Under the Land Registration Act 1925 overriding interests accounted
Discuss overriding interests and why they might be considered problematic with reference to case law.
Unregistered interests which override are those rights in another person’s land that have priority to the registered title of the registered proprietor – that is, they are binding on the land without being entered in the Register of title of the land they affect. So, they are unregistered interests which override the registered title and permit the person who claims the overriding interest to exercise the right against the land. (S. 11, 12, 29, 30 LRA 2002). 
Interests that override a registered disposition are interests that bind anyone taking under a registered disposition, including a purchaser for valuable consideration, although they are not recorded on the register and, as a consequence, cannot be discovered by inspecting it.1 Such interests have always been regarded as a flaw in the registered title system; in fact overriding interests under the LRA 1925 often been described as ‘the crack in the mirror of title’. 
The Registrar of the Land Registry, Mr Charles Fortescue Brickdale, observed: “ naturally the purchaser knows the land; he looks at it; he is aware, or, at any rate, he should be, that he can make inquiries as to tenants and others; he knows to whom they pay their rent, and so on." 
As Anderson observes, “ a few interests would bind the title notwithstanding lack of registration: leases in possession, for example, which could best be ascertained on the spot, and whose title ‘ is generally so independent of the documentary title to the property that they necessarily form a partial exception". 
Someone with an equitable interest in the land could be defeated by a bona fide purchaser for value without notice (Pritchard v Briggs ( Ch 338)) and so again, unfairness existed.
A problem is that social and judicial developments have enlarged the opportunity for the existence of overriding interests with the result that a purchaser cannot always determine whether such interests exist by inspection of the land or title documents. The most obvious example is the right of equitable co-ownership stemming from Pettitt v Pettitt  , whose effect under S 70 (1) (g) on an unwary purchaser was first fully appreciated in Williams and Glyn’s Bank v Boland. Another is the equitable estoppel easement said to fall within under S 70 (1) (a) in Celsteel v Alton  and Ferrihurst LTD v Wallcite  where the plaintiff’s overriding interest in respect of the property was undiscoverable because his actual occupation extended only to part of that property. This difficulty concerning overriding interests is one reason why the Law Commission recommended a reduction in their scope and effect and this has now been implemented in Schedules 1 and 3 of the LRA 2002. 
Under LRA 2002, overriding interests may take effect against a first registered proprietor or against a person who becomes registered proprietor on the transfer of a title that is already registered. Interests which override at first registration are defined in Schedule 1 to the 2002 Act and interests which override following a transfer of land that is already registered are defined in Schedule 3. 
In Roger Sexton’s view the 2002 Act achieves this purpose only to a very limited degree. 
Vinelott J., citing extensively from Lord Wilberforce's judgment in Boland  , confirmed the general irrelevance of notice-based doctrines and observed that purchasers face being bound by interests that they could not reasonably have discovered.
The observations of Ungoed-Thomas J. in Hodgson v Marks  that actual occupation within section 70(1)(g) must be apparent occupation [were] clearly founded on the assumption, which can now be seen to be incorrect, that section 70(1)(g) is a statutory application of the equitable principle of constructive notice of the rights of a person in occupation  , explained in Hunt v Luck. 
Sparkes observes that “ Vinelott J. assumed that protection of undiscoverable occupiers is the consequence of the rejection of the first instance decision in Hodgson v Marks. "  There is force in this argument. Section 70(1)(g) and the rule in Hunt v Luck  have key differences, one being that the wording of the former does not predicate that inquiry should be possible whereas the latter does.
Russell L.J. in Hodgson v Marks  articulated the extent of the ambit of the overriding interests of those in actual occupation: “ It must depend on the circumstances, and a wise purchaser or lender will take no risks. Indeed, however wise he may be he may have no ready opportunity of finding out; but, nevertheless, the law will protect the occupier." 
Mustill L.J. considered that “ when Parliament decided in 1925 to add paragraph (g) to the list of overriding interests in registered land already created … it intended to produce a result which did reasonable justice to the bona fide purchaser … although the paragraph does not actually say that the acts constituting actual occupation must be such that a purchaser who went to the land and investigated would discover the fact of occupation and thereby be put on inquiry, the closing words of the paragraph are at least a hint that this is what Parliament principally had in mind." 
