Registration of title Part 2

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Priority rules in registered land

Question of priority- what impact does a disposition of registered land have on various sorts of pre-existing interests in or over that land? 

LRA 2002 establishes exactly what types of propreitary interests affect the transferee when they become registered as owner.

LRA 2002 REPLACES the doctrine of notice- this is very important.

Registration is key. The default rule is that if you don't register your interest you lose your priority. You often lose against someone who has a registered interest. 

There must be exceptions to this (overriding interests). Need to protect those who cant reasonably be expected to register their interests. Maximise resource by making sure purchaser knows of what rights and interests the land has. 

The importance of overreaching- overreaching is where certain equitable rights in land otherwise protected in the system of registration are 'swept off' the land and transferred to purchase money on occasion of sale. Rights that would be binding against a purchaser will not be binding due to statute. 

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Priority rules in registered land

Beneficial interests kept off the register (curtain principle.) This is so that purchasers dont have to worry about the interests behind a trust eg beneficial interests. Legal ownership is nice and simple, which means the complexities are hidden behind a trust. 

Overreaching- if two essential statutory criteria are met, equitable ownership is removed from the land. Beneficiaries interest is no longer in the land, it is instead in the proceeds of sale. 

City of London Building Society v Flegg 1988- Lord Oliver- 'the whole philosophy of the LPA 1925 was that a purchaser of a legal estate (which includes a mortgagee) should not be concerned with the beneficial interests of the co owners which were shifted to the proceeds of sale.' 

'If then one asks what were the subsisting rights of Mr and Mrs Flegg... the answer must be in my judgement, that they were  rights which, vis a vis the mortgagee were at the same moment with the creation of the charge, overreached and therefore subsisted only in relation to the equity of redemption.' The Fleggs interest was overreached and so had no priority. 

Flegg demonstrates a common dilemma, the court has a choice to make between two victims. Special land features make harder: F- social importance of land. B- substantial loan. 

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State Bank of India v Sood 1997- 'a principal objective of the 1925 property legislation was to simplify conveyancing and the proof of title to land. To this end equitable interests were to be kept off the title to the legal estate and could be overreached on a conveyance to a purchaser who took free from them.' 

Overreaching exists primarily to protect purchasers (and banks). Flegg shows this. Where one innocent party must lose the courts favour the purchaser. If you didnt favour purchasers the banks would never lend money. 

Statutory conditions for overreaching- rights must be capable of being overreached LPA 1925 s2(3). Specified interests in land. Lists interests which cannot be overreached. Mainly commercial interests. Equitable co-ownership rights behind a trust can be overreached. 

The sale must be made by those persons and in those circumstances that constitute an overreaching transaction. LPA 1925 s2(1)(ii) . Two conditions- 1) there must be a conveyance and 2) overreaching will only operate in favour of a person who is a purchaser of a legal estate or mortgagee. The requirements of s27 of this Act respecting the payment of capital money arising on such a conveyance must be complied with (money that arises on sale or purchase of land).  

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Application of capital monies- one way the law tries to protect the person whos interest is being overreached. To prevent fraud. LPA 1925 s27(2) - in order to effect an overreaching transaction. The transaction isnt void if only pay to one trustee, it just means it isnt overreaching. 

Also note- capital monies need not arise from transaction: State Bank of India v Sood 1997- overreaching will occur as long as mortgage is properly executed if capital monies dont immediately occur. 

Overreaching beats overriding: rules on overriding interests will only kick in if interest has not been overreached. Overreaching cannot occur if theres only one legal owner. This is the purchasers trump card. 

But where overreaching does not occur we must turn to priority rules governing registered land. 

The 'basic priority rule' LPA 2002 s28- date of creation is what matters, the earlier gains priority. Someone who doesnt pay for land (give valuable consideration) should take the land as it comes. 

s28(1)- if transferee is not a purchaser they have to take the land subject to all prior proprietary rights, whether they were on the register or not. 

