Autumn '19 England & Wales

Autumn 2019 ISSUE

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FIRST COMMENT IN THIS ISSUE: • EASEMENTS, EQUITY AND LAND REGISTRATION • WHAT LIES BENEATH - MANORIAL RIGHTS • CONSIDERING THE FUTURE OF YOUR INDEMNITY POLICIES • PRODUCT FOCUS: MANORIAL RIGHTS

Leading Title Insurance

Welcome to the Autumn edition of our newsletter for 2019.

In this issue, Kevin Lee, of Hill Dickinson LLP looks at recent cases around easements and adverse possession.

We also look at the law around manorial rights.

Finally, one of our commercial underwriters, Ben Baker, looks at how First Title can help when an existing policy may be inappropriate for the needs of a new owner.

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FIRST COMMENT

Easements, equity and Land Registration

by Kevin Lee Hill Dickinson LLP

The case of Pezaro v. Bourne [2019] EWHC 1964 (Ch) is an interesting case for those of us who spend a lot of our time arguing, advising and litigating over easements.

The case concerns three properties: 147, 149 and 151 New Street, Andover, Hants. Mr and Mrs Pezaro owned 149 and 151 New Street, Mr and Mrs Bourne were the current owners of 147. 147 had the right of way over a track to a cemetery that passed through 149 and 151.

Mr and Mrs Pezaro had bought 149 and 151 in 2001 and 2004 respectively. They were aware that 147 had a right of way. At this time, Mr Ayres owned 147. After the sale off of part of the rear gardens, the burden of the right of way was removed from the title of 149, but remained entered on the Charges Register of the title to number 151. Importantly, the benefit was registered on the registered Title of number 147.

Mr and Mrs Pezaro then moved to New Zealand and rented their houses out. Their plan was to redevelop the properties and, at the end of 2009, Mrs Pezaro telephoned Mr Ayres from New Zealand to ask if he would object to Mr and Mrs Pezaro applying for planning permission to build a further house on the plot. Mrs Pezaro gave evidence to say that in that conversation no mention was made of the right of way, which she says was consistent with her belief that the right of way had effectively fallen away in accordance with previous oral agreements made with Mr Ayres. Mrs Pezaro also gave evidence that at the beginning of 2010 she telephoned Mr Ayres again and explained to him that the right of way still existed on the title of 147 and that it still had the benefit of the right of way. She asked if he would agree to its removal if she and Mr Pezaro paid his legal costs. She said that Mr Ayres had expressed surprise that the right of way still existed and that he thought it had been removed some years earlier and that he stated that he had no issue with its 3

removal. Crucially, however, Mr and Mrs Pezaro took no steps to have the right of way removed from the registered titles.

Mr and Mrs Pezaro obtained planning permission in 2011, and Mrs Pezaro contacted Mr Ayres again with a view to having the right of way removed.

However, very much to her surprise, she found out that Mrs Ayres had sold 147 in August 2010 to a property developer, Mr Bradshaw. Therefore, Mrs Pezaro contacted Mr Bradshaw, but he explained to her that he had then sold the land on to Mr and Mrs Bourne in May 2011. Mrs Pezaro then contacted Mr and Mrs Bourne in order to try to agree to have the right of way removed, but Mr and Mrs Bourne were not prepared to do so, and that is how the matter ended up in Court.

Mr and Mrs Pezaro’s case relied on the doctrine of proprietary estoppel. Put briefly; proprietary estoppel is based upon a representation by words or conduct which amounts to a statement about the future enforcement of legal rights. There has to be a representation, reliance on the representation, and detriment flowing from the reliance.

The complicating factor in this case, of course, was that the representation had been made by Mr Ayres and not by the current registered proprietors, Mr

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and Mrs Bourne. Mr and Mrs Bourne relied on their registered title. If Mr and Mrs Pezaro were entitled to rely on proprietary estoppel, would that be binding on Mr and Mrs Ayres, as purchasers of the land in good faith for valuable consideration?

