type of right according to national classification: “Restricted real right”.

Observations: An example of a restrictive covenant might be “not to use the land for more than one residential unit”, or “not to use the property for the sale of alcohol”.

BANKRUPTCY ENTRIES IN RELATION TO A CHARGE OF A REGISTERED CHARGE

Original name: BANKRUPTCY ENTRIES IN RELATION TO A CHARGE OF A REGISTERED CHARGE

Definition of this right: If a person with the benefit of a registered charge (the chargee or mortgagee) is an individual and a petition in bankruptcy is registered under the Land Charges Act 1972,  a bankruptcy notice must be put in the charges register. If a bankruptcy order is made a restriction must be entered in relation to any charge affected by the order.

Type of right according to national classification: Bankruptcy entries.

Observations: Only bankruptcy notices and restrictions against the chargee will go in the C register. Bankruptcy notices and restrictions against the registered proprietor of the land will go in the B register.

RENTCHARGE

Original name: RENTCHARGE

Definition of this right: A rentcharge is any sum of money charged on land payable either annually or periodically, other than rent reserved by a lease or interest charged under a charge.

Rentcharges are sometimes described in deeds as rent charges, chief rents, quit rents, fee farm rents, second rents, overriding rents, improved rents, ground rents, or merely as rents. A rentcharge is usually perpetual but can be granted for a term of years.

Since 22 August 1977 the creation of most types of rentcharge has been prohibited. The main class of rentcharge excepted from the general prohibition is what is known as an estate rentcharge.

This can be a rentcharge of either:

– a nominal amount for the purpose of making covenants to be performed by the landowner enforceable by the rentowner against the current owner of the land; or

– a reasonable amount to meet the cost of the performance by the rentowner of covenants for the provision or services, maintenance or repair and insurance and other payments for the benefit of the land affected by the rentcharge.

Type of right according to national classification: Rentcharge.

Observations: A rentcharge is also capable of being registered under its own title number.

Where a rentcharge is created out of a registered estate on or after 13 October 2003 it must be registered to be effective at law (s.27, LRA 2002). However, when a rentcharge is created by a transfer or other disposition of a registered estate, only the burden need be noted unless specific application is made to register the rentcharge in its own right.

CUSTOMARY RIGHT

Original name: CUSTOMARY RIGHT

Definition of this right: Customary rights differ from easements because there is no dominant tenement and from profits a prendre and easements because there is no individual or corporate beneficiary to whom a grant could have been made. They differ from public rights because they are not enjoyed by the public at large, but by a smaller group defined by the custom.

A custom can be regarded as a local law which differs from the common law.

Type of right according to national classification: Customary right.

Observations: A common example is a churchway, which is a customary right of way for the parishioners to cross private land to reach the parish church. It is not an easement because there is no dominant tenement and the parishioners are not a body corporate to whom a grant could have been made. It is not a public right because it is not enjoyed by the public at large.

FRANCHISE

Original name: FRANCHISE

Definition of this right: A franchise requires a grant from the Crown in the form of a charter or letters patent. It may also be claimed by prescription (which presupposes a grant that has been lost).

It is likely that franchises were also validly granted in the past by certain Lords who had palatine powers (“jura regalia”) within their Lordships. These are the Earls of Chester, the Earls and Dukes of Lancaster, the Earls and Dukes of Cornwall and the Bishops of Durham.

A franchise does not carry with it ownership of the physical land and is distinct from the freehold or leasehold estates in land.

To be capable of registration, a franchise must constitute a legal estate and be either:

– perpetual
– for a term of years absolute with more than seven years unexpired.

A franchise can be either:

– an ‘affecting franchise’ – “a franchise which relates to a defined area of land and is an adverse right affecting, or capable of affecting, the title to an estate or charge”

– a ‘relating franchise’ – “a franchise which is not an affecting franchise” (rule 217(1) of the Land Registration Rules 2003).

Only an affecting franchise will be noted in the C register of all the land affected by the right. The affecting franchise will also have its own register and title plan.

Type of right according to national classification: Franchise.

