Charges Register Flashcards
(33 cards)
How do you create a legal mortgage?
A legal mortgage must be created by deed.
All legal mortgages over registered property must be registered in the Charges Register of the registered property, otherwise the mortgagee will not obtain a legal interest and third parties will take free of the mortgage.
What are the two entries to protect mortgages in the Charges Register?
1st entry: contains the date of the mortgage deed and the date of registration
2nd entry: gives the name and address of the mortgagee
Why do most lenders place a Restriction on the Proprietorship Register to prevent the register being changed?
Because that could diminish its value.
For example, any other mortgages being created or an easement being granted over the property.
What does PWB stand for?
Person owning the land with the benefit of the covenant.
You cannot refer that person as the vendor because that could be misunderstood as referring to the current seller.
What are the two ways that restrictive covenants are protected by registration in the Charges Register?
- Fully set out in the register
2. By reference to a document filed at the Land Registry
What does Tulk v Moxhay give rise to?
The criteria meant that if they are complied with, the burden of correctly registered restrictive covenants runs with the burdened land and will therefore bind the purchasers of the burdened land once they own it.
What are the two ways that a buyer’s solicitor identify issues when reviewing restrictive covenants on the Charges Register?
- Check whether there have been any past breaches of the covenant which are continuing as the buyer will be liable
- Check whether any of the buyer’s proposed plans for the property will constitute possible breaches of the covenant in the future as the buyer will be liable for any future breaches
What should the buyer’s solicitor ask as a first step for identify past breach of covenant?
Ask the seller’s solicitor to confirm whether or not the consent of the PWB was obtained prior to ‘breaching’ the covenant as, if it was, then there would not actually have been any breach at all.
The seller’s solicitor should provide a copy of the PWB’s consent prior to exchange of contracts.
What should the buyer’s solicitor do and ask if the PWB’s consent was not obtained by the seller before they breached the covenant?
A clause in the contract may be necessary to address this issue or the buyer will inherit liability for the breach on completion of their purchase.
The buyer’s solicitor should ask the seller’s solicitor to obtain restrictive covenant insurance.
What is the advantage of restrictive covenant insurance to deal with a past breach without consent from PWB.
A quick and cheap solution for a past breach, particularly if the covenant is old and several years have passed since the breach without complaint from the PWB.
What does a restrictive covenant insurance cover?
The insurance has a single “one-off” premium and covers both the buyer and
the buyer’s successors in title.
The buyer will normally put pressure on the seller to pay for the premium in full as the buyer would argue that without the insurance policy, the seller’s title is defective.
When and why should you not opt for the insurance option?
When insurance is not available at an economic cost, or at all.
e.g. for a very recent breach and/or a covenant which is only a few years old.
What is the second option as a solution for past breach after insurance?
The seller approaches the PWB for retrospective consent.
What is the challenge for approaching the PWB for retrospective consent?
The PWB could be difficult to trace and is likely to charge for giving
retrospective consent for a past breach of the restrictive covenant.
What is the problem with approach the PWB?
It would alert the PWB to the existence of the covenant and its possible breach, which would then mean that you would no longer be able to obtain insurance, because no insurer will insure in circumstances where the PWB has been made aware of the breach - it’s too risky for them
What is the third and final option for dealing with a past breach?
(If the PWB cannot be found, or is being unreasonable)
Apply to the Upper Tribunal (Lands Chamber) under s.84 LPA 1925 for the waiver, discharge or modification of the restrictive covenant.
What is the disadvantage of applying to the Upper Tribunal (Land Chamber)?
Time consuming and expensive, and there is no guarantee of success so it is always an option of last resort.
The remedy is very impractical in the context of the usual timescale of a property transaction: most transactions are over in a matter of a few weeks or moths, whereas application under s.84 LPA 1925 will usually take several months to conclude.
What should you advice if you client intends to carry out a future breach of the restrictive covenant?
To obtain a quote for a restrictive covenant insurance policy
What is the problem with restrictive covenant insurance for future breach?
Insurers are taking a greater risk. It is harder to gauge the likely response of the PWB as the breach has not yet occurred. Consequently, the premium for a future breach is often weighted to reflect the additional risk which insurers consider a future breach poses.
In some cases, insurers will refuse to insure or the premium will be prohibitively expensive because insurers have serious concerns that the PWB might come forward and sue for it losses caused by the breach of the covenant.
What is the next course of action if insurance is too expensive or unobtainable?
You should approach the PWB to request a release of the covenant, in consideration for which the PWB will usually ask for a payment as well as its legal fees.
The Upper Tribunal (Lands Chamber) is the last and least attractive, option due to the time and expenses and having an impractical remedy.
What remedy can the PWB obtain for breach of a restrictive covenant?
The right to obtain an injunction against a breach of a restrictive covenant will pass to any PWB - the PWB will have to be able to prove they are entitled to the benefit of the covenant.
An injunction is a discretionary remedy.
What else can the PWB apply for to remedy the breach of a restrictive covenant?
- A prohibitory injunction which requires a party to stop a particular act
- A mandatory injunction requiring a party to perform a specified act
- An interim injunction which prevents the person in breach from taking any further steps in connection with the works they are doing
What could happen with the injunction if the PWB stand by and wait until the development/work in breach of the covenant has completed?
The PWB is unlikely to be granted an injunction. The longer the breach has gone on, the less likely it is an injunction will be awarded.
What circumstances would the court be more likely to award damages?
If the injury to the applicant’s legal rights:
- is small
- is capable of being estimated in money
- can be adequately compensated by a small money payment
- it would be oppressive to the developer to award an injunction
