'Schedule 3, para.2 Land Registration Act 2002 protects the purchaser at the expense of the innocent occupier'. Consider the truth of this statement.

This is stated in Schedule 3, para.2 (b) and (c) which read as follows:

Interests of persons in actual occupation

2     An interest belonging at the time of the disposition to a person in actual occupation, so far as relating to land of which he is in actual occupation, (will be overriding) except for-

  (b) an interest of a person of whom inquiry was made before the disposition and who failed to disclose the right when he could reasonably have been expected to do so;

  (c) an interest-  

  (i) which belongs to a person whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition, and

  (ii) of which the person to whom the disposition is made does not have actual knowledge at that time

Whether governed by Schedule 1 or Schedule 3, the rights of a person in actual occupation will override only to the extent that they coincide with that occupation. This is designed to deal with situations such as in Ferrishurst Ltd v Wallcite. In this case a registered leasehold title included offices and a garage, each of which was let on a separate sublease to a different tenant. The sublease of the offices gave the subtenant an option to purchase his landlords reversion i.e. to acquire the registered leasehold title to both the offices and garage. The lease was assigned to the purchaser for value and Ferrishurst Ltd, the sub tenant of the offices sought to enforce its option against that purchaser. The option was not protected as a minor interest by any entry on the title to the lease, but Ferrishurst claimed an overriding interest arising from actual occupation. The Court of Appeal held that an occupier need not be in actual occupation of the whole plot comprised in the registered title and could enforce an overriding interest against the part which he did not occupy. This decision is now reversed by application of the new regulations and this emphasises that ‘actual occupation’ is really just a warning to an intending purchaser of the existence of third party rights in the land, not in itself a guarantee of such rights.

As mentioned under Schedule 3 the rights of a person in actual occupation will not override a purchaser where either:

˜ enquiries have been made of the right-holder and he has failed to disclose the right in circumstances where he could reasonably be expected to disclose it; or

˜ the right-holder’s actual occupation is not obvious on a reasonable inspection of the land, and the person potentially bound did not have actual knowledge of the interest at the time of the disposition.Provided the occupation is either apparent or known it does not matter that the interest itself is not.

Thus s.70(1)(g) of the 1925 Act which states that overriding interests consist of:

the rights of every person in actual occupation of the land or in receipt of the rents and profits thereof, save where enquiry is made of such person and the rights are not disclosed

has been replaced with a modified rule to be kinder to non-disclosers. The second change is harsher, since ‘undiscoverable rights’ in already registered land will lose their protection by actual occupation, but a distinction must be drawn between truly undiscoverable rights and those which are merely undiscovered. Where the rights are simply not discovered, perhaps through conveyancing incompetence or bad practices, the Boland rules will still apply.

In Williams and Clyn Bank Ltd v Boland it was held that ‘it is the fact of occupation that matters’ and what is required is ‘the physical presence on the land and not some entitlement in the law’. It is only where the rights of the person in actual occupation were truly impossible for a reasonably prudent purchaser to discover that protection has been removed by the 2002 Act, such as in Chokkar v Chokkar and Malory v Cheshire. 

In Malory v Cheshire the land in question was awaiting development by Malory Enterprises Ltd, which claimed an overriding interest under s.70 of the 1925 Act. The Court considered that because the company had maintained fences around the land and taken other physical measures to exclude trespassers this amounted to actual occupation.

In Chokar v Chokar a wife with an equitable interest in the matrimonial home was son holiday when her husband absconded with the proceeds of the sale of the house. The Court of Appeal held that she was in occupation and the purchaser was bound by her right.

It is difficult to think of new situations where the interest is undiscoverable and unfairness would result, so arguably this reform may have little effect? It certainly doesn’t to me seem to offer excessive protection to the purchaser at the expense of the innocent occupier.