| City of London Building Society v Flegg | |
|---|---|
| Court | House of Lords |
| Citation(s) | [1987] UKHL 6, [1988] 1 AC 54 |
| Case opinions | |
| Lord Templeman, Lord Oliver | |
| Keywords | |
| Overreaching, overriding interest, actual occupation | |
City of London Building Society v Flegg [1987] UKHL 6 is an English land law case decided in the House of Lords on the priority given to overriding interests and overreaching interests.
Contents |
In 1977 Mr and Mrs Flegg sold their home of 28 years and used the £18,000 they made to help buy Bleak House, Grange Road, Gillingham, Kent, registered at HM Land Registry title number K467866. Their daughter and her husband, Mrs and Mr Maxwell-Brown had asked them to, and they put in the remaining £16,000 by taking out a mortgage. It was meant for them all to live in, but the daughter and husband registered as the owners, despite their solicitor advising all four of them be registered. (So Mr and Mrs Flegg had an equitable property right from their contributions to the purchase price, the Maxwell-Browns holding on trust for them.) The Maxwell-Brown’s had money trouble and remortgaged with the City of London Building Society to raise £37,500 without the Fleggs’ consent. They Fleggs were suspicious and entered a caution against dealings at the Land Registry. They defaulted and the building society sought possession.
The House of Lords held that the building society’s charge took priority, and could use the overreaching defence against the Fleggs’ pre-existing trust right. Although under the Land Registration Act 1925 section 70, people with actual occupation may have an overriding interest that would take priority over a third party, like the building society, this does not happen if the purchase money is paid to two or more trustees or a trust corporation. If that happens, under LPA 1925 section 2(ii) the interests of the beneficiaries will be overreached and will attach to the purchase price, not the property.
Lord Templeman said the following.[1]
| “ | One of the main objects of the legislation of 1925 was to effect a compromise between on the one hand the interests of the public in securing that land held in trust is freely marketable and, on the other hand, the interests of the beneficiaries in preserving their rights under the trusts. By the Settled Land Act 1925 a tenant for life may convey the settled land discharged from all the trusts powers and provisions of the settlement. By the Law of Property Act 1925 trustees for sale may convey land held on trust for sale discharged from the trusts affecting the proceeds of sale and rents and profits until sale. Under both forms of trust the protection and the only protection of the beneficiaries is that capital money must be paid to at least two trustees or a trust corporation. | ” |
Lord Oliver gave a concurring judgment.
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