Guidance

Practice guide 75: transfer under a chargee's power of sale

Updated 1 August 2022

Applies to England and Wales

Please note that HM Land Registry’s practice guides are aimed primarily at solicitors and other conveyancers. They often deal with complex matters and use legal terms.

1. Introduction

This guide explains HM Land Registry practice where:

• a charge has been created by a deed expressed to be by way of legal mortgage (whether or not it is a registered charge) over a registered estate. (Under the Land Registration Act 2002, a proprietor, or person entitled to be registered as proprietor, cannot create a mortgage by demise or sub-demise: section 23(1)(a))
• an order has been made under section 90 of the Law of Property Act 1925 vesting in the mortgagee a legal term of years absolute to enable the mortgagee to carry out the sale of a registered estate. (There is no conflict between this provision and Land Registration Act 2002, section 23(1)(a), because the charge created by a section 90 order is not created by a proprietor or person entitled to be registered as proprietor)

In the case of a charge created by deed expressed to be by way of legal mortgage, in the absence of an expression of contrary intention in the charge, the chargee has a statutory power of sale when the mortgage money is due (section 101 of the Law of Property Act 1925). Although the power of sale arises at this point, it does not become exercisable unless one of 3 conditions has been satisfied, which are:

• notice requiring payment of the mortgage money has been served on the borrower and default has been made in payment for 3 months thereafter
• some interest under the charge is 2 months or more in arrears
• there has been breach of some provision contained in the Law of Property Act 1925 or the charge deed (other than the covenant for payment of the mortgage money or interest) (section 103 of the Law of Property Act 1925)

We presume that the power of sale has arisen where the transfer by the chargee is made at least one month after the date of the charge. Where the transfer is made less than one month afterwards, we require evidence that the power of sale has arisen.

If the statutory power of sale has arisen, the purchaser’s title is not impeachable merely because none of the 3 conditions above have been satisfied or the power of sale has in some other way been improperly or irregularly exercised (section 104(2) of the Law of Property Act 1925. The sale is deemed to be made in exercise of the statutory power of sale unless a contrary intention appears: section 104(3)).

A charge survives disclaimer by the trustee in bankruptcy (section 315 of the Insolvency Act 1986), or a liquidator (section 178 of the Insolvency Act 1986), or the Treasury Solicitor or Royal Duchy (section 656 of the Companies Act 1985, or section 1013 of the Companies Act 2006), as does the chargee’s power of sale (SCMLLA Properties Ltd v Gesso Properties [1995] BCC 793, 802-806, relying on section 104(2) of the Law of Property Act 1925). It is irrelevant whether the power arose before or after the disclaimer.

1.1 Retention of documents submitted with applications

Original documents are normally required only if your application is a first registration.

A conveyancer may, however, make an application for first registration on the basis of certified copy deeds and documents only. For information about this, see practice guide 1: first registrations – Applications lodged by conveyancers – acceptance of certified copy deeds.

If your application is not a first registration then we will need only certified copies of deeds or documents you send to us with HM Land Registry applications. Once we have made a scanned copy of the documents you send to us, they will be destroyed. This applies to both originals and certified copies.

However, any original copies of death certificates or grants of probate will continue to be returned.

2. Registration of a transfer where the charge has been completed by registration

2.1 Requirements for registration

The transfer must be in form TR2 or form TP2, depending on whether the sale is of the whole or part only of the borrower’s registered title (rule 58 and Schedule 1 to the Land Registration Rules 2003), and must be executed by the chargee.

The transfer operates to release the land from the charge. A separate discharge for the charge is therefore not required.

The transfer must be lodged with a completed form AP1 and, where this is required, a Stamp Duty Land Tax or Land Transaction Tax certificate.

See When confirmation of identity or rule 17 identity evidence is required for our evidence of identity requirements for transfers under power of sale.

2.2 Cancellation of entries in the register

2.2.1 General

On registration of the transfer we will cancel the entry in the proprietorship register that gives the proprietor’s details, and the other entries that would normally fall on registering a transfer for valuable consideration – in particular, a Form A restriction, a price paid entry, and entries in respect of personal or indemnity covenants.

We will cancel the entries for the charge and any associated restrictions.

We will only cancel other entries if either:

• it is clear to us that the charge has priority to the interest which is the subject of the entry (The sale will override all rights over which the charge has priority: section 104(1) of the Law of Property Act 1925)
• there is a successful application for cancellation or removal, and so on, of the entry

The following sections explain the most common types of entries which may appear in the register and when an application for cancellation or removal, and so on, is required.

