Chapter 5: Enforcement of interests over registered land

Question 1

1. Introduction to enforcement

Answer 1

Enforcement of interests over registered land is governed by the Land Registration Act 2002 (LRA
2002) and administered by the Land Registry who maintain an electronic register of all registered
land in England and Wales.
One of the key features of a proprietary right is that it is capable of being enforced against a third
party ie a new owner of the burdened land.

Question 2

1. Introduction to enforcement

Answer 2

If the burdened land is registered, whether the proprietary right will in fact be enforceable is
determined by applying the enforcement rules under the LRA 2002. It is these rules that are the focus of this chapter. These rules are also the law behind the process
of ‘title investigation’, which is undertaken by a buyer’s solicitor before exchange of contracts
occurs.

Question 3

1.1 The Land Registration Act 2002

Answer 3

Simply, the LRA 2002 places all estates and interests in land into one of three categories and
explains what must be done in terms of registration in order to make those estates and interests
binding on new owners of the servient land. The categories interact with LRA 2002, s 28 and s 29 to determine whether an estate or interest will be binding on new owners of servient land.

Question 4

1.1 The Land Registration Act 2002

The three categories are:

Answer 4

• Registrable dispositions
• Interests protected by entry
• Overriding interests

Question 5

1.2 The ‘basic rule of priority’

Answer 5

It is logical to start with the ‘basic rule of priority’ in LRA 2002, s 28. It states that an interest of whatever kind will take priority over later dispositions.

Question 6

Example: The basic rule of priority

Answer 6

If a man has a registered freehold estate and grants an easement to one neighbour, then enters a
covenant with another neighbour, then sells the freehold to a women, the women will take the freehold subject to the pre-existing easement and covenant.

Question 7

Example: The basic rule of priority

Answer 7

LRA 2002, s 29 provides an important exception to this rule, which operates where there is a
disposition of a registered estate for valuable consideration. This is actually the majority of land
transactions.

Question 8

1.3 ‘A disposition of a registered estate for valuable consideration’

Answer 8

LRA 2002, s 29 is difficult to understand, but its effect is this:

A registrable disposition of a registered estate made for valuable consideration will take priority
over any pre-existing rights in the land except those which have been protected on the register or those which are overriding interests.

Question 9

Example: Effect of LRA 2002, s 29

Answer 9

If a woman buys freehold land and registers the disposition, the woman will take the land subject
to interests which have been protected on the register and overriding interests. The woman will not take the land subject to any interests which should, but have not, protected. These unprotected
interests would then be ‘lost’ forever. These unprotected interests would then be ‘lost’ forever.

Question 10

s 28

Answer 10

This means that s 28 and the normal rule of priority is limited in scope to transactions not made
for valuable consideration: where the new owner is a ‘donee’ (also referred to as a ‘volunteer’).

Question 11

Donee

Answer 11

A donee is someone who has been gifted or inherits the land. The basic rule of priority applies to donees which means donees will take the land subject to all pre-existing interests, irrespective of whether they have been protected by registration.

Question 12

Example: Donees

Answer 12

A man is gifted a freehold estate. On registration as the new owner, he will take the land subject
to:
* All properly created interests which have been protected on the register;
* Any overriding interests; and
* Any properly created interests which should, but have not been, protected.

Question 13

1.4 Summary

Answer 13

• Enforcement of interests over registered land is governed by the LRA 2002.
• A donee of land will take the land subject to all pre-existing estates and interests whether they
  are protected by registration or not.
• A purchaser for valuable consideration will take land subject to all properly protected interests
  and overriding interests.

Question 14

2. Registrable dispositions: legal interests

Compulsory Registration

Answer 14

To achieve an accurate register of title, LRA 2002, s 27 states that some transactions, set out in s
27(2) and called ‘registrable dispositions’, must be completed by registration. Section 27(1) states
that the dispositions do not operate ‘at law’ until the registration has been completed. We call this
‘compulsory registration’.