Nicholls L.J. interpreted the open-textured rationale in Boland extending s.70(1)(g) to offer protection for more modern problems connected with the occupation of property.70 His judgment reveals that ordinary conceptions of occupation no longer provide a just mechanism by which to resolve the question of priority between formal and informal interests in land.  Property is now used for a greater variety of purposes and persons may not live in the property. Nicholls L.J. considered that equating occupation with residence would “ in some cases" , for example, cases of renovation, “ defeat the purpose intended to be achieved by paragraph. 
The unregistered system of examining title deeds and the doctrine of notice might be considered to be unduly burdensome on the purchaser. Nonetheless, the judiciary has to balance the competing interests of the purchaser and the occupant. It is due to this need that although the doctrine of notice finds very little application in the unregistered system and no place at all in the registered system, the judiciary and legislature has found it necessary to impose certain comparable requirements to purchasers of registered land. The emphasis, focus and terminology has certainly shifted, however, perhaps the legislators of the very first system were more right than they thought when they stated that: 
When compared with the LRA 1925, LRA 2002 markedly reduces the scope and range of overriding interests in respect of both Schedules 1 and 3. The aim is to ensure that a potential purchaser of the land is bound only by those unregistered interests which it is absolutely necessary must bind without registration and then only in circumstances when the purchaser had a realistic opportunity of discovering the existence of the interest by a physical inspection of the land or by making normal enquiries of the transferor. Overriding interests account for a substantial number of rights affecting registered land and their importance stems from the fact that they have priority without being entered on the Register. 
“We are aware that it has been said that judges would notwithstanding any law to the contrary, in the course of time contrive some means of neutralising any enactment which went to exclude the doctrine of notice. 
This group of overriding interests is described as well-recognised burdens that are easily discoverable, although they cannot be conveniently entered onto the register. Furthermore, s.3 of the Land Registration Act 1925 states that overriding interests automatically bind the third-party purchaser, notwithstanding that they cannot be ascertained by merely looking at the register of title, or the fact that the third-party purchaser is not actually aware of their existence. 
Registered land, however, puts the burden on the purchaser who has physically to inspect the land itself and make enquiries of persons living there. The purchaser is faced with the problem of finding out as much as he or she can before purchasing the land. This burden distorts 'absolute certainty which is the ideal of all registered systems throughout the world’ to the extent that, 'absolute title becomes something of a misnomer,' (Sir John Stewart-Wallace). 
MP Thompson critically examined the wording of s.70(1)(a), identifying inconsistencies and the extent of the 'crack'. The words focused on are 'easements not being equitable easements required to be protected by notice on the register'. 
Accepted in Celsteel Ltd v Alton House Holding Ltd  . Here, Scott J held that, if equitable interests were construed narrowly and excluded from para (a), then there would exist a wide category of overriding interests, despite being undiscoverable by a purchaser of the servient tenement. 
The 'benefit' of the overriding interest may be vital (to the occupier), and the burden 'devastating' to the purchaser. The Court of Appeal's decision in William & Glyn's Bank v Boland leads to more problems for the purchaser or mortgagee concerning the duty of enquiry, especially where the spouse claims an overriding interest behind a trust for sale of the matrimonial home. 
In the Court of Appeal, Nicholls LJ acknowledged the difficulties of s.20 of the 1925 Act which focused on the position at the time of registration and s.70(1)(g), which gave rights to persons in occupation of the land at the time when the purchaser or mortgagee acquired the estate or interest. This difficulty was due to the 'gap' between completion and registration. Nicholls LJ went on to say that once completion had taken place the 'die had been cast'. 
S 134 and Sch.12, paras. 7-13 provide that any overriding interest which bound an estate immediately before the act came into force will continue to have an overriding effect, either for three years from the coming into force of the LRA 2002 or indefinitely. 
LRA 2002 provides two lists of overriding interest: Sch.1 lists the interests which override first registration, and Sch.3 lists interests which override a registered disposition.
