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Land | Ownership

Third Party Rights: Overview

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  • landowners may grant third party rights to his land (such as easements or covenants)
  • if original landowner gives land to donee or sells, question arises whether third party rights are binding on new owner or donee of the land
  • proprietary rights: interest in land capable of binding third parties, some require registration to protect the right (& bind third parties)

Registered titles

  • third party rights can exist over unregistered & registered titles
  • third party rights over registered land is dealt with under Land Registration Act 2002 (LRA 2002)
    • s.29: purchaser for valuable consideration of registered freehold title, subject to: entries on the register & unregistered interests which override registered disposition
  • four categories of third party interests: registrable dispositions, interests affecting a registered estate, equitable interests under trust & overriding interests

Registrable dispositions

  • registrable dispositions: same as estates & interests capable of existing after 1925 (fee simple absolute in possession & legal lease for more than seven yrs)
  • transactions must be registered with separate title number (otherwise equitable interest affecting a registered estate)
    • s.27(1): dispositions listed do not take legal effect until registered
    • s.27(2): dispositions which are required to be completed by registration -
      s.27(2)(a): transfer of already registered title
      s.27(2)(b): grant of a new lease for a term of more than seven years
      s.27(2)(e): express creations of interest under s.1(2) LPA 1925 (legal easements, legal rentcharge, right of entry under legal lease or legal rentcharge)
      s.27(2)(f): grant of legal charges (mortgages)
  • transfer of already registered title (s.27(2)(a) LRA 2002): sale of registered freehold estate in land requires registration of buyer on proprietorship register
  • leases (s.27(2)(b) LRA 2002): new register if title opened to record tenant owns lease & lease registered as burden in charges register of landlord's title
  • easements (s.27(2)(b) LRA 2002): benefit registered on title of land benefitting from right & burden entered on charges register of title burdened by right
  • s.27(1) LRA 2002: requires correct registration, pending registration equitable interest

Interests affecting a registered estate

  • general rule: notice placed in charges register of title protects interests (binding)
  • interests protected: restrictive covenants between freehold landowners, equitable easements, estate contracts & home rights under Family Law Act 1996 (FLA 1996)
  • exceptions: equitable interests under trusts, leases of under three years & restrictive covenants between landlord & tenant
  • agreed notice: registered with consent of proprietor or if land registrar satisfied is valid interest in the land
  • unilateral notice: registered without consent of proprietor, once registered proprietor notified & can dispute
  • if owner of encumbrance or third party interest entitled to register restriction: prevents registration of transactions unless restriction complied with
  • restrictions can be registered without consent of registered proprietor, such as claims of equitable interest under resulting or constructive trust & not admitted by registered proprietor (only entered once registered proprietor chance to object)
  • equitable interests under trusts: restriction entry on register may warn buyer of trust but it is not binding if buyer follows overreaching procedure
  • land registry refuse to register transactions, if failure comply with procedure described in the restriction
  • s.29 LRA 2002 deals with owner of interest who fails to protect interest by registration
    • s.29(1): if purchase of the registered title for value (registrable disposition for valuable consideration) completed by registration any right under s.29(2)(a) not binding
    • s.29(2)(a): priority of an interest is protected if -
      s.29(2)(a)(i): registered charge or subject of a notice in the registered
      s.29(2)(a)(ii): falls within Sch.3
      s.29(2)(a)(iii): appears from the register to be excepted from the effect of registration
      s.29(2)(b): disposition of leasehold estate, if the burden of interest is incident to the estate
  • if land acquired as gift (not for value) then donee would be bound by interest even if not protected by notice in the charges register (s.29(1) LRA 2002)

Overriding interests

  • general rule: third party interest must be registered to be binding (registration principle)
  • overriding interests exception to mirror principle: unregistered interests which override registered dispositions & are binding
  • two types overriding interests: ones that bind on first registration of a title (Sch.1 LRA 2002) & ones that bind already registered title (Sch.3 LRA 2002)
  • actual occupation is an overriding interest


    • husband (H) held legal estate on trust for himself & subject to wife's (W) equitable interest (she contributed to purchase price)
    • H mortgaged land to Williams & Glyn's Bank
    • bank's charge was registered & W's equitable interest was unregistered


    • did mortgage take effect subject to W's equitable interest?


