Essay land law overriding and overreaching 80% PDF

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final coursework for land law about overriding and overreaching interests in land...

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‘In the registered land system, overreaching and overriding interests represent opposing trends in modern land law. While overreaching operates to benefit purchasers and mortgagees, they can be unfairly disadvantaged by the overriding interests of those in actual occupation of the land.’

Critically discuss this statement.

Word count: 2000 Overriding interests in registered land have always been controversial 1. Since compulsory registration was first introduced in 18972, and afterwards fixed and expanded 1 Law Commission, Updating the Land Registration Act 2002 (Law Com CP No227,2016) para11.2. 2 Judith-Anne MacKenzie, Textbook on Land Law(16thedn, Oxford University Press2016)p86.

under the Land Registration Act 20023 (“LRA 2002”), the main goal of the legislature was to produce on the register an accurate representation of all the rights burdening a piece of land4. Consequently, the existence of binding unregistered rights is contradictory. However, the Law Commission concluded that there are some rights, particularly those that arise informally under a trust of land, where it is unreasonable to expect them to be registered 5. This is mostly notable in the cases where actual occupation exists, where one believes that being in occupation of the land is enough protection.6 In contrast, overreaching is the process by which a beneficial interest is transferred from the land to the monies paid by a purchaser, no longer burdening the land even if it might have had overriding status7. Thus, there are two opposing trends regarding disposition in modern land law. One benefits a person who has an equitable right and is in actual occupation of the land, while the other benefits an innocent purchaser who, for different reasons, was not aware of any adverse rights. However, due to its economic and social value, the latter has been protected by the LRA 2002 and its interpretation by the courts8. This essay will argue that, although overriding benefits those in actual occupation of the burdened land, a reasonable careful purchaser (or mortgagee) is highly protected both by statute and recent case law.

The LRA 2002 replaced the Land Registration Act 1925 in its entirety, however it has preserved some features of the old law through transitional provisions 9. One of its main goals was to ensure that as many third-party interests as possible were registered against the title of the estate, thus emphasising the mirror principle 10. Section 71 encourages a person, both in first registration and in registration of a registered estate, to disclose any 3 Ibid. 4 Law Commission,(n1)para2.12. 5 Law Commission, Land Registration for the Twenty-First Century(Law Com No254,1998) para5.61. 6 Ibid. 7 McKenzie,(n2).

8 Martin Dixon, ‘The Boland Requiem’(2015) 4 Conv. 285. 9 MacKenzie,(n2)p86. 10 Law Commission,(n1) para11.2.

unregistered interests known to them 11. Although in the 1925 Act the majority of overriding interests were capable of being discovered by inspecting the property, the LRA 2002 nonetheless reformed its operation and scope in order to minimise their impact on a purchaser12. As an example, the 2002 Act created two Schedules that operate differently depending on whether it is first registration or disposition, making the latter less extensive than the former with the objective of giving a person who has given value the opportunity to discover which rights might bind him. At the same time, it has reduced the occasions an unregistered interest can override a disposition, terminating the overriding capacity of a number of diverse interests that must now be registered in order to be protected13. Regardless, the unregistered rights of those in actual occupation of the land still play an important role in a disposition. According to paragraph 2 of Schedule 3 of the 2002 Act, an interest will have overriding effect on the basis of actual occupation, in relation to the land he is in actual occupation of, if the occupation was “obvious on a reasonably careful inspection” or if the disponee had “actual knowledge” of the right at the time of the disposition. Simultaneously, an interest will be considered overreached if inquiries were made to a person in actual occupation and that person failed to disclose any rights when he could reasonably have done so. It is argued here that these sections have been construed and interpreted to give priority to a purchaser’s interest, rather than protecting an overriding interest of a person in actual occupation. Firstly, the fact that the interest has to exist in relation to the land that is being actually occupied explicitly reverses the position on Ferrishurst Ltd v Wallcite Ltd14, where an occupier’s option to acquire the whole property was held to override the registered title, despite only being in actual occupation of part of the land. Secondly, although the Act states the need for a careful inspection of the land, the purchaser does not have to inspect the land himself, being able to rely on the fact that the occupation was not actually discoverable if an inspection was made15. Lastly, it was decided by the House of Lords in Abbey National Building Society v Cann16 under section 70(1)(g) of the LRA 1925 that a purchaser is only bound by overriding rights that exist at the time of the transfer, eliminating 11 Section 71(a) and (b) LRA 2002.

