Protecting an interest in a property, where the beneficiary of that interest is not the owner (‘the Proprietor’) of the Property can be done in one of two ways (depending on the type of interest being protected). One of these methods of protection, is by Notice, the other being by Restriction. In this article we will consider Restrictions.
Where there is more than one party claiming an interest in a registered title, each interest is ranked in order of priority. The lower ranking interest has to give way to the higher ranking interest.
Interests are ranked in date order (being the date of the registration of the interest on the title). This has the effect of protecting an existing interest from being affected by a later disposition or an interest that has not been registered at all. Dispositions for value, will on registration, postpone the priority of any other interest that has not been registered (the exception to this, being Overriding Interests).
Where a third party interest is not an overriding interest and cannot be protected by a Notice, protection can be provided by the entry of a Restriction in the Proprietorship Register of the title.
The Effect of a Restriction
Restrictions prevent the making of an entry in the title register in respect of a disposition of a specified kind. The prohibition afforded by the Restriction may be permanent or for a specified period; it may be absolute or conditional (for example, a Restriction requiring the consent of another party to a disposition). ‘Disposition’ is not defined in the Land Registration Act 2002, but it is generally understood to mean the dealing with the property (for example, transferring the title, selling the property, mortgaging the property).
The presence of a Restriction on the title is an indication that the Proprietor’s ability to deal with the property is limited or that a prior condition must be satisfied in order for a disposition to be registered.
A Restriction remains on the title until it is cancelled or withdrawn and will not be automatically cancelled following a disposition. Occasionally, the registrar at HM Land Registry may cancel a Restriction if in their opinion, is has become superfluous, an example of this is a Restriction referring to a Registered Charge which is no longer on the title.
A Restriction relating to the disposition of a registered title will be entered in the Proprietorship Register. The Restriction will not have any effect on existing registered charges or the powers of the existing chargees, but may effect a charge that is registered after the entry of the Restriction.
What Entries May be Prevented by a Restriction?
Restrictions must be in a standard form. The prescribed forms are set out in Schedule 4 of the Land Registration Rules 2003; a non-standard Restriction can be used, subject to a higher registration fee.
The standard form restrictions regulate or restrict the registration of a disposition. None of the standard form Restrictions will prevent the entry of a Notice on the title and any non-standard Restriction purporting to prevent the entry of a Notice, will not be permitted.
Entry of restrictions
The registrar may allow the entry of a Restriction in the register if it appears to him that it is necessary or desirable to do so in order to:
(a) preventing invalidity or unlawfulness in relation to dispositions of a registered estate or charge,
(b) securing that interests which are capable of being overreached on a disposition of a registered estate or charge are overreached, or
(c) protecting a right or claim in relation to a registered estate or charge.
The registrar may enter a restriction for one of the above purposes whether or not an application has been made for him to do so.
Who may apply for a restriction?
You only apply for the entry of a restriction if you:
- are the relevant proprietor
- are entitled to be registered as the relevant proprietor
- have obtained the consent of the relevant proprietor or someone entitled to be registered as such,
- otherwise have a sufficient interest in the making of the entry.
There are certain situations where it is mandatory for a person to apply for a Restriction. An example of this is where a new trust is set up or if there is a change in a trust of land resulting in a sole proprietor not being able to give a valid receipt for capital money in which case the proprietor must apply for a Form A Retriction (Tenants in Common).
Where the applicant does not have the consent of the Proprietor they must show that they have a sufficient interest in the making of the Restriction. The applicant must give details of the nature of their interest and how it arose.
The HM Land Registry will always notify the Proprietor of the entry of the Restriction before the application is completed unless it is made with the consent and cooperation of the Proprietor, is a compulsory Restriction or is entered pursuant to a Court Order.
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