Question 15

2. Registrable dispositions: legal interests

Answer 15

Some of the dispositions listed in s 27(2) relate to legal estates. The transfer of an existing registered freehold or leasehold estate must be completed by registration (s 27(2)(a)); as must the grant of a new lease for a term of more than seven years (s 27(2)(b)).

Question 16

2.1 Express legal easements

Answer 16

The easement will then appear on the property register of the dominant land and in the charges
register of the burdened land. It will be a properly registered disposition and will bind a purchaser
for valuable consideration (LRA 2002, s 29(2)).

Question 17

2.2 Grant of a legal mortgage

Answer 17

The grant of a legal mortgage (also known as a legal charge) by a borrower is a ‘registrable
disposition’ (LRA 2002, s 27(2)(f)).
As with express legal easements, the mortgage must be created by a deed which is submitted for
registration. The mortgage will not be legal until it has been properly registered, and failure to do
so has a huge impact on the lender’s powers to repossess and sell. Once registered it appears in the charges register of the mortgaged land.

Question 18

2.3 Grant of a landlord’s right of entry

Answer 18

The grant of a landlord’s right of entry, known as a right of forfeiture, is a ‘registrable disposition’ (LRA 2002, s 27(2)(e)). As with other legal interests it must be created by a deed and must be
submitted for registration. The right will not be legal until it has been properly registered. A right of entry is a right to bring a legal estate, a lease, to an end. It is a very powerful right which has drastic consequences for the tenant, thus it is logical that it has a high degree of formality to meet.

Question 19

2.4 Summary

Answer 19

• A purchaser for valuable consideration will take land subject to, amongst other things, all
  properly registered ‘registrable dispositions’.
• Registrable dispositions are set out in LRA 2002, s 27.
• The most common legal interests in land are express easements, mortgages and rights of
  entry. All of these are registrable dispositions.
• If they are registered, then a purchaser for valuable consideration of the burdened land will take the land subject to them.
• A purchaser for valuable consideration includes a lender.

Question 20

3. Equitable interests protected by entry and overreaching

A notice or restrictions

Answer 20

An equitable interest in the land (eg an estate contract) can be validly created and exist without
any registration requirement.
Whether the equitable interest with be binding and enforceable against a third-party purchaser of the burdened land will depend upon whether it has been protected by entry of either a notice or restriction.

Question 21

3. Equitable interests protected by entry and overreaching

Answer 21

All equitable interests (other than an interest in a trust of land) must be protected by the entry of a
notice in the Charges Register of the burdened land (LRA 2002, s 32).
If an interest is protected this way, it will bind subsequent purchasers, who may be buyers or lenders (LRA 2002, s 29(2)).

Remember: a new owner of the burdened land who is a donee would be automatically bound by
any equitable interests regardless of whether they have been protected under the basic rule of
priority (LRA 2002, s 28).

Question 22

3.1 Interests which may be protected by entry of a notice (LRA 2002, s 32)

Answer 22

A notice is the appropriate way to protect an interest which is intended to last beyond a change
of ownership. The most commonly encountered interests which cannot be protected by notice are beneficial interests in a trust of land (which can be protected by a restriction), and short legal leases for a term of three years or less (which are binding as overriding interests).

Question 23

3.1 Interests which may be protected by entry of a notice (LRA 2002, s 32)

Answer 23

A notice is intended to bring the relevant equitable interest to the attention of a purchaser,
notifying them that the interest will be binding if the purchaser proceeds. The entry of the notice does not guarantee that the interest has been properly created so as to be valid. It simply means that if the interest has been properly created, it will be binding.

Question 24

3.1 Interests which may be protected by entry of a notice (LRA 2002, s 32)

Answer 24

Some interests must be protected by notice to be enforceable against a purchaser; others may
be, but do not have to be. For example, legal leases which are granted for more than three years
and up to seven years can be, but do not have to be protected by notice as they will still be binding as overriding interests.

Question 25

Assessment focus point: Doctrine of Notice

Answer 25

A notice in the charges register must not be confused with the ‘doctrine of notice’ which is
relevant only to unregistered land.

