Jointly owned: Registering a form J Restriction (ISCIS)
The trustee does not have an interest in the legal estate of a jointly owned property, his or her interest is in the proceeds of its sale. Thus, it is a bankrupt's share of the surplus remaining, after deducting the balance due to all mortgagees and other charge-holders from the value of the property. All property interests must be recorded on ISCIS (‘Assets’ tab). Within the property entry further details can be added such as any joint owners, charge-holders and the property type (e.g. family home, garage, house).
The reason a bankruptcy restriction cannot be registered is that the legal title is not vested in the bankrupt alone but in the joint proprietors and as a result the legal title does not vest in the trustee of the bankrupt’s estate. The joint legal title is not severable and consequently does not form part of the bankrupt’s estate. The reason for this is that Bankruptcy Law provides that the trustee can obtain no better title than the bankrupt had. Even if all joint owners are bankrupt, it will only be their beneficial interests and not their legal title that vests in the trustee. The bankrupt’s beneficial interest is in the proceeds of the sale. The Chief Land Registrar is not concerned with the beneficial interest in a property (which is severable).
A beneficial interest is the share in a property to which an individual is entitled. It is an equitable interest and unlike a legal interest is severable. Beneficial interest may arise as a result of a person’s financial contributions to the purchase of a property. The calculation of an individual’s beneficial interest can be quite complicated as there are various factors to take into consideration. For instance, the legal owners may not necessarily be the same as the beneficial owners.
It is important to understand the concept of both legal and beneficial ownership. For example, a house in joint names, purchased 3 years before bankruptcy, paid for entirely with monies from the husband’s business account. The wife does not contribute any monies. Although they are joint legal owners, it could be proved that the bankrupt is the sole beneficial owner as the wife cannot claim to have made any financial contributions towards the property purchase and any transfer of an interest in the property would be void under the provisions of The Insolvency Act 1986. Under normal circumstances, where spouses or civil partners contribute something towards the property, even though it is not in exact equal proportions, they may be regarded as joint beneficial owners as well as joint legal owners.
When a joint owner’s interest is noted on the ‘Assets’ tab, the ‘Percentage Total Estimated Share’ data entry box is for the property interest held by the joint owner and not the bankrupt.
The Land Registry will not register a bankruptcy restriction against any jointly owned land in which the bankrupt has an interest, even where all the owners are subject to bankruptcy proceedings. To protect his or her interest in a property that is jointly owned, the official receiver (OR) must lodge a Form J restriction at the Land Registry. Prior to 13 October 2003, the official receiver would lodge a caution against dealings at the Land Registry to secure his or her interest in a property. Under the Land Registration Act 2002 (LRA2002) cautions against dealings were abolished and replaced with Form J restrictions.
Generally, a Form J restriction has the same effect as the old caution against dealings. A Form J restriction is entered on the Proprietorship Register as a warning of the official receiver’s interest to anyone having possible dealings with that property. A Form J restriction has only a limited effect as it does not prevent dealings with the property. To fully protect the official receiver’s interest all known mortgagees and charge-holders must be informed of the insolvency order.
If an attempt were made to sell the property, the prospective purchaser would normally obtain an office copy of the Register of Title. This would show all the entries made against the land, including any restriction(s) lodged by the official receiver or any other trustee or liquidator. To ensure that the vendor has obtained what is known as good legal title to the land, the purchaser will normally require the vendor to obtain the consent of the ‘cautioner’ to withdraw his or her caution or restriction. The official receiver then has the opportunity to consider the appropriate action.
The official receiver must ensure that all mortgagees and charge-holders are notified of the insolvency as soon as possible after the bankruptcy order has been made. They are also sent a questionnaire to complete regarding the type of mortgage held, amount outstanding, whether any security is held, etc. This information is significant, as the official receiver needs to determine whether there is any equity in the property and also ascertain whether there is any collateral security, such as endowment policies that may also need protecting.
In all cases where the official receiver becomes trustee, form MP3 must be sent to all mortgagees and charge-holders, asking them to note the OR's interest in a property which forms part of the bankruptcy estate and requiring them to account to him or her if they realise their securities, or if any other action is taken against the property. All recipients of the notice are required to return a duly signed copy of the notice, by way of acknowledgement of receipt.