12 Martin Dixon, Modern Land Law(10thedn, Routledge 2016). 13 Ibid.

14 [1999] CH 355. 15 Dixon,(n12). 16 [1991] 1 AC 56.

the registration gap. This has been now emphasised by Baker v Craggs 17, where Mr Craggs was held to have priority over Mr and Mrs Baker’s overriding interest, despite the fact that he failed to register his title within the period given by the land registry 18. Nonetheless, in Mortgage Express v Lambert19, although it was found on the facts that Ms Lambert had an equitable interest triggered by unconscionability and was in actual occupation of the property at the time the charge was created, the Court of Appeal was able to find different ways to reach an outcome favourable for the mortgagee20. the first place, Lewison LJ found that Ms Lambert had failed to disclose her equitable right when was reasonable for her to do so by relying on the contract of sale she signed, and was later on set aside for unconscionability 21. This means that not only Mortgage Express benefited from an inquiry they did not actually make but also, the wording of paragraph 2(b) was interpreted as a duty to disclose, ignoring the ‘reasonable’ concept affirmed in Begum v Issa22. However, Lewison LJ’s main reason for rejecting Ms Lambert’s priority was that, in his interpretation, her equitable right had been overreached when the two third-parties to whom she sold the property created the mortgage. Thus, even in situations where a trust exists because of a mere equity arising from unconscionability, despite having priority, the courts are still able to find that the right has been transferred to the monies paid by a purchaser, therefore losing its binding capacity. This decision is actually surprising, being that in Thompson v Foy 23, Lewison LJ affirmed, by relying on section 116 of the LRA 2002, that in cases of undue influence, if the right-holder were to be in actual occupation at the time of the transfer, this would take priority over the mortgagee24. When the existence of an equitable right is asserted, Williams & Glyn’s Bank v 25

Boland has clarified that if it is not overreached on a disposition and the right-holder is in actual occupation, it can take overriding status. This then represents two questions for the court: was the equitable right overreached; and if not, was there actual occupation. It has 17 [2018] EWCA Civ 1126. 18 Gwilym Owen, ‘Priorities and Registered Land During the Registration Gap’(2017)3 Conv. 230. 19 [2016] EWCA Civ 555.

20 Martin Dixon, ‘Priority, overreaching and surprises under the LRA 2002’(2017) 133 L.Q.R. 173. 21 Ibid.

22 [2014] 11 WLUK 81. 23 [2009] EWHC 1076. 24 Ibid. 25 [1981] AC 487.

been debated26 that the meaning of actual occupation has become broader, departing from an objective test to accommodate the “wishes and intentions” 27 of the occupier. However, it is established that ‘actual occupation’ depends on the facts of the case28, Lord Oliver pointing out that it “may have different connotations according to the nature and purpose of the property” and that it does not necessarily involve the “personal presence of the person claiming to occupy”29. Consequently, it is possible to argue that the courts always had the authority to find that actual occupation took place based on the specific events of the case in front of them. To answer the first question, the courts analyse different factors. For an equitable right to be overreached it has to exist under a trust of land, and the purchase money has to be paid to at least two trustees 30. If no other elements are involved, the right is deemed to only exist against the proceeds of sale which are held under a trust, even if there was no actual money involved.31 Moreover, section 2 of the Law Property Act 1925 considers overreaching to occur when the money is paid to the trustees, instead of the beneficiaries. This happens because the person with the legal title of a land under a trust is entitled to exercise its powers as an absolute owner 32, unless there are any limitations on that power imposed33 by the deeds creating the trust which, as a matter of construction, do not apply when the trust arises informally. In situations where an equitable interest has the capacity to be overriding due to actual occupation, the courts consider if the occupier has given consent to the disposition in order to ascertain if it was overreached. Although it was decided that consent does not mean mere knowledge34, it has been extended to incorporate occasions where the consent is not expressly given to the charge in question but it is given to the idea of getting a mortgage 35, 26 Christopher Bevan, ‘Overriding and over-extended? Actual occupation: a call to orthodoxy’(2016) 2 Conv. 104. 27 Link Lending Ltd v Bustard [2010] EWCA Civ 42. 28 McKenzie,(n2)p117.