Question 26

3.2 Interests which may be protected by entry of a restriction (LRA 2002, s
40)

Answer 26

A restriction in the Proprietorship register is the appropriate way to protect an interest which is not
intended to last indefinitely. It is a means by which conditions can be imposed on a purchaser: it is only when the conditions have been fulfilled can, for example, the transfer of the freehold to a
purchaser be registered.

Question 27

3.2 Interests which may be protected by entry of a restriction (LRA 2002, s 40)

Answer 27

A restriction may also be entered where the registered proprietor of the land is bankrupt. In that
situation, the trustee in bankruptcy may enter a restriction to the effect that no disposition of the
land may be registered without the trustee in bankruptcy’s consent. This ensures that no sale can
take place without the trustee’s knowledge, and the trustee’s consent can be granted on condition that the sale proceeds are paid direct to the trustee, rather than the bankrupt.

Question 28

Overreaching

Answer 28

The best example of use of a restriction is by a beneficiary of an interest in a trust of land. In this
type of case, a restriction will usually ensure that overreaching occurs.

Question 29

Assessment focus point

Answer 29

Restrictions cannot prevent dispositions altogether: they simply impose conditions which must
be fulfilled before the disposition can be registered.

Question 30

3.3 Overreaching

Answer 30

Overreaching is a very important concept in land law and applies to interests in trusts of land and
to no other interest. Overreaching is governed by LPA 1925, s 2 and s 27 and applies equally to registered and unregistered land. It is not a feature of one system, rather it is something that must be considered
if a trust of land exists.

Question 31

3.3 Overreaching

Answer 31

A purchaser (which may be a buyer or lender) of land that is subject to a trust will need to ensure it will not take the land subject to any equitable interest a beneficiary of the trust has. To ensure it takes the land free of any equitable interest held by a beneficiary it must overreach the interest.

Question 32

3.3.1 How is an equitable interest in a trust of land overreached?

Answer 32

A purchaser must make sure that the capital money (which is the purchase price or the mortgage
advance) is paid to at least two trustees. The money must not be paid direct to the beneficiaries,
unless they are also a trustee. This has the effect of transferring the equitable interest from the
land to the monies paid.

Question 33

3.3.2 How does a restriction trigger overreaching?

Answer 33

If a restriction is entered on a registered title in respect of an interest in a trust of land, it will
require the purchaser to pay the monies to two trustees. A restriction used in this way therefore triggers overreaching, and ensures a purchaser/lender will take the land free of the trust interest

Question 34

Example: Overreaching

Answer 34

A man is the beneficiary of a trust of land of a house (the House). The legal title to the House is
registered in his partner’s name only. The man’s partner is therefore the trustee. The man and his partner wish to sell the House. If the purchaser pays the money to the partner only, the man’s equitable interest in the trust of land will not be overreached, it will remain in the land.

Question 35

Example: Overreaching

Answer 35

If the purchaser pays the money to the partner and a second trustee (someone needs to be appointed to take receipt of the monies – this could be the beneficiary or their solicitor) then the man’s equitable interest in the trust of land will be overreached. The man will no longer have any interest in the House, he will have an interest in the money.

Question 36

Key case: City of London BS v Flegg [1987] UKHL 6

Answer 36

Facts: Mr and Mrs Flegg, and their daughter and son-in-law, the Maxwell-Browns, decided to buy
a property together and all made direct contributions to the purchase price. The Fleggs paid cash
and the Maxwell-Browns borrowed their contribution. Legal title was held by the Maxwell-Browns
but the Fleggs had beneficial interests under an implied trust which arose from their contribution
to the price.

Without the Fleggs’ knowledge the Maxwell-Browns remortgaged the property several times to help Mr Maxwell-Brown’s business. The business failed, the Maxwell-Browns failed to make the mortgage repayments and the Building Society sought possession. The Fleggs said they had beneficial interests in the property which bound the building society and therefore it could not enforce the mortgage against them.

