Worksheet Tutorial 7

WORKSHEET ONE: Principles of Overriding Interests
The central
issue in Land
Transfer
Problems and
essays:
Land Transfer Law consists of the rules

that determine whether a purchaser of
land or a mortgage lender will take free
from or subject to property rights in the
land that he has bought.
Identify how each of the rules below work and what are the relevant statutory sections
Overriding Interests- Interests that bind the proprietor even if they have not been
registered in the land.
Unregistered disposition which overrides registered disposition
It is an interest that will bind a purchaser even though the land has been registered.
Bind the purchaser or the lender even though it has not been entered in the land register
Schedule 3 (1)- deals with leases which have been granted for less then 7 years, which will
bind the purchaser even though they have not been registered
Schedule 3 (3)- Legal easements which come into buy implied grant of prescription.
Schedule 3 (2)- (important one) The rights/ interest of a person in actual occupation, you
have to have teo elements, you have to have the right or interest in land and then actual
occupation must also need to be proved.
Schedule 3 paragraph 2 and cases such as Chhokar v Chhokar

Schedule 3 para 2- Rights of person in actual occupation, in order to satisfy overriding interests,
it has to be people who are in occupation of the land who have actual interest in the property.
How
answer
aninterest
Essay inQuestion
Need to
to satisfy
both
land and have actual occupation.
Chhokar v Chhokar: Husband and wife case, the husband was the legal owner of the property
and the wife had equitable interest. The husband decided to sell the house to Mr Parmar whilst
she was in hospital giving birth and when she came back she found out that the husband had
disappeared with the money to India. The courts held that even though she was not actually
occupying the house at the time, it did not mean she did not have occupation. She was only at
the hospital temporally, she was held to have actual occupation. Temporary absence does not
necessarily mean that you are not in actual occupation.
Link Lending v Bustard: She was held in the mental hospital, she was held to have actual
occupation because she intended to return because some of her property was there. She was
placed in the mental home involuntarily.
Abbey National v Cann- The mortgaged was used to acquire the house and Mrs Cann was
actually physically in the house before the mortgage was granted- she was not in actual
occupation because all she was doing was doing was unloading furniture and supervising 30
WORKSHEET TWO Building Blocks
Explain the policies in each of the Building Blocks below and show how they are valuable.
Now hold each rule from WORKSHEET ONE against the Building Blocks and see if you
can make an argument for why they are good or bad law
BUILDING BLOCK NO 5: Property Rights and the Protection of

Purchasers
BUILDING BLOCK NO 8: Statutory rules should reflect the purposes

behind their enactment
Rules should not exist for their own sake. If the rules of land registration that
you have studied above do not achieve the purposes of parliament behind
their enactment we may legitimately criticise them as being bad rules.
What is the purpose behind the rules you have studied above?
BUILDING BLOCK NO 1: Residential Security
WORKSHEET THREE: Practical Application of Law of

Registered Land and Overriding Interests
The De Montfort Building Society comes to see you. In 2009 they lent Mr Patel 100,000
to start up a new business. In return Mr Patel executed a legal charge (mortgage) over his
house, title to which is registered, in favour of the Building Society. Mr Patel is the sole
legal owner of the house. Unfortunately Mr Patels business has not prospered and has
now gone into liquidation. He has failed to keep up repayments due under the loan
contract.
The De Montfort Building Society has issued proceedings for possession of the house,
with a view to immediate sale. They wish to know whether the following interests bind the
land:
The house is large and has an upstairs flat. Five years before the mortgage, in
2004, Mr Patel granted Alison an option to purchase the house. Alison currently
occupies the flat and was in occupation at the time of the mortgage;
Mrs Patel had contributed 50% of the original purchase price. She lives in the house
with Mr Patel. However, at the time of the mortgage, when the Building Society
came to inspect the house, Mrs Patel had gone to visit her sister and Mr Patel had
removed all traces of her occupation. There was, however, a bottle of perfume left
on her dressing table in the bedroom and two of her dresses were left in the
wardrobe.
Advise the De Montfort Building Society

