Priorities and overreaching

Priorities and overreaching sit at the centre of modern Land Law. Weeks 1 and 2 established the building blocks: estates and interests in land; the distinction between legal and equitable rights; and the registered/unregistered title divide. Week 3 asks the next question. Once a right exists, against whom is it enforceable? If land is sold, mortgaged, or otherwise disposed of, does the right bind the disponee, lose priority, or shift away from the land into the proceeds of sale?

The registered-title system is not merely a filing system. It is a priority code. The register aims to make investigation of title simpler and more secure, but it does not abolish all off-register rights. Under the Land Registration Act 2002, the starting point is that priority is preserved unless a statutory priority rule changes it. The most important rule is section 29: a registrable disposition of a registered estate, made for valuable consideration and completed by registration, postpones earlier interests whose priority was not protected. Protection may be achieved through a registered charge, a notice, an entry which shows an exception, or, most importantly for many problem questions, Schedule 3 overriding status.

Overreaching performs a different function. It is not a contest between two land rights in the ordinary sense. It detaches certain equitable interests from land and transfers them to the capital money paid on a conveyance, provided the statutory machinery is satisfied. The classic case is a beneficial interest under a trust of land. If a purchaser pays capital money to at least two trustees, or to a trust corporation, the beneficiary's equitable interest is overreached: the purchaser takes free of it, and the beneficiary's claim is against the proceeds. If the statutory requirements are not satisfied, the beneficiary may still be able to bind the purchaser, commonly through actual occupation.

For Durham purposes, the topic is assessed through the interaction of rules rather than by isolated recall. A strong answer does not say merely that an interest is legal or equitable, or that the land is registered. It identifies the disposition, asks whether value was given, asks whether registration completed the disposition, tests protection under section 29, then separately asks whether overreaching has occurred. Priority and overreaching are often confused because both can defeat earlier equitable interests. They must be kept analytically separate. Priority determines relative ranking; overreaching removes the interest from the land.

English land law inherited a deep tension between conveyancing security and equitable protection. Equity allowed interests to arise behind the legal title, especially under trusts, settlements, contracts, and family arrangements. That flexibility was socially and commercially useful, but it made purchasers vulnerable. A purchaser dealing only with the apparent legal owner might unknowingly acquire land subject to undisclosed equitable rights. Before registration, the common law and equity answered this through doctrines of notice and the bona fide purchaser rule. A purchaser of a legal estate for value without notice of a prior equitable interest took free of it. That rule was conceptually elegant but practically unstable: everything turned on what counted as notice, including constructive notice of matters that proper investigation would have revealed.

The 1925 legislation was designed to simplify conveyancing. It did not eliminate equity. Instead, it reorganised it. The Law of Property Act 1925 reduced the number of legal estates and legal interests, made many rights equitable only, and created mechanisms by which equitable interests could be protected or displaced. Two reforms are crucial here. First, land charges and land registration supplied publicity mechanisms for certain rights. Secondly, overreaching allowed purchasers to acquire land free from equitable beneficial interests under trusts if payment was made to the required number of trustees. The policy was simple: purchasers should not be forced to investigate the internal beneficial ownership of a trust; beneficiaries should be protected by the receipt of purchase money by a suitable body of trustees.

Registered land developed more slowly. The Land Registration Act 1925 introduced a system in which the register was meant to be the central source of title information, but it preserved a substantial category of overriding interests. The result was sometimes criticised as a form of hidden title. A purchaser could inspect the register and still be bound by unregistered interests, especially those of persons in actual occupation. Williams & Glyn's Bank Ltd v Boland demonstrated the force of that principle: a wife's equitable beneficial interest, coupled with actual occupation, could bind a mortgagee where there was no overreaching because the mortgage was made by a sole legal owner.

The Land Registration Act 2002 sought to modernise and rationalise the system. Its policy was often described as moving towards e-conveyancing and a more complete register. Yet the Act did not make the register conclusive in an absolute sense. It retained overriding interests, though in a narrower and more carefully defined form. It also preserved overreaching as a central mechanism for dealing with trust interests. This matters doctrinally. The 2002 Act's section 29 priority rule is not a general replacement for overreaching; the two systems co-exist. A beneficial interest under a trust may be defeated because it is overreached, not because it lacks priority protection. Conversely, where overreaching fails, a beneficiary may rely on Schedule 3 paragraph 2 if in actual occupation.

The historical lesson is that English land law has not chosen between mirror principle and equitable realism. It has adopted a compromise. The register is powerful, but not exhaustive. Equity is protected, but often only through formal mechanisms. Trust beneficiaries are protected, but normally through money rather than land when statutory overreaching operates. Much of the examination difficulty lies in recognising which part of that compromise is doing the work.