First registration does not transfer or alter the title to the estate; it merely records the state of the title already held by the applicant. By contrast, registering a disposition of a registered estate does give the new owner a legal title which he did not have before. The 1925 Act did not distinguish between first registration and registration of a disposition. 
Of the remaining four important overriding interests, one, Local Land Charges, is retained unchanged. (See Sch. 3, para. 6.) The other three categories are:
(a) Easements and Profits;
(b) Short-Term Legal Leases;
(c) Property Rights of a Person in Actual Occupation.
These have all been reduced in their scope but will continue to be of fundamental importance. 
Easements and profits already existing against a registered title (and there must be a huge number of such rights) will continue to be governed by the old LRA 1925, s. 70(1)(a) and the case law interpreting that provision. As a result of these new rules, only a very few legal easements and profits will be excluded from being overriding interests. The new rules exclude from being overriding only an (undiscovered) legal easement or profit which has neither:
(a) left physical evidence on the land of its existence; nor
(b) been exercised at least once in the year before the land transfer. 
Critically evaluate to what extent the Land Registration Act 2002 simplifies and reduces the scope of the overriding interests regime, with particular reference to persons in actual occupation.
Ferrishurst Ltd v Wallcite Ltd
It is a truism that one of the purposes of the land registration scheme was to replace the doctrine of notice by less capricious system for resolving disputes between parties with competing interests in land. (LRA 1925) 
With reference to the system of unregistered title, Nicola Jackson said that “the discovery of encumbrances upon land is "parasitic" to this process as they are a natural consequence of verifying the title deeds." 
As far as the third party with the equitable interest is concerned, there still exists the risk of losing their interest in certain circumstances as would happen under the doctrine of notice if those circumstances will determine the judiciary to conclude that they are not in actual occupation as it was the case in Abbey National Building Society v Cann  , where the Court held that “taking "preparatory steps" to occupy the house is not actual occupation as a matter of fact." 
The Land Registration Act 2002 has been received with much critical acclaim, designed to revolutionise conveyancing in England and Wales and to bring the land registration system established by the 1925 Land Registration Act into the modern age.
Both reflect the new “ technology" of their age (the introduction of the widespread use of registers and e-commerce respectively). Fundamentally, both Acts are directed principally to simplifying the processes by which land transactions are carried out and substantive changes found in the two pieces of legislation can be regarded as supportive of this primary purpose.
In addition to this re-classification of “ interests that override" , the Act also radically alters the type of right that can have overriding status in the first place. The result is a considerably slimmer set of rights under both Schedules than those that take effect under the LRA 1925. 
Under the new scheme, there are a number of deliberate omissions from both Schedules. First, equitable easements no longer fall within either Schedule, despite being overriding interests under the LRA 1925 after Celsteel v Alton. The 2002 Act, however, uses the legal/equitable distinction as the touchstone for inclusion within the Schedules. In consequence, impliedly granted equitable easements do not enjoy overriding status, even though they are by definition not expressly mentioned in a written instrument and so may easily be overlooked for registration. This will have two immediate consequences. First, impliedly created equitable easements of necessity, common intention or under the rule in Wheeldon v Burrows will no longer carry overriding status. Secondly, easements generated by proprietary estoppel and now the inchoate equity that precedes it will have no protection unless the crystallisation of the estoppel (if any) has resulted in an entry on the register. 
The Land Registration Act 2002 makes provision to improve the accuracy of the land register and to accelerate the process of total registration of land throughout England and Wales. The pre-eminent aim of the 2002 Act is that a purchaser and other interested parties should be able to investigate title purely by examination of the land register with an absolute minimum of additional inquiries and inspections.(Law Com. No.271 at para.1.5. This implements the current Government's commitment to transparency: Charles Harpum, Land Registration Conference, October 2001, University of Reading; Modernising Government (1999) Cm. 4310. As the Law Commission observes, “ the register is no longer something of concern only to conveyancers but provides an important source of publicly available information about land, a resource in which there is an increasing interest" : Law Com. No.271 at para.2.9.) 
The 2002 Act makes provision for the creation of an interest to be simultaneous with its registration.