Question 37

Key case: City of London BS v Flegg [1987] UKHL 6

Answer 37

Held: The House of Lords held that it was not right. The Fleggs did originally have interests in the
land because of their contribution to the price. However when the Maxwell-Browns borrowed
money from the building society, the building society had paid the money to two trustees/legal
owners, being the Maxwell-Browns. The effect of this was that the Fleggs’ interests in land were
transferred to the money.

Of course, this had now gone. Although the Fleggs were living in the property, as they did not have a beneficial interest in the land, the building society was not bound
in any way and were free to repossess. The Fleggs had to move out, and any claim they had was
against the Maxwell Browns who had received the money. The building society was free to
repossess. If the Maxwell-Browns had been honest trustees, they would have handed over to the
Fleggs the amount of money which represented their interest.

Question 38

Key case: Williams & Glyn’s bank v Boland [1981] A.C. 487

Answer 38

Facts: A house was registered in Mr Boland’s sole name: he held the legal title. His wife had made
a substantial contribution to the price, so she had an equitable interest under an implied trust with
her husband as sole trustee. Without Mrs Boland’s knowledge or consent, Mr Boland remortgaged
the property to the Bank, which raised no enquiries about her. The bank paid the mortgage money to Mr Boland – ie to one trustee.

Question 39

Key case: Williams & Glyn’s bank v Boland [1981] A.C. 487

Answer 39

When the bank sought possession, to sell the property and recover money due, Mrs Boland
argued that it couldn’t enforce the mortgage against her because she had a beneficial interest in
the land which had not been overreached and which bound the bank as she was in actual
occupation.

Question 40

Key case: Williams & Glyn’s bank v Boland [1981] A.C. 487

Answer 40

Held: The court agreed that the bank had not overreached her interest because they had paid the
money to just one trustee – Mr Boland. It should have insisted that a second legal trustee was appointed (ideally, Mrs Boland) to overreach any potential beneficial interest she had. As there was no overreaching, Mrs Boland’s interest remained in the land itself, rather than transferring to the money, and bound the bank because she was in actual occupation, which was unable to repossess and sell.

Question 41

3.4 Summary

Answer 41

• A purchaser for valuable consideration will take land subject to, amongst other things, all
  equitable interests protected by entry of a notice in the Charges register.
• The most common equitable interests protected this way are restrictive covenants, estate
  contracts and equitable easements.
• Other interests may, but do not have to, be protected by notice; but trust interests cannot be
  protected by notice.

Question 42

3.4 Summary

Answer 42

• If the interests are protected, then a purchaser for valuable consideration of the burdened land
  will take the land subject to them. A donee would still be bound under the ‘basic rule of priority’.
• If they are not protected, then a purchaser for valuable consideration of the burdened land will take the land free of them.
• Restrictions impose conditions which must be fulfilled before a disposition of the land can be
  registered.

Question 43

3.4 Summary

Answer 43

• A restriction can be entered to trigger overreaching.
• Overreaching applies to a trust of land only. It operates to move the beneficiary(s) equitable
  interest from land into money. Overreaching can still occur without a restriction.
• To overreach an equitable interest in a trust of land, the money must be paid to at least two
  trustees/legal owners.

Question 44

4. Overriding interests

Answer 44

Overriding interests: They are interests which will bind a purchaser for value, whether a buyer or lender, even though they have not been protected by registration.

Question 45

4. Overriding interests

Answer 45

The main aim of land registration is to ensure that the register represents a complete record of all
of the interests affecting any particular piece of land, enabling a prospective purchaser to view
the register and see exactly what interests benefit and burden it.

Question 46

4. Overriding interests

Answer 46

Overriding interests defeat that aim. Their recognition has been contentious ever since they were
introduced in the LRA 1925 because they undermine the integrity of the register. The Law Commission did consider abolishing overriding interests altogether but recommended retaining them in limited form in the LRA 2002. Their continued existence means that inspections and enquiries which go beyond simply looking at the registers of title will still be needed.

Question 47

4. Overriding interests

Answer 47

Overriding interests may be said to provide a safety net of protection for those who are not able
to, have not, or cannot reasonably be expected to take steps to protect their interests in land.

