L6 - Purchaser defences (rev notes)

Question 1

Purchaser defences (5)

Answer 1

before the statute
- against a legal estate : no general defence, B wins bcs nemo dat quod non habet (A can no longer give what he’s already given away to B
- against an equitable interest : defence of good faith purchase for value without notice of a legal estate

LPA 1925
- Overreaching = s2 and 27

LRA 2002
- URL : defence of 1st registration = s11 (freeholds) and 12 (leaseholds)
- RL : defence of a registered disposition for value = s29

Question 2

Defence of first registration (freeholds)

Answer 2

= s11 LRA 2002

Question 3

s11 - availability

Answer 3

s11(2): benefit of this section only available to C registered with absolute title (under s9)

Question 4

s11 - effect

Answer 4

s11(3): estate is vested in the RP, together with all interests subsisting for the benefit of the estate

s11(4): RP takes subject only to
(a) interests which are the subject of an entry on the register* in relation to the estate
(b) interests which are overriding under schedule 1
(c) interests acquired under the Limitation Act 1980 of which the proprietor has notice

s11(5): Where C not absolutely entitled for his own benefit, takes subject to the interests of of persons beneficially entitled to the estate if he has notice of them

Question 5

Defence of first registration (leaseholds)

Answer 5

= s12 LRA 2002

Question 6

Defence of first registration - leaseholds ± same as freeholds, only 2 main ≠

Answer 6

C also takes subject to implied & express covenants, oblº and lb incident to the estate = s12(a)

Registration with good leasehold title = s12(6) : same effect as registration w/ absolute title except doesn’t affect enforcement of “any estate, right or interest affecting, or in derogation of, the title of the lessor to grant the lease”

Question 7

s12 - availability

Answer 7

s12(2): benefit of this section only available to C registered with absolute title (under s9)

Question 8

s12 - effect

Answer 8

s12(3): estate is vested in the RP, together with all interests subsisting for the benefit of the estate

s12(4): RP takes subject only to
(a) implied and express covenants, obligations and liabilities incident to the estate
(b) interests which are the subject of an entry on the register in relation to the estate
(c) interests which are overriding under schedule 1
(d) interests acquired under the Limitation Act 1980 of which the proprietor has notice

s12(5): Where C not absolutely entitled for his own benefit, takes subject to the interests of of persons beneficially entitled to the estate if he has notice of them

Question 9

Interests overriding first registration

Answer 9

= Schedule 1 LRA 2002: interests which can take priority over 1st registration under s11(4)(b)

§1. Leasehold granted for a term of less than 7y (except those that must be registered under s4(1) eg take possession more than 3m after grant)
§2. interest of a person in actual occupation
§3. legal easement or profit a prendre

Question 10

Cautions against first registration - sections

Answer 10

= s15-22 LRA 2002

Question 11

Who can lodge a caution?

Answer 11

can be lodged against registration of title to URL by person claiming to be entitled to a ‘qualifying estate’ or an interest affecting a qualifying estate = s15(1)

qualifying estates = s15(2): (i) estate in land, (ii) rentcharge, (iii) franchise, (iv) profit a prendre in gross

/!\ no caution may be lodged to protect freehold estate or leasehold w/ more than 7y to run (because those are independently registerable) = s15(3)

Question 12

Once RP is registered as proprietor (2)

Answer 12

• obtains “owner’s powers” in relation to the estate under s23 => include “power to make a disposition of any kind permitted by the general law” (except mortgage by demise or sub-demise)
• legal estate vests in him under s58, even if transaction is flawed = statutory magic

Question 12

Effect of registering a caution

Answer 12

s16: When someone applies for registration of estate against which a caution is lodged, registrar must notify cautioner of application and his right to object (+ give him a fixed time to respond before doing anything else)
/!\ caution against first registration has no effect on the validity or priority of any interest of the cautioner in the legal estate to which the caution relates = s16(3)

Question 12

Withdrawing and cancelling cautions

Answer 12

Cautioner may withdraw caution under s17

O of legal estate to which caution relates may apply for cancellation of the caution under s18 (unless consented to registration of the caution or derives title from someone who did so = 18(2)
=> registrar notifies cautioner, and will cancel the caution unless cautioner exercises his right to object within given period

Question 13

Registered disposition for value of a legal estate - starting point

Answer 13

= basic priority rule in s28: “the priority of an interest affecting a registered estate or charge is not affected by a disposition of the estate or charge”, whether or not it is registered

