england-and-wales property
What prevents exploitation of Land Registration Act 2002, s 58? How dangersome is it?
<p>I am affrighted that around 1 Nov 2021, <a href="https://www.bbc.com/news/uk-england-essex-59069662" rel="nofollow noreferrer">Reverend Mike Hall's identity had been stolen and used to sell the house in Luton and bank the proceeds.</a></p>
<ol>
<li>What deter, thwarts fraudsters, enemies of the UK  from abusing LRA 2002 s 58? Consider this extreme example from Sarah Greer, <em>Land Law Directions</em>, p 89.</li>
</ol>
<blockquote>
<p>To take an extreme example, if you were to try to sell the Houses of Parliament to Annie, a
gullible tourist, she would not become the owner of it, because you have no title to the Houses
of Parliament that you can sell!</p>
<p>But if Annie is then <em>registered</em> as the proprietor of the Houses of Parliament she <em>would</em> become
their legal owner, because of LRA 2002, ss. 11 and 58.</p>
</blockquote>
<ol start="2">
<li>Isn't LRA 2002, s 58 parlous? The following quotation antedates the fraud on Rev Mike Hall, and in hindsight, feels too naive and trustful.  The following quotation fails to mention —  <a href="https://old.reddit.com/r/unitedkingdom/comments/qk8f0b/luton_man_left_shocked_as_his_house_is_stolen/hivxlvs/" rel="nofollow noreferrer">If there has been a fraud, then the the victim has 6 years to make a claim with the Land Registry through the courts, which could involve a rectification to the registry and/or payment of indemnity to parties who have been harmed by the fraud. This is a horrible mess of a process as there's no clear way to resolve things.</a></li>
</ol>
<blockquote>
<p>However, the legal effect of this type of registration goes
beyond permitting title to pass once the formality of registration has been completed. It
also works to <em>validate</em> the title of the new registered proprietor, even in situations where
the transaction underlying the registration is flawed. This is the effect of s. 58 of the
LRA 2002, which provides:</p>
<blockquote>
<p>(1) If, on the entry of a person in the register as the proprietor of a legal estate, the legal
estate would not otherwise be vested in him, it shall be deemed to be vested in him
as a result of the registration.
(2) Subsection (1) does not apply where the entry is made in pursuance of a registrable
disposition in relation to which some other registration requirement remains to
be met.</p>
</blockquote>
<p>      This is known as the ‘dispositive effect’ of title registration, sometimes referred to as
‘statutory magic’. It applies in situations where, but for registration, the new registered proprietor would not be entitled to the legal estate. Examples may include clerical errors
leading to mistaken registration of the wrong person, or situations where Land Registry
is misled by fraud into believing that the registered estate has been transferred to a new
owner, even though the actual registered proprietor is completely unaware of the supposed
transfer.<br />
      The effect is not as radical as it may seem, because the statute makes provision for the
register to be altered on the application of a person affected by such an entry (see 6.7).
Thus, for example, if s. 58 transfers the legal estate from the lawful registered proprietor
to a fraudster who has relied on a forgery, the former registered proprietor may apply to
have the fraudster’s name deleted from the register and his or her own name restored.
<strong>However, it is only by making such an application that the registered proprietor can
get the estate back. The effect of s. 58 is that, until such an application is successfully
made, the estate remains genuinely vested in the new registered proprietor and this can
have important consequences for third parties who deal with the new registered proprietor
in the intervening period. [embolding mine]</strong></p>
</blockquote>
<p>Aruna Nair, <em>Textbook on Land Law</em> 2020 18 ed, p 92.</p>

<h2>That's the point of the Act</h2>
<p>The UK law creates a <a href="https://en.wikipedia.org/wiki/Torrens_title#Indefeasibility_of_title" rel="nofollow noreferrer">Torrens Title</a> system first implemented in the <a href="/questions/tagged/south-australia" class="post-tag" title="show questions tagged &#39;south-australia&#39;" rel="tag">south-australia</a> <em>Real Property Act</em> 1858.</p>
<p>The entire point of the system is that the record held by the Registrar is conclusive evidence (<a href="https://en.wikipedia.org/wiki/Defeasible_reasoning#Political_and_judicial_use" rel="nofollow noreferrer">indefeasability</a>) of ownership. The protection against error or fraud is:</p>
<ol>
<li>A court can order that the register be changed but not if this would injure innocent third parties (like the new owner in this case).</li>
<li>Where the register cannot be corrected, the Registrar stands as an insurer and pays compensation to those who are adversely affected.</li>
</ol>
<p>Reverend Hall will not get his house back but he will be compensated by the government for its loss.</p>
<p>There is far more security under a Torrens title system than a deed system and far more transparency. Everyone knows with certainty who owns a particular property and can act in complete reliance of that. When someone shows you a deed, however, you have no way of knowing if that deed is valid without an exhaustive search. Both systems are vulnerable to fraud or error but the Torrens title system is <em>much</em> less vulnerable and the government underwrites the risk.</p>
<p>If the same thing had happened under the previous deed system (as it can), there would be no compensation for anyone and the old and new owners would be engaged in drawn-out litigation until one of the &quot;won&quot;. This would be messy with Rev Hall having to prove the fraud and possibly having to pay for the building work that had been undertaken under the doctrine of unjust enrichment.</p>
