The Upper Tribunal (Lands Chamber) confirmed the high hurdle a property owner must clear to successfully claim an overriding interest against a new purchaser of the burdened land.
Facts:
In December 2023, Mr. Jasit Singh Dhami applied to register a 25-year lease dated 13 July 2021 to himself at an initial annual rent of £25,200. The lease was purportedly granted by the second respondent, Terra Properties Ltd., which was owned and controlled by Mr. Dhami as its sole director and shareholder. Terra Properties Ltd. had also been the owner of the adjacent, much larger property, which included a rear yard area. Terra Properties has been the common owner of both properties since 2005.
The larger of the two properties was subject to a legal charge to Habib Bank Zurich plc, which appointed receivers in September 2022 and sold that land to Western Property (London Road) Ltd. on 11 May 2023. The 2021 lease included an easement purporting to grant Mr. Dhami the right to park one vehicle. At the time the land was sold, the other land was occupied by a tenant, AJM Hybrid Centre Ltd., which used the premises as a motor garage and, with informal permission, used the rear yard for parking and storing vehicles as part of its business.
The first respondent objected to the registration of the lease, not on its own terms, but because of the contained easement, which Mr. Dhami sought to have registered against the first respondent's title.
Decision:
The Upper Tribunal (UT) allowed the registration of the 25-year lease to Mr. Dhami but refused to note the burden of the contained parking easement against the first respondent's title. The UT's reasoning for rejecting the binding nature of the parking easement focused primarily on the applicant's lack of "actual occupation" of the servient land at the time of its sale, which prevented the equitable easement from becoming an overriding interest under the Land Registration Act (LRA) 2002.
The UT noted that the failure to register the lease within the compulsory two-month period only created an equitable lease and easement. Under the LRA 2002, equitable easements cannot override a disposition under Schedule 3, paragraph 3. To bind the first respondent, it had to qualify under Schedule 3, paragraph 2 as an interest belonging to a person in actual occupation.
As the yard was primarily in use by the applicant's licensee/tenant, AJM, for its own garage business, the applicant could not rely on his tenant's occupation to assert his own overriding interest. Even if the applicant's use qualified as an occupation, it would still fail the LRA 2002 test because it would not have been obvious on a reasonably careful inspection.
Implications:
This case is a reinforcement of the strict requirements for an equitable interest (specifically an equitable easement) to acquire overriding status against a new registered proprietor under the LRA 2002.
The most significant implication is the clarification that the "actual occupation" required to bind a purchaser cannot be vicarious (through a tenant or licensee) when the right holder is seeking to protect an equitable easement. Instead, the LRA 2002 requires the right holder's personal, physical presence. A person who is merely "in receipt of rents and profits" cannot claim overriding status.
Finally, the case highlights the severe consequences of failing to comply with mandatory registration requirements. By failing to register his 25-year lease within the compulsory period, the applicant's interest was downgraded from a legal estate to an equitable interest.
