A bill was recently passed in Parliament which would amend the Registration of Deeds Act and related legislation. The changes to the law which certain aspects of this bill presage are far reaching and ought to have been the subject of deep research, careful analysis and deliberation by all stakeholders before it was presented to the Parliament. In countries with mature legal systems, the basis for and contents of this type of legislation would be developed and published by the Law Reform Commission or its equivalent so that the public and those charged with the passing of new laws would be fully informed of the need for and likely effects of such new laws and also have adequate opportunity to discuss the relevant issues. Alas, this path was not followed for this bill and I predict that if this law is brought into force there will be serious adverse consequences, some of which are known and others may yet be discovered.
There are parts of the bill with which there is no cause for objection, in particular, those that are based on requirements of FATF, namely, the registration of express trusts. There are, however, aspects of the bill that are not required by FATF and which ought to have been subject to the processes described in the first paragraph of this article but, sadly, were not. I will focus on the most significant of these aspects, namely the requirement for the compulsory registration of agreements for the sale of land. Here, it must be noted that the word “land” includes all interests in land such as leases, mortgages, rights of way etcetera.
The bill also makes other substantive changes to the law relating to land that would be of concern to buyers and mortgagees (i.e banks) and will introduce new bureaucratic practices that will add to an already cumbersome process and increase the expenses relating to the sale and purchase of land. These issues have been raised and will no doubt be discussed further by others.
Before I go further into the subject of compulsory registration of agreements for sale, it would be useful if I give some background information.
The sale of land between a buyer and a seller is usually effected in two steps, namely (a) the signing of an agreement for sale, and (b) the execution (i.e. signing) of a deed.
In the usual case, after the agreement for sale is signed, the buyer’s lawyer would check to verify that the seller is the rightful owner of, and that no one else has any interest in or claim to, the land (this process is called “searching the title”).
Searching the title, entails checking the records at the Government’s Land Registry. Once such documents are registered in the Land Registry, the public is deemed to have notice (sometimes called “constructive notice”) of them. If a buyer acquires a parcel of land but the records at the Land Registry show that someone other than the ‘seller’ is the true owner, the buyer would not obtain ownership of the land.
There are also cases where an owner’s title to land is the subject of a challenge (which is disputed by the owner) by another party (a “Claimant”) who claims ownership of, or an interest in, the land; in these cases Claimants could take legal action in the High Court against the ‘owner’ and file a document in the Land Registry known as a lis pendens or a caveat which records their claim. The lis pendens or caveat constitutes a warning or notice to the world that the Claimant has a claim to the land and that if someone buys the land and the Claimant succeeds in his lawsuit, he (the Claimant) would be recognised as the owner of the land or the interest that he has established, as the case may be.
An agreement for sale between a seller and buyer may also be registered in the Land Registry and if this is done, it would constitute constructive notice of the interest of the buyer in the land which is the subject of the agreement. However, the registration of agreements for sale is a rare occurrence because historically it has been and continues to be widely accepted by lawyers and their clients in T&T and other countries with legal systems that are similar to ours that buyers’ rights are well protected in law, without the need for registration of agreements for sale.
At this stage it would be useful to briefly discuss the rights and obligations of buyers and sellers in a typical sale transaction. These rights and obligations have been developed to a fair balance between sellers and buyers through centuries of judicial decisions and legislation. While it is not possible to spell out those rights and obligations in detail in this article, I make reference to some that are relevant to the discussion, namely:
1) The seller is obligated to provide a good title free from encumbrances (unless the parties agree otherwise) and the buyer must pay the purchase price;
2) If the seller does not have a good title, the buyer may refuse to complete the sale and is entitled to a refund of any money (such as a deposit) he would have paid to the seller plus interest and the reasonable legal expenses he spent in searching the title; however, the buyer would be entitled to additional money (called damages) if the seller knew that his title was defective and did not disclose this to the buyer;
3) If the sale has been completed and a defect in the title is subsequently discovered, the buyer can still sue the seller for all losses he (the buyer) has incurred;
4) If the seller falsely claimed that he was the owner of the land or he deliberately made false representations regarding his title, that would amount to a fraud which is an offence under criminal law for which he could be charged by the State and he would face fines and imprisonment whether or not the sale has been completed; the seller may also be sued by the buyer under civil law for a return of any monies paid to the seller plus damages and this right exists even if the fraud was discovered after the sale has been completed;
5) If a buyer is ready, willing and able to complete a sale but the seller refuses to do so, the buyer can sue the seller to force him to complete the sale and he may also lodge a lis pendens or caveat in the Land Registry which, as noted above, will constitute notice to the world that he has an interest in the land so that other persons would know that if they buy the land they do so at their own risk—this is usually sufficient to warn off other persons from buying the land and is a potent weapon in the hands of a buyer where the seller seeks to back off from an agreement for sale without good reason;
6) If a seller has a good title and is ready, willing and able to complete a sale but the buyer fails or refuses to complete in accordance with the agreement for sale, , the seller may terminate the agreement for sale and claim damages for his loss which is often effected by the seller forfeiting the deposit …ordinarily this would not exceed ten per cent of the sale price of the land.
• Ashmead Ali is an attorney-at-law