=> ** first in time prevails UNLESS under (major) exceptions of s29&30**

Question 14

s29(1) - quote

Answer 14

“If a registerable disposition of a registered estate is made for valuable consideration, completion of the disposition by registration has the effect of postponing to the interest under the disposition any interest affecting the estate immediately before the disposition whose priority is not protected at the time of registration”

Question 15

s29(1) - requirements (3)

Answer 15

1) a registrable disposition of a registered estate (listed in s27)*

2) made for valuable consideration : volunteer (recipient of gift or under will / intestacy) not protected by s29  takes legal estate subject to earlier interests and encumbrances,

3) completion by registration : s29 only kicks in once the disposition is registered = once legal estate vests in disponee

*= creation and transfer of legal estates and interests in land (except short leases)
=> short leases still protected under s29(4) : grant of short lease not involving registration is to be treated as if grant involved a registrable disposition

Question 16

s29(1) - effect

Answer 16

‘postpones’ other interests affecting the estate before the disposition = the interest under the disposition takes priority over earlier interests

/!\ UNLESS they are protected at the time of registration = s29(2)

Question 17

s29(1) - purchaser w/ knowledge or bad faith - Peffer v Rigg ≠Midland Bank v Green

Answer 17

Peffer v Rigg (1977) (HC) : seems to suggest that purchaser w/ knowledge of EI under trust (/ trying to deny it in bad faith) takes subject to it

BUT ≠Midland Bank v Green (1981) (HL) : purchaser’s statutory defence doesn’t include requirement of good faith or that consideration be equivalent to mk value

Question 18

s29(1) - purchaser w/ knowledge or bad faith - CTs & unconscionably

Answer 18

Lyus v Prowsa Developments (1982) (HC): no registration defence where purchaser promises to give effect to an interest in purchase contract – purchaser holds on CT for interest holder

≠ Chaudhary v Yavuz (2013) (CA) : use of right of way not enough for AO, and no CT where no new oblº undertaken (especially not where right = one that could/should be protected by registration)

Question 19

Exceptions to s29(1) : protected interests

Answer 19

= s29(2): interests whose priority is protected include
(a)(i) registered charges and interests which are the subject of a notice in the register
(a)(ii) overriding interests listed in schedule 3
(a)(iii) interests excepted from the effect of registration
(b) for leaseholds: interests the burden of which is incident to the estate

Question 20

Notices - relevant sections

Answer 20

= s32-36 LRA 2002

Question 21

Notice - definition

Answer 21

s32(1) : a notice = “an entry in the register in respect of the burden of an interest affecting a registered estate or charge”

Question 21

Notice - validity of interest

Answer 21

fact that an interest is the subject of a notice doesn’t necessarily make it valid

=> entry protects its priority = if interest is valid, notice ensures that it binds even a purchaser for value of the registered estate = s32(3)

Question 22

Agreed notices

Answer 22

Agreed notice (s34) = entered w/ ag of registered proprietor (generally where RP created the interest)

Question 22

Unilateral notices

Answer 22

Unilateral notice (s35-6) = may be entered without the consent of the registered proprietor (eg where denies the existence of the interest)

=> Must indicate that it is unilateral and who benefits from it

=> proprietor must be informed of entry of UN + has right to apply for cancellation

=> if no objection is made, notice protects the interest “as adequately” as an agreed notice

Question 23

Interests that cannot be protected by notice

Answer 23

/!\ some interests cannot be protected by notice = s33 => to avoid cluttering up the register w/ information that may confuse or prejudice position of a purchaser = the curtain principle

such interests include :
* interests under trusts or SLA settlements
* leases for less that 3y which are not required to be registered
* restrictive covenants btw lessor and lessee, so far as they relate to the demised premises

Question 24

Restrictions - definition

Answer 24

s40(1) LRA 2002 : restriction = “an entry in the register regulating the circumstances in which a disposition of a registered estate […] may be made the subject of an entry in the register”

=> eg by requiring giving of notice or obtention of consent before a disposition can be made

=> can also impose a complete ban on dealing (eg where RP is bankrupt)

= restriction on dealings w/ the registered estate => doesn’t tell P anything abt reason for it / the underlying right, only the conditions that must be complied w/ for a given transaction to be registered

Question 25

Restriction not an alternative to notice

Answer 25

restriction mustn’t be used for interests that are capable of being protected by notice = s42(2) and 46(2)

Question 26

Circumstances in which a restriction must be used

Answer 26

Restriction must be entered where 2 persons or more are registered as proprietor (so a statutory trust arises)  so that interests capable of being overreached on disposition of the estate are overreached = s44(1)