2.2.2 Other registered charges

The transfer overrides any inferior registered charges (and registered sub-charges of those inferior charges). The priority of registered charges as between themselves is determined by the order in which they are entered in the register, subject to any entry in the register to the contrary (section 48(1) of the Land Registration Act 2002; rule 101 of the Land Registration Rules 2003).

We will notify inferior registered chargees when we cancel entries relating to their charge on registration of a transfer under a power of sale.

Where another registered charge has priority, you will have to lodge a discharge from the lender for the charge or confirm that the transfer is being made subject to the other charge.

2.2.3 Registered easements

We will not automatically cancel a notice in respect of an easement that has been substantively registered. If an application for cancellation is made in form CN1, we will first determine whether the easement was registered before 11 April 2005. Before that date, we registered easements affecting land subject to a registered charge only if we were satisfied that the chargee consented to the easement, so notices in respect of such easements will not normally be cancelled. On 11 April 2005 our practice changed. Since then, where a chargee of the servient land does not join in the deed or consent to its creation, the easement can be registered but the following note is added to the entry in respect of the easement in the title to the dominant land:

NOTE: The consent of the proprietor of the charge dated …. in favour of …. affecting title(s) …. was not produced on registration and the rights …. may be overridden in the event of the exercise of the power of sale.

If there is no such note in respect of one of these more recent easements, we are unlikely to cancel the notice. If there is such a note, we will serve notice of the application for cancellation on the registered proprietor of the title to the dominant land. The notice in respect of the easement will be cancelled if we receive no objection to the application and there is no evidence of the chargee having consented to the granting of the easement.

2.2.4 Noted charges

If a notice was entered in the register in respect of another charge after the registration of the transferor’s charge, we will generally cancel the notice automatically on registering the transfer. If the notice is a unilateral notice, we will notify the beneficiary that we have cancelled the notice. If the notice is an agreed notice in respect of a charge that is dated prior to the date on which the transferor’s charge was registered we will check that the charge was not previously protected by a unilateral notice; if it was, it may have priority over the registered charge, in which case the notice will not be cancelled automatically.

We will not automatically cancel notices in respect of charges where the notice has been entered before the registration of the transferor’s charge. An application in form CN1 (for a charge protected by an agreed notice) or form UN4 (for a charge protected by a unilateral notice) must be lodged.

2.2.5 Noted estate contracts

2.2.5.1 Contract precedes the charge

A purchaser from the chargee will be bound by an estate contract where the contract preceded the charge and was noted before the charge was registered, so we will not automatically remove the notice on registering the transfer.

Nor will we automatically remove the notice on registering the transfer where the contract preceded the charge but was not noted until after the charge was registered. An application in form CN1 (for an estate contract protected by an agreed notice) or form UN4 (for an estate contract protected by a unilateral notice) must be lodged; this is in case the estate contract was protected on registration of the charge as an overriding interest (by actual occupation) or by an entry in the register which was subsequently cancelled.

2.2.5.2 Charge precedes the contract

Where the charge preceded the contract, a purchaser from the chargee will not normally be bound by it because the charge had priority to it and the registered chargee can therefore sell free from it. The noted contract relates to the registered proprietor’s equity of redemption: see Duke v Robson [1973] 1 WLR 267.

There are certain rare cases, however, where a noted contract made by a registered proprietor whose land is subject to a charge will have bound the registered chargee. That will be so where either:

• the power for the registered proprietor to grant a lease under section 99 of the Law of Property Act 1925 has not been excluded by the terms of the charge and the registered proprietor contracts to grant a lease
• the registered chargee has consented to that contract

Also, where, before creating the charge, the registered proprietor granted an option or right of pre-emption to a third party which was protected by a notice in the register, the option or pre-emption right will bind the registered chargee (see section 115 of the Land Registration Act 2002). Alternatively, a notice may have been entered only following the registration of the charge, with the option or pre-emption right having operated as an overriding interest on registration of the charge by virtue of the grantee’s actual occupation.

It may not always be apparent from the entries in the register or from the documents held by HM Land Registry that one of the situations referred to in the previous paragraph exists. In consequence, it is not possible for HM Land Registry to know in every case whether, where the registered chargee exercises their power of sale, the purchaser from the chargee should be bound by the noted contract (using that term to include options and pre-emption rights).

