Lecture 24 - Overriding interests – Issues arising
If an interest has been overreached, it cannot be overriding because the
interest is no longer in land.
Critique of Flegg:
Law Commission recommended that overreaching should only take place
with the landowner’s consent, but this has not been included.
Flegg (1987) was pre-ToLATA 1996. So still concerned with a “trust
for sale” rather than a “trust of land”, does this matter?
Law Com (1989) recommended that the interests of adult
beneficiaries of full capacity who have a right to occupy trust land
and are in actual occupation of it should only be overreached if they
consent.
Law Com (1989) suggests that post-Boland, the banks encouraged
couples to buy in both names so that the overreaching provisions
would apply (esp in cases of extended families where family
members might contribute + occupy but not be trustees).
Human rights?! National Westminster Bank Plc v Malhan [2004]
EWCA Civ 847
Look back at section 29, after that there is section 30. It applies to banks
who are obtaining a registered charge.
Actual occupation sch 3 para 2 – Kingsnorth Finance Co v Tizard
Certain conditions attached to the schedule – one of which is that if an
interest belongs to a person whose occupation was not obvious on
reasonably close inspection of the land IT DOES NOT AMOUNT TO AN
OVERRIDING INTEREST (unless they had actual knowledge). SO, if
reasonably obvious on inspection and you haven’t looked, then the risk is
of losing the overriding interest. If reasonably obvious and you don’t look,
they will keep their overriding interest.
Facts of this case:
Mr T sole legal owner. Mrs T has an interest under a constructive trust.
Mrs T frequently slept elsewhere but she was in the house every day. Mr T
sought to mortgage the property. Arranged for surveyor to visit on a
Sunday. (If not discoverable then it amounts to an overriding interest)
, What amounts to reasonably close inspection?
- “How then is a purchaser or mortgagee to carry out such
inspection ‘as ought reasonably to have been made’ for the
purpose of determining whether the possession and occupation
of the property accords with the title offered? What is such an
inspection ‘as ought reasonably to be made’ must, I think,
depend on all the circumstances.” Judge John Finlay Q.C.
He does say it’s not reasonable to expect them to go around opening
draws. The inspector knew Mr Tizard was married. Enough that more
questions should have been asked.
Registration Gap:
A purchaser (etc.) of registered land does not gain legal title until
registration. S27(1) LRA 2002. There is a period between ‘completion’
and registration, so before the purchaser becomes the registered
proprietor, when s/he has only an equitable interest in the land. This is
known as the ‘registration gap’ and it is a problem: adverse interests
arising during this ‘gap’ may bind the purchaser.
- Baker v. Craggs [2016] EWHC 3250 (Ch)
- Stodday Land Limited & Ripway Properties Limited v. Pye [2016]
EWHC 2454 (Ch)
“The effect of sections 27 and 29 of the 2002 Act is that, although a
registrable disposition takes place when it is executed, neither a
conveyance nor a charge takes effect at law until registration, and the
consequence is that a purchaser and a mortgagee acquire equitable
interests on completion” - Lord Collins in Scott v Pacific Mortgages [2014]
para. 40
Conveyance + mortgage Registration Gap Registration
Which comes first, the conveyance or the mortgage? If the conveyance is
viewed as coming first, you could argue that interests arising under the
conveyance, if that person is also in the property, that they have an
overriding interest which binds the bank.
All a question of timing,
Disposition, exchange of contracts and then completion.
Date of disposition
Date of registration
If an interest has been overreached, it cannot be overriding because the
interest is no longer in land.
Critique of Flegg:
Law Commission recommended that overreaching should only take place
with the landowner’s consent, but this has not been included.
Flegg (1987) was pre-ToLATA 1996. So still concerned with a “trust
for sale” rather than a “trust of land”, does this matter?
Law Com (1989) recommended that the interests of adult
beneficiaries of full capacity who have a right to occupy trust land
and are in actual occupation of it should only be overreached if they
consent.
Law Com (1989) suggests that post-Boland, the banks encouraged
couples to buy in both names so that the overreaching provisions
would apply (esp in cases of extended families where family
members might contribute + occupy but not be trustees).
Human rights?! National Westminster Bank Plc v Malhan [2004]
EWCA Civ 847
Look back at section 29, after that there is section 30. It applies to banks
who are obtaining a registered charge.
Actual occupation sch 3 para 2 – Kingsnorth Finance Co v Tizard
Certain conditions attached to the schedule – one of which is that if an
interest belongs to a person whose occupation was not obvious on
reasonably close inspection of the land IT DOES NOT AMOUNT TO AN
OVERRIDING INTEREST (unless they had actual knowledge). SO, if
reasonably obvious on inspection and you haven’t looked, then the risk is
of losing the overriding interest. If reasonably obvious and you don’t look,
they will keep their overriding interest.
Facts of this case:
Mr T sole legal owner. Mrs T has an interest under a constructive trust.
Mrs T frequently slept elsewhere but she was in the house every day. Mr T
sought to mortgage the property. Arranged for surveyor to visit on a
Sunday. (If not discoverable then it amounts to an overriding interest)
, What amounts to reasonably close inspection?
- “How then is a purchaser or mortgagee to carry out such
inspection ‘as ought reasonably to have been made’ for the
purpose of determining whether the possession and occupation
of the property accords with the title offered? What is such an
inspection ‘as ought reasonably to be made’ must, I think,
depend on all the circumstances.” Judge John Finlay Q.C.
He does say it’s not reasonable to expect them to go around opening
draws. The inspector knew Mr Tizard was married. Enough that more
questions should have been asked.
Registration Gap:
A purchaser (etc.) of registered land does not gain legal title until
registration. S27(1) LRA 2002. There is a period between ‘completion’
and registration, so before the purchaser becomes the registered
proprietor, when s/he has only an equitable interest in the land. This is
known as the ‘registration gap’ and it is a problem: adverse interests
arising during this ‘gap’ may bind the purchaser.
- Baker v. Craggs [2016] EWHC 3250 (Ch)
- Stodday Land Limited & Ripway Properties Limited v. Pye [2016]
EWHC 2454 (Ch)
“The effect of sections 27 and 29 of the 2002 Act is that, although a
registrable disposition takes place when it is executed, neither a
conveyance nor a charge takes effect at law until registration, and the
consequence is that a purchaser and a mortgagee acquire equitable
interests on completion” - Lord Collins in Scott v Pacific Mortgages [2014]
para. 40
Conveyance + mortgage Registration Gap Registration
Which comes first, the conveyance or the mortgage? If the conveyance is
viewed as coming first, you could argue that interests arising under the
conveyance, if that person is also in the property, that they have an
overriding interest which binds the bank.
All a question of timing,
Disposition, exchange of contracts and then completion.
Date of disposition
Date of registration
