Land Law Overriding Interests

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Land Registration Intro

Historical Background:

  • Land registration was introduced by legislation in 1862/1865 which provided only for voluntary registration of title and thus only a few were registered.
  • Then, Land Registration Act 1925
  • Since 1/10/90, it is compulsory to register land
  • Land Registration Act 2002 IS a major overhaul BUT many historical principles remain
  • Land registration is a RECORD of the ownership of land of who owns what/rights/interests
  • Land registration simplifies the role of a purchaser, with up to date information
  • Unregistered land exists only in the form of chains of documents (title deeds) 
  • Unregistered land is voluntary registration but being phased out (LRA 2002, section 3) and there are 'triggers' when you HAVE to register (LRA 2002, section 4) within period of 2 months (section 6(4))
  • 80-85% is registered land now
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LRA 2002

LRA 2002:

- E, Cooke 2012: 'registration creates a public record of ownership and 3rd party rights'. LRA 2002 exerts control over those rights by making the fact or the form of registration the crucial element in enforceability. 

-LRA 2002 and Land Registration Rules (LRR) 2003 governs land registration and modernises as well as providing a framework for the future of developing electronic conveyancing 

3 basic principles of the register:

1. Mirror : the register is 'transparent. Look in the mirror and what you see is what you get.

2. Curtain: shouldn't have to 'look behind the curtain' i.e. hidden secrets

3. Insurance: compensation if the register is not accurate and increases confidence

These are criticised and judged for their reality ....

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The register itself....

The register itself:

3 parts to the register: 

1. Property register: identifies the geographical location and extent of registered property by means of a short verbal description and by reference to an official plan. May give particulars of any rights that benefit that land or brief details of the lease (if applicable).

2. Proprietorship register: specifies the quality of the register. Gives the name and address of the legal owner and shows restrictions on their power to sell, mortgage or other. May give details of price paid or value information relating to the title.

3. Charges register: identifies partciulars of registered mortgages and notice of other financial burdens secured against the property (but not amounts!). Gives notice of other rights and interests to which the property is subject i.e. leades, rights of way or covenants

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The register itself....

Class of title:

1. Absolute: freehold (section 9): highest grade possible subject only to overriding interests

2. Qualified: freehold (section 9): limited period of subject to certain restrictions

3. Possessory: freehold (section 9): person in actual possession i.e. adverse possession/squat)

4. Good Leasehold: Leasehold (section 10): unlikely for leasehold to be registered absolute

Classification of proprietary interests (under LRA 2002) What goes on the register?

1. Registerable estates/interests (freehold or leasehold):capable of existing in law. LEGAL only. 

2. Registerable charges (mortgages/debts): LEGAL mortgage must be registered as charge

3. Minor interests/3rd party interests: notices s34-39 agreed (easements) or restrictions s40 (trusts) indefinite or fixed time

4. Overriding interests (do not appear on register but are binding on registered proprietor and on a person who acquires an interest in the property and have priority)

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1. MIRROR

1. Mirror Principle:

1. encapsulates the idea that the register should reflect the totality of the estate and should reflect back an identical picture/reflection

2. inspection should reveal the identity of the owner, the nature of that ownership + any limitations

3. BUT cracks appear in the mirror (undisclosed/unregistered interests like overriding interests) and it often does not tell the whole truth! The register is therefore not 'perfect'

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2. CURTAIN

2. CURTAIN

1. Encapsulates the idea that certain EQUITABLE interests should be hidden behind the curtain

2. The legal purchaser should only be concerned with the legal title

3. Purchaser shouldnt have to worry about what is behind the curtain because any EQUITABLE interests are OVERREACHED if formalities met. Equtiable rights are not totally destroyed though and the rights do not effect the purchase and trustees hold the purchase money on trust for the equitable owner therefore get money back instead! Williams and Glyn's Bank v Boland. (NB: not all equitable rights are overreachable- see section 2 of LPA 1925)

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3. Insurance

3. Insurance:

1. Encapsulates the idea that if title is duty registered, it is guaranteed by the state

2. Supported by a system whereby any purchaser who suffers loss by reason of the conclusive nature of the register, they are entitled to monetrary compensation and indemnified

3. Provides confidence in the system and encourages use. Very ambitious motive!!!

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Overriding Interests Intro

What are overriding interests?