Charge-holder and mortgagee details should be entered on the ‘Assets’ tab against the relevant property entry.
Land Registry form RX1 is used to register a Form J restriction. When completing this form, the official receiver must provide evidence that he or she has sufficient interest in the property which is capable of being registered by the Chief Land Registrar. The Land Registration Rules recognise a trustee in bankruptcy as having sufficient interest in a property.
8 Completion of the HM Land Registry form RX1- General
(Amended February 2014)
A template copy of form RX1 has been downloaded as a word document and completed, for example purposes in blue text, with the information that HM Land Registry require to lodge a Form J restriction. The contents of this form have been agreed with HM Land Registry to avoid applications being rejected.
To view the proforma RX1 click HERE.
The wording of the restriction makes it clear that a restriction cannot prevent the registration of a disposition by a registered charge-holder whose charge was registered before the restriction.
It is important that the official receiver (or deputy) signs both panel 10 and panel 12 of form RX1.
There is a fee payable to the Land Registry for registering a Form J restriction and this should be charged to the appropriate estate. From 17 March 2014 the fee charged for an application submitted (on form RX1) through the e-DRS will be £20 as prescribed by the Land Registration Fee Order 2013. The fee for an equivalent postal application is £40 and therefore the e-DRS should be used for all form J applications apart from when the official receiver does not have the full address of the property. In such circumstances an e-DRS application will not be accepted by the Land Registry and a postal application will have to be made. The fee is be paid centrally by the service wide Variable Direct Debit (VDD) when the ‘Key Number’ is used in box seven. The key number can be found in the The Land Registry Account Guidance. It is important that the reference used in box seven enables Estate Account Services (EAS) to properly identify the case and the office who made the application (e.g. LTADT-BKT00885685).
If both joint owners of a property are bankrupt then the fee payable is still £20 (providing that both of the RX1 applications are lodged together)(See introduction 8a). If a Form J restriction is required against more than one property where the bankrupt is a joint proprietor, application can be made against up to three titles on a single form RX1 (See introduction 8b).
When appropriate (See Introduction 8), any applications, search requests and enquiries made by an office should be despatched to the Land Registry, daily, by DX in a single package addressed to:
Land Registry Bankruptcy Unit
When sending standard applications/form to the Land Registry a covering letter is not required. A covering letter should only be used when providing specific instruction or information.
(Amended February 2014)
If both joint owners of a property are bankrupt then two form RX1s need to be completed. One of the form RX1’s needs to be annotated ‘1 of 2’ and the other ‘2 of 2’ in the top right hand corner of the forms. The fee for lodging the joint application is still £20 providing that both of the RX1 applications are lodged together. Payment is made by entering ‘£20’ in the ‘fee paid’ box of the first RX1, entering ‘NIL- see RX1 1of 2’ in the ‘fee paid’ box of the second RX1 and then stapling the two forms (together with the relevant attachments referred to at box 5 in each of the forms). It is important that the fee is apportioned correctly (i.e. 50/50) between the two estates. For this to be done the reference in box 7 of both forms should refer to both bankruptcy estates, the official receiver’s office making the application and also identifying that the application as a joint one. (e.g. JNT/BKT00885685/00885730). This reference cannot exceed 25 characters (including spaces).
Once the applications have been prepared they should be sent to the Land Registry as you would any other Land Registry application (see introduction 8).
(Amended February 2014)
If a bankrupt has an interest in a number of properties which require the protection of form J restrictions then only a single application on form RX1 should be made. The fee for this is £20 for up to three titles then £10 per subsequent title.
The application needs to be completed in the same way as you would an application against a single title, the only difference being in the way that panel two and three of the RX1 is completed. All title numbers for properties where a Form J restriction is required should be entered in panel two and their corresponding addresses should be entered in panel four.
Once the application has been prepared it should be sent to the Land Registry as you would any other Land Registry application (see introduction 8).