We will usually alter the register to remove the notice on registering the transfer provided there is a written statement, in the additional provisions panel of the transfer or separately, from the registered chargee, signed on its behalf by an authorised officer or by its conveyancer, confirming that it was not party to the noted contract, and did not consent to or adopt it and is not otherwise bound by it. Unless such a statement can properly be given, we will require a formal application in form CN1 or form UN4 for cancellation.

(Please note that if a lease has been granted by the registered proprietor after the date of the registered charge and has been registered, we will not close that leasehold title except on application, even if the lease had been granted pursuant to a noted contract made after the registered charge. We will need to be satisfied that the power of leasing in section 99 of the Law of Property Act 1925 had been excluded by the terms of the charge or that it does not cover the granting of that lease.)

2.2.6 Notices under the Matrimonial Homes Acts 1967/1983 or the Family Law Act 1996

We will cancel these automatically provided the notice was either entered after the charge under which the power of sale is being exercised or the home rights were postponed to it. We will notify the person with the benefit of the rights that their notice has been cancelled.

2.2.7 Other rights protected by an agreed or unilateral notice

We will not automatically cancel any such notices on registering the transfer, even if they are dated after the registration of the transferor’s charge. An application for their cancellation needs to be made in form CN1 or form UN4.

2.2.8 Restrictions

Where there is a restriction in the register, there are 2 issues to be aware of, namely:

• check if the restriction “bites” and, if it does, make sure it has been complied with
• check if the restriction needs to be removed from the register on registration of the transfer (whether or not it bit)

The first issue depends, of course, on the wording of the restriction. In particular, many restrictions only prevent the registration of dispositions by the proprietor of the registered estate, and a transfer under the power of sale is a disposition by the chargee.

Turning to the second issue, the following standard form restrictions will be cancelled automatically on registration of the transfer, regardless of when they were registered, because they are then superfluous entries. The registrar can alter the register for the purpose of removing a superfluous entry: Schedule 4, paragraph 5(d) of the Land Registration Act 2002.

• Form A: restriction on disposition by a sole proprietor
• Form B: dispositions by trustees - certificate required
• Form C: dispositions by personal representatives - certificate required
• Form E: non-exempt charity - certificate required

Provided the charge under which the power of sale is being exercised had overreaching effect or was created before the trust to which the restriction relates, we will also cancel the following types of restriction (and inform the restrictioner of this) regardless of when they were registered. The registrar must cancel a restriction entered for the purpose of protecting an interest, right or claim under a trust of land if they are satisfied that the registered estate is no longer subject to that trust of land: rule 99 of the Land Registration Rules 2003.

• Form J: trustee in bankruptcy and beneficial interest - certificate required
• Form K: charging order affecting beneficial interest - certificate required
• Form II: beneficial interest that is a right or claim in relation to a registered estate
• Form JJ: statutory charge of beneficial interest in favour of the Legal Aid Agency
• Form MM: interest in beneficial joint tenancy subject to a charge under section 22(1) of the Health and Social Services and Social Security Adjudications Act 1983 or under the terms of a deferred agreement within the meaning of section 68(2) of the Social Services and Well-being (Wales) Act 2014

A restriction in the register for a leasehold estate requiring a certificate from the landlord or management company confirming compliance with a leasehold covenant will not be cancelled automatically, even where the restriction post-dates the registration of the charge. The covenant is likely to bind the transferee (sections 3 and 28(6) of the Landlord and Tenant (Covenants) Act 1995.

A transfer under power of sale is caught by a restriction in Form QQ (land listed in a list of assets of community value maintained under section 87(1) of the Localism Act 2011) even if the charge was registered before the restriction. An application to register the transfer must therefore be accompanied by the certificate required by the restriction confirming that it does not contravene section 95(1) of the Localism Act 2011. A conveyancer should always be able to provide this because the transfer will not be a disposal to which section 95(1) of the Localism Act 2011 applies (Schedule 3, paragraph 6(1) of The Assets of Community Value (England) Regulations 2012). The restriction will not be cancelled however unless a specific application is made in form RX3 by the local authority or successor authority.

If the registered proprietor of the registered estate is an overseas entity and the following restriction appears in the register, see practice guide 78: overseas entities:

RESTRICTION: No disposition within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 is to be completed by registration unless one of the provisions in paragraph 3(2)(a)-(f) of Schedule 4A to that Act applies.

