Jack Dillon considers how to put right mistakes in charge deeds and their registration at the Land Registry and Companies House.
Mistakes concerning charges have serious consequences. The priority of a charge that is not registered at the Land Registry will likely be postponed behind most subsequent registered dispositions.[i] If the details of a charge created by a company are not filed at Companies House within 21 days the security conferred will likely be void against liquidators, administrators and creditors.[ii] A charge-holder in these scenarios will be discontented and will require the mistake to be remedied. Granting a fresh charge is unlikely to be an practical solution.
This article considers how to approach mistakes in a charge deed and filing mistakes at the Land Registry and Companies House, and outlines some of the routes to a remedy. (It only deals with resolving agreed mistakes; disputes about mistakes are another story).
Mistakes in the charge can vary in seriousness on a spectrum from the trivial to the fundamental. Examples of trivial mistakes include a failure to include the date of grant. At the other end of the spectrum a mistake might have been made around the secured liabilities or the security.
Best practice dictates that mistakes are remedied unless they are so trivial that they do not warrant the attention. An immaterial alteration that will not cause any prejudice can be amended without consent.[iii] Material amendments need consent from all parties. Care is needed here; there is a risk that ill-judged unilateral amendments can void the original charge.
Amendments can be made informally by manuscript on the original, preferably with each amendment signed, initialled and bearing the details of the signatories. For more formal corrections a side letter, further agreement or deed of rectification can be used. Caution would suggest a deed of rectification which may help to avoid potential difficulties concerning consideration, formalities or objections from the Land Registry, Companies House or a court.
The next question is what should be done to update the Land Registry and Companies House. This calls for careful judgement in each case: the answer may be to do nothing. Bear in mind that these are public facing; third parties may seek to contend that their interests have been prejudiced by any errors.
Errors in a charge registered at the Land Registry might not threaten the security. Deciding whether to update the Land Registry can be a balancing act.
If the mistake is discovered before registration of the charge, the Land Registry’s guidance is to alter the charge prior to applying for registration – noting that “[a]ll alterations to the deed must be authenticated by the signatures of all the parties against each amendment made.” [iv] It is sensible to extend any priority period while doing so.
For mistakes discovered after registration, the guidance goes on to say, a further registrable deed may be required. This depends on the nature of the mistake but, for mistakes of any gravity, it is surely sensible to avoid the argument.
If the mistake in the charge or its registration has led to a mistake on the register the remedy is to seek alteration or rectification.
A company that creates a charge must file the charge and certain information in Form MR01 within 21 days.[v] For a written charge this includes the date of creation, the name of the chargee, whether it is a floating charge, whether there are any restrictions on further security ranking with or ahead of the charge, details of property subject to the charge. The deadline may be extended on an application to court if it was missed by accident.[vi]
The registrar’s certificate of registration is “conclusive evidence that the documents required … were delivered to the registrar [in time].” [vii] It is not yet clear what the consequences are for errors in a Form MR01 that is filed in time. It is often thought that the sanction for not filing in time does not apply, but there is no authority on the current statutory regime.
If the mistake is caught sufficiently quickly there is a procedure at Companies House for informal corrections.[viii] Otherwise there are three main provisions of the Companies Act 2006 that will be of interest.
- The first power concerns filing errors. The court can order the register to be rectified, on terms that are just and expedient, if there has been an omission/misstatement in any statement or notice filed at Companies House which was accidental or does not prejudice the company’s creditors or shareholders.[ix]
- The second power is for errors in instruments. The court can order the replacement of an instrument if the copy sent to the registrar was defective, although it is not yet established that a drafting mistake is an eligible defect.[x]
- Finally, if a correction has resulted in adding or amending a term that affects the priority or ranking of the charge[xi], the corrected instrument and information about it can be filed at Companies House for registration.[xii]
If the nuclear option is required and the amendment amounts to the effective grant of a new charge, it can be registered in the usual way.
Remedying a mistake is often harder than doing something properly first-time round. Practitioners will need to use their judgement and common sense, identify the error in an instrument, assess its gravity and make any corrections that are considered necessary, and undertake any required corrections with the Land Registry and at Companies House. This article cannot cater for all mistakes but hopefully has outlined a useful approach to take.
Article by Jack Dillon
[i] LRA 02 s 29-30.
[ii] CA 06 s 859H(3).
[iii] E.g. Keane v Smallbone (1855) 139 ER 1038.
[iv] Practice guide 68: amending deeds that effect dispositions of registered land, para 2.1.1.
[v] CA 06 ss 859A, 859D.
[vi] CA 06 s 859F.
[vii] CA 06 s 859I(6).
[viii] CA 06 s 1075. The guidance requires the instructions for the correction to be received by the 21-day deadline.
[ix] CA 06 s 859M.
[x] CA 06 s 859N.
[xi] Within the meaning of CA 06 s 859O(1).
[xii] CA 06 s 859O.