A Cautionary Tale

The procedure to remove a caution from a folio is set out in Rule 123 of the Land Registry Rules 2012 (the “LRR”).  If the Property Registration Authority (the “PRA”) has received a representation from the registered owner of the folio seeking to cancel the caution, the PRA will issue a Form 74 notice to the cautioner. Unusually, there is no prescribed form application for the registered owner to submit to the PRA to remove the caution,  however standard practice is for the registered owner to submit an affidavit explaining the circumstances and reasons for the application to cancel the caution.

The Form 74 advises the cautioner that the  caution will cease to have any effect and will be  removed from the folio, usually after the expiration of 21 days unless an order to continue the caution is made by the PRA. The cautioner, now on notice, can contest the application by the registered owner to remove the caution and can apply to the PRA to continue the caution indefinitely or for a specified period. This mechanism is set out in Rule 125 of LRR. Furthermore, it is open to the PRA to hold a hearing on the matter and determine whether the caution ought to remain, however this outcome could prove unsatisfactory for the registered owner as it is not clear how long that process may take and there is always the risk that the caution  will be retained. Should this transpire the registered owner’s ability to deal with his/her property will continue to be fettered, and the applicant will be in no better a position than he/she was at the beginning of the application.

The application to the PRA to remove a caution on foot of the Form 74 application is typically of limited benefit to the registered owner of a folio but is a step that should be observed before legal proceedings are instituted to remove the caution.   If the cautioner wants to enforce its alleged rights under the caution, it will need to institute legal proceedings against the registered owner – for example the cautioner would have to institute specific performance proceedings against the registered owner of a folio which is the subject of an alleged Contract for Sale.  If the cautioner fails to bring the proceedings within an appropriate timeframe, the registered owner should recite this as a reason to have the caution removed.  More often that not, the Form 74 procedure is a prelude to litigation between the registered owner of the folio and the cautioner.

It is to be anticipated that there will be a growing jurisprudence in this area.  The ease with which cautions can be registered makes them susceptible to abuse by parties, particularly debtors, who may rely on them as a ready mechanism to frustrate charge holders.  Even cautions without merit can serve as a substantial delaying tactic given the hurdles in removing them compared with the relative ease with which they can be registered.

For further information in relation to this matter, please contact Claire McCormack (Partner), Emer Fitzhenry (Solicitor) or your usual AMOSS contact.