The governing principle of reform is that an interest should only override the estate of a registered disponee where (i) protection against purchasers is required because it is unrealistic to expect the owner of the interest to register and (ii) the priority of the interest could be discovered by the purchaser from his own inspections and inquiries.( Law Com. No.271 at paras 8.6, 8.53, 8.62.) 
Another factor that gave rise to the possibility of a concealed occupational overriding interest was the high standard of inspection imposed upon purchasers. Overriding protection is triggered by a level of conduct interpreted as amounting to “ actual occupation" . In the s.70(1)(g) case law, there are “ constitutionalist" interpretations, according to which occupation is required to be discoverable on an inspection of the land. On the other hand, “absolutist" constructions have been taken to mean that occupation is not required to be apparent to an intending purchaser: 
“ In the case of unregistered land, the purchaser's obligation depends upon what he has notice of--notice, actual or constructive. In the case of registered land, it is the fact of occupation that matters. If there is actual occupation, and the occupier has rights, the purchaser takes subject to them. If not, he does not. No further element is material." 
Thompson concludes that “there is probably less substance to this debate than might meet the eye, not least because the scope of constructive notice has, itself, widened considerably since Hunt v Luck  was decided". 
The Law Commission states: “ the existence of this uncertainty on a matter of such fundamental importance has been a major consideration … in making our proposals for reform." 
Accordingly, the 2002 Act introduces a limitation on overriding protection, the aim of which is to eliminate the possibility of a concealed overriding interest arising. An occupier's unregistered interest will only bind the estate of a registered disponee if occupation would have been apparent on a reasonable inspection of the land. The limitations contained in Sch.3 apply only to unregistered interests that override registered dispositions. The priority of unregistered interests over first registrations will be determined by the rules of unregistered conveyancing (if the registration is dispositionary) or will simply have been determined prior to the application for registration (in cases of voluntary first registration). 
It is undeniable that interpretations of s.70(1)(g) and s.199 impose standards of inspection that are repugnant to a system of documentary proof of title. However, this is the result of wide interpretations of what is apparent (in registered land) or what constitutes a reasonable inspection (in unregistered land). The possibility of the concealed overriding interest did not arise as a result of the absence of such requirements. Therefore, the 2002 Act's reasonably careful inspection defence will not enable the register to be any more conclusive as to priorities than it was under s.70(1)(g). Smith observes that “ the factors considered in the cases indicate that the result would be the same, albeit that the analysis would today be couched in the terms of the statutory language". 
under the 2002 Act, if a purchaser has actual knowledge of the occupation, the interest is overriding even if the occupation is not obvious which can be compared to the actual notice doctrine under the unregistered system. Although strictly speaking there is a difference between actual knowledge and actual notice, these differences are minimal and might not be significant in practice. 
Williams & Glyn's Bank Ltd. v Boland  A.C. 487 The doctrine of notice has no role in the registered system as it is irrelevant whether the purchaser has notice of any occupants besides the vendor. 
Lord Justice Mustill dissented from the majority opinion by saying that by the development of the doctrine of notice in para (g), this was merely preparing the home and she was not really there in occupation. Therefore, the bank had no opportunity to discover her interest. However, Lord Wilberforce in Boland stated that the doctrine of notice plays no part in registered conveyancing. 
Thompson v Foy  EWHC 1076 (Ch) the case where the previous decisions under the 1925 Act were cited with approval, although obiter, which might suggest that for an interest to become overriding the judiciary will employ the same interpretations as under the older act.
the doctrine of notice and the overriding interests - The two differ in this regard as the doctrine of notice is more concerned with the actions that the purchaser took and whether the actions were reasonable to acquire notice in regards to third party interests. 
Lloyds Bank Plc v Rosset  1 A.C. 107 In practice however this distinction, besides perhaps shifting the burden of proof from the purchaser to prove that he has taken all reasonable steps to the occupant to prove that they are in actual occupation and such occupation would be obvious. 
As for the purchaser, the way actual occupation is interpreted might suggest an underpinning of the doctrine of notice in the interpretation of the judiciary. Thus, temporary absence, such as being in the hospital, was found to be actual occupation due to the presence of the furniture as well as her intention to return, see Hogget v Hogget. 
