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Inability to register a legal charge is an extremely common scenario and there are many reasons why this might be the case.

A claim for breach of retainer against the perfecting solicitors will almost certainly arise, even if there is no evidence of negligence on their part. But what of the practicalities for the lender? Without a registered legal charge can it exercise its power of sale and, equally importantly, can a purchaser pursuant to that power of sale be registered as proprietor in place of the original borrower?

The Court in Swift 1st Limited v Colin and Others [2012] 2 WLR considered these points in the following context.

Swift was a mortgage lender. The proprietors had executed a legal charge by way of Deed (which was significant). However, due to a prior lender’s failure to consent to the charge or remove its restriction, Swift was unable to register a legal charge and had to make do with noting its interest on the register, such taking effect as a charge in equity only.

Subsequently, the proprietors entered into a further legal charge (which was properly registered) and an Interim Charging Order was registered against the title.

Swift exercised its power of sale and conveyed the property to Mr and Mrs Colin but Land Registry refused to register the transfer because there was no legal charge.

Land Registry’s position was that, as Swift was an equitable chargee only, its power of sale did not arise.

The Court disagreed.

Judge Perle QC sitting as a High Court Judge found that “The power of sale derives, not from the niceties of the land registration legislation, but from the Law of Property Act 1925, and all that is required is a mortgage by deed” and went on further to say that the lack of registration was “neither here nor there”.

The Court thus found that Swift’s TR2 Transfer was sufficient to transfer the property to Mr and Mrs Colin and to overreach the interests of the subsequent chargees.

This was clearly an important decision for Swift who, the Court was told, had over 1700 similar cases of non registration.

However, it is of wider application to any lender who suffers difficulties of this type.

It is fair to say that this case will not assist in cases where it cannot be evidenced that the mortgage was made by Deed which in most cases will involve producing the properly executed and witnessed charge, but where non registration is for other reasons it will bring some comfort to lenders and their purchasers.

For more information or to discuss in more detail contact Tom Seabrook at tom.seabrook@irwinmitchell.com