Posted in For Solicitors
Currently, if someone suffers loss as a result of a mistake in the land register, they can claim compensation from the Land Registry. The Government acknowledges that this insurance principle is vital for stability in the property market and the economy as a whole. Its consultation paper on privatising the Land Registry insists that any change in ownership “will not affect the existence of a state guarantee to rectify mistakes”. Nevertheless, practitioners should be aware that the Law Commission has set out a range of proposals that seek to narrow the Land Registry’s indemnity.
On 24 March the Government published a consultation paper on the privatisation of the Land Registry, in which it says:
At present, if someone suffers loss as a result of a mistake in the register, for example if Land Registry registers a mortgage that has been forged, they can claim indemnity or compensation for any loss, from Land Registry.... This is something we believe is very important to the smooth functioning of the property market in England and Wales and reduces the cost of transactions. Under these proposals, the principle of no fault indemnity would continue unaffected... the customer will always have access to compensation where they are not at fault.
While the paper acknowledges that the Government will seek to transfer “an appropriate share of financial risk associated with the indemnity” to the company that takes over the Land Registry, it reiterates:
This would not, however, affect the assurance to customers that if their own proof of ownership should ever be subject to challenge they will have the benefit of a state guarantee if they suffer any loss as a result.
Meanwhile, on 31 March the Law Commission issued a consultation paper on updating the Land Registration Act 2002. This sets out a range of proposals that narrow the scope of the current indemnity scheme. These include:
- introducing a cap on Land Registry’s liability,
- ‘enhancing’ the duty of care that conveyancers may owe Land Registry and perhaps introducing a statutory duty of care,
- removing the ability of mortgagees to obtain an indemnity from Land Registry in certain circumstances, or imposing a specific statutory duty on mortgagees to verify the identity of borrowers.
These two consultation documents should be read in conjunction. The existence of the state guarantee is not under threat, but its scope may be severely curtailed.
- The closing date for the Government’s consultation into the privatisation of the Land Registry is 26 May.
- The closing date for the Law Commission's consultation on updating the Land Registration Act 2002 is 30 June.