Definition: Interests where the purchaser/mortgagee is bound even though the interests do not/ cannot appear on the register and even though they have no knowledge of them! The difficulty is that their existence fundamentally distorts the mirror image of the register and the register can no longer be relied upon as a comprehensive record of the totality of interests. (Gray & Gray)

Land Registration Act 2002: attempts to restrict them as much as possible by legislating limitations for first registration (schedule 1) and on subsquent registered disposition (schedule 3) and offering the ability to register them (section 71). The LRA 2002 was brought about to include a system of registration that simplifies transfers and enabling purchasers to obtain the title to land that is shown on the land register. Land is valuable and we need a structure to manage and organise transactions practically whilst reducing spending and lengthy searches and reduce fraud. A purchaser can rely with confidence on the register and make an informed decision. LRA 2002 repeals must of the LRA 1925 act. It wipes out the need to examine deeds. 

Law Commission 'Land Registration for the 21st century (no 271) 2001: LRA 2002 aims to 'render the register a 'complete and accurate reflection of the state of the title to land at any given time'

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Overriding interests detail...

Overriding interests in more detail...the MINEFIELD...

- Always been a feature in land law but term introduced first in LRA 1925 (section 70) via a comprehensive list but... shift in the LRA 2002 to try and limit these interests!!!

- Law Commission in 1998: justifies their existence 'their continued existence is simple - unreasonable to expect B to register his property right to secure its enforcement'. Justified by the fact that these interests should be discoverable on inspection but are they? A balancing exercise?

- Dixon holds: 'overriding interests are an obstacle to achieving a conclusive register, which is one of the primary objectives of the LRA 2002'

- Seen as an 'unsatisfactory element' of land registration 

- E,Cooke 2012: good reasons for allowing some unregistered rights to be enforceable and the list was designed so as to be harmless to purchasers....are they really HARMLESS? binding!!!!

- Actual occupation policy operates to protect the home and only enforceable if noticeable!!

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Restricting Overriding Interests

Restriction:

- 2 groups of overriding interests: FIRST REGISTRATION and SUBSQUENT REGISTRATION

FIRST REGISTRATION: covered by schedule 1. As most land already registered, rarely use.

SUBSQUENT REGISTRATION: covered by schedule 3. Transfer/sale of already registered land

Seeking to reduce/curtail these 'minefields of overriding interests':

  • a. Fewer interests can now override (list reduced LRA 1925 section 70 to sch 1 & 3 LRA 2002)
  • b. Separate provision for overriding interests on 1st registration(sch1) and subsequent registration (sch3)
  • c. Register overriding interests (section 71 of LRA 2002) if know of interests, must register as notice or minor charge but then they no longer remain overriding interests
  • d. Some overriding interests will cease to have effect after 13th Oct 2013 (sec 117 LRA 2002)

Law Commission 2001: states should only have overriding status where protection against buyers was needed- and where it was neither reasonable to expect or sensible to expect to require any entry on the register i.e. when it would be inequitable not to acknowledge them.

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Schedule 1 vs Schedule 3

The differences/similarities in the two schedules:

- largely the same

- schedule 1 is slightly wider in scope for first registration

- schedule 3 is narrower in scope (particularly in relation to actual occupation)

- transferee not for value takes the land subject to all pre-existing proprietary rights

- transfer for value take the land free of all pre-existing property rights except those on the register and overriding interests 

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Examples of overriding interests and sch 1

Some main examples... not definitive.. see schedule 1 and 3 for more...

