Land Law: Overriding Interests

Introduction

Overriding interests are rights that bind purchasers of registered land even though they do not appear on the title register. They are carefully defined by the Land Registration Act 2002 (LRA 2002) and work as targeted exceptions to the idea that the register shows everything. In simple terms, if a right falls within Schedules 1 or 3 to the LRA 2002, it can take priority over a later registered disposition, despite being off-register.

Two themes run through this area:

• Many overriding interests are visible or discoverable on inspection (for example, occupation or an obvious right of way), so buyers can check for them.
• Some rights linked to the use of land (for example, legal easements) are protected because they commonly exist without formal registration.

Set against these protections is the device of overreaching under the Law of Property Act 1925, which can convert certain equitable rights into a claim against the sale money, leaving the buyer with clear title.

What You'll Learn

• How overriding interests fit within the LRA 2002 priority rules
• When “actual occupation” protects an unregistered proprietary right
• Which short leases (seven years or less) override and the practical limits
• How legal easements and profits can bind a buyer
• How overreaching removes equitable interests on a sale to a purchaser paying two trustees
• What a buyer, seller, or lender should check in a transaction

Core Concepts

The statutory framework and priority rule

• LRA 2002, section 29: a registered disposition of a registered estate for valuable consideration takes subject to interests protected on the register and to overriding interests in Schedule 3.
• First registration: similar protections appear in Schedule 1.
• Schedules 1 (first registration) and 3 (registered dispositions) set out which unregistered rights can bind. The most examined are:
  • Short legal leases (seven years or less)
  • Interests of persons in actual occupation
  • Certain legal easements and profits à prendre
• These categories are narrow and come with conditions that reflect what a careful buyer could reasonably discover.

Tip: In conveyancing, the register is your starting point, not the whole story. Always consider Schedule 3 before exchange and completion.

Actual occupation: requirements and limits

Schedule 3, paragraph 2 protects “an interest belonging at the time of the disposition to a person in actual occupation” if:

• The occupation would be obvious on a reasonably careful inspection, or the buyer actually knows of the interest; and
• The occupier is not asked about their rights or, if asked, they disclose them. If asked and they fail to disclose when reasonably expected to do so, their right will not override.

Key points:

• There must be a proprietary interest, not merely a personal right. National Provincial Bank v Ainsworth [1965] AC 1175 confirms that a personal licence to remain is not enough.
• “Actual occupation” is a factual state. Williams & Glyn’s Bank v Boland [1981] AC 487 treats it as physical presence, not entitlement on paper.
• Timing matters. Abbey National BS v Cann [1991] 1 AC 56 holds there is no split-second gap between purchase and mortgage: preparatory steps (like moving furniture in) are not occupation at completion.
• Continuous presence is not always essential. Temporary absence can still count if there is a continuing presence and intention to return. Chhokar v Chhokar [1984] Fam Law 166 and Link Lending v Bustard [2010] EWCA Civ 424 show that hospitalisation or compelled absence may not break occupation, especially where belongings remain and there is regular attendance.
• The occupation must relate to the interest claimed. If the right is purely personal, paragraph 2 cannot assist.
• “Obvious on inspection” is judged by the condition of the premises and what a careful inspection would reveal. Buyers who fail to ask occupants about their rights take risks.

Short legal leases (seven years or less)

• Schedule 3, paragraph 1 provides that a legal lease granted for a term not exceeding seven years overrides a later registered disposition.
• Rationale: short occupancies are usually visible and are commonly granted without registration.
• Limits and caveats:
  • The lease must be a legal lease.
  • Some short leases can be registrable (for example, certain reversionary or discontinuous terms), in which case different rules may apply.
  • A buyer who needs vacant possession should insist on surrender or appropriate completion arrangements, as the lease will otherwise bind.

Practical takeaway: if you see a tenant in situ, do not assume they can be removed on completion. Check the term and status of the lease.

Legal easements and profits à prendre

• Schedule 3, paragraph 3 protects certain legal easements and profits even if unregistered. They bind a buyer if one of the following is true:
  • The buyer knows of the right; or
  • The right is obvious on a reasonably careful inspection; or
  • The right has been exercised in the year before the disposition.
• Visibility and recent use matter. A well-trodden path, gates, worn tracks, or pipes may be enough to put a buyer on notice through inspection.
• Holaw (470) Ltd v Stockton Estates Ltd (2001) 81 P & CR 29 confirms that using a right of way is not “occupation” for paragraph 2. Easements fall to paragraph 3’s conditions.

Tip: Always walk the boundaries, look for paths, service media, signs, and speak to neighbours when appropriate.

