Land Law
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When referring to overriding interests, the former Chief Land Registrar,
Sir John Stewart–Wallace stated
‘…..a stumbling block on registration of title. They may, perhaps, be
described as the stumbling block.’
( Stewart-Wallace, Principles of Land Registration)
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In discussing this statement, I first will explain what is meant by overriding interests and the Impact on buyers before the LRA 2002, the aim of which was ensure that, as far as possible, the register reflects then true nature of the rights in the land concerned.
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Overriding interests are interests that are not recorded on the register but nonetheless bind the land, such interests as set down in Section 70(1) of the 1925 Act,
“All registered land shall, unless under the provisions of this Act the contrary is expressed on the register, be deemed to be subject to such of the following overriding interests as may be for the time being subsisting in reference thereto, and such interests shall not be treated as incumbrances within the meaning of this Act”1
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This Act created a category of property right that could bind the purchaser of a registered title when unregistered and even undiscoverable; these interests were problematic for anyone investigating title and created a major obstacle to the aim of ensuring that the register should reflect a complete record as possible.
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Under the 1925 act anyone with a proprietary right and also in actual occupation could claim an overriding interest; this was held by the House of Lords in the case of Williams v Boland:
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“A husband and wife were equitable tenants in common of the matrimonial home by virtue of both having contributed to the purchase price, although only the husband’s name appeared as the registered proprietor on the register in the land registry. The husband, without the wife’s knowledge, mortgaged the home under a legal mortgage to a bank. Before taking the mortgage the bank did not inquire of the husband or the wife whether the wife had any interest in the property. The husband defaulted on the mortgage and the bank brought proceedings for, and were granted, possession. On appeal the order for possession was discharged by the Court of Appeal ([1979] 2 All ER 697) on the grounds, inter alia, that the wife was ‘in actual occupation of the land’, within s 70(1)(g)a of the Land Registration Act 1925, and accordingly had an ‘overriding interest’, within s 70(1), 2which entitled her to remain in possession as against the bank and subject to which the bank had taken the mortgage. The bank appealed to the House of Lords, contending that the wife’s beneficial interest in the house (i) was a minor interest under s 3(xv)(a)b of the Land Registration Act 1925 and (ii) was not capable of being overriden by the trustees for sale since she was not ‘a person in actual occupation’ of the house within the meaning of s 70(1)(g) of the Act.”2
The practical effect of an overriding interest is that it will be capable of binding a third party purchaser of the land unless it is overreached:
“ if the overriding interest is overreached because the money is paid to two trustees it will not be binding on the third party”3
One of the other problems which was caused by LRA 1925 was occupiers rights which would be overriding only if they amounted to a recognisable interest in the land, LRA 1925 s. 70(1) (g) spoke of the rights of persons in occupation, and the courts were obliged to in several decisions to emphasise that rights could be overriding under that provision only if they constituted a recognised interest in land4
Actual occupation as stated by Lord Wilberforce in Williams & Glyns Bank Ltd v Boland
“ It is the fact of occupation that matters’ and what is required is physical presence on the land and not some entitlement in the law”5
Also in some instances persons have rights and are in occupation but nonetheless their rights will not override because of a specific statutory exclusion, therefore the right of a spouse or civil partner to occupy the home is not overriding and must be protected by means of an entry on the register if it is to bind a purchaser6
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Also by the Access to Neighbouring Land Act 1992, S5(5) rights arising from orders made under that Act cannot override.
Under LRA 1925 s.70(1)(g), the rights of a person who was not in actual occupation of the land but was in receipt of rents and profits from it were also overriding, save where enquiry is made of such person and the rights are not disclosed, “under LRA 2002 these interests are omitted and now cease to be overriding “.