1. Short term leases

2. Actual Occupation

3. Easements

Schedule 1 will override the estate of the 1st registered proprietor:

  • a. Short term leases (less than 7 years): 
  • b. Interests of persons in actual occupation
  • c. Legal easements and profits a prendre
  • d. Other perm overriding interests
  • e. Miscellaneous- time limited
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Schedule 1

a. Short term leases (less than 7 years): Schedule 1 paragraph 1 has the effect, subject to 3 exceptions, a leasehold estate granted for a term not exceeding 7 years from the date of the grant is an unregistered interest which overrides 1st registration. Anything more than 7 years must be registered on the register). 3 exceptions under schedule 1 para 4 whereby a short lease must be registered:

  • 1. right to buy lease (housing act 1985)
  • 2. certain leases by private sector landlords
  • 3. a lease that takes effect more than 3 months after it is made i.e. delay (such as students)

- Transition periods: Schedule 12 paragraph 12: leases of 21 years (if included before the act commenced 13/10/03, will be included in this)

b. Actual occupation: Schedule 1, paragraph 2: An interest belonging to a person in actual occupation, so far as relating to land of which he in actual occupation...except for an interest under the Settled Land Act 1925. (more detail later)

c. Easements: Sch 1, para 3: replaces section 70(1)(a) and has the effect that a legal easement or profit a predre overrides first registration but equitable easements will NOT override. 

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Schedule 3: leases and easements/profits

a. Short term leases (less than 7 years)

- Schedule 3, para 1: Must be legal leases (NOT equitable) that are short leases of less than 7 years as leases longer than this can be registed. Exceptions to this: 

  • 1. Right to buy lease (Housing Act 1985)
  • 2. Certain leases by private sector landlords
  • 3. Interest under Settled Land Act 1925
  • 4. Interest where enquirt made but failed to disclose
  • 5. Interest where occupation would not have been obvious on reasonably careful inspection
  • 6. A leasehold estate in land granted to take effect in possesion after 3 months

b. Easements/Profits a Prendre

- Schedule 3, para 3: position for legal easements and profits a prendre was the same for 1st registration (schedule 1) until 12/10/06. Since that date, they have been some exceptions. An unregistered easement or profit will now only override if: a. Obvious on reasonble careful inspection, b. known to persons to whom disposition is made, c. exercised within the year before the disposition, d. if a profit registered under Commons Registration Act 1965. (further attempt to curtail overriding interests!!!!)

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Schedule 3: Actual Occupation....

c. Actual Occupation: Contentious area on the equivalent sec of LRA 1925 section 70(1)(g) 

1. Strand Securities v Caswell 1965, Lord Denning: 'fundamentally its object is to protect a person in actual occupation of land from having his rights lost in the welter of registration'

2. Old law: Section 70(1)(g), LRA 1925: 'the rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed'.(new law: Schedule 1 para 2 AND Schedule 3 para 2)

3a. Actual Occupation: Sch 1, para 2: 1st registration. Very similar to old law (section 70(1)(g)) '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 (Settled Land Act 1925)'. More limited/narrower than LRA 1925 as 'in receipt of the rents and profits' is removed and relates only to land actually occupied.. Only 1 exception now! Trusts of Land+Appointment of Trustees Act 1996,no new settlements allowed.

3b. Actual Occupation: Sch 3, para 2: subsequent disposition. '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: a) Settled Land Act 1925 (same as Sch 1), b+c) Additional conditions i.e. inquiry and inspection, d) Lease to take effect in 3 months. 

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Schedule 3: Actual Occupation....

Following the changes from the previous discussed sections of the LRA 2002:

1. Interests belonging to persons receiving rents and profits, but not actually occupying the land, are NO LONGER PROTECTED.

2. Actual Occupation only extends to part of the land actually being occupied (reversing the decision of Ferrishurst v Wallcite 1999) i.e. legal reach only extends to the factual reach

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Schedule 3: Actual Occupation....

