Barclays Bank Plc v Zaroovabli

Barclays Bank Plc v Zaroovabli [1997] Ch 321

Whether statutory tenancies can be overriding interests.

Facts:

Barclays Bank claimed possession of a house from Mr and Mrs Zaroovabli (Z), and their tenant, Mrs Pourdanay (P). Z had obtained a mortgage from Barclays in 1988. A month later Z granted P a tenancy of the property. When the contractual tenancy ended P became a statutory tenant under s.(1)(a) Rent Act 1977. However, the bank did not register their charge until 1994. The trial judge gave the bank possession. P appealed.

Issues

P claimed an interest under s.70(1)(k) Land Registration Act 1925 which says that registered land is deemed to be subject to leases under 21 years, and under s.98 Rent Act 1977 which prohibited the court from ordering possession of a dwelling where the tenancy pre-dated the mortgage. The bank argued that P’s tenancy was not an overriding interest as it had to exist at the date of completion. They also argued that P’s lease was not protected by s.70(1)(k) of the 1925 Act as this only applied to leases that were ‘granted’ and not to statutory tenancies.

Decision/Outcome

The court found in favour of P. The determining date for an overriding interest was the date of registration, not completion, following Abbey National v Cann[1991] AC 56. If the lease was still in operation when the bank registered their charge, it would be an overriding interest under s.70(1)(k) of the 1925 Act. It made no difference whether this was a contractual lease or a statutory tenancy as to hold otherwise would have frustrated the purpose of the 1977 Act.