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Special priority rule

The 'special priority rule'- LRA 2002 s29- priority governing registered dispositions: estates. s29 favours registered dispositions. S29(1)- if buy a house and register the purchase you have priority over earlier rights unless earlier rights priority is protected. 

Registrable dispositions- LRA 2002 s27 (1) 'where land is already registered, those dispositions must be registered to operate at law.' Has consideration been given? Is transaction a registered disposition of a registrable estate? Does my interest take priority? 

S29 (2) LRA 2002 tells us when the priority of an interest is protected. 

LRA 2002 S29 (4) Leases- leases with 7 years or less with immediate start are in the same position as registrable dispostion. Gets advantage of s29 without needing to be registered. 

Priority of overriding interests- registered v unregistered. There is priority to anything in Schedule 3. LRA 2002 Schedule 3 lists 14 interests of 'unregistered interests which override registered dispositions.' LRA 2002 reduced the number of overriding interests compared with LRA 1925. 

Schedule 3(1) is about leasehold estates in land.

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Overriding interests

Schedule 3 LRA 2002- S2 is interests of persons in actual occupation. Has a list of factors which apply. 

Schedule 3(3) is about profits and easements. 

Interests of persons in actual occupation- case law on the 1925 act remains relevant but is sometimes different as the acts are not identical. 

Must hold a property interest in the land. Only have a proprietary right if gain overriding status. Personal rights cant gain status. 

National Provincial Bank v Ainsworth 1965- 'to suppose that the old overriding interests provision makes any right, of howsoever personal character, which a person in occupation may have, an overriding interest by which a purchaser is bound, would involve two consequences- first is that this act is, in this respect, bringing about a substantive change in real property law by making personal rights bind purchasers, second that there is a difference as to the nature of the rights by which a purchaser may be bound between registered and unregistered land: for purely personal rights including the wifes right to stay in the house cannot affect purchasers of unregistered land even with notice... 

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Overriding interests

'one may have to accept that there is a difference between unregistered land and registered land as regards what kind of notice binds a purchaser, or what kind of enquiries a purchaser has to make. But there is no warrant in the terms of this paragraph or elsewhere in the Act for supposing that the nature of the rights which are to bind a purchaser is to be different, excluding personal rights in one case, including them in another.' 

Scott v Southern Pacific Mortgages 2014- unanimously held that Scott had no proprietary interest in the land. When sale agreed purchaser didnt have a proprietary interest themselves. If dont have a proprietary interest cannot create a new one. Scott only had a personal right. No overriding interest. 

Once overreached, an interest cannot be the subject of an overriding interest. City of London Building Society v Flegg 1988- parents interest was overreached by mortgage company as paid to two trustees. Cant have an overriding interest where its been overeached. To overide need 1) proprietary interest needed and 2) owner of prop interest must be in occupation at date of disposition. 

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Actual occupation

Owner of interest must have been in actual occupation at date of disposition. LRA 2002 sch 3(2). 

Formula in para (c)(i)- proprietary interest and actual occupation obvious on a reasonably careful inspection= overriding interest. Where non actual occupation and no knowledge of the right= no overriding interest. 

Formula in para (c)(ii)- proprietary interest and non obvious actual occuapation but actual knowledge at the time= overriding interest. 

Old law- 'actual occupation' is a question of fact not law. Reference to the circumstances of each case. 

William and Glynns Bank v Boland 1981- 'are ordinary words of plain English and should in my opinion be interpreted as such.. given occupation ie presence on the land, I do not think that the word actual was intended to introduce an additional qualification, certainly not to suggest that possession must be adverse: it merely emphasises that what is required is physical presence, not entitlement in law.' 

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Actual occupation

Abbey National Building Society v Cann 1991- 'there is the serious question of what, in law, can amount to actual occupation. In Boland Lord Wilberforce observed that these words should be interpreted as they are, that is to say, ordinary words of plain English. But even plain English may contain a variety of shades in meaning.' 