This is where the Land Registration Act 2002 came into play. Under s.116 of the 2002 Act, equity by estoppel (i.e. a proprietary estoppel) “has effect from the time the equity arises as an interest capable of binding successors in title (subject to the rules about the effect of dispositions on priority)”. So, what did “the rules about the effect of dispositions on priority” have to say?

S.29(2) of the 2002 Act deals with the effect of dispositions on priority, and it provides that the priority of an interest is protected where it had been registered or where it fell within interests which override registration, i.e. interest belonging to a person in actual occupation. The key issue here, of course, is that the agreement between Mr and Mrs Pezaro and Mr Ayres was not on the title. Nor were they in actual possession of the right of way.

It followed that the claim to have the right of way removed on the grounds of proprietary estopped failed. Mr and Mrs Bourne were entitled to rely on the register as establishing their priority in terms

FIRST COMMENT of the registration of the right of way. In retrospect, Mr and Mrs Pezaro by waiting until after they obtained planning permission to take steps to have it removed from the titles had exposed themselves to the risk that the then registered proprietors may not be prepared to do so. Accordingly, the right of way will remain on the titles unless and until an agreement is reached for it to be removed and no doubt for an appropriate consideration.

The key message to be taken from this decision is the driving force of the policy behind the 2002 Act. Purchasers for value should be entitled to rely on the registered title. While proprietary estoppel, trusts and other equities all still play a part in unravelling disputes relating to registered land, one must always remember the key thrust of the legislation, which is to respect the registered title, particularly in relation to purchasers for value who rely on the register.

Finally, a very quick mention about a recent authority concerning adverse possession which has not been widely reported.

Thorpe v. Frank [2019] EWCA Civ 150 is a Court of Appeal decision arising out of a decision of the Upper Tribunal on adverse possession. The case involved semi-detached bungalows at 8 and 9 Harcourt Close, Bishopthorpe, York. In or around

1986, the owner of number 8 had paved an area of land, which was within the registered title of their neighbour at number 9. The land had not been enclosed or secured, but it was paved along with the own land, to give the appearance of it being within the curtilage of number 8.

The Court of Appeal noted that there was no legal authority where paving alone had been found to amount to adverse possession. What constitutes a sufficient degree of exclusive physical possession or control has to depend on the nature of the land and the manner in which the land was commonly used or enjoyed. In the case of open land where it is generally impossible to secure every part of the boundary, lack of a boundary feature securing this may not be so much of an issue. It was held that the mere paving of the land was indeed an act of sufficient degree of exclusive possession or control as to amount to “possession� for the purposes of adverse possession. It was undisputed that the adverse possessor had an intention to possess the land. They had incorporated it into their own property by paving and made it appear to be within the curtilage of number 8. The Court found that there could hardly be a clearer act of possession.

Accordingly, the owner of number 8 had been in possession of the disputed land and was entitled to adverse possession of it.

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FIRST COMMENT

What lies beneath?

A landowner does not automatically own the entirety of their land, that is to say, everything beneath the surface of the land, because of the existence of manorial rights. Nor do they necessarily own the rights to carry out certain activities such as fishing or shooting on their land.

If you are a developer, for example, and intend carrying out groundworks such as installing foundations that could impact a mineral layer, and you do not have the subterranean rights, you could face a potential legal claim if you do not have the necessary consent.

Manorial rights can be a valuable commodity, particularly in the case of landed estates or in areas rich in minerals. It is, therefore, an issue that may require serious consideration. You can forget any gold though: the law has already given the rights to gold and silver (as well as oil, gas and coal) to the Crown.

Lord of the Manor Manorial rights (along with Lordship of the Manor and manorial land) are a legacy of the feudal system from the days of the Norman Conquest.

