Lapsed Land Registry application saddles land with right of way

Where someone buys real estate they only have an equitable interest in it until it is registered in their name at the Land Registry. Registration perfects their legal ownership. Until that registration the seller is deemed to hold the land on trust for the buyer.

In the High Court case of Baker & Anor v Craggs [2016] two areas of land were being sold by the two joint owners. The second area sold should have had a right of way over the yard of the first area sold but the Sellers omitted to reserve it.

However the Sellers’ failure to reserve that right of way did not prevent them selling the second area with that “right of way”.

Normally transferring the first area without reserving that right of way would have disabled the Sellers from granting it to the Second Buyers. However fate intervened.

The “grant” of the right might still be valid if the Sellers were still the “legal owners” of the yard at the time the Second Buyers bought the second area with the “right of way”.

The Second Buyers faced four hurdles:

1. Were the Sellers still legal owners of the yard notwithstanding that they had already “sold” it to the First Buyer? The court said yes because there had been a major delay getting the first sale registered at the Land Registry due to a problem with the transfer plan. It had been overtaken in the registration stakes by the second sale. Pending registration the Sellers had owned the legal estate in the yard on trust for the First Buyer.

2. Did the First Buyer still have priority over the Second Buyers because of his Land Registry search and application? Answer: no because the priority conferred by them had lapsed when the First Buyer’s original Land Registry application was cancelled due to delays dealing with the plan problem.

3. Was the priority of the First Buyer’s interest nonetheless protected by the fact that he had been in “actual occupation” of the yard since his purchase? Answer: Yes it had been pretty obvious to the Second Buyers. The First Buyer had been doing some building work.

4. Was 3 above fatal to the Second Buyers’ right of way or could the Second Buyers show that the First Buyer’s interest in the yard was “overreached” by the Second Buyers’ purchase of the second area and that right of way so as to be nevertheless postponed to them? The court said: yes. Pending the First Buyer getting registered the Sellers held the yard on trust for the First Buyer but the Sellers nonetheless had all the sale powers of an absolute owner and the First Buyer’s interest in the yard would be overreached so as to be subordinated to the Second Buyers’ purchase and right of way provided (as occurred here) all the sale proceeds of the second area were paid to both the Sellers who still held the yard as trustees for the First Buyer pending resolution of the plan problem and the registration of the First Buyer’s ownership of the yard.

This use of the doctrine of overreaching seems very harsh on the First Buyer as he had no entitlement to any of the sale proceeds of the second area. The Sellers granting a burdensome right of way through the yard to the Second Buyers seems rather inconsistent with the concept of the Sellers holding the yard on trust for the First Buyer.

The very technical concept of overreaching appears to have come to the court’s aid to avoid the Second Buyers from being landlocked.

This blog has been posted out of general interest. It does not replace the need to get bespoke legal advice in individual cases.