The case involved a farm in Somerset owned by the Charltons. On 17th January 2012, part of the farm and some outbuildings were transferred to Mr Craggs.
Three days later, one of the remaining barns was transferred to the Bakers. This later transfer included a right of way and inadvertently related partly to land that had already been transferred to Mr Craggs.
At the Land Registry, Mr Craggs’ initial application to register his transfer was cancelled, as the plan attached to the transfer was incomplete and his solicitor was unable to submit a fresh application within the requisite priority period, which is usually 30 days. In the meantime, the Bakers registered their transfer, together with the right of way over the land acquired by Mr Craggs.
A buyer becomes the beneficial owner of land on the date of completion of the transfer. To become the legal owner, however, the title needs to be registered at the Land Registry. The time before registration and after completion is known as the ‘registration gap’.
When Mr Craggs did eventually register his interest in May 2012, he found that his registration was subject to the right of way in favour of the Bakers.
As he had lost his priority period, Mr Craggs was then forced to argue that he had an overriding interest in the property, which would take precedence over any interest granted to the Bakers.
To claim an overriding interest, an applicant needs to show that they are in actual occupation of the land.
Although Mr Craggs was able to show he was in actual occupation of the land, the court held that his overriding interest was ‘overreached’ in accordance with section 2(1)(iii) of the Law of Property Act 1925. The Bakers had paid their purchase money to two sellers, with the result that any interest Mr Craggs held in the land was transferred to this purchase money.
Overreaching requires purchase monies to be paid to two trustees. In this particular case, the result might have been different if the property had not been jointly held by the Charltons.
The case highlights the problems that can arise in the registration gap, along with the importance of registering a transfer within the priority period of a search.
From a lender’s perspective, it is important to note that a mortgage is not perfected until it is registered with the Land Registry. Ensuring the timely registration of their security is the primary objective of any lender – otherwise a full recovery is compromised and they stand in the queue with other unsecured creditors.
Title insurance will indemnify the lender in the event of their charge being unregistered and therefore unenforceable, providing reassurance against administrative difficulties.
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