A transfer by a registered chargee under its power of sale or leasing conferred on the proprietor of a registered charge is an excepted disposition under Schedule 4A to the Land Registration Act 2002 for the purpose of the restriction but a certificate as referred to in that practice guide will be required.

2.2.9 Cautions in the proprietorship register

Such a caution will not operate where the transfer is under the power of sale because it is not a dealing by the proprietor of the registered estate. Furthermore, it is our practice to remove automatically any caution in the proprietorship register, whether the caution was registered before or after the charge under which the power of sale is being exercised, unless the caution is in respect of home rights which arose under the Matrimonial Homes Act 1967, in which case the caution will be removed automatically only if it was registered after the charge or has been postponed to it.

2.2.10 Disclaimer

A registered charge survives disclaimer by the Trustee in Bankruptcy (under section 315 of the Insolvency Act 1986), a liquidator (under section 178 of the Insolvency Act 1986), or the Treasury Solicitor or Royal Duchy (under section 656 of the Companies Act 1985, or section 1013 of the Companies Act 2006), as does the chargee’s power of sale. It is irrelevant whether the power arose before or after the disclaimer – see SCMLLA Properties Ltd v Gesso Properties [1995] BCC 793, 802-806, relying on section 104(2) of the Law of Property Act 1925.

These principles apply regardless of whether the registered estate is freehold or leasehold.

The registrar will cancel a disclaimer entry automatically but, on completion of the registration of the transfer, will notify the Crown Estate or the Royal Duchy, as appropriate, of the action taken.

2.2.11 Encumbrances against the charge

Any restriction against the charge must either be complied with or an application made in form RX3 for its cancellation or form RX4 for its withdrawal. It is possible for a restriction to affect dispositions by a chargee even if the restriction is in the proprietorship register.

Where such a caution appears in the charges register, and the cautioner does not apply to withdraw the caution in form WCT, we will serve notice on the cautioner, who may object to the registration of the transfer. A notice of deposit of charge certificate continues to operate as such a caution: Schedule 12, paragraph 3 of the Land Registration Act 2002.

3. Registration of a transfer where the charge has not been completed by registration: charge created by deed expressed to be by way of legal mortgage

It sometimes happens that a charge of the registered estate is made by deed and expressed to be by way of legal mortgage, but it is not completed by registration. In these circumstances, the charge takes effect as an equitable charge, but the chargee still has a statutory power of sale; the sale will override all rights over which the charge has priority; and the transfer will be of the registered estate (Swift 1st Limited v Colin [2011] EWHC 2410 (Ch)).

3.1 Requirements for registration

You must lodge a certified copy of the charge deed unless a copy is held by HM Land Registry, in which case please state the title number under which it is held.

We will also need to be satisfied that the lender is the current owner of the charge. We will accept either a certificate by the lender named in the charge confirming that it remains the owner of the charge and entitled to exercise the power of sale, or, if the lender in the transfer is different, documentary evidence of the transfer of the ownership of the charge to the lender exercising the power of sale.

The transfer under the power of sale must be in form TR2 or form TP2, depending on whether the sale is of the whole or part only of the borrower’s registered title (rule 58 and Schedule 3 to the Land Registration Rules 2003), and must be executed by the chargee.

The transfer operates to release the land from the charge. A separate discharge for the charge is therefore not required.

The transfer, and so on, must be lodged with a completed form AP1 and, where this is required, a Stamp Duty Land Tax or Land Transaction Tax certificate.

See Retention of documents submitted with applications regarding retention of documents submitted with applications.

We will serve notice of the application on:

• the registered proprietor of the estate and the transferor, regardless of whether the application was lodged by a conveyance or non-conveyancer
• any other chargees whose charges are registered or noted, regardless of the date these other charges were registered or noted, unless a form DS1 or other discharge is lodged in respect of their charge and the discharge application has been made by a conveyancer.

3.2 Cancellation of entries in the register

On registration of the transfer we will cancel the entry in the proprietorship register, which gives the proprietor’s details, and the other entries that would normally fall on registering a transfer for valuable consideration – in particular, a Form A restriction, a price paid entry, and entries in respect of personal or indemnity covenants.

We will only cancel other entries if either:

• it is clear to us that the charge has priority to the interest which is the subject of the entry
• there is a successful application for cancellation or removal, and so on, of the entry

In determining priority, it may well be relevant whether the transferor’s charge is noted – but not always. Assume that charge A (created by an individual) in the following scenarios is the transferor’s charge.