Question 27

Circumstances in which a restriction may be used

Answer 27

Restriction may be entered on application of RP or any person w/ a sufficient interest (w/ or w/out RP’s consent) – if without, RP must be notified of it

Question 27

Effect of entering a restriction

Answer 27

Default rule = “no entry in respect of a disposition to which the restriction applies may be made in the register otherwise than in accordance with its terms” = s41(1)

BUT under s41(2), Registrar does have a power to make an order disapplying or modifying a restriction so that an entry that is inconsistent with its terms can be made – /!\ this can only be done in response to an application by a person who has an interest in the restriction

Question 28

Owners’ powers & restrictions - s26 LRA 2002

Answer 28

26(1) “a person’s right to exercise owner’s powers in relation to a registered estate or charge is to be taken to be free from any limitation affecting the validity of a disposition”

BUT /!\ subject to subs (2): subs (1) does not apply to a limitation (a) reflected by an entry on the register

Question 28

Debate abt effect of s26

Answer 28

suggestion that effect of s26 = where no restriction on the register, disposition by RP (T) will ‘overreach’ any EI affecting title, whether or not requirements for statutory overreaching are met

=> idea that s26(1) means that limits on powers of trustee don’t affect disponee unless they are reflected by an entry on the register => under s26(2)

• interpretation upheld (obiter) by *Lewison LJ in Mortgage Express v Lambert *(2017) and HC in Kensington Mortgages Co Ltd v Mallon (2019)
• but doubted by HC in Ali v Dinc (2020)

Question 29

Overriding interests (OI)

Answer 29

= listed in schedule 3 LRA 2002:
* some short leases (§1)
* rights of persons in actual occupation (§2)
* some easements and profits (§3)
* some miscellaneous interests (§4-9)

Question 30

OI - Short leases

Answer 30

= Sch 3 §1 : some leases ‘not exceeding’ 7y = leases that are not independently registerable

/!\ not short registerable leases => excluded from §1

/!\ not equitable leases: held in City Permanent BS v Miller (1952) that the use of the word ‘granted’ in the equivalent provision of LRA 1925 (=s70(1)(k)) excluded equitable leases, bcs they are not the subject of a grant => seemingly also applies here

Question 30

OI - Legal easements and profits

Answer 30

= Sch 3 §3 : Legal easements or profits which arise otherwise than by express creation AND satisfy one of the following conditions:

• P had actual knowledge of its existence, or
• it would have been obvious on a reasonably careful inspection of the land, or
• it has been exercised within a year before the date of disposition, or
• it is registered under the Commons Act 2006 (or its predecessor)

expressly created easements must be completed by registration to take effect as legal easements

Question 31

OI - Interests of persons in actual occupation

Answer 31

= Sch 3 §2: 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

Question 31

OI - interests of persons in AO - exceptions to sch3 §2 (4)

Answer 31

(a) interest of a person under SLA settlement

(b) interest of a person of whom inquiry was made before the disposition and who failed to disclose the interest 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 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 the time

(d) leasehold estate in land granted to take effect in possession more than 3m after date of grant and which hasn’t taken effect in possession at the date of disposition

Question 32

Provision preceding Sch 3 §2

Answer 32

= s70(1)(g) LRA 1925

=> case law on it accepted as authoritative by the courts

Question 33

Requirements for an interest of a person in AO to be overriding (4)

Answer 33

• Occ’s interest must be proprietary
• Occ’s interest must not have been overreached
• Occ must not have expressly or impliedly authorised the purchase or grant
• Occ’s interest must not be excluded by statute

Question 34

OI - AO - req to be overriding #1 : Occ’s interest must be proprietary

Answer 34

= Scott v Southern Pacific Mortgages (2014) (SC) - see also Ainsworth

Question 35

OI - AO - req to be overriding #2 : Occ’s interest must not have been overreached

Answer 35

Contrast Boland (overriding bcs bank dealt only w/ 1T) and City of London BS v Flegg (not overriding bcs overreached bcs BS dealt w/ 2Ts)

Question 36

OI - AO - req to be overriding #3 : Occ must not have impliedly authorised the purchase or the grant

Answer 36

Either bcs knew that mortgage necessary to purchase property = Paddington BS v Mendelsohn (1985) or bcs 2nd mortgage insofar as being used to repay a first to which Occ consented = Equity and Law Homes Loans Ltd v Prestidge

Question 37

OI - AO - req to be overriding #4 : Occ’s interest must not be excluded by statute

Answer 37

Excluded interests (which cannot be overriding by virtue of AO) :

