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Can actual occupation protect you during the registration gap?

24 Jul 2018

 

Even after completion of a purchase, a buyer does not become the legal owner until they are registered as a proprietor at HM Land Registry. The period of time between completion of the transfer and registration is known as the registration gap. This can cause some concern with new owners awaiting confirmation of registration.

 

The decision in Baker v Craggs (2018) may provide some relief to those owners.

 

Facts

 

In Baker v Craggs, the owner of two adjoining properties sold one of the properties (X) to Mr Craggs but failed to reserve a right of way for the other property (Y).

 

The sale of X completed and Mr Craggs went into actual occupation of the property. Registration of Mr Craggs’ title was delayed and he lost the benefit of the land registry’s 30 day priority period meaning he was not protected against any adverse registrations.

 

During the registration gap, the owner of Y contracted to sell the property to Mr and Mrs Baker. The owner also purported to grant Mr and Mrs Baker an easement over X. On completion of the transfer of Y, Mr and Mrs Baker registered the title with HM Land Registry including the benefit of the easement over X.

 

Mr Craggs was subsequently registered as the proprietor of X and was therefore subject to the adverse registration of the easement.

 

Mr Craggs disputed the easement and Mr and Mrs Baker issued proceedings to determine the matter.

 

First hearing

 

The judge held that the grant of the easement was a conveyance to a purchaser of a legal estate which overreached Mr Craggs’ equitable interest in X.

 

Mr Craggs appealed this decision on the basis that overreaching may not apply where the conveyance was a grant of an easement over land.

 

Court of Appeal

 

The Court of Appeal stated that section 2(1) Law of Property Act 1925 only applies where there is a conveyance to a purchaser of a legal estate in land. The court determined that although an easement could be defined as a “legal estate”, it was not capable of being defined as a “legal estate in land”.

 

Therefore the purported grant of the easement over X could not prevail over Mr Craggs’ right to be registered as the proprietor of X without the easement.

 

The Court of Appeal held that this was because a bare trust had been created. This bare trust was where the beneficiary, Mr Craggs, has the absolute right to the capital and assets within the trust and the equitable interest in X was protected by Mr Craggs’ actual occupation of X making it an overriding interest which cannot be defeated by the subsequent grant of the easement in favour of Y.

 

The Court of Appeal went further and stated that it would also not have been possible to identify what part of the sale proceeds paid by Mr and Mrs Baker to the owner attached to the interest and as such the payment would have been incapable of overreaching.

 

Summary

 

The Court of Appeal’s decision will protect buyers during the registration gap as long as they are in actual occupation of the property.

 

However, practically the case highlights the importance of registering at HM Land Registry as soon as possible after completion to avoid any issue about priority and adverse registrations.

 

It is likely that the next question the courts will have to deal with is whether if Mr Craggs had not been in actual occupation of the property – would the Court of Appeal’s decision have been different especially if the specific proceeds could not be allocated?

 

If you have any questions or require residential property advice, please do not hesitate to contact Claire Devapal at cd@srflegal.co.uk or Amy-Louise Ions at ali@srflegal.co.uk or contact our offices on 0191 232 0293.

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Tel: +44 (0)191 232 0283  ·  Email: info@srflegal.co.uk

 

Short Richardson and Forth Solicitors Limited is a private limited company registered in England and Wales under company number 10572065, authorised and regulated by the Solicitors Regulation Authority No 637150.

Short Richardson and Forth Solicitors Limited is a private limited company constituted and run in accordance with the provisions of the Companies Act 2006. The term “partner” has been used to denote individual senior solicitors employed by Short Richardson and Forth Solicitors Limited.