Land Registration: Paragraph 2 Overriding Interests

The interest of a person in actual occupation falls within Paragraph 2 and is the most litigated and disputed aspect of registered land.

Note for dealing with cases: Formerly goverened by LRA 1925 Section 70(1)(g).

Have to ask two questions (National Provincial Bank v Ainsworth (HL) )

• Is there actual occupation?
• Does the occupiter have an interest.

The interests which count are those which are generally regarded as binding purchasers (eg. not contractual licenses: in that case, actual occupation is irrelevant. Similarly,  in Ainsworth, it was hold that the 'deserted wife's equity' was a mere personal right against her and so actual occupation made no difference.)

TLATA makes it perfectly clear that beneficial interests of a trust of sale constitute overriding interests (confirming Boland (HL) ).

LRA 2002 section 116 makes clear that equities and estoppel claims can bind purchasers of registered land and, accordingly, can be overriding interests.

Malory Enterprises v Cheshire Homes – CA ruled that statutory right to rectify under LRA 1925 could constitute an overriding interest. Remains to be seen whether it would be different if the claimant had no conventional (beneficial) interest binding the proprietor.

Types of interest which are expressly excluded from Paragraph 2:

• Statutory possession rights of spouses and those in civil partnerships (Family Law Act 1996 s31(10)).
• Future leases. Falls within once it comes into possession (but remains an unregisterable disposition and so cannot be legal).
• Rights to ‘overriding leases’ under Landlord and Tenant (Covenant) Act. Excluded by s20(6) of that Act.

Standard case: Boland - HOL expressed no hesitation in holding that the words of the legislation mean what they say. Given that the land was the wife's home, the only conceivable answer was that she was in actual occupation.

Note privision that purchasers are not bound if the 'occupation would not have been obvious on a reasonably careful inspection of the land'.

Law Com has stressed that it is the occupation which has to be obvious, rather than the interest.

Standard case: Boland - HOL expressed no hesitation in holding that the words of the legislation mean what they say. Given that the land was the wife's home, the only conceivable answer was that she was in actual occupation.

Note privision that purchasers are not bound if the 'occupation would not have been obvious on a reasonably careful inspection of the land'.

Law Com has stressed that it is the occupation which has to be obvious, rather than the interest.

Living in a house is actual occupation, but what else suffices?

Derelict land / Agents or employees

Rosset: (CA was reversed in HL on other grounds not relevant to AO) Husband held on trust for himself and his wife as beneficiaries. The house being purchased was semi-derelict and work was done (both before and after completion) by builders to put it in a habitable state. Because Mr Rosset was frequently away, much of the day to day control of the builders was undertaken by Mrs Rosset. The question whether Mrs Rosset could be said to be in actual occupation at the time of completion, in order for her interest to bind the mortgagee bank, was nicely balanced. A majority of the CA held that Mrs Rosset was, on the facts, in actual occupation. This was based partly on her activities on the land and partly on the actual occupation of the builders as agents for Mr and Mrs Rossett. On AO point (majority only): Nicholls LJ: Notes importance of relating to every day speech (from Boland). It is not the case that in every day speech actual occupation can never exist short of residence. Wife’s physical presence (spent almost every weekday at the property from 10am to 4pm) was what would be expected of an occupier, having regard to the then status of the property. Moreover, occupied through builder as employee/agent (there every working day). Notes that this is in line with dicta in Strand Securities v Caswell in which the tenant was in occupation through an agent/employee (caretaker). Note the two reasons given, and that they seem to be independent and neither is given more weight than the other. Purchas LJ reached the same conclusion.

Malory Enterprises v Cheshire Homes was another case on derelct land - Could not reside there or cultivate land or use for recreation because was derelict, but judge was entitled to draw the conclusion that there was actual occupation from boarding up windows, fencing and storage.

Epps v Esso Petroleum Co Ltd - Claimant parked car on a ***** of land which looked as though it belonged to his neighbour. Parked his car there every night and sometimes during the day. This was not actual occupation for the following reasons: Parking of a car on a ***** of land 11/80 feet does not occupy the whole, or a substantial, or any defined part of the ***** for the whole or any defined time; the parking of a car on an unidentified piece of land is not an assertion of actual occupation of anything. Moreover, defendants were in possession (because of where they had put a brick wall: they possessed land up to the wall). Also, there was no method of driving onto the ***** without trespassing on the defendants' land, unless car bounced up the kerb and steered between a stop sign and a tree.

Chaudhary v Yavuz (CA) - Access was by a metal 'balcony' built onto the servient land by the dominant owner. The balcony could not be the occupation, because it had become part of the servient land. (Also attempted to argue that had been in actual occupation by virtue of contractors when structure was put up and never ceased to be in actual occupation. Had never been in actual occupation by virtue of contractors (? fit with Rosset not explained - was probably the fact that this was one quick job rather than ongoing building work?). Even if he was, this came to an end.)

However, may be wrong to assume that no eaement could ever qualify: exercise of an easement of storage or parking might have a better chance of constituting occupation.

