Overriding interests and Schedule 3 LRA 2002

Under the Land Registration Act 2002, certain interests bind registered proprietors despite not appearing on the register — these 'overriding interests' are listed exhaustively in Schedule 3 (Schedule 1 for first registration). The dominant category is interests of persons in actual occupation (para 2), where a proprietary interest coupled with physical presence at the time of disposition binds unless: (a) enquiry was made and not disclosed (para 2(b)), or (b) occupation was neither obvious on reasonably careful inspection nor within the disponee's actual knowledge (para 2(c) — both limbs needed). Legal easements also override unless all three conditions are absent: no actual knowledge, not obvious on inspection, and not exercised within one year (para 3). The rationale balances the mirror principle (complete register) against protecting vulnerable occupiers and interests arising informally by operation of law.

Williams & Glyn's Bank Ltd v Boland [1981] AC 487: Mrs Boland's beneficial interest under trust coupled with actual occupation constituted overriding interest under s 70(1)(g) LRA 1925; established that 'actual occupation' bears ordinary meaning of physical presence with permanence. This catalysed reform by prioritising occupiers over institutional lenders.

City of London Building Society v Flegg [1988] AC 54: Beneficial interests were overreached when capital monies paid to two trustees under ss 2 and 27 LPA 1925; overreaching defeats overriding interests as interests shift to proceeds. This protects purchasers who comply with trust machinery.

Abbey National Building Society v Cann [1991] 1 AC 56: Purchase and mortgage treated as simultaneous; preparatory acts (moving belongings) insufficient for actual occupation without physical presence; occupation must exist at moment of disposition. Narrows Boland and protects purchase-money lenders.

Link Lending Ltd v Bustard [2010] EWCA Civ 424: Occupation obvious on inspection meant para 2(c) exception did not apply; 'enquiry' under para 2(b) must be express and directed at occupier's rights, not mere inspection. Clarifies interplay between the two exceptions.

Courts apply a three-stage analysis for para 2 claims: (1) Does claimant have proprietary interest? (bare licences insufficient); (2) Were they in actual occupation at time of disposition/registration? (physical presence with permanence — temporary absence acceptable if intent to return); (3) Do any exceptions apply? For para 2(b), check if express enquiry made and occupier failed to disclose. For para 2(c), both limbs needed: occupation not obvious AND no actual knowledge.

For legal easements (para 3): confirm it's legal not equitable, then check if ANY of three conditions present (actual knowledge OR obvious OR exercised within year) — if yes, it overrides.

Always consider overreaching first: if capital monies paid to two trustees, beneficial interests cannot override (Flegg). Timing crucial: assess occupation at moment of registration (Cann).

Confusing overreaching/overriding: Overreaching (payment to two trustees) removes interests from land entirely — they cannot then override. Always check overreaching before analysing Schedule 3.

Para 2(c) conjunctive test: Students wrongly think either 'not obvious' OR 'no knowledge' defeats overriding status. Both needed — if occupation obvious OR disponee has knowledge, interest overrides.

Temporal precision: Occupation must exist at exact moment of registration, not days before/after. With simultaneous purchase/mortgage, beneficiary cannot occupy before purchaser acquires (Cann).

Notice irrelevant: Registered land doesn't use notice doctrine — overriding interests bind regardless of purchaser's knowledge unless specific statutory exceptions apply.