(Amended January 2011)
The official receiver should ask the Land Registry to enter a Form A restriction at the same time as registering a Form J restriction and is to be detailed on the same form RX1 and uses a standard form of wording (i.e. RESTRICTION: No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court). When entered on the register this implies that the joint tenancy has been severed.
The severance of the joint tenancy means that should one of the joint-owners die, the rule of survivorship whereby the surviving member automatically receives the deceased’s share, would not apply. There is no fee payable for the registration of a Form A restriction.
It is possible that the joint tenancy was severed prior to the date of the bankruptcy or that the property was originally held as tenants in common. If this is the case a restriction in Form A (as shown above) should already in place, the Land Registry will not allow another Form A restriction to be entered if one already exists.
(Amended March 2012)
Under the Land Registration Rules 2003, the official receiver may apply for a search of the Index of Proprietors’ names in respect of an individual specified in the application. Form PN1 should be used for this purpose (accompanied by Form CIT) and an appropriate fee is payable for each name searched. The search will reveal registered land or charges in which the bankrupt or company appears to have sole or joint interest. If copies of the Register of Title are required an additional fee is payable.
Where the official receiver is using this facility to identify any property that may be jointly owned by a bankrupt, the name of any spouse or civil partner if known, should be included on the application. Form PN1 should clearly show the official receiver’s case reference number and telephone number of the case officer to be contacted by HM Land Registry in the event of any query. The completed forms CIT and PN1 should be sent to the Land Registry Bankruptcy Unit, at:
2 William Prance Road
DX8249 - Plymouth 3
In exceptional cases, a search of the Land Charges Department at Plymouth may be used using Land Registry Form K15. This should not be carried out as a matter of routine and only in rare events, for example, in a non-surrender where the search may reveal an asset of the insolvent and/or possibly the current whereabouts of a company director or bankrupt.
(Amended July 2010)
When producing the Land Registry forms RX1, the Midlands RTLU address of PO Box 10089, Birmingham, B2 4WH should be used as the default address at Panel 9 instead of the local office address. Midlands RTLU will forward any subsequent Land Registry correspondence to the appropriate office dealing with the case. This covers the problem of dealing with properties in matters where the official receiver has re-located some years after the original restriction was lodged and a re-direction of mail is no longer effective. The local office address should be used at Panel 7 of the RX1 to avoid correspondence regarding the RX1 application being returned via the Midlands RTLU.
Where a bankrupt jointly owns a property situated in Scotland, the OR should initially have the bankruptcy order noted in Scotland. This is done by making a written request enclosing a copy of the bankruptcy order, to the Petition Department of the Court of Session in Edinburgh. The noted bankruptcy order together with evidence of the official receiver’s appointment as trustee, should be lodged with the Keeper of the Registers of Scotland with a request that it be entered on the Register of Inhibitions. This should alert any person who attempts to purchase or lend on the land that the official receiver has an interest. In addition, the official receiver should also write to the bankrupt informing him or her that the official receiver must be informed in writing, should there be any attempt to deal with the land.
The normal procedure of notifying all mortgagees of the bankruptcy order should also be followed (form MP2) and where the official receiver is trustee notice to account (form MP3) must also be sent.
(Amended February 2014)
The official receiver will only wish to register a Form J restriction (See introduction, paragraph 8) in company cases where a property is jointly owned by the company and others.
a If both joint tenants are bankrupt, two separate Form J restrictions must be registered. If both of the restrictions are submitted at the same time only one fee is payable (see paragraph 8 Completion of the HM Land Registry form RX1)
b In cases where the mortgagee has obtained possession or is in the process of re-possessing the property, refer to the examiner, as it may no longer be necessary to lodge a Form J restriction.
c A Civil Partnership is a means by which same sex couples may obtain legal recognition of their relationship and gain equal treatment in a wide range of legal matters in line with married couples.
Where can I find out more?