Question 48

4.1 The main categories

Answer 48

If there is a ‘registrable disposition’ of the land, the new registered proprietor will take the land
subject to any overriding interests.
Where land is already registered, the list of overriding interests is set out in LRA 2002, Schedule 3.
These are:
* Paragraph 1: legal leases granted for a term of seven years or less.
* Paragraph 2: equitable interests held by people in actual occupation of the land, subject to
exceptions.
* Paragraph 3: implied legal easements or profits a prendre, if conditions are met.

Question 49

4.2 Para 1: Legal leases for seven years or less

LRA 2002, Schedule 3 para 1:

Answer 49

A leasehold estate in land granted for a term not exceeding seven years from the date of the
grant, except for –
[…] (b) a lease the grant of which constitutes a registrable disposition

Question 50

Legal leases for more than seven years

Answer 50

are registrable dispositions (LRA 2002, s 27(2)(b)). As part of the registration process, a note of the lease will be added to the register of the freehold title, and it will be binding on a new freehold owner. Legal leases which are shorter than this do not have to be substantively registered and will bind a new freehold owner as overriding interests. The rationale for this is two-fold

Question 51

4.2 Para 1: Legal leases for seven years or less

Answer 51

First, there are too many short leases in existence to make
registration a practical proposition. Second, it is unreasonable to expect those who occupy
premises under short leases, especially residential short leases, to register them. Frequently these
arrangements are entered into without legal advice, and it is asking too much of tenants to expect
them to realise that they must protect their interests by registration.

Question 52

Assessment focus point

Answer 52

Equitable leases do not fall within this provision but may fall within Sched 3 para 2, equitable interests held by people in actual occupation.

Question 53

4.3 Para 2: Equitable interests held by people in actual occupation

LRA 2002, Schedule 3 para 2:

Answer 53

An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to the land of which he is in actual occupation […] This is probably the most controversial category of overriding interests. The provision does have exceptions, but the scope of the basic provision must be considered first. It has a wide reach, as it has the effect of, amongst other things, enforcing equitable trust interests, which have not been overreached, against purchasers and lenders.

Question 54

LRA 2002

Answer 54

The Law Commission explained why it felt it necessary to retain this class of overriding interest in the LRA 2002. First, it felt that it was unreasonable to expect people whose interests had arisen
informally, for example under implied trusts, to take formal steps to protect those interests. Second, when people occupy land, they tend not to appreciate that their position may be precarious, and therefore do not think about whether they need to do anything to protect their position.

Question 55

4.3 Para 2: Equitable interests held by people in actual occupation

Answer 55

The category of overriding interests based on actual occupation is therefore designed to protect people who do not realise that they are in a vulnerable position. In order for an interest to be overriding within Sched 3 para 2 there must be an interest in land
and the holder must be in actual occupation of the land to which the interest relates.

The interest must be a qualifying proprietary ‘interest in land’ rather than a personal right. Classic examples are: equitable interests in a trust of land; equitable leases and options to purchase. It is not enough simply to hold one of these interests; the holder must be in actual occupation of the land too.

Question 56

4.4 What is ‘actual occupation’?

Answer 56

There is no definition of ‘actual occupation’ in the LRA 2002. In Link Lending v Bustard [2010]
EWCA Civ 424, Mummery LJ said that case law decided under the equivalent provision in LRA
1925, s 70(1)(g) can assist but said:
[…] The trend of the cases shows that the courts are reluctant to lay down, or even, suggest, a
single test for determining whether a person is in actual occupation.

Question 57

4.4 What is ‘actual occupation’?

Answer 57

He set out a non-exhaustive list of factors which should be considered when deciding whether someone is in actual occupation of land. It must be noted that weight is given not simply to objective matters, but also to the subjective intentions and wishes of the person who holds the interest:

[…] The degree of permanence and continuity of presence of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person are among the
relevant factors […]

Question 58

4.4.1 ‘Actual occupation’: key cases

Williams & Glyn’s Bank v
Boland [1981] AC 487

Answer 58

Actual occupation is to be given its plain meaning, and involves a
degree of physical presence.