Scenario 1
2 May 2011	Charge A created
5 August 2011	Charge B created
10 August 2011	Charge B completed by registration
Charge B has priority (section 29(1) of the Land Registration Act 2002)

Contrast this with the situation where the transferor’s charge, charge A, is noted.

Scenario 2
2 May 2011	Charge A created
19 May 2011	Charge A noted
5 August 2011	Charge B created
10 August 2011	Charge B completed by registration
Charge A has priority (section 29(1) and (2)(a)(i) of the Land Registration Act 2002)

However, it is only relevant whether the transferor’s charge is noted if the other entry is in respect of a subsequent disposition for valuable consideration that is then completed by registration, as in scenarios 1 and 2. If the other entry is in respect of an earlier disposition then it does not make any difference whether the transferor’s charge is noted.

Scenario 3
6 January 2011	Charge C created
2 May 2011	Charge A created
19 May 2011	Charge A noted
Charge C has priority regardless of whether charge A is noted on 19 May 2011: section 28 of the Land Registration Act 2002

If an existing restriction is not being cancelled you will need to consider its effect on any new disposition to be registered, such as any new charge accompanying the transfer under power of sale.

4. Registration of a transfer where the charge has not been completed by registration: charge created by order under section 90 of the Law of Property Act 1925

Under this provision, the court may make an order creating a legal charge, normally to allow for the enforcement of a charging order against the registered estate. The order can only create a charge on the registered legal estate, and therefore enable a transfer of the registered legal estate, if the charging order or other equitable charge to which the order relates was itself a charge on the legal estate and not just on a beneficial or equitable interest (Sainsbury’s Supermarkets Ltd v Olympia Homes and others [2005] EWHC 1235 (Ch)). The charge takes the form of a demise for a term of years: usually 3,000 years if a freehold estate has been charged or, if a leasehold estate has been charged, for one day less than the original term granted by the lease. If a legal charge has been created on leasehold land, the term of the demise must not extend beyond the term granted in the lease.

If the section 90 charge is registered, we will proceed with an application to register a transfer by a charge in the same way as if the transfer were under any other registered charge. This section is concerned with transfers by section 90 chargees where the charge has not been completed by registration.

The registered estate can effectively be transferred under the power of sale without the section 90 mortgage being registered first. This is because the mortgage is to be treated as being a mortgage by deed. Under section 90(1) of the Law of Property Act 1925 “the court may .… create and vest in the mortgagee a legal term of years absolute to enable him to carry out the sale .… in like manner as if the mortgage had been created by deed by way of legal mortgage pursuant to this Act ….”.

4.1 Requirements for registration

Where the power of sale derives from an order of the court under section 90 of the Law of Property Act 1925, you must lodge a copy of the order sealed by the court.

The transfer must be in form TR2 or form TP2 depending on whether the sale is of the whole or part only of the borrower’s registered title (rule 58 and Schedule 1 to the Land Registration Rules 2003) and must be executed by the chargee.

The transfer operates to release the land from the charge. A separate discharge for the charge is therefore not required.

The transfer must be lodged with a completed form AP1 and, where this is required, a Stamp Duty Land Tax or Land Transaction Tax certificate.

To find out what happens to documents submitted with application forms, see Retention of documents submitted with applications.

4.2 Cancellation of entries in the register

On registration of the transfer we will cancel the first entry in the proprietorship register, which gives the proprietor’s details, and the other entries that would normally fall on registering a transfer for valuable consideration – in particular, a Form A restriction, a price paid entry, and entries in respect of personal or indemnity covenants.

We will cancel all entries relating to the charging order or other form of equitable charge.

We will only cancel other entries if:

• it is clear to us that the charge has priority to the interest which is the subject of the entry
• there is a successful application for cancellation or removal, and so on, of the entry

In determining priority, account will need to be taken of the wording in section 90(1) (“without prejudice to any encumbrance having priority to the equitable mortgage”) and of sections 28 and 29 of the Land Registration Act 2002.

If an existing restriction is not being cancelled you will need to consider its effect on any new disposition to be registered, such as any new charge accompanying the transfer under power of sale.

5. Fees

A scale 1 fee under the current Land Registration Fee Order is payable on the value of the consideration for the transfer, see HM Land Registry: Registration Services fees.

6. Things to remember

We only provide factual information and impartial advice about our procedures. Read more about the advice we give.