Restrictions on title – protecting interests in property

In property and private client work we often find ourselves explaining how a person’s interests in a property that is registered with the Land Registry can be protected by entering a restriction on the title to that property. Today, the Land Registry of England and Wales holds more than 24 million titles to property – the documents which register ownership. The Land Registration Act 2002 offers two methods of protecting a person’s interests in registered properties; restrictions and notices. This article focuses on restrictions. A restriction is an entry made on the Proprietorship register of the title to a freehold property which restricts what dispositions (sales, gifts, mortgages etc) can be registered against that title. Restrictions can be an absolute bar against a disposition, or can state conditions which need to be fulfilled before a disposition can be registered. There are over 30 standard form restrictions set out in 2003 Land Registration Rules that can be used by various parties to protect their interests in relation to a property.

Two common forms of restriction:

1) Tenants in Common – Form A restriction: When two or more people purchase a property and choose to hold it as Tenants in Common, rather than as Joint Tenants, the standard “Form A” restriction is registered on the title of the property. Holding a property as Tenants in Common means that each owner owns a distinct half share of the property and when they die, their half will not automatically pass to the surviving owner. Instead, the deceased’s half share will form part of their estate and will be given to someone in accordance with their Will, for example to their children. The purpose of the restriction is to ensure that, on the death of one proprietor, the property cannot automatically be sold by the survivor on his own (which could circumvent the rights of the beneficiaries of the deceased’s Will). A ‘replacement trustee’ needs to be appointed to step into the shoes of the deceased and be a party to any transfer alongside the surviving proprietor. If the survivor is entitled to the deceased’s share, in accordance with the terms of the deceased’s Will, the restriction can be removed from the register by supplying a death certificate and a statement from the remaining registered owner showing he is solely entitled both to the legal and the beneficial estate in the property. When co-owners of a property are living and the property is held as tenants in common, a Form A restriction alerts third parties to the existence of the tenancy in common and the need to pay purchase monies to all co-owners.

2) Certificate of Compliance required in order to register a disposition A “Form L” restriction is frequently used where an owner of a property has entered an agreement with another, stating that the owner will do something specific. The restriction prevents the owner from disposing of the property without providing a certificate to say that the requirement has been complied with. Such a certificate may be required from the owner’s solicitor, or from the person who benefits from the restriction. The restriction will often refer to a specific agreement; for example, if parents have sold a property to their child and have entered into a loan agreement with the child to facilitate the purchase, the restriction may say that the child cannot dispose of the property without the parents (or their solicitor) providing a certificate stating that the terms of the loan agreement have been complied with. Another common situation where this restriction is used is where sellers and buyers of a piece of land have entered into an overage agreement (for example, an agreement setting out that the buyer will pay the seller 50% of the increase in value of the land if planning permission is granted for a development on it within 20 years of the buyer purchasing it). Such an agreement is only enforceable between the original parties, so the original seller of the land (the overage beneficiary) will usually impose an obligation on the buyer to ensure that any subsequent owners/buyers of the land will enter into the same agreement with the overage beneficiary (until the end of the overage). This obligation would be protected by a restriction on the title of the property. What cannot be entered as a restriction on a title? Usually the restrictions entered on the register are in the standard forms. However, in exceptional circumstances, solicitors will draft a non-standard restriction and have to seek the Land Registry’s approval of it. Standard restrictions normally require a third party action to show a condition has been satisfied and the land registry will not take on responsibility for interpreting whether an obligation has been met. Who can apply to have a restriction entered?

• The owner of a property (the registered proprietor);
• Someone who would be entitled to be registered as the proprietor, for example the person who a property is about to be sold to;
• A person with consent from the owner of the property or from someone who would be entitled to be registered as the proprietor;
• Someone with sufficient interest in the property (Rule 93 of 2003 Land Registration Rules sets out many standard situations where a person is deemed to have a sufficient interest to apply for particular standard restriction, for example, the Charity Commission has sufficient interest in relation to land held on charitable trusts).

If you are interested in entering a restriction on a property title or have any other property related queries and would like a quote for our services, please contact us via 01603 610911 or email info@leathesprior.co.uk.