The presence of furniture alone does not amount to actual occupation; see Strand Securities Ltd. v Caswell.27 If Hogget v Hogget were to be upheld under the new act, it is unclear how a purchaser is to determine the intention of the occupant to return. It seems that a duty would be imposed upon the purchaser to inquire of other occupants to determine the intention of the absent occupant which resembles the requirement under the doctrine of constructive notice to take all reasonable steps. 
LRA 2002 creates a more simplified and efficient system for practitioners, which will increase the volume of cases able to be undertaken; reducing costs; the elimination of barriers; and the increase of customer satisfaction. 
The introduction of e-conveyancing has opened up interests in land, such as leases and charges for viewing. It has also meant that there is no need to lodge applications of land charges and transfers of title as this will be done automatically in the e-conveyancing; therefore creating a more efficient system for conveyancing practitioners. As with every change there will be apprehension that the title and charges have really been completed without the sending of applications and receipts of notification; however this is belied by the fact the changes can be viewed openly to make sure they are correct. However, it will be important for practitioners to remember that any documents sent to the Land Registry without a certified copy will be retained and possibly destroyed. To counteract the loss of valuable information the LRA 2002 has given a grace period of 5 years in which documents will be retained and application can be made for their return. Also it has introduced a change in the registration of legal leases from 21 years to 7 years because the sale of property is a lot more prevalent after a few years and this has been made compulsory, as well as any legal easement. This will make the process of land sales and transfers a lot more efficient. In addition to further this easier system of conveyancing the practive of entering a caution against first registration is being phased out; whereby after 2 years no applications will be taken and those in the previous 2 years cancelled meaning that upon sale the property must be registered. The categories of adverse possession and overriding interests have been narrowed. In the circumstance of possible adverse possession it clearly delineates between who is an adverse possessor and those that have a legal right in the property. It also makes compulsory application for title by the adverse possessor after 10 years which will be rejected, the court will notify the paper owner and if after 2 years the adverse possession is not ended the title will be given to the adverse possessor. Overriding interests have been narrowed and certain categories, such as legal easements have been made compulsory to register therefore confirming the easy access to conveyancing. 
Link Lending Ltd v Hussain and another
 EWCA Civ 424;  WLR (D) 103
MUMMERY LJ said that the judge had considered the relevant authorities on the concept of a "person in actual occupation" of land in the earlier land registration legislation and now found in the Land Registration Act 2002. The construction of the earlier equivalent provisions by the House of Lords was binding on the court. The courts were reluctant to lay down, or even suggest, a single legal test for determining whether a person was in actual occupation. The decisions on statutory construction identified the factors which had to be weighed by the judge on that issue, which included the degree of permanence and continuity of presence of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person. The question for the court was whether the judge could properly and reasonably conclude that the second defendant had been in actual occupation of the property at the relevant date. It was clear that the second defendant was not a "mere fleeting presence", nor was this a case like Abbey National Building Society v Cann  1 AC 56 of acts preparatory to the assumption of actual occupation. It was also distinguishable from Stockholm Finance Ltd v Garden Holdings Inc  NPC 162 where the owner had lived with her family abroad for more than a year. The new and special feature of the instant case was the psychiatric problems of the person claiming actual occupation. On the facts she remained in actual possession despite her involuntary removal to a care home.
JACOB and SULLIVAN LJJ agreed.
The meaning of 'actual occupation' within the LRA 1925, while including occupiers' right, covers relationships of many kinds and does not differentiate between occupation as a source and consequence of an interest (see National Provisional Bank Ltd v Ainsworth  AC 1175). 
'Actual occupation', in fact, is extended to include the mere physical presence of someone other than the vendor. The latter was determined by Lord Denning MR, as he then was, in William & Glyn's Bank v Boland  : 'Actual occupation is a matter of fact not a matter of law.' 
LRA 2002 reduces the number of potential overriding interests, by redefining some of them and by providing that others will lose their overriding status, either immediately or after a period of time.3 Also, when dealing with first registration, the registry must make an effort to note any interests which would otherwise have an overriding effect. Moreover, s.71 provides that applicants for registration should reveal any such interests. 
