Land Registry indemnities

We investigate the circumstances in which a party can claim an indemnity from the Land Registry as a result of a wrongly mapped boundary.

Anyone who has had dealings with the Land Registry will know that that they can make mistakes. One common mistake is inaccurately or incorrectly mapping a boundary line.

Mistakes and redline boundaries

Inaccurate recording of a boundary can have significant financial repercussions for a housebuilder. Housebuilders often plan out their sites in reliance on the redline boundary shown on their title plan. However, if the Land Registry has recorded that redline boundary inaccurately, this can result in the housebuilder losing land it thought it had, and as a consequence, some of the plots that it has planned. Alternatively, it might choose to buy the missing land from the neighbouring landowner, probably at a ransom price. Both options will be expensive.

Given the serious financial repercussions that such errors may have for housebuilders, is there any recourse for a housebuilder for losses that it sustains as a result of a Land Registry error?

Indemnity for rectification of the Register

The short answer is that it depends on how much land the housebuilder loses as a result of the error. Under paragraph 1 of Schedule 8 of the Land Registration Act 2002, a person is entitled to be indemnified by the Land Registry if he suffers loss by reason of “rectification” of the Register.

However, not all mistakes at the Land Registry will require “rectification”. Boundaries shown on Land Registry title plans are only general boundaries^[1]. This means that the Land Registry will not guarantee the accuracy of the redline boundaries. Although a landowner can apply to have a boundary shown as “determined” on the Register, this is very rare and the default position is that all boundaries on Land Registry title plans are general.

Because the Land Registry cannot guarantee the accuracy of redline boundaries due to the “general boundary rule”, it will not indemnify a party for any mistake that it makes that falls within the “general boundary rule”. However, an error that requires more than adjusting the boundary within the general boundary rule will entitle the landowner to an indemnity from the Land Registry.

So what falls within the general boundary rule and what does not?

Land Registry Practice Guide 39 provides some useful guidance. Essentially, it comes down to the particular facts of each case, but the following are important factors.

1. The physical area of the disputed land in relation to the size of the title from which it is to be removed. For example, removal of a piece of land 4-5 metres wide between a hedge and fence, did not entitle the land owner to an indemnity, because the area of the land from which it was to be taken was over 150 acres (Drake v Fripp [2011] EWCH Civ 1279). On the other hand, in Parshall v Hackney [2013] EWCA Civ 240, the removal of a small piece of land, not big enough for a car to park on, did amount to rectification because its size was relatively significant relative to the area of the title from which it was being taken (a small London house).
2. The importance of the piece of land to be removed from the title to the title from which it is to be removed. For example, removal of a relatively small piece of land over which a right of way ran was said to amount to rectification entitling the landowner to an indemnity, because the land could not be accessed without it (Lee v Barrey [1957] Ch 251).

Conclusion

In short, a mistake by the Land Registry entitling a landowner to an indemnity from the Land Registry will have to involve the loss of a significant area of land (either in terms of its physical area or its importance, or both). However, if in practice the mistake means that the housebuilder is going to lose plots, or have to make a ransom payment to a neighbouring landowner, there will be a good argument that the lost piece of land is financially important, and therefore its removal from the title will amount to rectification that entitles the housebuilder to an indemnity from the Land Registry.

Finally, it is worth remembering that an indemnity from the Land Registry will not necessarily cover all losses that a housebuilder sustains as a result of rectification of the register. A reduction will, for example, be made where the Land Registry can show that the housebuilder contributed to its loss by failing to take proper care^[2]. Similarly, the housebuilder must ‘mitigate’ its losses, meaning it must take reasonable steps to avoid incurring damage and loss. If it fails to mitigate its losses, some or all of those losses may not be indemnified.