Issue link: https://fhpublishing.uberflip.com/i/1045844
NETWORK / 14 / NOVEMBER 2018 A s every lawyer knows, one of the key requirements for a contract to be valid and en - forceable is that it must be made for a consideration. This is no different for con- tracts creating or disposing of land interests. Consideration is the recip- rocal giving and receiving of something between parties to a contract. It is up to the parties to the contract to decide what consideration they want, but it must have some value in the eyes of the law. Historically, as little as a pep - percorn has been recognised as sufficient consideration by the courts and the modern equiva- lent is £1. The courts have also upheld non-monetary promises, such as covenants, as amounting to consideration. The network industry has readily adopted the nominal and/or non-monetary consid - eration approach in its standard easement, lease and transfer documentation. However, this has created dif - ficulties when coming to register such dispositions at the Land Registry so that they are binding on future landowners. The registration process includes conducting a priority search, which grants a priority period within which to apply for LEGAL registration of the disposition. Provided that the applica- tion for registration is received by the Land Registry within the priority period, the disposi- tion will take precedence over competing applications not revealed by the search result, or so it should. Geldards recently undertook a transaction where a legal charge was registered during the priority period of a clear search against land over which one of our electricity network clients had obtained an easement. Instead of registering the easement ahead of the legal charge, the Land Registry asked us to obtain the consent of the bank to the reg - istration. They stated that neither the £1 consideration nor the covenants by the electricity network company in the ease - ment amounted to valuable consideration for land registra- tion purposes and, therefore, our application did not have the protection of the priority search. Being unable to rely on prior - ity searches to secure registered rights against third parties has far reaching consequences for network operators and puts them at risk of being in breach of their statu - tory duties. Therefore, Geld- ards engaged with the Land Registry at the highest level to ensure that our clients applica - Why consideration matters to network operators As a result of issues raised by Geldards LLP, HM Land Registry have revised their guidance for caseworkers on what constitutes 'valuable consideration.' It will be instructing caseworkers that when an easement, lease or transfer involves a utility company, they should assume that it is made for valuable consideration. Jamie Gordon, partner at Geldards and head of the networks team, discusses the issue. tions would be protected by pri- ority searches: confirmation was needed that the Land Registry accepted that typical network transactions were, indeed, made for valuable consideration for registration purposes. The Land Registry have now acknowledged that such trans - actions will, invariably, form part of much larger commercial transactions for valuable con- sideration. They have revised their guid- ance for caseworkers on what constitutes valuable considera- tion so that when an easement, lease or transfer involves a network operator, they are to assume that it is made for valu - able consideration and, there- fore, any priority search made to protect such a disposition will be effective. The Land Registry have also, with our help, compiled a list of network operators, including all our clients, to whom their revised guidance will apply. Up until now, there had always been doubt regarding the validity of priority searches made to protect dispositions for nominal and/or non-mon - etary consideration, leading, on occasions, to them losing priority and being postponed for registration to later disposi- tions made for full monetary consideration. However, for the network industry, at least, that doubt has now been removed. Credit Wales & West Utilities