Property Law

Enforcement of Third Party Interests Against a Purchaser – Registered Land | Land Law – SQE1 & SQE2 Exam

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Enforcement of Third Party Interests Against a Purchaser – Registered Land
• Interest in land is proprietary rather than merely contractual, so may be
enforceable against successors in title to the party who originally created
them
• Pre-1926:
o Legal interests in land enforceable against subsequent owners
o Equitable interests in land bound everyone except Equity’s Darling
• Where title to the land not yet registered, partial registration system
applies – Land Charges Act 1972
• Where title to land is registered, enforceability against buyers governed
by LRA 2002
• Ideal of 1926 reforms of having all estates and interests registered falls
down because of:
o Some land remaining unregistered
o Class of interests that do not appear on the register: ‘overriding
interests’ (‘unregistered interests which override registered
dispositions’)
Interests enforceable against purchaser if:
1. Protected on the register
2. Overriding
Classification of Estates and Interests
• Applies to interests created since 13th October 2003 (LRA 2002 effective)
• Slightly different provisions for interests already existing on 13th October
2003 + for recognition of overriding interests at the time a title is first
registered – Sch 12 + 1 of LRA
• 3 parts to register (for freehold + leasehold of more than 7 years (LRA
2002 s 27(2)(b)(i)):
o Property register
o Proprietorship register
o Charges register
© Liam Porritt 2020 2
Estates and interests requiring substantive registration to be legal
NB These estates are substantively registrable as registration is an essential
part of their initial creation, and these are thus automatically binding on a new
owner = major interests
LRA 2002, s 27(2):
a) Transfer
b) Term of years absolute for more than 7 years
c) Lease for manor / franchise
d) Grant or reservation of interest under s 1(2)(a) LPA = easement, right or
privilege; other than those registrable under Commons Registration Act
1965
e) Grant or reservation under s 1(2)(b) or (e) LPA = rentcharge + rights of
entry
f) Grant of legal charge = s 1(2)(c) + (d) LPA = legal mortgage and other
similar charges
… Therefore, this covers creation of all of s 1(2) LPA legal rights + transfer of
freehold + leasehold over 7 years.
(b)-(e) must be registered by registrar on charges register to protect them = s 38
LRA 2002.
© Liam Porritt 2020 3
Interests protected by entry of notice on Charges Register
NB These do not have to be entered on register as part of creation (e.g. equitable
interests) = minor interests
• Can be enforced following transfer of land if properly protected
• S 28 LRA 2002 = all interests in registered land binding on new owner of
registered estate
• BUT S 29(1) + (2) LRA 2002 = most minor interests must be protected by
entering s 32 notice on the charges register in order to bind buyers for
value
o Failure to do so = new owner free from interest
o Unless ‘overriding interest’ under LRA 2002, Sch 3
Registration ≠ valid interest; an invalid interest could be registered.
Registration is necessary to protect valid interests (so they are enforceable
against third parties), but must be both valid and registered.
Notice on the Charges Register (LRA 2002, s32)
2 broad categories of EI in land:
a) Notices for ‘Commercial’ EIs (s 32) – equitable easements, restrictive
covenants, estate contracts etc.
Ø Designed to last for a long time binding land through successive
title holders
b) No notice for ‘Family’ EIs (s 33) – interests behind an express or implied
trust (s 33(a)(i))
Ø Intrinsically moveable rights which the trustee can manage by
buying and selling trust assets (and registration by beneficiary
would inhibit this right of the trustee)
Ø Can enter s40 restriction
c) Also no notice for:
Ø An interest under a settlement under the Settled Land Act 1925 (s
33(a)(ii))
Ø Leasehold estate for three years or less (s 33(b)(i))
Ø Restrictive covenant between lessor and lessee, so far as relating
to the demised premises (s 33(c))
Ø An interest capable of registration under Commons Registration
Act 1965 (s 33(d))
Ø An interest in any coal or coal mine (s 33(e))
© Liam Porritt 2020 4
Failure to enter notice on charges register
• If not overriding interest, no registration = purchaser for valuable
consideration takes land free of interest (s 29(1) LRA 2002)
• Purchaser for valuable consideration of registered land takes land subject
only to: (1) overriding interests; and (2) entries on the register (s 29(2)
LRA 2002).
o Buyer’s awareness (even by express notice) of unprotected charge
would not, on its own, alter this result (De Lusignan v Johnson)
o However, consider exception in Lyus v Prowsa Developments Ltd:
§ Unprotected option to purchase (estate contract – EI)
§ Land sold, subject to protection of plaintiff’s interest – it
was sold twice with this condition
§ Exercise of option refused as second purchaser took land
free from EI not registered (s 29(2) LRA 2002)
§ HELD: constructive trust with both first and second
purchasers as trustees for plaintiff
§ Limited to facts of this case – explicit agreement to
honour option + reduced price for land because of the
option
Restrictions and overreaching
• S 40 LRA 2002
• Proprietorship register
• May be fixed period, indefinite or until event
• Unless terms of restriction are complied with, registrar will not register
new owner of property
• Most common use: overreaching of family equitable interests
• LRA 2002 s 44: where two or more persons are registered as proprietor
(and not holding beneficial interests on their own behalf), registrar must
enter restriction to alert buyers of need to overreach = pay the purchase
monies to at least two trustees
o Helps buyers know what to do to be registered and take the
property free of the interest in question
Overreaching
• Overreaching = beneficial interests under trust detach from land and
attach to money paid by buyer ~ purchaser of legal estate takes land free
from beneficial interests (s 2(1)(ii) LPA 1925)