Schedule 3, para 2 further...

b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so. Must be disposition NOT 1st registration and an interest is not protected if inquiry was made of the person claiming it before the disposition took place and they failed to disclose it when they could (been expected).

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. Must be disposition NOT 1st registration and an interest is not protected if it is obvious on a reasonably careful inspection of the land, that the person claiming it is occupying the land. This is a new provision and does not apply if the person actually knows about the claimants interest

What is a 'reasonably careful inspection'?: Seeking to establish whether there is an occupier. Objective or subjective? DEBATABLE AREA...in case of Link Lending 2010, the only inspection was a drive by for valuation purposes!

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Date of Actual Occupation?

Date of Actual Occupation?: Not a problem post LRA 2002 but still need to know for pre-2002

- Currently 2 stage process:

  • 1. Transfer in favour of transferee
  • 2. Transferee applied for registration
  • 3. Legal title only passes when registration occurs

Between 1 and 2, what if a 3rd party with an interest goes into occupation? When should the purchaser INSPECT? - the interest to be protected must be enforceable against the land immediately before registration- (must be in actual occupation BEFORE registration)

1. Abbey National v Cann 1991, Lord Oliver: HoL's held the critical time was the date of registration EXCEPT for interests under section 70(1)(g) LRA 1925 (actual occupation) i.e. it is the DISPOSITION not the registration. Moving carpets in 35 minutes before the charge was complete was NOT held to be actual occupation as bank couldn't have been put on notice of that!
2. Thompson v Foy 2009, Lewison J: interpreted section 27 LRA 2002: timing issues of actual occupation: immediately before disposition and at the date of registration    

3.Cook v Mortgage Business 2012, Neuberger MRApplied Cann. Must be at time of disposition not registration! 10 years post LRA and Court of Appeal decision.

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What is actual occupation?

  • Not defined expressly in LRA 2002 & suggested this is to allow flexibility. Question of fact.
  • Law Commission 2001: fact of occupation but be 'obvious'...what is OBVIOUS??
  • Lord Oliver in Abbey National v Cann: requiring 'degree of permanence and continuity'
  • 'Defining the scope of actual occupation under the LRA 2002: some recent judicial clarification: Barabara Bogusz, 2011: Actual Occupation is difficult to define in terms of scope and meaning. Recent cases show the courts continue to grapple with concept. She argues that: The adoption of a more expansive interpretation is apparent as in Thompson v Foy and Link Lending v Bustard to shed new light on scope of actual occupation.
  • Cases are not ground breaking in their significance however, they have raised pertinent questions concerning the scope of application and definition of the Schedule, and raised the prospect for further judicial debate on this issue. While a factual analysis of actual occupation is the norm, there has in these judgments been an identifiable shift towards a more reflexive contextual approach particularly notable in cases where there is an undiscoverable right but equally applicable where the right is undiscovered. The court to take onboard external factors that affect the circumstances of a party's enjoyment of the property
  • Mummery LJ in Link Lending: expanded on Lord Olivers formulation: 'The degree of permanence and continuity of presence of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person are among the relevant factors.'
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Defining Actual Occupation: Case law

1. Link Lending 2010, Mummery LJ:Through fraud, Mrs Hussein took advantage of Ms Susan Bustard’s mental handicap and got her to transfer her the house. Bustard was sectioned in 2007 and put in hospital. Hussein took out a loan and defaulted,bank claimed possession, arguing she had not been there for over a year. Bustard argued that she was in actual occupation under LRA 2002 Sch 3, para 2. Mummery LJ held that she was indeed in actual occupation because of her persistent intention to return home, evidences by regular visits to the property.'trend of cases shows that the courts are reluctant to law down, or even suggest, a single test for determining whether a person is in actual occupation'.

