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The Deed giveth and the Deed taketh away

  • United Kingdom
  • Real estate

28-02-2020

Eversheds Sutherland property column: February 2020 

Introduction

A property to be transferred is often so much more than an area of land or a building. The rights that accompany the area edged red on a title plan may make the land worth having or useless, the next great destination or forever greenbelt. The easements that come with the registered title, the additional rights that are granted by the deed of transfer itself, and the implied rights that may or may not arise by statute or case law upon completion, may all be critical.

Subtle variation in drafting within the deed of transfer can make a big difference to the rights that are registered on the new title following a transfer of part. So for the transferee to be sure that all the rights it was expecting or had negotiated for are there to be enjoyed following registration, it is important to understand how rights transfer, or not, and how they are created both deliberately or accidentally.

Take a typical development scenario. One developer has built the infrastructure for a new logistics park both within and beyond the land it owns. That developer bought the land, obtained planning permission and put in place the private rights over adjoining land that were needed for the site to function as a logistics hub: easements for the passage of services perhaps and, say, the right to build a spur road from the nearest highway to the boundary of the site. That same developer then built roads within the estate and divided the park into parcels, each sold to operators keen to build and to occupy, safe in the knowledge that their plot is well served by the site’s infrastructure and that the site as a whole has the benefit of the access road to the highway.

Rights transferring with the party

The existing rights registered on the freehold title, such as the right of way to the highway, will transfer with the plot. Just occasionally the drafting intended to prevent the creation of implied easements goes further than intended and prevents the existing rights from transferring to the newly created title. In a freehold situation, that is very rarely the intention but is more usual in the creation of new leasehold titles. HM Land Registry has recently amended its guidance to require Land Registry prescribed clause 4 of a lease to refer both to the premises and the lease clause that states the parties’ intentions as to whether rights benefiting the freehold should be part of the demise or not.

In our typical development scenario, it is most likely that the rights of way and for the passage of services across neighbouring land outside the transferor’s title will benefit the newly created title upon registration of the transfer of part.

Rights expressly granted in favour of the property

The transfer of part will confer rights to go along with the plot to be sold, and those newly created and granted easements will be expressly set out in the deed of transfer following familiar drafting such as "The Transferor grants to the Transferee for the benefit of the Property…" These newly granted rights over the developer’s retained land will be first registered in favour of the newly created title, and against the title to the retained land, when the transfer of part is registered.

Rights impliedly granted in favour of the property; or not

The transfer of part will carry with it rights implied by reason of the decision in Wheeldon v Burrows and the effect of section 62 of the Law of Property Act 1925. It is the very uncertainty of the rights created by these mechanisms which is the reason counter wording is included in the transfer deed, so that the usual exclusion wording prevents the deed of transfer from giving more than it should.

Rights expressly granted in favour of the retained land

Odd as it might seem, rights reserved in the transfer of part are in fact rights granted back to the transferor by the transferee. So in our development scenario the wording of the transfer of part is likely to be "The Transferor excepts and reserves out of the Property for the benefit of the Estate…" and those newly created reserved (but actually granted) rights will again be first registered when the transfer of part is registered, in favour of the retained land and against the newly created title of part.

Prescriptive rights

Prescriptive rights benefiting the larger site will also transfer with the part sold (if those prescriptive rights benefit the area in question) unless expressly excluded. However, there will be nothing to show for them unless and until an application to register the benefit and burden of those prescriptive rights is made to HM Land Registry. If the intention is that the transferred land will benefit from such rights it is perhaps usual to require the transferor to apply for registration of the right created by prescription before completion.

Commonly a transfer of part will give the transferee the transferor’s consent to the access of light and air to the land making up the new title. This might at first appear to be a "giving" provision of the transfer but is in fact a mechanism to prevent the new title acquiring prescriptive rights of light and air, taking away the potential for a future right.

Conclusion

Once sure that the land will transfer with and subject to the intended rights, attention should then turn to the extent of those rights (with or without vehicles, at all times of the day perhaps, and whether those rights should come with conditions to their exercise), making good damage caused to the road, or contributions towards upkeep. All that detail won’t help though if the deed itself has not granted and reserved what was intended in the first place.