29 Abbey National Building Society v Cann [1991] 1 AC 56 para 93. 30 City of London Building Society v Flegg [1988] 1 AC 54. 31 State Bank of India v Sood [1997] CH 276. 32 Section 6(1)TOLATA 1998. 33 Ibid, section 8.

34 Skipton Building Society v Clayton[1993]66 P&CR 223. 35 Thompson v Foy(n23).

and occasions where the consent is not given to the mortgagee directly but he can still relate on it.36 In addition to this already existing willingness to favour purchasers, the Court of Appeal has now reshaped the meaning of consent by applying what is called the Brocklesby principle37, which requires an equitable owner who has given full legal powers to another to manage his propriety, to bring to a third-party’s attention any limitations on that power if he wishes to rely on said interest against any future rights the third-party might acquire 38. This approach is arguably controversial39 being that not only the legal owner of a trust of land has by statute absolute owner powers40 but also, when there is co-ownership of land, a mandatory trust of land arises in which the owner of the legal title has the power of a sole owner41. Consequently, the only way to control the legal owner would be by placing a Restriction on the register, which goes against the curtain principle42 and might not happen in the common “family house” situation43.

Although overriding interests have the power to benefit persons in actual occupation, and in some cases purchasers do find that their rights have lost priority against occupiers, it has been argued here that the LRA 2002 has been designed with the goal to make the register a mirror of all the rights burdening the land. This allows judges to interpret the law in order to accommodate the importance land has in the financial and investment world by not keeping banks away from their money. As two opposing trends in modern land law, it is necessary to find the right balance between overriding and overreaching, and after analysing the current situation, it can be said that the scale is tipped more in favour of a purchaser than those in actual occupation.

36 Abbey National Building Society(n16). 37 Wishart v Credit & Mercantile[2015]EWCA Civ 655.

38 Brocklesby v Temperance Permanent Building Society[1895]A.C. 173. 39 Dixon,(n8). 40 Section 6(1)TOLATA 1996. 41 Section 34 Law Property Act 1925. 42 Law Commission,(n1)para1.21. 43 Ibid.

Table of Legislation: - Law Property Act 1925. - Land Registration Act 1925. - Trusts of Land and Appointment of Trustees Act 1996. - Land Registration Act 2002.

Table of cases: - Abbey National Building Society v Cann [1991] 1 AC 56. - Baker v Craggs [2018] EWCA Civ 1126. - Begum v Issa [2014] 11 WLUK 81. - Brocklesby v Temperance Permanent Building Society [1895] A.C. 173.

- City of London Building Society v Flegg [1988] 1 AC 54. - Ferrishurst Ltd v Wallcite Ltd [1999] CH 355. - Link Lending Ltd v Bustard [2010] EWCA Civ 42.

- Mortgage Express v Lambert [2016] EWCA Civ 555. - State Bank of India v Sood [1997] CH 276. - Skipton Building Society v Clayton [1993] 66 P&CR 223. - Thompson v Foy [2009] EWHC 1076. - Williams & Glyn’s Bank v Boland [1981] AC 487. - Wishart v Credit & Mercantile [2015] EWCA Civ 655.

Bibliography: Books: Judith-Anne MacKenzie, Textbook on Land Law (16thedn, Oxford University Press 2016). Martin Dixon, Modern Land Law (10thedn, Routledge 2016).

Journals: - Christopher Bevan, ‘Overriding and over-extended? Actual occupation: a call to orthodoxy’ (2016) 2 Conv. 104. - Gwilym Owen, ‘Priorities and Registered Land During the Registration Gap’ (2017) 3 Conv. 230. - Martin Dixon, ‘Priority, overreaching and surprises under the LRA 2002’ (2017) 133 L.Q.R. 173. - Martin Dixon, ‘The Boland Requiem’ (2015) 4 Conv. 285.

Reports: Law Commission, Land Registration for the Twenty-First Century (Law Com No254,1998). Law Commission, Updating the Land Registration Act 2002 (Law Com CP No 227, 2016)....