Facts
- Ms. Scott and Mr. Ahmed purchased a 25% interest in a property through a shared ownership scheme with a housing association, which retained the remaining 75%.
- The purchase was financed via a mortgage from Southern Pacific Mortgages Ltd, secured against the property.
- Ms. Scott contributed to the purchase price and mortgage payments and claimed an equitable interest in the property.
- The couple defaulted on their mortgage, and the lender sought possession.
- Ms. Scott contested possession, asserting that her equitable interest should take priority over the lender's charge.
- The dispute centered on whether the equitable interest created by Ms. Scott's contribution could survive the application of overreaching provisions under the Land Registration Act 2002.
Issues
- Whether Ms. Scott's equitable interest, arising from contributions to the purchase price and mortgage payments, could take priority over the mortgage lender's legal charge.
- Whether the overreaching mechanism under the Land Registration Act 2002 extinguished Ms. Scott's equitable interest when the statutory requirements were satisfied.
- How the priority of interests is determined in the context of shared ownership schemes and property financing by mortgage.
Decision
- The Supreme Court held that the mortgage lender's charge overreached Ms. Scott's equitable interest once statutory requirements were satisfied.
- The housing association and Mr. Ahmed, as joint legal owners, acted as trustees; their compliance with overreaching provisions transferred Ms. Scott's equitable interest from the property to the sale proceeds.
- Ms. Scott's equitable interest did not take priority over the lender's charge, as the Land Registration Act 2002 required such interests to be overreached if statutory formalities are met.
- The doctrine of notice, historically relevant to equitable interests, had been superseded by the statutory framework governing priority.
- Where the sale proceeds were insufficient to satisfy the mortgage, Ms. Scott's rights were limited accordingly.
Legal Principles
- Overreaching transfers equitable interests in land to the proceeds of sale or mortgage when legal owners act as trustees and comply with statutory requirements.
- The Land Registration Act 2002 governs priority of interests, emphasizing registration and compliance over the doctrine of notice.
- Mortgage lenders who comply with overreaching requirements acquire title free from equitable interests, even where those interests arise from contributions to price or payments.
- In shared ownership and co-ownership arrangements, equitable interests remain subject to overreaching upon mortgage or sale by legal owners.
- Strict compliance with statutory formalities is essential; failure to comply may preserve the priority of equitable interests.
Conclusion
The Supreme Court clarified that, in property transactions where statutory overreaching requirements are met, equitable interests such as those arising from contributions are subordinate to the lender's legal charge and are transferred to the proceeds of sale, reinforcing the statutory framework for prioritizing interests in registered land.