Manorial land is land originally forming part of the landholdings of the Lordship of the Manor and which has not been transferred separately from the Lordship title. Manorial rights formed part of the manorial title and were usually retained by the Lord on disposal of parts of manorial land.

Typically, this includes hunting rights, and the right to shoot or fish or extract minerals – even the Lord’s right to hold fairs and markets.

In the case of land registered at HM Land Registry, these manorial rights were traditionally overriding interests which meant that the rights affected the property on disposal, even if not noted on the registered title. Significant changes were introduced on 13 October 2013 by virtue of section 117 of the Land Registration Act 2002. Since then, the overriding status of manorial rights no longer exists. Instead, any such manorial right needs to be protected by registration at Land Registry; otherwise, the owner of the manorial interests loses those rights to the landowner.

When the rule changes were announced, there was the expected flood of applications by manorial rights owners to register their interests at HM Land Registry (some 90,000 applications were made by the end of 2013) – otherwise, the owners risked losing their rights. Once registration was effected, the registered surface landowners were then given notice that they did not own the entirety of the land.

According to the Ministry of Justice figures, 84,000 manorial rights notices were registered between December 2012 and July 2014.

The new rules mean that so long as the applicant can prove they have title to the rights, a notice of the rights can be entered on the registered title; and can apply to register their rights under a separate title.

Readers may recall the genuine concerns reported by many recipients of these notices following the initial surge of applications. For instance, 4,000 residents received notices that a Cheshire businessman, who had bought the title of the Lord of the Manor for 10,350 acres of Anglesey, 7

had asserted his right to royalties from minerals extracted below their homes. He eventually dropped the claim.

If the legal owner of manorial rights has not made an application to protect their interests, the purchaser of property and land takes the land including title to the manorial rights if they have received no notice of them.

It’s not uncommon for a seller or purchaser of land and property to peruse the official copy of the title register and see that the right, for example, to mine minerals or the right to fish and shoot, are reserved and / or excepted to someone else. This reflects the fact that at some point, when the land was sold, the mines and minerals (or other rights) were retained with the title so are excluded from the surface owner’s ownership.

However, to be clear, the position now is that buyers of the surface land will take legal title to such excepted or reserved mineral or other manorial rights – unless they have notice of them and the legal owner has registered the rights to protect their interests.

Permission granted The implications of manorial rights, particularly mines and minerals, tend to arise in the case of the owner of ‘open’ land. Routine farming work and other ‘surface’ operations are not an issue, but what if deeper workings and excavations are required?

For example, actual mining of minerals, installing foundations for battery storage facilities or wind turbines and archaeological excavations.

The question is, who has the right to what lies beneath the surface, and what are the limits to those rights? If, for example, you’re a property developer and need to excavate your land for a large development, you need to know if you have the right to do so before any works begin.

Unless your registered title specifically states you own the rights, the first step to determining whether there is a separate freehold title to manorial rights

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is to undertake a Land Registry SIM (index map) search. If the rights to the subterranean land or other manorial rights are registered to someone under a separate title number you can then get hold of a copy of the registered title and identify the registered proprietor.

If you identify a third party is the registered owner of manorial rights you may need to secure their permission. This could require a level of negotiation with specific terms to be agreed before any work starts. Typically, this could be the rights of access in return for a proportion of the royalties received. If permission is not secured and the activity is carried out, this could lead to a civil claim against you.

‘Who has the right to what lies beneath the surface?’

Likewise, if the owner of the rights themselves seeks to assert those rights by requesting permission to access the land to excavate – they will need the permission of the surface landowner to access the land. Any work they might seek to do in relation to subsurface mines is limited in law to underground works, so without the surface owner’s consent to enter their land, they will be trespassing.

This could lead to a civil claim for an injunction and / or substantial damages, depending on what (if any) damage to the land has been caused; and the potential profit that could be derived from the mining or other activity.

Both parties, therefore, need to be open to reasonable negotiations to ensure an acceptable outcome for both.

