Mistake In Registered Legal Charge Leaves No Cherry On Top Of The Cake

Cherry Tree Investments Limited v Landmain Limited [2012] EWCA Civ 736

The Court of Appeal has recently refused to amend a legal charge registered at the Land Registry, even though it would have given effect to the parties' common intention (which had been mistakenly missed out of the charge). A legal charge is a public document on a public register upon which third parties would be expected to rely in order to obtain an accurate picture of the state of title to the land. It was held that where parties had registered a standard form charge over land but mistakenly omitted a clause extending the power of sale (contained in a facility letter), that clause could not be inserted as a matter of interpretation. Background knowledge Readers may be aware that a 'facility agreement' is usually a letter in which the bank or lender sets out the terms and conditions on which it is prepared to make a loan facility available to a borrower. It is also sometimes known as a loan or credit facility agreement. Once the facility letter is signed up, a legal mortgage over land will be created. In conveyancing terms, a charge by deed is expressed to be by way of 'legal mortgage'. This has led to legal mortgages over land also being called 'legal charges', even though technically they are different legal concepts. Summary of facts in Cherry Tree case

A lender registered its standard form legal charge over a property at the Land Registry. A separate unregistered facility agreement (but not the charge itself) contained an extension to the lender's statutory power of sale. This extended power gives the mortgagee a power of sale exercisable on the execution of the charge without default, as well as once the mortgage monies have become due. The Court of Appeal held that the...