Learning Outcomes
After studying this article, you will be able to explain the statutory basis and practical operation of overreaching in English land law. You will understand when overreaching applies, the requirements for its effectiveness, and its consequences for purchasers and beneficiaries. You will also be able to distinguish overreaching from other methods of protecting interests and apply the rules to SQE1-style scenarios.
SQE1 Syllabus
For SQE1, you are required to understand the function and requirements of overreaching in both registered and unregistered land. Focus your revision on:
- the statutory provisions governing overreaching (Law of Property Act 1925 and Land Registration Act 2002)
- the conditions for overreaching to occur, including the two-trustee rule
- the effect of overreaching on equitable interests and the protection it provides to purchasers
- the consequences of failing to overreach
- the application of overreaching in common exam scenarios
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- What are the statutory requirements for overreaching to occur on a sale of land?
- What is the effect of overreaching on a beneficiary’s equitable interest under a trust of land?
- In what circumstances will a purchaser not take free of a beneficiary’s interest, even if the interest is not protected by a notice or restriction?
- How does the two-trustee rule protect purchasers in property transactions?
Introduction
Overreaching is a statutory mechanism in English land law that allows certain equitable interests in land to be detached from the land and transferred to the proceeds of sale. This ensures that purchasers can acquire land free from those interests, while beneficiaries retain a right to the sale money. Overreaching is central to the protection of purchasers and the smooth operation of the land registration system.
The statutory basis for overreaching
Overreaching is governed by the Law of Property Act 1925 (LPA 1925) and applies to both registered and unregistered land. The relevant provisions are:
Key Term: overreaching The process by which an equitable interest in land is removed from the land and attaches instead to the proceeds of sale, provided statutory conditions are met.
Key Term: trust of land A situation where the legal title to land is held by trustees for the benefit of one or more beneficiaries who have equitable interests.
Section 2(1) LPA 1925 provides that a conveyance of a legal estate by trustees to a purchaser will overreach any equitable interests, provided the purchase money is paid to at least two trustees or a trust corporation (section 27(2) LPA 1925). This is often called the "two-trustee rule".
Key Term: two-trustee rule The requirement that purchase money must be paid to at least two trustees (or a trust corporation) for overreaching to be effective.
When does overreaching apply?
Overreaching applies where:
- The land is subject to a trust of land (express, implied, resulting, or constructive)
- The trustees are selling or mortgaging the legal estate to a purchaser for value
- The purchase money is paid to at least two trustees or a trust corporation
If these conditions are satisfied, any equitable interests under the trust are "overreached"—they no longer bind the land, but instead attach to the sale proceeds.
Worked Example 1.1
Scenario:
A property is held by Alice and Ben as trustees for themselves and Carol, who has a 50% equitable interest. Alice and Ben sell the property to David. The purchase money is paid to both Alice and Ben.
Answer:
David takes the property free of Carol’s equitable interest. Carol’s interest is overreached and attaches to the sale proceeds. She can claim her share from Alice and Ben, but cannot assert any right against David or the land.
The effect of overreaching
When overreaching occurs, the purchaser acquires the land free from the beneficiaries’ equitable interests. The beneficiaries’ rights are converted into a right to the sale money. This protects purchasers from being bound by hidden or unregistered equitable interests and fosters confidence in the land registration system.
Key Term: purchaser A person who acquires a legal estate in land for value (money or money’s worth).
Requirements for overreaching
The key requirements for overreaching are:
- There must be a trust of land (express or implied).
- The trustees must have the power to sell or mortgage the land.
- The purchase money must be paid to at least two trustees or a trust corporation.
If the purchase money is paid to only one trustee, overreaching does not occur. In that case, the purchaser may be bound by the beneficiary’s equitable interest if it is protected as an overriding interest or the purchaser has notice of it (in unregistered land).
Worked Example 1.2
Scenario:
Emma is the sole legal owner of a house, but holds it on trust for herself and Fiona. Emma sells the house to George, who pays the purchase money to Emma alone.
Answer:
Overreaching does not occur because the money was paid to only one trustee. If Fiona is in actual occupation, her equitable interest may bind George as an overriding interest (in registered land) or under the doctrine of notice (in unregistered land).
Overreaching in registered and unregistered land
Overreaching operates in both registered and unregistered land. In registered land, it is particularly important where a beneficiary has an equitable interest under a trust and is in actual occupation. If the purchase money is paid to two trustees, the beneficiary’s interest is overreached and cannot be protected as an overriding interest.
Key Term: overriding interest A property right that binds a purchaser of registered land even if not entered on the register, such as the interest of a person in actual occupation.
In unregistered land, overreaching removes the need for a purchaser to investigate the existence of equitable interests under a trust, provided the statutory requirements are met.
Worked Example 1.3
Scenario:
A bank lends money to two trustees who hold a property on trust for themselves and a third party. The bank takes a mortgage and pays the loan to both trustees. The third party is in actual occupation.
Answer:
The third party’s equitable interest is overreached. The bank’s mortgage takes priority, and the third party cannot claim an overriding interest. The equitable interest attaches to the money received by the trustees.
Consequences of failing to overreach
If the purchase money is not paid to at least two trustees, overreaching does not occur. In registered land, a beneficiary in actual occupation may have an overriding interest that binds the purchaser. In unregistered land, the purchaser may be bound by the beneficiary’s interest under the doctrine of notice.
Exam Warning
If a beneficiary’s interest is not overreached, and the beneficiary is in actual occupation, the purchaser may be bound even if there is no entry on the register. Always check if the two-trustee rule has been satisfied.
Overreaching and the protection of purchasers
Overreaching is designed to protect purchasers and facilitate the free transfer of land. It allows purchasers to take land free of equitable interests under a trust, provided they pay the purchase money to two trustees. This is a key reason why most conveyancing transactions involving co-owned land require at least two legal owners.
Overreaching and beneficiaries
For beneficiaries, overreaching means that their rights are not lost, but are transferred from the land to the sale proceeds. They can claim their share from the trustees, but cannot assert any right against the purchaser or the land itself.
Overreaching and mortgages
Overreaching also applies where a mortgage is granted by two or more trustees. The mortgagee’s interest takes priority over the beneficiaries’ equitable interests, which are overreached and attach to the mortgage money.
Overreaching and court-ordered sales
A sale ordered by the court under the Trusts of Land and Appointment of Trustees Act 1996 (TOLATA 1996) will also overreach beneficiaries’ interests, provided the statutory requirements are met.
Limitations of overreaching
Overreaching does not apply to all equitable interests. It applies mainly to beneficial interests under a trust of land. It does not apply to equitable easements, restrictive covenants, or interests arising by proprietary estoppel. These interests must be protected by registration or may bind as overriding interests.
Key Point Checklist
This article has covered the following key knowledge points:
- Overreaching is the statutory process by which equitable interests under a trust of land are detached from the land and attach to the sale proceeds.
- Overreaching requires payment of purchase money to at least two trustees or a trust corporation.
- When overreaching occurs, purchasers take the land free of beneficiaries’ equitable interests.
- If purchase money is paid to only one trustee, overreaching does not occur and the purchaser may be bound by the beneficiary’s interest.
- Overreaching operates in both registered and unregistered land.
- Overreaching does not apply to all equitable interests—mainly to beneficial interests under a trust of land.
Key Terms and Concepts
- overreaching
- trust of land
- two-trustee rule
- purchaser
- overriding interest