Overriding interests that bind registrable dispositions, such as the mortgage to the De
Montfort Building Society, are found in Schedule 3 of the Land Registration Act 2002. The
paragraph we are interested in here is paragraph 2
Explain the legal problem
Taking the text of sched 3(2) below, what factors do Alison and Mrs Patel have to prove
before their interests can be held to bind the De Montfort Building Society?
Schedule 3 para.2 protects as an overriding interest:

2. 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 for
(a) an interest under a settlement;
(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;
(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.
Applying this law

1. Can Alison and Mrs Patel establish that they have an interest in land? What
interests do they have?
Mrs Petal has a beneficial interest under a trust due to her contribution. Because she
paid 50% she has beneficial interest
Alison has an interest in land, because she has the option to purchase which counts as
an interest in land due to Kling v Keston Properties. She may also have a lease but we
are not told.
2. Is Alison in actual occupation? We are told she is in actual occupation

Is Mrs Patel in actual occupation? At the time of mortgage Mr Patel is not present
because she is visiting her sister. But she is in actual occupation because on the basis of
Chhokar case and the Bustard case.
How can Chhokar v Chhokar be applied here?
How does the reasonable inspection test apply here?

When the building society came around to see the property they would have seen
Alison because all of her things would have been there. But Mr Patel had removed all
traces of Mrs Patel but he missed out the perfumer and that would have been
questioned. They would have questioned who that belonged to. Seeing that bottle of
perfumer they should ask questions and try to find out further.
Does the De Montfort Building Society have actual knowledge of either interest? What
would be the effect if they did?
so they might have actual knowledge the building society is bound by it.
Some advanced statutory interpretation
If Alison can establish an overriding interest can she purchase the
whole house or just the flat? What words of sched 3(2) are of particular
significance here?
The reasonably careful inspection and actual knowledge tests

This is where the bank or the building society go around to the person who they are going
to provide a loan to, they go to the property to conduct an inspection before providing the
loan. They want to check if there are any other people in the property.
You have people who remove traces and hide some evidence to get a loan and the point
of the inspection is for the bank to identify anything.
If there was traces left behind then the bank should be able to find that, if it was obvious or
straight forward they should have noticed it and if they should have done and they dont
then its their fault. But if they have done everything they were expected to do then they are
free of interest.
But they cannot fall back on this test if they do know about it- if they know about the actual
interest on somebody then they cannot ignore it. Banks need to find out if there are actual
occupation. But if they actually know then they cannot fall back on this test.
This process is done before the conveyance.
Overreaching
Mortgage money or the purchase money is paid to at least two individuals or trust
cooperation- the persons interest if turned into the interest to money rather then the
land. The interest in money overreaches it to the interest in land.
As long as the buyer or lender has provided the money to two individuals then the
land can be overreached.
City of London Building Society v Flegg [1988]
The daughter and son in law and the Fleggs- all four of them put money into buying
this house. The parents did not register as proprietor, they trusted the daughter and
the son in law who went on to mortgage the property and then they spent the money.
So when the building society came to repossess the house the Fleggs held that they
have an interest in the land.
Building society said you have not got an interest because we have paid our money to
two trustees so therefore your interest in land is been overreached. The interest is
turned into money which now is not there anymore because it has been taken by the
daughter and son in law.
The interest in land turned to an interest in money- which is the meaning of
overreached.
If the parents have registered the land then they could have put a restriction, or the
building society would have contacted them and it could have been stopped.

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WORKSHEET ONE: Principles of Overriding Interests

Land Transfer Law consists of the rules

Schedule 3 paragraph 2 and cases such as Chhokar v Chhokar

WORKSHEET TWO Building Blocks

BUILDING BLOCK NO 5: Property Rights and the Protection of

BUILDING BLOCK NO 8: Statutory rules should reflect the purposes

BUILDING BLOCK NO 1: Residential Security

WORKSHEET THREE: Practical Application of Law of

Advise the De Montfort Building Society

Schedule 3 para.2 protects as an overriding interest:

Applying this law

2. Is Alison in actual occupation? We are told she is in actual occupation

How can Chhokar v Chhokar be applied here?

How does the reasonable inspection test apply here?

The reasonably careful inspection and actual knowledge tests

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