The gap widens
Author: James Benedick and Michael Callaghan
Applies to: England and Wales
A buyer of land, whose Land Registry application was cancelled because the plan was faulty, was bound by a right of way that the sellers accidently created after they had sold the land to the buyer.
In October 2016, our article 'Mind the gap' highlighted the problem of the 'registration gap'. This is the period between a buyer buying a property and the Land Registry registering the buyer as its legal owner. During the registration gap, the former owner remains the legal owner of the property.
The case of Baker v Craggs  EWHC 3250 (Ch) illustrates once again the extent of the problems that can arise as a result of the registration gap. It is a further demonstration that this area of law could do with reform.
Background to the dispute
Mr and Mrs Charlton sold land, including stables and a stable yard, to Mr Craggs. His solicitor applied to register Mr Craggs as the new owner. Unfortunately, the plan attached to the transfer of the property was incomplete and the Land Registry asked for this to be corrected. Because the new plan was not submitted within the time allowed by the Land Registry, it cancelled Mr Craggs' application to be registered as the legal owner of the property.
Cancellation of the application meant that Mr Craggs lost the benefit of his priority period to be registered as the new owner. The priority period, which last for 30 working days, is important because, so long as the registration of ownership takes place under an application delivered to the Land Registry during the priority period, the new owner takes free from any interests that have arisen during that period. As a result of the cancellation, a new application had to be made to register Mr Craggs as owner of the property outside the priority period.
During the intervening period, Mr and Mrs Charlton sold another part of their property to Mr and Mrs Baker. The transfer of the new property included (by accident) the grant of a right of way over the stable yard that Mr and Mrs Charlton had already sold to Mr Craggs. The Bakers' solicitors were successful in having title to the new property registered. Title to the Bakers' property showed that it had the benefit of the right of way over the stable yard. When Mr Craggs' title was finally registered, it showed that his property was subject to this right of way. The court had to decide whether the right of way should remain registered against his title.
The court's decision
The court held that the right should remain. When Mr and Mrs Charlton created the right of way, they were the legal owners of the stable yard, as Mr Craggs' application to register his ownership of the stable yard had not been completed. Had his original application been successful, he would not have been subject to the right of way. However, because the original application had been cancelled, he had lost his priority.
The court then had to consider whether there were any other circumstances that would give Mr Craggs' ownership of the stable yard priority over the right of way. Although Mr Craggs had been in actual occupation of the stables and stable yard during the period when the new right of way was created, this was not sufficient to defeat it. While the rights of people in 'actual occupation' of land can take priority to other interests in the land, the fact that Mr and Mrs Baker had paid the purchase price for their land to two people meant that any interest of Mr Craggs arising from his occupation was automatically transferred from the land to the purchase money paid to Mr and Mrs Charlton; this is a process known as overreaching. It was unfortunate for Mr Craggs that Mr and Mrs Charlton owned the property jointly: the result might have been different had there been a sole seller.
The court also had to consider whether Mr Craggs retained any rights as a contracting purchaser of the property. Contracting purchasers' rights can also take priority to other interests in land. The court decided he did not retain any rights. As completion of the transfer had taken place, Mr Craggs became the beneficial (if not the legal) owner of the property. This was, in substance, different to the status of a contracting purchaser. He could not defeat the right of way in this manner.
It seems extraordinary that, having sold a property, an owner can continue to create new rights over that property that bind the new owner. It highlights not only the need to ensure that documents and plans are correct before they are sent to the Land Registry but also the unnecessary problems that the registration gap can cause.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.