Kingsnorth Finance Co v Tizard (first instance)- Wife had left family home but returned most days to help look after the children. She left clothes at the house and occasionally slept there if her estranged husband was away. Trial judge held that this counted as actual occupation.

Smith: Regards this as borderline decision. Even if in actual occupation, today might be found to not be discoverable on reasonably careful inspection of the property. (There was debate as to whether such a requirement applied to Section 70(1)(g), and trial judge in Tizard did not consider it).

Strand Securities v Caswell - Does not suffice to simply to have furniture and other things on the premises. Claimant allowed stepdaughter to occupy flat rent-fee. That his furniture was there was not enough to protect him. Made caretaker point as dicta (see above), but was not enough just to give a licence to stepdaughter - she was not occupying on the claimant's behalf.

Paragraph 2 specifies that there is an actual occupation overriding interest if actual occupation exists at the time of the transfer (some weeks before registration) rather only arising when registered.

Abbey National v Cann - HL held that moving furniture 35 minutes in advance of completion of purchase clearly did not mean that there was actual occupation at the moment of competion. A frequently quoted speech by Lord Oliver is that there must be 'some degree of permanence and continuity which would rule out mere fleeting presence'.

Rosset raised a similar point: purchaser had been allowed to undertake work on the land before completion. However, extent of work and lengthy period involved (around six weeks) justified the court's finding of actual occupation.

Note: both are cases where 2002 requirement of 'obvious on a reasonable inspection' might be argued today. However, seems like result in both would remain the same.

Hypo-Mortgages Services v Robinson (CA) - Held that minor children of registeed proprietor were not in actual occupation. Ruling partly based on their having no independent right to occupy.

Smith: This provides some difficulty since the source of occupation is generally irrelevant. More credible, at least for young children, is the argument that it is not feasible to make inquiries (compare protection as regards children's consents in TLATA Section 10).

Once actual occupation has started, actual physical presence is not always required toprove an overriding interest.

Chhokar v Chhokar (HC, went to CA on other grounds) - While wife was in hospital having a baby, the proprietor (husband) transferred the land to a purchaser. By the time the wife returned home, she found that the locks had been changed. Not surprising that Ewbanks J held that she was in actual occupation. Note that outcome likely to be different if removed all evidence of wife before sale - Note stress in Paragraph 2(c) on 'time of disposition'.

Thompson v Foy (HC) - Claimant was in process of moving out. Had taken personal belongings away and in just four days had ceased living there, though her furniture and bedding were still in the house. Lewison J held that her actual occupation had come to an end, much stress being placed on the fact that she did not intend to return.

 Link Lending Ltd v Bustard (CA) – Claimant had been in a residential care institution for over a year. She wished to return home, though it was unclear whether her health would ever permit that. Though Foy was approved, CA held that there was actual occupation – based on the fact that she did wish to return and had no other home of her own.

Now settled by the wording of Paragraph 2: The overriding interest relates only to land over which there is AO. Still cannot mean that they need to occupy every inch of it (rather, the statement in Paragraph 2 is aimed at clarifying the situation in which there is property with two distinct parts).

Section 29: The date of registration applies to overriding interests (as a general rule).

However, was made clear in Cann that in the case of actual occupation overriding interests the appropriate date is the date of completion (made clear in Paragraph 2: disposition). Less clear whether it must continue to the time of registration. Though most commentators reject this requirement, Lewison J supported it on a close reading of S29 and Para 2 (Thompson v Foy, but no final view expressed). Cann appeared to support the opposite view on the old legislation.

• Have already noted the protection as regards non-obvious occupation.
• Further provision protects purchasers if they make inquiries of the occupier (not seller) and the interest is not disclosed, when disclosure might reasonably been expected. Note - Unlielly that they'd be expected to identify precise interest: 'I have a right to live here' should suffice and onus is on purchaser to dig deeper. No cases on reasonable inquiry so far.

Even when there is no inquiry, conduct of occupier may defeat their interest.

Example: S is registered proprietor of house. She holds it on trust for herself and her partner T. They plan an extension to the house to provide more room for their children. S obtains a loan of £80,000 from a bank to cover the costs of the building work; the bank is protected by a registered charge. Can T (very clearly in AO) claim that his beneficial interest defeats the charge?  Success would mean that T would get his share of the proceeds of any sale before the bank could claim its £80,000.

Courts have held that occupiers such as T for whose benefit the loan has been obtained must be taken to have approved the loan (Bristol & West BS v Henning (CA), Paddington BS v Mendlesohn (CA) , which means that can't claim AO against the lender which enabled them to acquire the property. Once approval is given, it extends to the full sum in fact borrowed (Cann).

How far does this principle extend?

Boland - Loan was for proprietor's business. Both he and Mrs Boland (by a higher standard of living) would benefit if business prospered. These facts came nowhere near to approval of mortgage. No direct benefit (eg. share in more valuable house). Might have been different if she had been told but failed to say anything negative.

• No reference to inquiries of occupier or rights being obvious on inspection of land.
• Future lease exception omitted.