The High Court recently considered the nuanced requirements for establishing actual occupation as an overriding interest capable of taking priority over a mortgage.
Background:
Mrs. Hevedi has been the sole proprietor of a property since it was purchased in December 2014 and charged it by way of legal mortgage with MTF (NH) Ltd. (MTF) to secure a loan to herself on 23 September 2022. MTF initiated proceedings against Mrs. Hevedi, seeking possession of the property on 4 November 2023 because the term of her loan had expired and the outstanding balance had fallen due.
Mrs. Hevedi was in a domestic relationship with Mr. Hevedi for a period, with Mr. Hevedi, who successfully applied to join the proceedings as he had also been living in the property since 2015. The couple had two children together. Mrs. Hevedi, however, had moved out of the property in 2021 and relocated to London with the children.
Mr. Hevedi was still living at the property, but in January 2022, the locks were changed while he was absent for work. Mr. Hevedi engaged a locksmith in order to regain entry and change the locks. At the end of January 2022, fearful of further assault, he left the country, leaving his possessions at the property. At this stage he gave his brother Yilmaz Gun the keys to the property.
On 16 June 2022, the second defendant became aware from the Internet that the property was being advertised for sale. He took steps to have the advertisement taken down. On 17 June 2022, Yilmaz visited the property and discovered that the locks had been changed again. In July 2022, Mr. Hevedi returned to the UK and the property but left by the 30th of July 2022. In August, he learned the property was again on the market and took steps to have the advertisement taken down. He returned in mid-August 2022, with history repeating itself and locks having again been changed. This time, the property was vacant. Mr. Hevedi then moved back into the property with his brother Ilyas, his wife and their three children.
Mr. Hevedi is now claiming that he has an overriding interest in the property due to his alleged actual occupation at the time of the mortgage. There is also a separate legal action claiming he is the true beneficial owner of the property.
Decision:
Master McQuail ruled against the second defendant. The Court first established that there is no single test for determining whether a person is in actual occupation under Schedule 3, paragraph 2 of the Land Registration Act (LRA) 2002, but instead, such occupation is based on the facts and various factors. It is for the person claiming occupation to demonstrate it. The Judge found that Mr. Hevedi was not in actual occupation of the property on the relevant Date (23 September 2022). He concluded that his physical absences were too prolonged and his returns were motivated by preventing the sale of the property rather than for the purposes of his own personal occupation. Moreover, the occupation of his brother Ilyas and his family was for their own residential purposes, and not as caretakers on Mr. Hevedi's behalf. As a result, the question of whether such occupation would have been obvious was technically academic. However, Master McQuail stated that, even if the occupation was that of Ilyas and his family, this would not have indicated occupation by Mr. Hevedi. Furthermore, there were no visible signs of his own occupation at the relevant time, as the property had been emptied of his belongings. Therefore, his occupation would not have been obvious on a reasonably careful inspection.
The Court then analysed the question of the priority of the mortgage was only relevant if Mr. Hevedi was in actual occupation and such occupation was obvious on a reasonably careful inspection. However, Master McQuail indicated that the principles from the Wishart case would likely apply, potentially granting priority to the mortgagee even if Mr. Hevedi had been in occupation under those specific assumed circumstances.
Implications:
This case reinforces the stringent requirements for establishing "actual occupation" under Schedule 3, paragraph 2 of the Land Registration Act 2002. Any mere fleeting presence or an intention to return is insufficient. Clients must demonstrate a degree of permanence and continuity of physical presence at the property at the relevant time.
This decision also highlights that prolonged absences, even if explained by compelling reasons, can significantly undermine any claim of actual occupation. Moreover, the occupation by licensees, even family members, will not automatically be deemed the actual occupation of the licensor. The Court will scrutinise the reasons for the occupation. If the licensees are occupying for their own residential purposes, even with the permission of the person claiming the overriding interest, it is unlikely to be considered that person's actual occupation.