Closing The Registration Gap

In late 2016 the High Court decided that a purchaser was bound by an easement granted by his sellers, without his permission, after he had purchased his land from them. That decision caused considerable unease. Accordingly, it will come as a relief to many that the Court of Appeal has overturned the previous decision in Baker v. Craggs and, in the process, confirmed that the grant of an easement is not capable of triggering the overreaching provisions of the Law of Property Act 1925 (LPA 1925).

Background

The Charltons owned a farm in Somerset. On 17 January 2012 they completed a transfer of part of the farm land and outbuildings (the Farm Land) to Mr Craggs. Subsequently the Charltons contracted to sell one of the remaining barns to the Bakers including, by mistake, a right of way over the Farm Land. The transfer of the barn to the Bakers (including the grant of the right of way) completed on 20 February 2012.

Mr Craggs' application to register his transfer at the Land Registry was cancelled and his solicitors were unable to submit a fresh application within the priority period. The transfer to the Bakers was accordingly registered first together with the right of way over the Farm Land. When Mr Craggs finally completed registration of his transfer it was registered subject to the right of way in favour of the Bakers.

The dispute in this case was whether or not that right of way bound the Farm Land that had been acquired by Mr Craggs.

Reminder of High Court decision

At first instance the High Court held that the Farm Land was bound by the easement.

By virtue of section 27(1) of the Land Registration Act 2002 (the 2002 Act) legal title to registered land only passes to a buyer upon completion of the registration formalities. The period between the dating of a transfer and its registration at the Land Registry is known as the registration gap. During the registration gap, the Charltons held the legal title to the Farm Land on trust for Mr Craggs, who in turn held no more than an equitable interest.

Under section 29 of the 2002 Act the registration of the transfer of the barn to the Bakers for valuable consideration was subject only to interests affecting the same immediately prior to that transfer which were either protected by registration or which constituted overriding interests. Paragraph 2 of Schedule 3 of the 2002 Act provides that "an interest belonging at the time of disposition to a person in actual occupation" can amount to an...