Clients look to their lawyers for protection against risk.

The implementation of the Land Registration Act 2002 on 13 October 2003 brings the greatest change to conveyancing practice since 1925, and a need for increased risk awareness, warns Alan Riley

In advance of implementation of the Land Registration Act 2002 (and its rules) on 13 October 2003, solicitors should brief their clients on the areas in which clients' interests are placed at greater risk.

These are namely new registration triggers, new rules for protecting third party rights, and new procedures for exemption of confidential information from the open register rules.

Registrations

The Act introduces new registration triggers.

Clients should be advised that any lease granted for more than seven years will need to be registered.

Failure to perfect title through registration will prevent the lease from having legal effect.

Assignments of unregistered leases, with more than seven years remaining unexpired, must also be the subject of an application for registration (as must the transfer of any registered lease - whatever the length left on the term).

This point interests both tenants and their landlords.

Landlords giving licence to assign should extract a condition that the assignee perfects title by registration.

In default of registration, the assignment will lack legal effect, and therefore, notices served by the landlord on the 'assignee' (for example, section 25 notices) may not be effective.

A lease of any length term must be registered if the lease term does not commence until more than three months after the grant.

A college student taking an assured shorthold tenancy by deed in May, to take effect in September, will find that his lease lacks binding legal effect if not registered (and since the tenant will not, immediately, be in actual occupation, no overriding interest can arise).

Easements and overriding interests

Easements are problematic under the Land Registration Act 2002.

The express grant of an easement out of registered land amounts to a registrable disposition.

So, to take legal effect, a notice must be entered on the servient title.

This will be done automatically where the easement is granted in a TP1 or a registrable lease, but a separate form AP1 will be necessary in other cases (for example, an easement granted to an unregistered freeholder, or short-term lessee).

Easements not perfected in this way are not overriding and cannot bind purchasers of the servient land.

Much greater concern exists for clients currently benefiting from easements over unregistered land.

Easements taken over unregistered land in, say, 1999 for future development purposes (for example, to lay out roads and services within a perpetuity period) are at risk.

On a post-Land Registration Act 2002 first registration of the retained (servient) land, the Land Registry can only record the burden of the easements if they are apparent from the deeds (was a duplicate transfer placed with the deeds, or a memorandum of the easements endorsed?), or are disclosed in accordance with the new section 71 duty of disclosure.

This is not an immediate problem - the easements will be overriding under schedule 1, paragraph 3.

But if the servient land is later sold, the easements are in grave danger of falling away owing to the narrowing of protection available to overriding easements (from 13 October 2006) under schedule 3, paragraph 3.

Clients need to review past acquisitions, and consider registering cautions against first registration to ensure that their easements will be brought on to the register.

It may be that the acting solicitor was negligent for not having required a memorandum to be endorsed at the 1999 completion.

Relying on actual occupation, instead of protecting a client's interest on the register, should cease, owing to the narrowing of overriding protection available under the Act.

For example, a tenant with an option to purchase should protect the option by registration, despite actual occupation, because in future, actual occupation will only protect an interest in relation to the part actually occupied.

This change does not just affect future rights.

Clients should review their portfolios to see whether any such rights have been left protected merely as overriding interests.

In addition, receipt of rent ceases to protect an interest (as is currently the case under section 70(1)(g) of the Land Registration Act 1925).

So, if an option is granted to a tenant and the tenant sub-lets, its option will not be overriding.

Where a pre-Act option is currently overriding (because of receipt of rent) the Act preserves its overriding status, but only so long as the receipt continues.

Adverse possession

Clients should be advised to consider voluntary registration of unregistered titles.

Under the Land Registration Act 2002, registered land is much better protected against adverse possession claims, because of the new procedures for notification of claims (and the ability of the true owner to serve counter-notice).

Furthermore, no limitation period will run against the registered proprietor.

Clients are strongly advised to keep their addresses for service on the register up-to-date.

This ensures that the client will be notified of any adverse possession claims.

If the client does not serve counter-notice within 65 business days, the squatter can be registered as proprietor.

By contrast, if counter-notice is correctly returned, the squatter will only succeed if he is able to show one of three fairly limited statutory grounds.

Mortgagees must also ensure that a counter-notice is correctly served so as to avoid the squatter taking free from the charge.

If a squatter's application for registration fails, clients must take action (at the very least, by commencing proceedings) to remove the squatter within two years of the failure, since a second application would thereafter automatically succeed.

If title by adverse possession has not already been acquired, clients should be advised to restore moved boundaries to their correct positions before 13 October 2004.

Thereafter, ten years adverse possession, plus a reasonable belief by the neighbour that the land is theirs, will lead to a successful claim.

Clients need to consider applying for exemption from the open register rules for commercially or personally sensitive information.

Information may be sensitive for a number of reasons (for example, rental levels, break rights, identity of guarantors).

The need to consider exemption applies to:

- Documents lodged at the Land Registry in the future, in connection with an application by the client (or its tenant) for registration;- Documents already there (for example, existing leases, charges, correspondence) which, at present, are only available for third party inspection at the discretion of the registrar.

In this regard, clients should consider an audit of their property portfolio;- Documents which may be lodged in the future by a third party (for example, by an assignee of a previously unregistered lease).

Applications to court in 1954 Act renewal cases should be protected by notice.

This is not usually done because the tenant is in actual occupation.

But under section 87 of the Land Registration Act 2002, such rights will no longer be capable of being overriding.

This is a non-exhaustive list of the risks arising.

Much training is being undertaken publicly and in-house.

Property lawyers need to take time to digest the Act, its rules, and the newly published land registry practice guides.

Alan Riley is a property law training consultant at Manchester-based law firm Halliwell Landau, and at Central Law Training

LINK: www.landregistry.gov.uk