Observations: The most common franchise is the right to hold a market or fair. A right of market confers on the owner a monopoly right, that is to say the exclusive right to hold markets within a radius of 6 ⅔ miles. A fair is a market held at rarer intervals.

The Land Registration Rules 2003 allow for the registration of a relating franchise without a title plan (rule 5 of the Land Registration Rules 2003).

As a result such a franchise:

– will be described verbally in the property register

– will not be shown on the index map but will instead be recorded in the index of relating franchises and manors, which is a verbal index (rule 10 of the Land Registration Rules 2003).

A relating franchise will not be noted in the C register of land as they are not interests in specific land.

PROFIT A PENDRE

Original name: PROFIT A PENDRE IN GROSS

Definition of this right: A profit a prendre is a right to take something from another person’s land. The thing taken must be capable of ownership and could be

-part of the land itself (such as peat);

-something growing on it (such as timber or grass, which can be taken by the grazing of animals); or

-wildlife killed on it (for example by shooting and fishing).

A profit a prendre in gross belongs to a person independently of any land.

A profit a prendre may be granted or reserved in a conveyance or transfer, created by a deed of grant, or arises by prescription.

It can be freehold or leasehold.

A note of the right will be made in the C register of all the affected registered titles. The profit will also have its own register and title plan.

Type of right according to national classification: Profit.

Observations: A profit a prendre in gross exists independently from the ownership of other land.  There is no dominant tenement. It is a right to take something from someone else’s land.

NOTICES GENERALLY

Original name: NOTICE (AGREED OR UNILATERAL)

Definition of this right: A notice is an entry in respect of the burden of an interest affecting a registered estate or charge (section 32 Land Registration Act 2002). In addition to those mentioned above, there can be many other types of burden protected by notice, for instance—

-A home rights notice

-An inheritance tax notice

-A notice in respect of an order under the Access to Neighbouring Land Act 1992

-A notice in respect of a public right

It is not possible to list all the potential rights which may be protected by notice.

The fact that the interest is the subject of a notice does not mean that the interest is valid (that would be for a court to decide if there was a challenge), but does mean that the priority of the interest, if valid, is protected.

Type of right according to national classification: Notice.

Observations: An agreed notice can only be entered in the register either:

–          by, or with the consent of, the relevant proprietor (or someone entitled to be registered as such)

–          if the applicant can satisfy the registrar that the interest claimed is valid (for instance, by the production of a court order).

A unilateral notice may be entered without the consent of the relevant proprietor. The applicant is not required to satisfy the registrar that their claim is valid and does not need to support their claim to the interest with any evidence. The registrar will however check that the interest claimed is of a type that may be protected by unilateral notice.

The interest must be a legal interest in the land, not just a debt owed by the proprietor.

This information includes LR entries or notices related to restrictions decreed by judicial orders which mean either a claim on the property, or a challenge on the registered title, or an attachment of the property to debts as a result of judicial procedures, etc.

In this system:

a. Information on judicial restrictions or charges forms part of the regular land register extracts (if they relate to the land and have been registered).

b. Information on judicial restrictions is out of the scope of the regular land register extracts. Other registers or archives would have to be consulted to know if a property is affected by judicial restrictions (if the land is not registered a purchaser or lender would have to search the Land Charges Register for any writs or orders affecting the land; a purchaser or lender should also do a search of the local land charges register of the local authority in which the land is located; these are land charges which a local authority can create for debts to the local authority and other matters affecting the property; it is planned to move the administration of the local land charges registers to the Land Registry in the next few years).

c. Information on judicial charges is not covered by any public registry (if they affect the land they should be registered; if they are not registered a purchaser for value will not be affected by them; if the land is not registered, a writ or order affecting land should be registered as a land charge under the Land Charges Act 1972; that register is also maintained by the Chief Land Registrar and can be searched by name and administrative area).

d. Means of formal publicity ordinarily contains information about the judicial order that leads to the registration of notices or caveats; about if notices or caveats are temporary or indefinite entries, or warn about this issue.

For purposes of the information, orders of attachment or seizure decreed by administrative authorities lead to notices or caveats, and to administrative restrictions or burdens.

Fiscal burdens (tax liabilities falling on the properties and entered in the Land Register) work in this system as charges.