Enforcement of 3rd Party Interests against a Purchaser (registered)

Question 1

Estates requiring Substantive Registration – s27 LRA 2002

Answer 1

• Transfers of a freehold or leasehold
• Grant of lease for more than 7 years
• Assignment of lease with more than 7 years to run
• First legal mortgage of freehold, or leasehold with
more than 7 years to run
• Landlord’s right of entry
• Express easement for a freehold or leasehold
term

Question 2

LRA 2002, s28

Answer 2

All interests in registered land will be binding on a new owner of a registered estate, but this is heavily qualified by LRA 2002, s29(1) and (2).

Question 3

LRA 2002, s29(2)

Answer 3

Holders of minor interests are required to protect their interest by entering a s32 notice on the charges register of the servient land in order to ensure that a buyer of that registered estate will be bound.

Question 4

LRA 2002, s29(1)

Answer 4

Failure to protect your interest by entering a S32 notice means the new owner takes the land free from the minor interest.

Question 5

LRA 2002, Sch 3

Answer 5

A new owner will not take the land free from the interest, even if it hasn’t been protected by a S32 notice, if it is deemed to be an overriding interest.

Question 6

Interests protected by S32 Notice

Answer 6

Commercial equitable interests – rights designed to last a long time and bind servient land through successive owners.

o Equitable easements
o Restrictive covenants
o Estate contracts

Notices appropriate for the protection of commercial interests as they ensure a duly protected valid equitable interest will continue to bind the land through subsequent title holders.

Question 7

Family equitable interests

Answer 7

Intrinsically moveable rights which the trustee can manage by buying and selling trust assets free from the beneficiary’s interest.

o Interests behind an express or implied trust

Not possible to protect a family equitable interest by S32 notice, because would mean the beneficiary could permanently fix his interest to the land which would conflict with the trustee’s fundamental right to manage the trust fund by selling the land free from the beneficiary’s interest.

Question 8

Does entry of a S32 notice in the register automatically protect the interest?

Answer 8

Yes, but it does not mean interest in land is valid.

Question 9

LRA 2002, s29(1)

Answer 9

If an interest is not correctly protected on the register, a purchaser for valuable consideration (includes buyer and lender) takes the land free from it, unless it takes effect as an overriding interest, even if he is aware of the interest.

Question 10

De Lusignan v Johnson [1973]

Answer 10

The buyer had express notice of an estate contract but nevertheless took it free from the interest as it had not been protected.

Question 11

Wilkes v Spooner [1911]

Answer 11

Once an interest is lost, it doesn’t reappear.

Question 12

What is a restriction?

Answer 12

• Restrictions appear in the proprietorship register.
• Show that the proprietor is under some restriction
affecting his ability to deal with the property.
Unless the terms are complied with, the registrar
will not register the new owner of the property.
• Most commonly used to ensure family equitable
interests are overreached.

Question 13

LRA 2002, s44

Answer 13

Where 2 or more persons are registered as the proprietor of an estate in land, the registrar is obliged to enter a restriction to alert the buyer of the need to overreach i.e. pay the purchase monies to at least 2 trustees.

Question 14

What is overreaching?

Answer 14

Process where beneficial interests in land under a trust become detached from the land and transferred to the money paid by the buyer. Enables purchaser to take land free from those beneficial interests, irrespective of whether a restriction placed on register.

Question 15

Overreaching

Answer 15

Only applies to beneficial interests behind a trust not to any other type of interest in land
Detaches the equitable interest from the land and transfers it into money
Money can be purchase money or mortgage loan
Money must be paid to at least 2 trustees/legal owners
Protects the buyer/lender who takes land free of beneficial interests
Protects the beneficiary as he still has interest in the sale proceeds
Applies to registered and unregistered land

Question 16

Williams & Glyn’s Bank Ltd v Boland [1981]

Answer 16

Husband held legal title to a house and re-mortgaged it to the bank. Wife was in occupation and had an equitable interest. The interest was not overreached because the money was only paid to the husband so one trustee. Therefore, the wife had an overriding interest and bank couldn’t take the house.

Question 17

City of London Building Society v Flegg

Answer 17

Husband and wife, daughter and son-in-law all bought a house together. D&S re-mortgaged it to building society without telling H&W. H&W did have an equitable interest through contribution to the purchase but when loan money was paid during remortgaging, was paid to 2 trustees – D&S – and so the equitable interest was now in the mortgage money as opposed to the land. H&W did not have interest in the land and bank could take house free of interest.

Question 18

Overriding Interests

Answer 18

• Interests which do not need to be registered to be
binding. List provided under Schedule 3 LRA 2002
o Legal leases for 7 years or fewer (para 1)
o Interests of people in actual occupation (para 2)
o Implied legal easements (para 3)
o Beneficiaries under an implied trust
o Equitable lessees

Question 19

Schedule 3 LRA 2002 para 3

Answer 19

• Implied legal easements will be held to be overriding interests:
o If existence known to buyer, OR
o Obvious on reasonable inspection, OR
o Exercised within 1 year prior to disposition

Question 20

Schedule 3 LRA 2002 para 2

Answer 20

INTEREST IN LAND + ACTUAL OCCUPATION + CONDITIONS IN SCH 3 PARA 2 = OVERRIDING INTEREST

• Interest held by people in actual occupation of the land over which the interest exists will be overriding interests.
• Overriding unless (Schedule 3 para 2)
o not disclosed by interest holder on enquiry
o Belongs to a person whose occupation would not have been obvious on reasonable inspection of the land and purchaser has no actual knowledge of the interest.

Question 21

Webb v Pollmount [1966]

Answer 21

There does not need to be any causal connection between the right protected and the occupation that provides the protection. An option to purchase freehold included in a lease was held to be an overriding interest when challenged by the successor in title.

Question 22

Lloyd’s Bank v Carrick [1996]

Answer 22

There is an absence of the safety net if the land is unregistered. Widow’s estate contract was held void against the bank, despite being in occupation and no enquiry had been made of her.

Question 23

Link Lending v Bustard [2010]

Answer 23

Actual occupation held to be intention to return to the property, payment of outgoings and leaving your stuff there will be held to be actual occupation.

Defendant detained in a mental hospital but always intended to return to it. Paid bills, supervised visits.

Question 24

Abbey National v Cann [1991]

Answer 24

Don’t have to be there for actual occupation to be held. If possessions are there and have you have intention to return

Question 25

Chhokar v Chhokar [1984]

Answer 25

Don’t have to be physically present at time of sale. Actual occupation isn’t interrupted by holidays/business trips/hospital stays etc

Question 26

Stockholm Finance Ltd v Garden Holdings Inc [1995]

Answer 26

London flat of a Saudi princess – not been there in over a year, but had staff and possessions there

Question 27

Strand Securities v Caswell [1965]

Answer 27

Lease of a flat not protected by registration – allowed step daughter and her children to live there rent free. Freeholder sold flat and said he was not bound by the lease as stepfather wasn’t in actual occupation. Court agreed. You can’t occupy through someone else. Step daughter didn’t have an interest in land. Have to have interest AND occupation.