1. Priority is not the same as validity. A right may be valid between the original parties but ineffective against a later disponee. A restrictive covenant, an equitable easement, an estate contract, or a beneficial interest under a trust may exist perfectly well in equity. The priorities question asks whether that right binds another person who later acquires an estate or charge. In registered land, the answer turns principally on the Land Registration Act 2002.

1. Section 28 is the basic preservation rule. Unless sections 29 or 30 apply, the priority of an interest affecting a registered estate or charge is not affected by a disposition. This is easily overlooked. The Act does not start with a general assumption that transfer destroys earlier rights. If A has an interest before B's disposition, A retains priority unless the special statutory rule postpones it. Section 28 is especially relevant where the later transaction is not for value, or where the disposition is not of the kind covered by section 29.

1. Section 29 is the central purchaser priority rule. It applies where there is a registrable disposition of a registered estate, for valuable consideration, and completion by registration. All three elements matter. The disposition must be one which requires registration for completion: for example, a transfer of a registered freehold, the grant of a legal lease exceeding seven years, or the grant of a registered charge. It must be for valuable consideration; gifts do not receive the protection of section 29. It must be completed by registration. Until that point, the disponee's position may be more vulnerable.

1. The effect of section 29 is postponement, not invalidity. Earlier interests whose priority is not protected are postponed to the registered disposition. The interest may continue to exist between the original parties, and may still bind others. But it ranks behind the disponee's estate or charge. This language is important in problem answers. Avoid saying that the interest is void. Registered land priority is usually about relative enforceability.

The leading cases show the balance between purchaser security and equitable protection. Williams & Glyn's Bank Ltd v Boland remains the classic warning that the register is not exhaustive. A husband was the sole registered proprietor, but his wife had contributed to the acquisition of the matrimonial home and had an equitable beneficial interest. She was also in actual occupation. Because there was only one trustee, the bank's charge did not overreach her interest. Her interest could bind the bank as an overriding interest. The case is doctrinally important because it confirms that an equitable beneficial interest may be protected by actual occupation, provided it has not been overreached.

Abbey National Building Society v Cann imposes a limiting principle. Where a purchaser acquires the property with the assistance of a mortgage, the transfer and charge are treated as one indivisible transaction. The alleged occupier cannot claim priority in a fictional moment after acquisition but before the mortgage. This is a case about timing and priority; it prevents the purchase-money lender's security from being undermined by immediate occupation funded by the very transaction that creates the estate.

City of London Building Society v Flegg is the leading authority on overreaching. Elderly parents contributed to the purchase of a house and had beneficial interests behind the legal title held by two trustees. The trustees mortgaged the property and misapplied the money. The parents were in actual occupation, but their equitable interests were overreached because the mortgage money was paid to two trustees. Their protection lay in the money, not the land. The harshness of the result is deliberate: the purchaser or lender is not to be made responsible for investigating beneficial ownership where statutory overreaching has been properly triggered.

State Bank of India v Sood confirms that overreaching is not confined to sales. A mortgage by trustees of land may overreach beneficial interests if the requirements are satisfied. This is crucial in lender problem questions. A student who reserves overreaching for conveyances on sale will miss a common route by which a bank takes free of occupiers' beneficial interests.

Strand Securities Ltd v Caswell and Chhokar v Chhokar illustrate the factual character of actual occupation. Occupation is not a purely legal label. It depends on presence, use, belongings, intention, and the circumstances of absence. Chhokar is particularly important because a temporary absence for childbirth did not prevent actual occupation where the claimant's connection with the property remained real and obvious. Conversely, mere entitlement or occasional use may not be enough.

Link Lending Ltd v Bustard, under the 2002 Act, shows that actual occupation can survive absence where the facts justify it. A person detained in a secure hospital remained in actual occupation because of continuing physical manifestations of occupation and a persistent intention to return. The case should not be overgeneralised. It does not mean that intention alone suffices. It shows that actual occupation is a composite factual inquiry.

Finally, Scott v Southern Pacific Mortgages Ltd demonstrates the Supreme Court's caution about informal arrangements that would disrupt mortgage priority in sale-and-rent-back transactions. The Court declined to allow the occupiers' personal arrangements with the purchaser to generate a proprietary right capable of binding the lender ahead of the mortgage. It reinforces the importance of identifying a proprietary interest before asking whether occupation protects it.

See practice questions section below.

See further reading section below.