2. Williams & Glynn Bank v Boland 1981, Lord Wilberforce: Actual = physical presence. Husband was registered proprietor of a house. Wife contributed large party of the purchase price and mortgage repayments and therefore had a beneficial interest in house. House mortgaged to bank and bank made no enquiries of the wife. House was matrimonial home in whcih husband and wife resided. Loan defaulted and possession order granted. Held, wife had an overriding interest of actual occupation (AND physical presence) under s70(1)(g) LRA 1925 to which the banks interest was subject to. Her actual occupation based upon her beneficial interest was more than just a minor interest.NB:Of itself a beneficial interest is registrable as a minor interest

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Actual Occupation meaning...case law

3. Thompson v Foy, Lewison J: Mother and daughter, original house 2 bedroom and decided to build extension- father died and moved to Spain- signed deeds- buy out mother- many possessions remained and claimed undue influence. Claim failed. Meaning of actual occupation considered. 'There is no doubt that Mrs Thompson was in actual occupation. But there is a subsidiary question: in actual occupation of what?' If Mrs Thompson was in actual occupation, her rights are protected only so far as relating to land of which she was in actual occupation. This is a deliberate change from the position under s.70 (1) (g) of the Land Registration Act 1925 . Found Thompson not in actual occupation and did not fall within the exceptions!

  • (i) The words “actual occupation” are ordinary words of plain English and should be interpreted as such. The word “actual” emphasises that physical presence is required: Williams & Glyn’s Bank v Boland [1981] A.C. 487 per Lord Wilberforce at 504;
  • (ii) It does not necessarily involve the personal presence of the person claiming to occupy. A caretaker or the representative of a company can occupy on behalf of his employer: Abbey National BS v Cann [1991] 1 A.C. 56 per Lord Oliver at 93;
  • (iii) However, actual occupation by a licensee (who is not a representative occupier) does not count as actual occupation by the licensor: Strand Securities Ltd v Caswell [1965] Ch. 958 per Lord Denning M.R. at 981;
  • (iv) The mere presence of some of the claimant’s furniture will not usually count as actual occupation: Strand Securities Ltd v Caswell [1965] Ch. 958 per Russell L.J. at 984;
  • (v) If the person said to be in actual occupation at any particular time is not physically present on the land at that time, it will usually be necessary to show that his occupation was manifested and accompanied by a continuing intention to occupy: compare Hoggett v Hoggett (1980) 39 P. & C.R. 121 , per Sir David Cairns at 127.
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Actual Occupation...

4. Hypo-Mortgage Services v Robinson 1997, Nourse LJ: was held that children living with their parents (the estate owners) could not be said to be in actual occupation in their own right because their presence was explained by their parents. Dixon has explained that caution is needed in this area as 'wives don't occupy as mere shadow of husband'. 

Licensee?

5. Strand Securities v Caswell 1965: Actual occupation by licensee is NOT SUFFICIENT for actual occupation

Furniture?

6. Strand Securities v Caswell 1965: Mere presence of furniture will not usually count as actual occupation (STRICT)

7. Link Lending v Bustard 2010, Mummery LJ: Although in an institution involunatarily, she returned weekly and furniture was still there in situ. Always her intention to return even though absent and was found to be in actual occupation. If furniture reveals sufficient degree of continuity and permanence of occupation then actual occupation may be possible (MORE RELAXED)

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Actual Occupation...

Renovations/preparations:

8. Abbey National v Cann 1991: laying of carpet in preparation for actual occupation = NOT sufficient

9. Thomas v Clydesdale Bank 2010: intentions were to reside after renovations and held to be in occupation during renovations! 

Intention

10. Link Lending v Bustard 2012: see previous slide. Cont'd to pay bills and clear intention to return. 'continuity and permanence of occupation' seems important as does 'intent'.

Nature of Property

11. Malory v Cheshire Homes 2002: land was derelict and unusable. Claimant established actual occupation through minimal use (i.e. erection of a fence)T he fact that he had maintained fences, boarded up windows, and used the land for storage, amounted to actual occupation of the land for the purposes of s.70(1)(g). 