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As a result of criticism of overriding interests and the uncertainty caused by the 1925 Act there have been several reports which tried to address the problem which gave way to the reforms contained in the Land Registration Act 2002,
The 2002 Act dealt with the great number of overriding interests by renaming overriding interests with the title “unregistered interests”, distinguishing between those which override first registration (listed in schedule 1) and those which override a registered disposition (listed in schedule 3) and to bring as many possible onto the register, also by phasing out some of the more obscure overriding interests ( such as manorial rights and the right to receive corn rents) by 20137
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It also requires an obligation to notify Land Registry on form D1 of any overriding interest of which the applicant is aware on acquisition or first registration (s71)
LRA 2002 also reduces the term of leases that require registration from what used to be 21 years to that of 7 tears (s4), and that the only leases qualifying for overriding status will be those(i) with a term of less than seven years; or(ii) granted before the Act came into force (para 3 of schedule 3)
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LRA 2002 restricts the range of easements and profits that can be overriding to those that are legal (as opposed to equitable) and are also(i) actually known to the buyer;, or(ii) exercised within the one year period prior to the sale (para 3 of schedule 3)
The most important changes from S. 70 of the LRA 1925 are concerned with persons in actual occupation, easements and short leases, as aforementioned by s.70 (1) (g) of the LRA 1925;
“The right of every person in actual occupation of the land or in receipt of the rent and
profits thereof” is an overriding interest “save where enquiry is made of such
person and the rights are not disclosed”.8
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Under S 1 of the LRA 2002 one Unregistered Interest Which Overrides
First Registration is:
An interest belonging to a person in actual occupation, so far as relating to
land of which he is in actual occupation, except for an interest under a
settlement under the Settled Land Act 1925.9
Under S 3 of the LRA 2002 one unregistered interest which overrides registered dispositions is:
An interest belonging at the time of the disposition to a person in actual
occupation, so far as relating to land of which he is in actual occupation,
except for–
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an interest under a settlement under the Settled Land Act 1925;
(b) an interest of a person of whom enquiry was made before the
disposition and who failed to disclose the right when he could
reasonably have been expected to do so;
( (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 that time;
(d) a leasehold estate in land granted to take effect in possession after
the end of the period of three months beginning with the date of the
grant and which has not taken effect in possession at the time of the disposition.
Under these provisions in the Act persons in receipt of rents or profits from the land are not treated as if in actual occupation. Only physical occupation of the land whether in person or through an agent or perhaps through positions will suffice. although existing overriding interests arising from rent or profits will be preserved by para.8 of sch 12.
Under the 1925 Act occupation of part of the land comprised in a particular title gave the occupier an overriding interest affecting all in it, In Ferrishurst v Allcite Ltd10
An under lessee in occupation of none part of a building had an unprotected option to purchase the superior lease of the whole building. It was held that the overriding interest extended to the to the whole building, this has now been reversed. Rights which are overriding by virtue of occupation only override in respect of the land occupied, therefore under the 2002 ACT the rights of persons in actual occupation have been narrowed11
The scope of the interest has further been refined in the case of a registered disposition of registered land. Where an interest protected by occupation will not be overriding if; (i) it is not disclosed non reasonable enquiry; or (ii) a buyer who did not know about the third party interest would not have become aware of it by carrying out a reasonable inspection at the time of the purchase12
Since Williams v Boland it seems that the courts have been reluctant to suggest any test for what is ‘essentially a question of fact’. In Abbey National v Cann [1991]13 it was pointed out that:
…’occupation’ is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied.
this was also illustrated by the decision of the Court of Appeal in Mallory Enterprises Ltd v Cheshire Homes14, in which land awaiting development by Mallory Enterprises Ltd, which claimed an overriding interest of it under s.70 (1) (g). As stated in the words of Arden LJ (at para.80)
“ If a site is uninhabitable…residence is not required, but there must be some physical presence, with some degree of permanence and continuity”.
In this case the company had maintained fences around the land and taken other practical measures to exclude trespassers, and the court considered that this amounted to actual occupation’, this would seem clear that a prospective tenant or purchaser who is allowed to enter property to plan alterations or furnishings, because of a lack of permanence and continuity he could not be said to be in occupation.