Overreaching: when equitable interests do not bind

• Overreaching is a statutory device under the Law of Property Act 1925, sections 2 and 27. Where capital money is paid to at least two trustees (or a trust corporation), equitable interests under a trust are detached from the land and attach to the proceeds of sale.
• The buyer then takes the land free from those equitable rights, whether or not the beneficiaries were in actual occupation.
• City of London Building Society v Flegg [1988] AC 54 shows this in action: the mortgagee was not bound because the money was paid to two trustees, so the beneficiaries’ interest was overreached.
• Contrast with Boland: there was only one legal owner, so overreaching did not operate and the bank was bound by the spouse’s overriding interest.

Limits:

• Overreaching applies to equitable interests under a trust of land. It does not remove legal rights such as legal easements or short legal leases.
• Correct payment mechanics are essential: capital money must be paid to two trustees or a trust corporation.

Key Examples or Case Studies

• Williams & Glyn’s Bank Ltd v Boland [1981] AC 487

  • A spouse contributed to purchase and lived at the property. Her beneficial interest, coupled with actual occupation, bound the mortgagee. Only one trustee took the money, so overreaching did not apply.

• Abbey National BS v Cann [1991] 1 AC 56

  • Moving furniture in before completion did not amount to occupation at the critical moment. No “scintilla temporis” separates purchase from mortgage.

• Chhokar v Chhokar [1984] Fam Law 166

  • Temporary absence (hospital) did not break occupation where belongings remained and there was an intention to return.

• Link Lending v Bustard [2010] EWCA Civ 424

  • Occupant detained in psychiatric care remained in actual occupation given her belongings, regular visits, and clear intention to return.

• National Provincial Bank v Ainsworth [1965] AC 1175

  • A spouse’s personal right to remain was not a proprietary right. Without a proprietary base, Schedule 3 paragraph 2 cannot assist.

• City of London BS v Flegg [1988] AC 54

  • Beneficial interests behind a trust were overreached when capital money was paid to two trustees, so the lender was not bound.

• Holaw (470) Ltd v Stockton Estates Ltd (2001) 81 P & CR 29

  • Use of a right of way is not “occupation” of the land burdened by it. Easements are assessed under paragraph 3, not paragraph 2.

• Caunce v Caunce [1969] 1 WLR 286 (historical)

  • An older approach to enquiries of occupiers, now overtaken by the LRA 2002’s focus on inspection, knowledge, and express enquiry of the person in occupation.

• Scenario: short lease and visible easement

  • A tenant holds a legal lease for five years. A neighbour uses a clear path across the land every week. The buyer inspects and sees both. The lease overrides under Schedule 3 paragraph 1; the easement likely binds under paragraph 3 because it is obvious and has been exercised within the last year.

Practical Applications

For buyers and their conveyancers:

• Inspect the property thoroughly. Look for people living there, stored belongings, furniture, or business use.
• Ask every occupier about their rights. Record answers in writing. Failure to answer when asked can defeat an overriding claim.
• Review the TA6 (or relevant) property information form and raise targeted enquiries on occupation, tenancies, family members, and lodgers.
• Check for short leases. If you need vacant possession, agree a surrender, sale with vacant possession conditions, or price in the risk.
• Walk the boundaries. Look for signs of rights of way, pipes, cables, drainage grates, gates, stiles, or tracks.
• Consider overreaching. Where equitable interests are possible (family purchase, contributions by non-owners), structure completion so capital money is paid to two trustees or a trust corporation. If there is only one legal owner, consider appointing a second trustee.
• Where risk remains, consider obtaining appropriate occupier consent/postponement agreements or indemnity insurance (as a last resort, not a substitute for proper enquiry).

For lenders:

• Conduct occupancy checks and require occupier consent or postponement forms from adult occupiers who are not on the mortgage.
• Check the number of trustees. Ensure capital is advanced to two trustees where trust interests are likely.
• Inspect for visible easements or short leases that could affect value or enforcement.

For sellers:

• Disclose occupiers and any tenancies clearly. Undisclosed occupation can derail completion.
• Where family members have contributed, take early advice on appointing a second trustee to allow overreaching on sale.

For tenants and easement users:

• Keep records of your lease and evidence of occupation.
• For easements, maintain regular use and keep physical indicators visible where appropriate and lawful.

Summary Checklist

• Identify the category: short legal lease, actual occupation, or legal easement/profit.
• Confirm there is a proprietary interest (actual occupation will not protect a mere personal licence).
• For actual occupation:
  • Is the occupier physically present at completion (allowing for temporary absence)?
  • Would occupation be obvious on a careful inspection?
  • Did the buyer know of the interest or ask the occupier about rights?
• For legal easements/profits:
  • Are there visible signs?
  • Has the right been exercised in the last year?
  • Does the buyer actually know of it?
• Consider overreaching:
  • Are there equitable interests behind a trust?
  • Will capital money be paid to two trustees or a trust corporation?
• Document enquiries and inspection findings before exchange.

Quick Reference