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Actual Occupation...

Other uses

12. Chaudhary v Yavuz 2011: using an easement does NOT amount to actual occupation. 

Shorter Absences

Absence itself does not necessarily purport abandonment but actual occupation is needed not just 'use'. Holidays/business/ill doesnt prevent actual occupation if continuing intention to return.

13. Chhokar v Chhokar 1984: Absent whilst having a baby in hospital after husband had abandoned and left her in India but considered to STILL be in occupation. Her possession evidenced her occupation.

Longer Absences

14. Stockholm Finance v Garden Holdings 1995: Saudi princess had not set foot in property in over 1 year and thus could not establish actual occupation. 

15. Link Lending: absent from home for long period in psychiatric unit but did intend to return!

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Academic Commentary

Academic Commentary:

Defining the  scope of  actual occupation under the LRA 2002: some recent judicial clarification. Barbara Bogusz, 2011: Lack of test is necessary for flexibility in this area to avoid harshness i.e. throw someone out. Balancing exercise required occupiers rights vs ownership rights. 

However, if, as Barbara argues, we are moving towards a more 'embracing approach', where is the line drawn? Is actual occupation actually becoming more accepted rather than curtailed and thus the main objective of the LRA 2002 of the mirror, curtain, insurance principles and reflecting the totality is bogus despite the numerous attempts for limitation in the LRA 2002. 

Adverse  possession;  Electronic  conveyancing; Land registration; Overriding interests; Title to land, Elizabeth Cooke, 2002: Overriding interests are the bane of the title registration system, but too deeply entrenched to be dispensed with. They militate against the principle that title should be apparent from the register itself, and proposals to cut them down have been around for a while. The concern was to find a way of simplifying, and therefore necessarily cutting down, the scope of the overriding interests regime without falling foul of the ECHR. In spite of this concern, the approach of the Bill is a confident one. Fewer interests will be overriding; some disappear immediately, some will be phased out.

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Academic Commentary

'The reform of property law and the LRA 2002: a risk assessment' Martin Dixon, 2003

  • There is, perhaps, no other creation of the Land Registration Act 1925 that has aroused as much fierce comment as the infamous s.70(1) and its list of overriding interests. The fact that there is a category of property right that can bind a purchaser of a registered title without either that interest appearing on the register or necessarily being discoverable is thought by many to be anathema to the very idea of a  registration system. To others, among which the present author can be counted, there is nothing inherently wrong with a category of non-registrable binding right, even in a system of  land registration, provided that the category is well-bounded, well known and can be justified by reference to some stronger legal, social or economic need. It could be thought socially and economically politic to ensure that the property rights of those who do not have the protection of a formal acknowledgement of their rights, but who nevertheless occupy  land as their home, should be protected without the need to register. For, theory aside, the  act of  registration “against” another's  land, even when it is not the  land of one's emotional partner, is readily seen as an hostile  act.


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Academic Commentary

'The reform of property law and the LRA 2002: a risk assessment' Martin Dixon, 2003

- It is arguable that Sch.3 should have included some reference to the reasons why the actual occupation is undiscoverable in relation to actual occupation and the need for “obvious” on a reasonably careful inspection of the land. However, it is because of some devious act of the vendor (as in Chokkar ), the absolute rule in Sch.3 serves only to punish the occupier. To be clear about this, the argument here is not that the occupier should always triumph in such cases: it is rather that by resolutely denying overriding status to rights supported by undiscoverable occupation the legislation actually expresses a decisive and unquestioned policy choice in favour of purchasers. It is the lack of a mechanism to counter this policy choice that may prove troublesome. Other policy factors that, in some cases, might re-dress the balance in favour of the undiscoverable occupier are now excluded by the firm rule in Sch.3 and the Act is poorer for it.

- Dixon is in support of the LRA 2002 but notes above the policy difficulties that we may be faced with when attempting to severely curtail overriding interests.

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