Question 59

Abbey National v Cann
[1991] 1 AC 56

Answer 59

There must be ‘permanence and continuity’ and not simply a
‘mere fleeting presence’ preparatory to moving in.

Question 60

Thompson v Foy [2010] 1
P&CR 16

Answer 60

The person claiming the interest must be in actual occupation at
the time of the transfer deed and possibly also at the time of
registration to claim an overriding interest.

Question 61

Chhokar v Chhokar [1984]
FLR 313

Answer 61

Actual occupation is not defeated by temporary absences such
as holidays, hospital stays or business trips.

Question 62

Stockholm Finance Ltd v
Garden Holdings Inc
[1995] NPC 162

Answer 62

There will be a point at which a prolonged absence means there is
no actual occupation. For example, protracted periods of absence in a second home elsewhere will make an argument for actual occupation unsupportable.

Question 63

Key case: Link Lending v Bustard

Answer 63

Facts: Mrs Bustard (B) suffered a mental illness which impaired her ability to make rational decisions. She was the registered freehold owner of her home. Mrs Hussein (H) fraudulently persuaded B to transfer the property to her in 2004. H borrowed money from Link Lending (L) and secured the loan with a mortgage over the property. B never received any money for the transfer or from the loan, although she remained living at the property. In 2007, B was detained in a
mental health hospital and was unable to live at home. She paid the bills and visited every week.
When H defaulted on the loan, L brought possession proceedings.

Question 64

Key case: Link Lending v Bustard

Answer 64

Held: The court considered whether B had an overriding interest under LRA 2002, Sched 3 para 2.
It was plain that although she had transferred the legal estate to H, she retained the equitable
interest. The question was whether B was in actual occupation. L argued that forcible detention
hospital for over a year meant that she was not, and therefore had no overriding interest to bind
it. The court held that as a matter of fact B was in actual occupation. Her belongings remained;
her absence was involuntary; and her regular visits demonstrated a continuing intention to
return.

Question 65

4.5 Exceptions to actual occupation

Answer 65

LRA 2002, Sched 3, para 2(b) and (c) sets out two situations in which there will be no overriding
interest even though the holder is in actual occupation. An interest will not override a disposition where it is:
(b) an interest of a person of whom inquiry was made before the disposition and who failed to
disclose the right when he could reasonably have been expected to do so.

Note. It is the holder of the interest (or their solicitor) who must be asked and fail to disclose, and
those who do not know they have an interest cannot reasonably be expected to disclose it so it
remains overriding

Question 66

4.5 Exceptions to actual occupation

Answer 66

(c) an interest –
(i) which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and
(ii) of which the person to whom the disposition is made does not have actual knowledge
at the time. It is the occupation which would not have been obvious, and it is the interest which the purchaser does not know about. Both elements must be met for if the interest is to lose overriding status. This protects purchasers from interests which they do not know about, and where there is no obvious actual occupation to prompt an enquiry

Question 67

4.6 Para 3: Implied legal easements

Answer 67

Schedule 3 para 3 states that an implied legal easement will be binding as an overriding interest
if:
(a) The new owner knew about it;
(b) The new owner did not know about it, but it was obvious on a reasonable inspection of the
land; or
(c) It has been exercised within the 12 months immediately before the disposition

Question 68

4.6 Para 3: Implied legal easements

Answer 68

Therefore, most implied legal easements, even those which are not obvious, will be overriding
interests as it is highly likely that they will have been exercised recently. For example, an easement
through an underground drain, not visible from the surface, will be binding if it has been used
recently. This is good news for the holder of the easement but not such good news for the new
owner of the burdened land, who will be bound by it.

Question 69

Assessment focus point

Answer 69

Remember, an easement may be implied under the rule in Wheeldon v Burrows, by common intention, by necessity or by virtue of LPA 1925, s 62. An implied easement takes its status from the document it is implied into, which is often a legal transfer deed or legal lease.