Fact 41. Overriding Interests - what does this mean?

Overriding interests are legal rights affecting registered land that bind new owners even without appearing on the title register, including rights of people in actual occupation.

When purchasing property in England and Wales, most buyers rely heavily on the Land Registry title register to reveal all the rights, restrictions, and interests affecting their new property. The assumption is straightforward: what appears on the register is what you need to know about. However, property law contains a significant exception to this principle through the concept of overriding interests. These are legal rights and interests that can affect registered land even though they do not appear on the title register itself, and they represent one of the most important areas of risk that conveyancers must investigate when handling property transactions.

Understanding overriding interests is essential for anyone involved in buying, selling, or owning property. These interests can fundamentally affect your rights as a landowner, potentially restricting what you can do with your property or requiring you to recognize the rights of third parties. Unlike most interests in land, which must be registered to be enforceable against new owners, overriding interests bind subsequent purchasers automatically, regardless of whether the buyer knew about them or could have discovered them through normal searches and enquiries.

What Makes an Interest 'Overriding'?

The term "overriding interest" describes a legal interest in registered land that takes effect despite not being recorded on the register. The concept exists because certain interests are considered so important, or so difficult to register, that the law protects them automatically. 

When you purchase property, these interests effectively override the usual rule that the register is conclusive about what affects the land.

The current legal framework for overriding interests is set out in Schedule 3 of the Land Registration Act 2002, which reformed and reduced the categories of interests that can override registration. 

Before this Act came into force, the categories were broader and created greater uncertainty for purchasers. The 2002 reforms aimed to reduce the number of overriding interests over time, making the register more comprehensive and reliable.

Key Categories of Overriding Interests

Several distinct categories of interests can override first registration or a registered disposition of land:

Legal easements and profits à prendre are among the most significant overriding interests. An easement is a right to use someone else's land for a specific purpose, such as a right of way across neighboring property to access a road. A profit à prendre is a right to take something from another person's land, such as fishing rights or the right to extract minerals. These rights can exist as overriding interests if they were created before October 13, 2003, or if they are within the actual knowledge of the buyer, or if they would have been obvious on a reasonably careful inspection of the land.

Interests of persons in actual occupation represent perhaps the most problematic category for purchasers. Under Schedule 3, paragraph 2 of the Land Registration Act 2002, if someone is in actual occupation of land at the time of a disposition, and they have a proprietary interest in that land, their interest will be an overriding interest that binds the purchaser. 

This provision has generated considerable case law and can create unexpected difficulties during property transactions.

Local land charges are also protected as overriding interests. These are financial charges imposed by local authorities for works they have carried out, such as street improvement costs. Although there is a local land charges register that should reveal these, they are still classified as overriding interests to ensure they bind new owners even if a search was not conducted or was defective.

Legal leases granted for seven years or less override registration. Short leases can be granted without being registered at the Land Registry, yet they remain binding on anyone who subsequently acquires the freehold or a longer leasehold interest in the property. This category recognizes the practical difficulty of requiring registration for shorter tenancies.

Certain rights acquired through adverse possession can also be overriding interests. If someone has been using land without permission and has acquired rights through long use, these may bind a purchaser even if not registered.

Various miscellaneous interests also fall within the overriding category, including customary and public rights, rights to mines and minerals created before 1926, and certain rights of chancel repair that still affect some properties.

The Problem of Actual Occupation

The category of interests belonging to persons in actual occupation causes particular concern in conveyancing practice. The landmark case of Williams & Glyn's Bank v Boland established that a spouse living in the matrimonial home could have an overriding interest based on their contribution to the purchase price, even though their name did not appear on the registered title. This decision fundamentally changed how conveyancers approach residential transactions.

Actual occupation is a question of fact that depends on the circumstances of each case. The courts have held that occupation must be more than merely preparatory and must involve some physical presence on the land. However, the concept is interpreted broadly to protect vulnerable parties. Even temporary absence does not necessarily destroy actual occupation if the person intends to return and maintains some connection to the property.