The courts have acknowledged that it is the burden of the buyer to make proper enquiries was greater under the registered system in the recent case of Bank of Scotland v Hussain & anr 15. The High Court has restated the need to properly question occupiers.
The case was instigated by the bank’s attempt to repossess the property and was complicated by an undue influence claim by the second defendant against the first defendant, reported separately as Qutb v Hussain & anr[2005], but the crux of the matter was that the second defendant, Mrs Qutb, claimed a overriding interest under s70(1)(g) LRA that if succesfull, would have defeated the bank’s possession action.
At first instance the court found for the bank, on the basis that it relied on enquiries made of Mrs Qutb in November 2000 before in January 2001 she sold the property to Hussain, who had taken out a mortgage for the whole price. She had completed a property information questionnaire and had confirmed in replies to requisitions that she lived alone at the property and that vacant possession would be provided. Ms Qutb appealed on the issue of whether the bank had made an adequate enquiry within the meaning of s70 (1)(g) so as to trigger the proviso to that subsection. Her argument was upheld in the High Court, stating that the bank should have found out who was in actual occupation, and then questioned her to find out the nature and extent of her interest.
When published it will be interesting to see what enquiries Mrs Qutb had completed and what actions the Judge though the bank should have taken, but needless to say that the onus is now fully on the buyer to make as many enquiries as possible in regards to the overriding interests which could attach to a property.
The inquiry must be made as to the existence of rights in the land, if it is asked for only specific rights this is inadequate to protect against all interests
In the case of Winkworth v Edward Baron Developments 16, the mortgage company asked a husband and wife to acknowledge that they occupied a house as licensees and not by virtue of tenancy or lease, Ruled that this amounted to no more than an enquiry as to the capacity of their occupation and didn’t prevent overriding interests.
In October 2013 certain overriding interests will lose automatic protection these are
A franchise, a manorial right, a right to rent that was reserved for the crown on the granting of any freehold estate, a non-statutory right inn respect of an embankment or sea or river, a right to payment in lieu of tithe and a right in respect of the repair of a church chancel. Some of these overriding interests could be seen as quaint leftovers from another age and the loss of which will not have a great effect on the majority, but, in some cases the existence of overriding interests have protected some from what could be seen as injustice
As in Lloyds bank v Rossett17, Chokar v Chokar18 and Abbey National v Cann19
Rights of occupation were recognised and somewhat defined whether this will prove to be a benefit or not only time will tell, but until the registration process is more streamlined overriding interests will remain a safeguard although not a straightforward one
1
LRA s 70 1925
Williams & Glyn's Bank Ltd v Boland [1981] AC 487
City of London Building Society -v- Flegg And Another [1988] AC 54;
National Provincial Bank v Hastings Car Mart Ltd [1964] Ch 892, per Russell,LJ,at 696
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Strand Securities v Caswell [1965] Ch 958
Williams & Glyns Bank Ltd v Boland [1981] AC 487 at pp. 504-5
Family Law Act 1966,s 31(10)
Land Registry Practice Guide 66 Nov 2008, www.landregistry.gov.uk
LRA 1925 s.70 (1) (g)
LRA 2002 s 3
Ferrishurst v Allcite [1999] Ch 355
LRA 2002 para 2 of schedules 1 and 3
LRA 2002 para 2 of schedules 1 and 3
Abbey National Building Society v Cann [1991] 1 AC 56 at p.93
Mallory Enterprises Ltd v Cheshire Holmes (UK) Ltd [2002] Ch 216
Bank of Scotland v Hussein [2008] EWHC 1669
Winkworth v Edward Baron Development Co Ltd [1986] 1 WLR 1512
Lloyds Bank v Rosset (1991) 1 AC 107
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Chhokar v Chhokar [1984] FLR 313
Abbey National Building Society v Cann [1991] 1 AC 56