Many property transactions are affected by a “restriction on title” which is an entry in the Proprietorship Register (Section B) of a registered title preventing the registered owner from being able to legally dispose of the property (and subsequently registering such disposal at the Land Registry) without first complying with certain conditions, as set out in the wording of the restriction itself. Such restrictions are typically in favour of a third party who wishes to protect their own interest in the property or otherwise to notify any potential purchaser of a separate legal obligation on the owner upon disposing of the property.
The legal definition of a “disposal” (under the Land Registration Act 2002) for the purposes of a restriction is surprisingly wide and catches many property owners off guard when they come to deal with their property. It includes the act of transferring an interest in either the whole or part only of the property and includes:
- a sale;
- granting a lease to a third party for a term of over seven years;
- granting a mortgage or legal charge;
- gifting the property;
- creating new rights (for example, granting easements); or
- extinguishing interests in the property.
There are many different “standard forms” of restriction and the requirements and/or conditions to satisfy each of these can range significantly. However, the most common restrictions usually require the following:
- the written consent of the beneficiary of a restriction (including mortgage lenders) or their solicitor to a disposal of the property;
- a written certificate from a solicitor confirming that certain provisions contained in a conveyance or deed affecting the title (e.g. the payment of overage by the property owner OR the acquiring party entering into a deed of covenant with the beneficiary of the restriction) have either been complied with before the date of completion of the relevant disposal or that they do not apply in the circumstances of the disposal;
- where the property is held as “tenants in common” or by trustees (not a trust corporation), to ensure that a sole proprietor or surviving joint proprietor cannot sell or mortgage the property without appointing a second trustee or obtaining a court order to ensure capital money is properly handled;
- where the property owner is a registered charity, to include relevant wording in the legal documentation for a disposal which satisfies the requirements of section 117-121 or section 124 of the Charities Act 2011 (as amended in 2022).
Sometimes a poorly worded restriction on title can mean that the exact extent or nature of the beneficiary’s interest (or, indeed, the identity of the beneficiary themselves) is not immediately clear. This can result in problems identifying what is required to comply with such restriction and has the potential to cause significant additional cost and delay when the property owner comes to dispose of the property in the future.
Therefore, if you are a property owner who is considering “disposing” of your property, then it may well be worthwhile seeking legal advice at an early stage to determine whether or not there is an existing restriction on your title and, if so, whether or not such restriction will apply to your intended disposal and the specific requirements for complying with it.
Similarly, if you have an interest in a property that you do not own and you wish to protect this by way of a restriction on the owner’s title, then you should seek legal advice as to the most appropriate form of restriction to be applied against the title and the process for registering this at the Land Registry.
In either case, we would be very happy to assist you.
