Unilateral Notices: revisited
April 23, 2018
Written by Property Litigation Partner, Tom Seabrook
Some years ago, as a fresh faced young associate, I wrote an article called ‘Unilateral Notices; Exploding the Myths’ that took the internet by storm. It went almost viral and if you Google ‘Unilateral Notice’ now you will see it is still one of the top results.
*pause while everyone Googles ‘Unilateral Notice’*
See? It was top last week, and I don’t know how these things work but may be top again now if you have all searched on it. You’ll note my name is no longer on it and you might be forgiven for thinking that someone who works there now wrote it. But they didn’t it was me.
The subject matter is all still correct save that Land Registry adjudication has now been replaced by referral to the First Tier Tribunal. A semantic change as it is still as slow and expensive as ever. The FTT is also oddly reluctant to force parties to comply with deadlines and Orders which is generally a disadvantage to the party in the right!
The key point with Unilateral Notices (and Agreed Notices – see below) is that they give notice to a subsequent buyer of or lender to the legal estate who will take subject to the interest once registered.
Many second charge lenders will protect their interests by registering a Unilateral Notice. In some cases, this is because the first lender, with the benefit of a Restriction, will not consent to registration. In other cases, it can be a matter of policy as Unilateral Notices are quick and very cheap to register.
I’m often asked (really) whether the lender’s Power of Sale still applies to a charge protected by Notice rather than one registered as a legal charge. The answer to that is yes provided the charge is made by Deed and evidenced as such. The Power of Sale arises from the Law of Property Act 1925 and is not dependent on registration.
Protection by way of Notice does not give the chargee a right to a Restriction purporting to prevent further charges being registered but, as we can see, that is of limited benefit anyway.
One area of confusion arises in relation to Charging Orders. Sometimes these are protected by way of Notice, other times by Restriction. Why the difference?
If it is remembered that Notices only apply to the legal estate, then the reason becomes clear. An Order protected by Notice is an Order against the legal estate, effectively a (further) charge.
If, though, you were to obtain judgment against one joint owner then you could apply for a Charging Order over their share of the equity in which case a Restriction would be the answer.
In either case, if quick registration is required to prevent dissipation, it is important to note this can’t be done by an Official Search. An Outline Application which could be done over the phone or in 2 minutes online used to be the answer but anyone who reads my personal linked in feed will know they were recently abolished. This seems like a backward step, but the only answer now is to crack on with the Application itself ASAP. Business users can register these online.
I mentioned Agreed Notices above. Rather like Commonhold in my last article, they haven’t really taken off. Agreed Notice can be a misnomer as they need not actually be agreed. The simple difference is that an Agreed Notice is either agreed by the registered proprietor OR the applicant must show evidence of the interest being protected at the time of registration.
As per the previous article you have all now looked at, if a Unilateral Notice is used, the applicant need only show the interest is of a type capable of being protected by a Notice and need only prove the interest if challenged by the proprietor. Thus, they tend to be quicker and cheaper in almost all cases.
These entries continue to cause more confusion than they really should. The reality is that the system is far simpler now than in the days of Cautions and Inhibitions. But it really is, in almost all cases, all about registration these days. There are still a few interests that are binding without registration but far fewer than previously. If in doubt register a Notice.
But if you do need any advice, please talk to me not them.