Trial·Breaker SQE1
SQE1 › FLK2 › Land Law › Question
SQE1 · FLK2 · Land Law

Registered land and overriding interests — SQE1 Land question

A worked single-best-answer question on registered land and overriding interests, with why each wrong option is wrong — the way SQE1 traps candidates.

Registered land and overriding interests

Jasmine and Kieran are the registered proprietors of a freehold house which they hold on trust for themselves and for Jasmine's parents, who contributed to the price and live in the house. Without telling the parents, Jasmine and Kieran granted a legal charge to Marlow Building Society to secure a loan of £200,000, which was paid to them both. The charge has been registered. Jasmine and Kieran have now defaulted.

Is Marlow Building Society bound by the parents' beneficial interests?

  1. ANo, because the loan money was paid to two trustees, so the parents' interests were overreached and attach to the money instead.
  2. BYes, because the parents' interests override the charge as interests of persons in actual occupation.
  3. CYes, because the parents did not consent to the charge being granted.
  4. DNo, because a beneficial interest can only ever bind a purchaser if protected by a restriction.
  5. EYes, because the building society should have inspected the property and discovered the parents.
Show answer and reasoning
A is the best answer. Where capital money arising from a disposition by trustees of land is paid to at least two trustees, the beneficial interests are overreached under the Law of Property Act 1925, ss 2 and 27, and take effect against the proceeds. In City of London Building Society v Flegg the House of Lords held that overreached interests cannot bind the disponee as overriding interests, even where the beneficiaries are in actual occupation.

Rule: Payment of capital money to two trustees overreaches beneficial interests, even those of beneficiaries in actual occupation.

  • B Actual occupation does not help an interest that has been overreached by payment to two trustees. (wrong rule)
  • C Overreaching does not depend on the beneficiaries' consent where capital money is paid to two trustees. (wrong rule)
  • D Unprotected beneficial interests can override if the holder is in actual occupation and the interest has not been overreached. (wrong rule)
  • E Inspection is irrelevant once overreaching has occurred, as in City of London Building Society v Flegg. (right rule, wrong facts)

Source: Law of Property Act 1925, ss 2, 27; City of London Building Society v Flegg [1988] AC 54

Practise more Land Law   All Land subtopics