The key elements for an overriding interest based on actual occupation are:

The person must have a proprietary interest in the land, such as a beneficial interest under a trust, an option to purchase, or an estate contract. A mere personal right or license is insufficient.

The person must be in actual occupation at the relevant time, which is the date of registration of the disposition for buyer protection purposes.

The interest must not be excluded under certain limited exceptions, such as where the occupier failed to disclose their interest when reasonable enquiry was made.

How Conveyancers Protect Against Overriding Interests

Given that overriding interests do not appear on the register, conveyancers must take proactive steps to discover them during the transaction process. This involves several important investigative measures.

Physical inspection of the property is essential. The conveyancer or the client should visit the property to identify any signs of rights that might affect it. Evidence of pathways across the land, shared driveways, utility installations, or occupation by persons other than the seller should all prompt further investigation. What appears obvious on inspection can constitute an overriding interest.

Raising enquiries with the seller through the standard conveyancing questionnaires helps reveal easements, rights of way, and other interests affecting the property. Sellers have a duty to disclose known overriding interests, though they may not always be aware of them.

Conducting careful enquiries about who occupies the property is crucial for residential transactions. 

If anyone over the age of 17 lives at the property besides the seller, the conveyancer should investigate whether that person has any interest in the property. Where such interests exist, it is standard practice to obtain a signed declaration from the occupier confirming they have no interest in the property or agreeing that their interest will be postponed to the buyer's mortgage.

Local authority searches help reveal local land charges that might otherwise be missed. 

Although these are overriding interests, the local land charges register provides a mechanism for discovering them.

Examining the lease terms for leasehold properties can reveal rights granted to tenants that may affect the property being purchased.

The Impact of Overriding Interests on Property Transactions

Discovering an overriding interest during a transaction can have significant consequences. If a third party has rights over the property being purchased, this might affect its value, its suitability for the buyer's purposes, or the buyer's ability to obtain mortgage financing. Mortgage lenders are particularly concerned about interests of persons in actual occupation, as such interests could potentially take priority over the lender's security.

In some cases, the discovery of an overriding interest may lead to renegotiation of the purchase price, or in serious cases, withdrawal from the transaction entirely. Where the interest cannot be removed or adequately protected against, proceeding with the purchase may expose the buyer to future disputes or restrictions on their use of the property.

Reducing the Scope of Overriding Interests

The Land Registration Act 2002 was specifically designed to reduce the categories and scope of overriding interests over time, supporting the policy goal of making the register as comprehensive and reliable as possible. Under the Act, many interests that could previously override registration now must be registered to bind future purchasers.

For example, legal easements and profits created after October 13, 2003, must generally be registered to be enforceable against buyers. The Act also introduced a system for automatically registering certain interests when trigger events occur, gradually moving interests onto the register where they can be discovered through standard searches.

Practical Importance for Property Owners

For current property owners, understanding overriding interests is important for several reasons. If you have granted rights to neighbors or others that were not formally registered, these may still be enforceable as overriding interests. Conversely, if you are relying on rights over neighboring land, ensuring these rights are properly registered provides greater security than relying on them taking effect as overriding interests.

Property owners should also be aware that occupiers of their property may acquire interests that could cause problems upon a future sale. This is particularly relevant where family members or partners contribute financially to a property but are not named on the title. Proper documentation and registration of their interests avoids disputes and complications later.

Overriding interests represent a necessary but complex exception to the principle that the Land Registry title register should be comprehensive and conclusive. While they protect important rights that might otherwise be overlooked, they also create risks and uncertainties in property transactions. 

Competent conveyancing practice requires thorough investigation to identify potential overriding interests before completion, protecting buyers from unexpected claims and ensuring they acquire the property rights they expect. As the law continues to evolve toward greater transparency through universal registration, the practical importance of understanding and investigating overriding interests remains central to safe property transactions.