N3 Living Ltd v Burgess Property Investments Ltd & Anor

On the transfer of registered land for valuable consideration, section 29 of the Land Registration Act 2002 generally postpones unprotected interests to the transferee’s registered interest. A Form A restriction does not prevent a sale by a sole proprietor if a second trustee is appointed and the transfer is completed in accordance with the Land Registry’s prescribed procedure. The purchaser then takes registered title free from the claimed interest, which attaches instead to the sale proceeds.

The purchaser’s knowledge of the equitable interest does not itself defeat overreaching or good faith. A purchaser is not concerned with the trust affecting the land or with the application of the proceeds after payment to the trustees.

The claimant purchaser sought directions under section 49 of the Law of Property Act 1925 concerning its purchase of registered property from the first defendant. The second defendant had applied for a Form A restriction, asserting an interest derived from the estate of Elizabeth O’Neill.

The vendor proposed completing the sale through a transfer appointing a second trustee, in accordance with Land Registry Practice Guide 21. The purchaser argued that the arrangement would not overreach the asserted interest, might involve breach of trust, and might deprive it of good faith purchaser protection. At the hearing, the vendor and the second trustee gave undertakings concerning the sale proceeds, the restriction application was withdrawn, and completion proceeded. The remaining issue was the parties’ underlying dispute for the purpose of costs.

1. The purchaser ought to have completed in accordance with the executed transfer. The vendor’s proposed arrangement was a conventional method of dealing with a Form A restriction and provided good title.

2. Under sections 29(1) and 29(2) of the Land Registration Act 2002, registration of a disposition for valuable consideration postpones an unprotected interest. The asserted interest was not protected by notice, could not be protected by notice by reason of section 33(a), and was not an overriding interest under Schedule 3, including because no relevant person was in actual occupation under paragraph 2. The purchaser would therefore take free of that interest on registration.

3. The Form A restriction applied only to a disposition by a sole proprietor under which capital money arose. A transfer by the sole proprietor to the vendor and a newly appointed trustee for no consideration would not be caught by the restriction. A subsequent transfer by the two registered proprietors to the purchaser would likewise not be a disposition by a sole proprietor. The arrangement complied with Land Registry Practice Guide 21.

4. Even if the statutory overreaching provisions required separate consideration, sections 2 and 27 of the Law of Property Act 1925 would be satisfied. The asserted equitable interest was capable of being overreached. The purchaser’s knowledge of that interest did not prevent overreaching, and the purchaser was not concerned with the trusts affecting the land or with the application of the sale proceeds.

5. The requirement that the purchaser act in good faith was met. The transaction was arms-length, the purchaser had contracted before becoming aware of the dispute, and there was no basis for alleging dishonesty or assistance of a breach of trust. The vendor’s failure to place the proceeds in an escrow account was not itself a breach of trust.

6. The purchaser’s contrary submissions were rejected. The purchaser was ordered to pay the vendor’s costs on the standard basis. An indemnity costs order was refused.