Indemnity insurance against the risk presented by manorial rights is a vital consideration as a landowner. Think about protecting against the risk

FIRST COMMENT of a third party lawfully seeking access to your land to excavate, mine or similar. First Title will take full details and ensure the level of indemnity insurance is effective to protect any risk involved.

The future of manorial rights?

You would not be wrong for viewing manorial rights as somewhat of a Norman relic, and there have been calls for further change. Back in 2015, the Justice Select Committee of MPs called for the Government to review the operation of manorial

rights and recommended changes for more efficient operation in future; and examined arguments for and against the abolition of the protection of manorial rights in law. The Government appears to be taking on board criticism of the current system but, as yet, has made no soundings towards abolition.

Manorial rights are likely to remain a necessary consideration for businesses in the property sector for years to come.

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Considering the future of your indemnity policies

By Ben Baker Commercial Underwriter

Title indemnity insurance has been around for some time now, and it is therefore not uncommon to deal with a site which already benefits from a title indemnity policy. On such occasions, it will be necessary to ascertain whether the existing insurance policy remains appropriate for the needs of the new owner. Similarly, when incepting cover for a site now or in the future, it could be beneficial also to consider the ongoing utility of the policy being placed.

When carrying out an initial review of an existing insurance policy, you should check that the policy continues to provide adequate coverage under the limit of indemnity. One consideration that could be applied when issuing a policy in relation to this is an option to include some form of inflation cover in the policy. At First Title we are generally more than happy to include such cover which will ensure that the Policy Amount will increase in line with the value of the land over time subject to certain limits.

Another option in relation to the level of cover available is to seek an endorsement to an existing policy to increase the policy limit in light of a new valuation. Most providers would be able to offer this. However, one factor to bear in mind when placing cover is whether the provider you have chosen will be able to offer additional cover as a result of increases in value. At First Title we are able to offer some of the highest policy limits in the title insurance market so you can be confident when placing a policy with First Title that further policy increases are likely to be available if required.

When issuing a new policy for a development it might also be useful to consider First Title. Our Developer’s Policy functions differently from some similar policies available in that it insures up to the full property value from the outset, but allows for the premium to be paid in

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FIRST COMMENT stages, either upon receipt of planning permission or if there is a claim. This means that the client can be sure of continued coverage all the way from taking an interest in the site through to plot sales and the use of the land thereafter, without being subject to a further underwriting assessment once planning is obtained.

Beyond simple increases in the amount of the cover, we also assess making other substantive amendments to existing policies. For example, changing the Insured Use, adding further risks which were not included in the original policy or adding further losses which were not required at the policy outset (for example in relation to electricity provider relocation losses).

These changes are effected as policy amendments.

A policy amendment requires that the consent of all parties insured under a policy is obtained in order to make the changes, or that confirmation can be given that the party requesting the amendments is authorised to make those changes. Given the nature of the successor cover on title insurance policies the earlier such changes are considered and implemented the easier they could be to implement. This is especially true on particularly large sites, either through making sure the policy is as future-proof as possible from the outset or by reserving rights to update a particular policy in a lease or sale documents to allow for changes with a lesser administrative burden.

A further consideration is whether a loss payee endorsement is to be, or has been included, on the policy. First Title is sometimes requested to include such a provision for the benefit of a lender or interested party who is not the property owner, which stipulates that in the event of a claim payments will be made to that named party first.

Given the nature of the instruction that such an endorsement incorporates, there are strict rules in place for making any amendment to policies containing loss payee provisions. For example, even if the loss payee no longer holds the interest that the endorsement was designed to protect, written confirmation will still be required before any further changes can be given effect under the policy.

Another common request is that policies are able to be splintered. Contrary to the requirements of an endorsement policy, a splinter policy can be offered without requiring any amendments to the original cover or permission from other insured parties.

