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Published: Fri, 02 Feb 2018
Protection of Third Party Rights in land law
Protection of Third Party Rights
a) Third Party Rights – Registered Land
Helen must have regard to the potential interests of each of the parties with which she has been dealing:
- Kevin is in “actual occupation“ notwithstanding the fact that he is not a registered legal owner;
- She has granted a 5-year lease of Flat 2 by deed to Tom;
- The Building Society have a legal mortgage to secure their lending of the shortfall;
- She has entered into a covenant with the seller only to use the property as a newsagent’s shop.
The concern of a potential purchaser will be with the existence of “overriding interests”. These may be defined as interests which:
“…bind anyone taking under a registered disposition, including a purchaser for valuable consideration, although they are not recorded on the register and so cannot be discovered by inspecting it.”
So far as Kevin is concerned, Schedule 3, paragraph 2 of the Land Registration Act 2002 (“LRA 2002”) – the somewhat more limited successor to s.70(1)(g) of the Land Registration Act 1925 – provides that a registered disposition is subject to “an interest belonging at the time of the disposition to a person in actual occupation [except an interest] which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of disposition, and…of which the person to whom the disposition is made does not have actual knowledge at that time.” (This will be discussed in greater detail below.) In respect of the 5-year lease of Flat 2 granted to Tom, the buyer should exercise caution since notwithstanding the shortening of the qualifying length of such leases, leases “granted” for a period not exceeding seven years continue to be overriding interests by virtue of Sch.3, para.1 of LRA 2002. It is important that the grant of this lease was “by deed”: It was held by the Court of Appeal in City Permanent Building Society v Miller that the use of the term “granted” excluded equitable leases. It is considered likely that paragraph 1 will continue to be interpreted in the same way. The legal mortgage should not concern the purchaser since this will have to be discharged on sale but it should be noted that by virtue of ss.4 and 27 of LRA 2002, the mortgage deed does not, by itself, create the mortgage, it is the registration of the charge which perfects it. It is not stated why the seller was anxious that there should be no competition with the commercial property next door. It was held in London County Council v Allen that at the date of the covenant, the covenantee must have owned benefited land. However, if this were not so, the vendor to Helen may have required a restriction that she would not sell without the transferee agreeing to be bound by the covenant.
In the case of unregistered land, the Land Charges Act 1972 which replaced that of 1925 perpetuates a system that is in sharp distinction with registered land in which the register is intended as a “perfect mirror” of title. Under that regime, certain interests are deemed to be “registrable” and non-registration makes the interest void against certain purchasers. Kevin would be entitled to register his rights of occupation as a spouse as a Class F land charge. Although highly improbable in practice, the interest of the building society as a lender could be registered as a land charge of Class C(i) if the mortgagor had not taken steps to protect his interest by taking possession of the title deeds in order to put a potential purchaser on notice of his interest. The restrictive covenant relating to the use of the premises could be registered under Class D(ii). Thus the beneficiaries of these various interests should have taken steps to protect their position by registration since non registration of any registrable matter in the appropriate register makes it void against a purchaser for value of any interest in the land save that non-registration of a Class D charge makes it void only against a bona fide purchaser of a legal estate for money or money’s worth.
As has been seen above, Kevin may be protected against the claim of the Southern Counties Building Society by Sch.3, para.2 of LRA 2002. The issue that will arise is whether he was in actual occupation of the premises when the building society acquired their interest. In Williams & Glyn’s Bank Ltd v Boland, a wife was living with her husband in a property in which she had acquired an equitable interest at the time of the execution of a mortgage and claimed that she had a right of occupation as against the bank by virtue of her interest and occupation. The House of Lords found it possible to distinguish her interest from that of her husband. In this case, Kevin will have acquired a similar right by virtue of his contribution to the purchase price. It is important to note, however, that Kevin’s occupation would have to be discoverable upon a reasonable inspection. In this respect, he will be assisted by Chhokar v Chhokar in which the wife was a victim of an unscrupulous husband who sought to sell and exclude her from the property while she was away in hospital. Accordingly, she was not physically present when the purchaser was registered as the proprietor. However, the Court of Appeal noted that her furniture was present in the property on the date of registration and had “no difficulty” in finding that she was in occupation to the requisite degree. In this case, the fact that the vendor allowed Kevin to enter the property, fit carpets and move in furniture was ill-advised in that it could be argued that he was similarly in occupation before the date of completion still less at the point of registration of the building society’s charge. Following Williams & Glyn’s (supra), a prudent lender exercises far greater care in establishing who might be in actual occupation.
MacKenzie, J-A & Phillips, M., Textbook on Land Law, 10th Ed., 2004
Oakley, J., Megarry’s Manual of the Law of Real Property, (8th Ed., 2002)
Smith J., Property Law, (5th Ed., 2006)
 MacKenzie, J-A & Phillips, M., Textbook on Land Law, 10th Ed., 2004, p.88
  Ch 840
 See, for example, Smith J., Property Law, (5th Ed., 2006), p.242
  3 KB 642
  AC 487
  FLR 313
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