Note the recent obiter dicta in K Sultana Saeed v Plustrade  ,  EWCA 2011 which suggests that an easement may qualify as an overriding interest under s.70(1)(g) of the LRA 1925 (and by implication Schs 1 and 3) because the claimant was in actual occupation of the portion of land subject to the easement: in this case, by using the parking space that was granted by the easement. While it is questionable whether use of the easement also qualifies as “ actual occupation" of the land, we must be aware of the possibility that the Schedules may be subject to the same kind of flexible interpretation as the judiciary seek to ensure “ fairness" in the operation of the Act. 
A second change is that the rights of adverse possessors per se will no longer be overriding, although whether this will have major practical implications is uncertain. Thus, while there is no equivalent of s.70(1)(f) of the LRA 1925, the rights of adverse possessors will override if supported by “ actual occupation" of the land within the respective terms of the Schedules. In consequences, an absent adverse possessor has no protection, but this compromise between the rights of the purchasing third party and the adverse possessor was well supported by the consultation process. 
Thirdly, overriding status is no longer accorded to the rights of persons in receipt of rents and profits of the land. In the result, in Report No.271, the Commission took the view that the risk of “ hard cases" would be much reduced when full e-conveyancing took hold because it would then be impossible to create long leaseholds without electronic registration: there would be no such thing as a valid, but unregistered and non-overriding long lease. 
And representing a major policy shift, is the re-definition of “ actual occupation" under Sch.3. Under the current s.70(1)(g), the rights of persons in actual occupation are overriding whether or not they are discoverable by a purchaser. The purchaser is bound pro tanto and is denied the opportunity of walking away from the purchase or taking steps to avoid the overriding interest. Under Sch.3, rights of persons in actual occupation are excluded from overriding status in two situations: first, where enquiries are made of the right holder and he fails to disclose the right in circumstances where he could reasonably be expected to do so; and secondly, where the right holder's actual occupation is not obvious on a reasonably careful inspection of the land and the person who might be bound did not have “ actual knowledge" of the interest at the time of the disposition. 
The second limitation on “ actual occupation" under Sch.3 is more controversial. It is designed to prevent the overriding status of undiscoverable rights: hence the actual occupation (not the right) must be “ obvious" on a reasonably careful inspection of the land and the interest must not be within the “ actual knowledge" of the person affected. 
By way of contrast, there are relatively few cases turning on the truly undiscoverable overriding interest: that is, cases where any reasonably prudent purchaser simply could not have discovered the existence of an adverse right and so never had the opportunity to take avoiding action. We might include in the list Chokkar v Chokkar  (the hidden wife in hospital), Kling v Keston  (the occupied garage) and, more recently Malory v Cheshire Homes. 
The 2002 Act further complicates matters by containing two, slightly differing, lists of overriding interests. Schedule 1 lists ‘unregistered interests which override first registration’, while schedule 3 lists ‘unregistered interests which override registered dispositions’. 
The old s. 70(1)(k) is replaced by Sch. 3, para. 1, which makes overriding all legal leases for a duration not exceeding seven years. As before, the short legal lease will be overriding irrespective of whether the tenant is occupying the property and irrespective of whether or not the tenant tells any enquirers that he has rights in the land. 
A large amount of case law has developed around the ‘old’ provision especially as to the meaning of ‘actual occupation’, and there can be no real doubt that (with one exception) this old case law will equally be applicable to the new provision.  Cases which reflect this include: Webb v Pollmount  , Ferrishurst v Wallcite  , Malory Enterprises v Cheshire Homes 
Lord Oliver, who delivered the only reasoned speech in Abbey National v Cann  , elaborated on the issue of what constitutes ‘actual occupation’:"It is, perhaps, dangerous to suggest any test for what is essentially a question of fact, for 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. A caretaker or the representative of a company can occupy, I should have thought, on behalf of his employer. On the other hand, it does in my judgment, involve some degree of permanence and continuity which would rule out mere fleeting presence." 
Under the new law X’s property right will only forfeit overriding status if X could reasonably have been expected to reveal his (or her) right. The new law envisages that there will be situations where it is not reasonable to expect someone to respond to an inquiry by revealing their right.