    • W had overriding interest: she was in actual occupation under s.70(1)(g) LRA 1925 (now Sch.3 p.2 LRA 2002)
  • Schedule 3 LRA 2002 provides for leases as overriding interests
    • Sch.3 p.1: protects leases granted for term not exceeding seven years
  • Schedule 3 LRA 2002 provides for actual occupation overriding interests
    • Sch.3 p.2: protects interest of person in actual occupation
      recognised interest in land (equitable interests under trusts & options to purchase)
      occupation obvious on reasonable inspection of the land or buyer knew of interest
      buyer can take free if asks occupier & occupier unreasonably fails to disclose
      equitable interests arising under a trust can be protected
  • home rights under FLA 1996 not protected under Sch.3 p.2 LRA 2002 (s.31(10) FLA 1996)
  • by using overreaching a party may take free of a Sch.3 p.2 LRA 2002 right


    • Mr & Mrs Brown (Bs) and Mr & Mrs Flegg (Fs) both paid half purchase price of Bleak House
    • Bleak House registered in names of Bs, who held legal title on trust for sale
    • Bleak House was occupied by Bs & Fs
    • Bs mortgaged the property to City of London Building Society (in breach of trust & without Fs knowledge)
    • Bs defaulted & City of London Building Society sought possession
    • Fs argued: a beneficial interest through contribution to purchase which was an overriding interest as in actual occupation (s.70(1)(g) LRA 1925)
    • City of London Building Society argued: Fs interest was overreached as trustees (Bs) had received capital


    • had overriding interest been overreached?


    • House of Lords: Fs interest was overreached
    • overreaching operated to detach beneficial interest from land to proceeds of sale, so no interest capable of being an overriding interest
    • City of London Building Society took free of beneficial interests
  • Schedule 3 LRA 2002 provides for easements as overriding interests
    • Sch.3 p.3: protects easements:
      created by implied grant, reservation by deed or prescription
      not easements expressly created by deed (which are registrable dispositions) or equitable easements (interests affecting a registered estate)
    • easements created by prescription or under the implied grant or reservation rules created after 13 October 2003 must satisfy one of following:
      buyer of registered title knew of existence
      interest obvious on a reasonably careful inspection of the land
      easement used in the year prior to the sale

Occupation rights

  • meaning of actual occupation has developed in case law

    Thompson v Foy [2010] 1 P&CR 16


    • Mrs Thompson (T) inherited family home on death of her husband
    • T transferred title to daughter, Mrs Foy (F) to raise loan secured against property from The Mortgage Business (TMB)
    • T & F agreed to share loan money but F did not give any of loan to T
    • T argued: F used undue influence to obtain transfer of title & therefore she had equitable right to set aside transfer
    • if T's interest registered before grant of mortgage it would have been overriding interest (s.29 LRA 2002)
    • T argued: as equitable interest not registered, she had overriding right by virtue of actual occupation (Sch.3 p.2 LRA 2002)


    • were TMB bound by T's equitable interest?


    • F did not assert undue influence so T no right to set aside transfer of title
    • obita dicta: decisions on application of s.70(1)(g) LRA 1925 relevant to Sch.3 p.2 LRA 2002
    • if actual occupation must exist at one date only, then in my judgement the date of disposition is the relevant date
  • several important cases on interpretation of s.70(1)(g) LRA 1925
    • actual occupation: ordinary words of plain English, and should be interpreted as such
    • actual emphasises physical presence necessary


    • husband (H) & wife (W) agreed purchase semi-derelict property, W did not financially contribute
    • before formal transfer they started renovations
    • renovation work carried out by builders & supervised by W majority of time
    • work completed after transfer


    • was W in actual occupation at time of transfer so as to have priority over mortgagee?


    • no reason, in principle or in practice, why a semi-derelict house... should not be capable of 'actual occupation' whilst the works proceed and before anyone has started to live in the building
    • presence of employees (builders) may be sufficient to establish actual occupation
    • W held not to have beneficial interest: decision criticised not recognising work done might generate an equitable interest in family home
    • relevant time for determining actual occupation is date of completion of transaction not date of registration
    • sending furniture not actual occupation: no more than the taking of preparatory steps leading to the assumption of actual residential occupation
    • occupation is a concept which may have different connotations according to the nature and purpose of the property which is claimed to be occupied. It does not necessarily, I think, involve the personal presence of the person claiming to occupy
    • not necessarily involve personal presence of person claiming to occupy: a caretaker or the representative of a company can occupy... on behalf of his employer
    • actual occupation by licensee (who is not a representative occupier) not sufficient for actual occupation by licensor
    • licensee can be in actual occupation in own right but not gain overriding interest unless holds proprietary right in the land
    • mere presence of licensor's furniture not usually sufficient for actual occupation
    • actual occupation of derelict & uninhabitable land possible through minimal acts of use (erection of fence around the plot to keep intruders out)

    Kingsnorth Finance v Tizard [1986] 1 WLR 783

    • physical presence does not have to continuous & uninterrupted
    • regular & repeated absence does not necessarily negate presence

    Hypo-Mortgage Services v Robinson [1997] 2 FLR 71

    • minor children not capable of actual occupation
    • children are shadows of the occupation of their parent

    Epps v Esso [1973] 1 WLR 1071

    • parking of car on land (in which claimant had equitable interest) will not amount to actual occupation
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