Registration of Options
Solicitors who are members of the Solicitors’ Mutual Defence Fund will have received a newsletter from the fund in which the need to register options was canvassed.
The solicitors who acted for the fund in the case referred to in the newsletter have kindly set out the facts in the case to the Conveyancing Committee. It involved a complicated series of transactions commencing with an option to sell a plot of land, followed by a sale of the lands by the original vendor, the sale being subject to the option agreement. The lands were sold on by that first purchaser and were sold again, without any reference to the option, to a final purchaser.
While that last transaction was fraudulent, the final purchaser was not aware of the option and would not have discovered its existence in the course of a careful investigation of title. He was, therefore, a purchaser for value without notice and could not be successfully sued by the holder of the option. If the person holding the option agreement had registered it, then that option would have been discovered and the ultimate purchaser would have been on notice of the option and the original holder of the option would have been protected.
The committee has considered the matter and, while the facts in the particular case were unusual, even apart from the fraudulent element, it believes that it should advise solicitors acting for persons who have taken an option to purchase land to consider whether they should register the option in the Registry of Deeds or as an inhibition in the Land Registry.
The committee believes that there is a strong case for effecting such registration where, for example, the option period is lengthy. A similar argument would apply where there is a contract for the sale of lands with a long closing date or where the closing is postponed by agreement for a lengthy period or is being significantly delayed by the vendor.