• right of a spouse or civil partner to occupy the home is not capable of overriding => can only bind P if protected by entry on the register = Family Law Act 1996, s31(10)
• interest under a SLA settlement = LRA 2002, Sch3 para 2(a) => even if B is in actual occupation, rights can only be protected by entry of a restriction on the register
• interest of a person of whom inquiry was made and who failed to disclose it where would’ve been reasonable to do so = Sch 3 para 2(b)
• interest belonging to someone whose occupation would not have been obvious on reasonably careful inspection of the land and of which disponee has no actual knowledge at the time of disposition = Sch 3 para 2(c)
• Future leases which are compulsorily registerable (unless they have taken effect in possession at the time) = Sch 3 para 2(d)

Question 38

Meaning of AO - Lord Wilberforce in Boland

Answer 38

“ordinary words of plain English”

‘actual’ = what is required is “physical presence on the land and not some entitlement in the law”

No need for the occupation to be incompatible w/ title of vendor (spouse can be in AO of house owned by husband etc)

Question 39

Meaning of AO - Lord Oliver in Cann (3)

Answer 39

occupation may have “different connotations according to the nature and purpose of the property which is claimed to be occupied”

=> “does not necessarily […] involve the personal presence of the person claiming to occupy” (possible for caretaker or employee to be in AO on behalf of employer)

BUT does have to involve involve “some degree of permanence and continuity” ≠ “mere fleeting presence”

Question 40

Meaning of AO - Arden LJ in Malory v Cheshire Homes (3)

Answer 40

“If a site is uninhabitable […] residence is not required, but there must be some physical presence, with some degree of permanence and continuity” [80]

maintaining fences, storing goods + excluding trespassers is enough [82]

“The requisite physical presence must […] in fairness be such as to put a person inspecting the land on notice that there was some person in occupation” [81]

Question 41

Meaning of AO - temporary absence of the occupier

Answer 41

Occupier being temporarily absent doesn’t necessarily prevent AO = *Link Lending Ltd v Bustard (2010)

=> depends on a number of factors, incl :
- length of absence and reason for it,
- nature of property,
- intention to return,
- degree of permanence and continuity of presence of person concerned,
- personal circumstances of that person…)

Question 42

Meaning of AO - presence of possessions on the property (3)

Answer 42

Thompson v Foy (2010) (obiter) : presence of possessions can establish actual occupation where there is an intention to return, but not without the intention to return

≠Strand Securities v Caswell (1965) : presence of belongings alone, w/ no previous occ and intention to return, is not enough to establish occupation for purpose of s70(1)(g)

=> C had 39y lease in flat in London, not registered or protected by notice on L’s title (not required at the time) – left a few clothes and possession in flat, which was occupied by daughter as licensee – L sold its interest, new O claimed that lease not binding bcs neither registered nor protected

=> Court held that C not in AO bcs presence of belonging not enough, and daughter in occº didn’t have proprietary right + clearly occupying flat bcs of her own needs, not as C’s agent

Question 43

Meaning of AO - several ppl in AO

Answer 43

Possible to have several ppl in AO at the same time – eg landowner and lodger (Hodgson v Marks) wife and husband (Boland)

but /!\ Hypo-mortgage services Ltd v Robinson (1997): CA held that child cannot be a person in actual occupation for the purpose of s70(1)(g) (bcs children can’t occupy on their own – didn’t consider minors over 16 who can be married or cohabiting)

Question 44

Meaning of AO - use of an easement

Answer 44

Probably not AO

=> Chaudhary v Yavuz : CA rejected ag that use of a right of way across neighbour’s land could amount to actual occupation of that land

BUT question abt easements of storage (which involve smth more permanent)
=> Lord Neuberger in Moncrieff v Jamieson (2007) at [143] = “A right can be an easement notwithstanding that the dominant owner effectively enjoys exclusive occupation, on the basis that the servient owner retains possession and control

Question 45

For purpose of AO, is ‘time of disposition’ date of conveyance or registration ?

Answer 45

considered (obiter) by Lewison J in Thomson v Foy: “if actual occupation must exist at one date only, then in my judgement the date of disposition [= the grant / conveyance] is the relevant date” – bcs :
o s27(2)(f) : disposition = grant of legal charge, not completion by registration
o lgg of s29(1) contemplates that time of disposition and of registration may be ≠
o sch 3 para 2 contemplates inspection at the time of disposition -> “this must mean an inspection at the date when the legal documents are executed and the money is released”

BUT obiter + left open Q of whether person must be in actual occupation at the date of registration as well as that of disposition + some contrary views