Insolvency Act 1986
Section 283 – Definition of bankrupt’s estate
Section 426 – Co-operation between courts exercising jurisdiction in relation to Insolvency Enforcement in other parts of the UK (Scot)
The Land Registration Act 2002
The Land Registration Rules 2003
The Land Registration Fees Order 2006
The Land Registration (Amendment) Rules 2008
T20-05 – Civil Partnership Act 2004
T34-08 – Dealing with property in Scotland - making an application to the Court of Session to validate an insolvency order
Land Registry website
Registering a form J Restriction
Land Registry Practice Guide (LRPG) no 34 – Personal Insolvency
Land Registry Practice Guide (LRPG) no 35 – Corporate Insolvency
Forms to be used:
Land Registry forms
RX1 – Application to enter a restriction
CIT – Application in connection with court proceedings, insolvency and tax liability
K15 – Application for an official search (not applicable to registered land)
PN1 – Application for a search in the index of proprietors’ names
LRCLET – ‘Land Registry, caution letter’
MP1 – ‘Mortgaged Property (1) - Letter sent to the bankrupt and/or co-owner of a property inviting an offer to purchase the bankrupt's interest in that property from the official receiver’
MP2 – ‘Mortgaged Property (2) - Letter to mortgage lender seeking information about the mortgage’
MP3 – ‘Mortgaged Property (3) - Letter to a mortgagee asking them to note the OR's interest in a property which forms part of the bankruptcy estate’
NTASS – ‘Notice to assurance company’
(Amended January 2011)
1 The examiner will normally conduct a land registry search against the title of a property if he/she believes that the bankrupt has an interest in that property. This should be obtained by using the Land Registry Portal (see CHM: Solely owned property: introduction 5).
2 The examiner should ensure that the ownership details are correct (proprietorship register) and a copy of the Land Registry title view should be placed on the case file. If the bankrupt is a joint proprietor of the property, ensure full details of the property and its joint ownership are entered on ISCIS, (‘Assets’ tab).
3 Enter details of the Mortgages/Charges on ISCIS,(‘Assets’ tab), under the property charge-holders list.
4 Receive instructions from examiner to deal with jointly owned property requiring an application to lodge a Form J restriction. Make application for Form J restriction as per the guidance at introduction paragraph 8.
5 When completed, pass to the official receiver (or deputy) for signing, enclosing:
(Amended February 2014)
6 Form RX1s that are submitted by post (See introduction 8) should be despatched to the Land Registry, daily, by DX in a single package addressed to:
Land Registry Bankruptcy Unit
A covering letter is not required.
7 Send form MP2 (‘Docs’ tab), letter to mortgagee (and other charge-holders) seeking information about the mortgage/ charge.
8 If the OR is to be trustee, send 2 copies of form MP3 (‘Docs’ tab), letter to a mortgagee asking them to note the OR's interest in a property which forms part of the bankruptcy estate. A copy should be signed by the mortgagee and/or other charge-holder, and returned to the official receiver.
9 When replies are received from all known mortgagees and charge-holders, if there are any endowment or other insurance policies connected to the mortgage, prepare and send forms NTASS (‘Docs’ tab) . This is a letter to the assurance company informing them of the bankruptcy order and seeking information about life policies held by the bankrupt. Please ensure that the schedule to accompany the letter is attached.
10 Await acknowledgement from the Land Registry confirming that the Form J restriction has been lodged. Where this has not been received, prepare form ‘LRCLET.Reminder.dot’ (‘Docs’ tab), ,which is a reminder of the application to lodge a Form J restriction, and send to the Land Registry.
11 When form RX1 has been signed and returned to you, prepare form LRCLET, (‘Docs’ tab) - a letter to the Land Registry enclosing the Form J restriction.
12 Attach form LRCLET to signed form RX1 and pass to the cashier to record, and for forwarding to Land Registry after ensuring that box 4 and 7 have been completed correctly with details of the Variable Direct Debit key number. Ensure that the certified copy of the bankruptcy order and the copy of the no meetings notice are enclosed with any application.
13 Await acknowledgement from the Land Registry confirming that the Form J restriction has been lodged. Where this has not been received, prepare 2 copies of form LRCLET (‘Docs’ tab), selecting the option for the letter to be a reminder of the application to lodge a Form J restriction, and forward a copy to the Land Registry.