In effect, a splinter policy mirrors the coverage of a previous policy for a smaller part of that wider site. The advantage of a splinter policy is that the purchaser of that part then has the peace of mind of knowing that they are covered without any other insured party being able to make a claim under the same policy and, potentially, reduce the cover available to other parties.

Splinter policies are usually provided for a nominal premium on the basis that the land removed from the original policy should reduce the level of cover required for that site. Further consideration will, however, apply if any changes are needed to the cover, or if the value of the site was not the basis for the Policy Amount on the original policy.

It will also form part of the underwriter’s process to check that the use of the property, which requires the splinter policy, is consistent with the insured use in the original policy. Otherwise, it would probably be more useful to obtain a new policy that reflects the needs of the present owner. Although, as noted above, we can look to amend the Insured Use on a policy once it has been issued to ensure that it remains appropriate going forward.

In conclusion, it is helpful to consider when issuing a new title insurance policy whether the level of cover selected will be sufficient for the future requirements of the land and whether there are likely to be any endorsements required at a future date. If so, is there a way to control the timeline so that those can be effected more simply? Also, if splinter policies are likely to be required, is there a process in place to issue these? When reviewing an existing policy, it will be useful to consider if the cover is still appropriate for the current and intended use of the site. Can the insurance provider accommodate any changes required and / or establish whether any other third parties would also have the benefit of the policy? This way it may be possible to work together to effect any necessary amendments 11

Seeing the wood for the trees for 35 years

Call: +44(0)207 160 8100 Email: info@firsttitle.co.uk Visit: www.firsttitle.co.uk First Title Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Title Insurance plc is registered in England under company number 01112603.

Registered office: ECA Court, 24-26 South Park, Sevenoaks, Kent, TN13 1DU.

Leading Title Insurance

FIRST COMMENT

Product Focus:

Manorial Rights Background The insured was the purchaser of land currently being used for agricultural purposes.

The intention was to develop the land for residential housing pursuant to planning consent. Concern had arisen because the titles to the land were subject to manorial rights.

Manorial rights date back to feudal times (1066 and later). They were reserved by the Lord of the Manor when land became freehold in the early 20th century. Those rights can include rights to mines and minerals, sporting rights such as hunting, shooting and fishing, and rights to hold fairs and markets as well as the ownership of any mines and minerals under the land.

Ramifications of risk The existence of manorial rights can be problematic. Since 13 October 2013, they must be protected by registration, either by registering them in their own right (in which case they will be noted as a burden on any title that is affected) or through protection pursuant to the registration of a notice on the affected title. Whilst many manorial titles have ceased to exist, and the majority of the remaining Lords are unlikely to exercise the rights, the burden will still be noted on the title of the affected land.

Many lenders are unwilling to lend to borrowers unless this risk is resolved, so coverage is often sought to protect against any possible enforcement, even when the manor no longer exists. Particular concern surrounds the increased awareness of the value of the mineral rights increasing the risk that a Lord of the Manor may come forward as the mineral owner and attempt to enforce their rights and / or allege trespass if the foundations of the new buildings interfere with the mineral strata beneath the land. Where a Lord of the Manor does come forward, the developer is at risk of the manorial owner seeking to claim damages or an injunction against them.

Solution Following full consideration of the risk, First Title was able to provide a suitable policy to the insured and their Successors in Title providing cover in the event of any future enforcement against the exercise of the manorial rights.

Cover includes: •

Legal costs in defending a claim in a court or tribunal.

•

Damages, compensation, costs and expenses awarded by a court or tribunal.

•

Costs in complying with any injunction awarded.

•

Reduction in market value of the property as a result of someone successfully enforcing the rights.

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To find out more about our products and services email info@firsttitle.co.uk or call +44 (0)207 160 8100

www.firsttitle.co.uk

First Title Insurance plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. First Title Insurance plc is registered in England under company number 01112603.

Registered office: First Title Insurance plc, ECA Court, 24-26 South Park, Sevenoaks, Kent TN13 1DU.