o Happens irrespective of whether there is a restriction or not
• Overreaching applies where two or more individuals or a trust
corporation are the trustee(s) (s 2(2) LPA 1925)
• Purchaser of legal estate from trustees not concerned with trusts affecting
proceeds of sale ~ i.e. no obligation to consider whether there may be any
beneficiaries in the land, where two or more trustees (s 27(1) LPA 1925)
© Liam Porritt 2020 5
• Proceeds of sale or other capital money shall not be paid to or applied by
the direction of fewer than two trustees (except trust corporation) (s
27(2) LPA 1925)
o Does not affect right of sole personal representative to give
receipts for proceeds of sale
o Does not make it necessary to have more than one trustee
• Williams & Glyn’s Bank Ltd v Boland
o Husband holds property on implied trust for himself and his wife,
and he alone mortgages the land to bank
o No overreaching as only one trustee
o Bank therefore took the land in repossession subject to the wife’s
BI ~ an overriding interest due to her actual occupation
• City of London Building Society v Flegg
o Married couple hold property on implied trust for themselves and
wife’s parents (Mr & Mrs Flegg)
o Mortgage property to BS – legal charge means that BI of Mr and
Mrs Flegg is overreached, i.e. transfers to the equity of redemption
held by Maxwell-Browns (equity as they pay back mortgage) +
monies received by them from bank to pay for house, but not in
the property itself
o As they have no beneficial interest in the property itself (their
interest has been overreached), overriding interests (actual
occupation) are irrelevant
Overriding interests
Sch 3 LRA 2002, overriding interests:
1. Legal lease for ≤ 7 years
Ø 3 years > lease ≤ 7 years can be protected by s32 notice (LRA
2002)
Ø Equitable leases
o Should be protected by s32 notice
o May be overriding interests if Sch 3 para 2 requirements
met
2. “Actual occupation” – EIs where no s32 notice
Ø There must be an interest in the land
o Webb v Pollmount – actual occupation can protect EIs
where no s32 notice, regardless of reason of occupation and
nature of interest (e.g. option to purchase + actual
occupation due to licence)
o Hodgson v Marks – interest in land may be BI due to
resulting trust, where transfer of legal title without
intention to transfer BI
Ø There must be actual occupation – permanence and continuity
o Physical presence (Williams & Glyn’s Bank Ltd v Boland)
© Liam Porritt 2020 6
§ Kling v Keston Properties – plaintiff’s wife’s car in
garage enough to be occupation of garage
o Absences
§ Chhokar v Chokkar – absences okay depending on
circumstances, here a few days (while giving birth!)
§ Link Lending Ltd v Bustard – weekly visits to collect
post + possessions there, while in mental health care
home = AO
§ Stockholm v Garden Holding – belongings +
occasional use + weekly cleaner + twice-weekly
driver visits ≠ AO
§ AIB Group v Turner – Occassional visits to cottage in
England, but living in Barbados ≠ AO
o Occupation by proxy
§ Strand Securities v Casswell
• Licencee not paying rent ≠ AO
o Here, says spouse can be in AO on
behalf of spouse, but ‘heavily obsolete’
(Williams v Boland)
• Licencee who is paid (e.g. caretaker) is
representative of interested party = AO
(supported Abbey National v Cann)
o Vs Stockholm above (cleaner + driver)
§ Lloyds Bank plc v Rosset – builders employed by
husband and wife to complete building works on
semi-derelict house + wife’s presence weekly = AO of
wife herself + through agent
o Enjoyment of easement (equitable) = AO?
§ Holaw Ltd v Stockton Estates – use of right of way ≠
AO
§ Chaudhary v Yavuz – obiter – possible that rights of
parking / storage could = AO
o Exceptions:
§ Inquiry made of person claiming to have interest
who failed to disclose right = not overriding interest
(Sch 3, para 2(b) LRA 2002)
§ Occupation of person not obvious on reasonably
careful inspection + buyer has no knowledge of it
(Sch 3, para 2(c) LRA 2002)
Ø Actual occupation must be at the time of the disposition = date of
the transfer deed (Thompson v Foy)
o … and possibly also at time of registration (undecided –
Thompson v Foy)
3. Legal easement acquired by implied grant / reservation or prescription
Ø Known to buyer; or
Ø Obvious on reasonable inspection of the land; or
Ø Exercised within one year prior to the disposition
© Liam Porritt 2020 7
Family Law Act 1996 Charges
• Spouse / civil partner = right to occupation of marital/partnership home
• FLA 1996, s 30 ~ spouse/cp ~ right not to be evicted or excluded if
already in occupation / to enter into occupation at discretion of court
o FLA 1996, s 31 ~ s 30 right takes effect as charge until termination
of marriage/cp or order of court (s 33(3))
• FLA 1996 charges ≠ interest in land / right to proceeds of sale; = statutory
right to occupation
• Can be registered as s 32 charge = as though EI + impossible to sell, giving
vacant possession until charge cancelled by termination of marriage/c.p.
OR court order
• If not registered, it cannot bind third parties, even if actual occupation
(s 31(10)(b) FLA 1996)
Entry of interest onto the register of the dominant land
• In general, it is good practice to enter benefits on property register of
dominant land (as well as land over which there is an interest) so that
buyer of this land knows they have an interest
Alteration of the Register, LRA 2002 Sch 4
• Minor errors (e.g. misspelled names) can be rectified easily by registrar
• LRA 2002 Sch 4(1) = power for registrar to/court to order change to
register
• Swift 1st Ltd v Chief Land Registrar – where fraudster entered as legal
owner, they acquire full beneficial title so that any subsequent purchaser
also takes full beneficial title
o The defrauded owner must seek redress via the rectification
provisions of LRA 2002 ~ innocent purchaser will receive
compensation from Land Registry when rectification takes place
(LRA 2002 Sch 8)
§ LRA 2002 Sch 8 – lists circumstances where those suffering
loss by reason of rectification of the register are entitled to
an indemnity

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