There must be sufficient physical presence, But residence is not required. (quite a large gap.) 

Lloyds Bank v Rosset 1989- 'level of presence depends upon nature of the interest the person has.' 

Claiming actual occupation through a representative/ personal rights such as licence do not confer overriding status- Strand Securities v Caswell 1965

Symbolic occupation while temporarily absent- Chhokar v Chhokar 1984- 'The wife and the baby were discharged from hospital on 22nd Feb. They went home. They found the locks had changed... On 1st March Mr Parmar registered the conveyance to him at the Land Registry. The wife at that date was not in the house because he had put her out, but some of her furniture was there. I have to consider if she was in actual occupation the day of registration of the conveyance. I have no difficulty in deciding that she was in actual occupation. Her interest accordingly, in the house is an overriding interest.' 

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Actual occupation

Shades into and substantially overlaps with the continuity of actual occupation. 

Link Lending v Bustard 2010

Actual occupation needs to be discoverable so how do we reconcile this with intention? State of mind is meant to be irrelevant. Relates to schedule 3 (c) (i) and (ii). 

In certain circumstances symbolic occupation alone is note necessarily enough. Must be a continuing intention to occupy (as per Link Lending). Regard needs to be had to the length and reasons for absense. 

Date to establish actual occupation- difficulty arises from the registration gap- this is the execution of a registrable disposition and later registeration at Land Registry. Someone can take up actual occupation in the gap and if have equitable interest may become overriding. 

This happened in Abbey National Building Society v Cann 1991- produce a coveyancing obsurdity. Would have to survey in the gap. Have to see actual occupation in first date. (old law) 

LRA 2002 schedule 3 wording creates issues. 

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Actual occupation

Schedule 3 seems to link actual occupation to the first date. S27 disposition is defined as meaning registration. Would work in e conveyancing where theyre the same date. Still have two different dates. May overrule Abbey v Cann. 

Thompson v Foy 2009- said need to look at both dates but was in obiter. 

Scott v Southern Pacific Mortgages 2014- said Cann applies to LRA 2002. 1st date is necessary to determine priority. 

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Actual occupation

Schedule 3 seems to link actual occupation to the first date. S27 disposition is defined as meaning registration. Would work in e conveyancing where theyre the same date. Still have two different dates. May overrule Abbey v Cann. 

Thompson v Foy 2009- said need to look at both dates but was in obiter. 

Scott v Southern Pacific Mortgages 2014- said Cann applies to LRA 2002. 1st date is necessary to determine priority. 

Actual occupation- 

Actual occupation is an issue of fact to be determined by circumstances of individual cases- Williams and Glyns Bank v Boland 1981.

Actual occupation requires some degree of permanence and continuity- Abbey National Building Society v Cann 1991

The degree of physical presence required will depend on the nature of the land- Lloyds Bank v Rosset 1989 and Epps v Esso Petroleum 1973

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Actual occupation

Obiter statements suggest that occupation by a representative may be sufficient- Abbey National Building Society v Cann 1991, Lloyds Bank v Rosset 1989 and Strand Securities v Caswell 1965. 

There is no requirement that the occupation must be inconsistent with the title of the vendor (wife as a shadow of husbands occupation)- Hodgson v Marks 1971

Although the shadow theory may be relevant with regards to children- Hypo- mortgage services v Robinson 1997

Temporary lapses in occupation- A person recieving long term compulsary residential medical care may still be regarded as in actual occupation- Link Lending v Bustard 2010. 

Shorter stays in hospital may also be regarded- Chhokar v Chhokar 1984.

Whilst occupation of part of the land was sufficient under the old LRA 1925, this is no longer possible under schedule 3 para 2. 

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Actual occupation

Obvious occupation- Thomas v Clydesdale Bank 201-

Failure to disclose rights- Hodgson v Marks 1971 and Winkworth v Edward Baron Developments 1986.

Actual knowledge- Chhokar v Chhokar 1984. Symbolic occupation is allowed, from the presence of furniture. 

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