Overriding interest — Bare trust — Rents — Appellant holding first charge over registered property — Respondent entering caution on title on basis of beneficial ownership under bare trust and receipt of rent under tenancy granted by her — Judge refusing summary judgment in claim by appellant for vacation of caution — Whether respondent in receipt of “rents” — Whether respondent having overriding interest — Sections 3 and 70(1)(g) of Land Registration Act 1925 — Appeal allowed
The respondent’s husband, H, was the registered freehold owner of a building in South Shields, Tyne and Wear. H let part of the property and occupied the remainder as office space. In December 1990, H granted a first charge over the property to UCB Bank plc, the appellant’s predecessor, to secure all moneys from time to time owing to the bank. The charge was registered at the Land Registry in January 1991.
In 1997, the respondent entered a caution on the title to the property. In her application for the caution, she stated that: (i) in January 1990, H had executed a deed transferring the entire beneficial interest in the property to her; (ii) she had been in receipt of rents and profits from the property at the time of the grant and registration of the UCB charge; and (iii) her beneficial interest in the property was accordingly an overriding interest within the meaning of section 70(1)(g) of the Land Registration Act 1925, taking precedence over the UCB charge. The “rents and profits” asserted were weekly payments by H under a tenancy by estoppel of the property, granted to him by the respondent in her capacity of beneficial owner. The respondent did not assert that she had at any time received the rents under the leases granted by H.
The appellant brought a claim for vacation of the caution, and applied for summary judgment under CPR 24. For the purposes of those proceedings, the appellant accepted the first two assertions of fact in the respondent’s caution application, but contended that it did not follow that she held an overriding interest. The judge dismissed the application, and the appellant appealed.
Held: The appeal was allowed.
A beneficial interest under a bare trust of registered land, such as that upon which H held the property for the respondent, was not itself a registrable estate in land. It took effect in equity as a minor interest pursuant to section 2(1) of the 1925 Act. Accordingly, it qualified for protection under the Act not by means of substantive registration, but by an entry on the register of a restriction or notice, or by the temporary expedient of a caution, as in the instant case. It followed that such a beneficial interest did not fall within the definition of “land” in section 3(viii) of the Act. Thus, sums payable under a tenancy by estoppel granted out of that beneficial interest would not be rent “issuing out of or charged upon land” so as to come within the definition of “rent” in section 3(xxv). In the context of that definition, the expression “issuing out of” connoted rent payable under a tenancy that had been carved out of the legal estate in the land. That being so, the respondent had not been in receipt of “rents” at the date of the UCB charge, and her claim to an overriding interest was bound to fail. The judge should have allowed the appellant’s application for summary judgment for vacation of the caution.
Mark Wonnacott (instructed by Halliwell Landau, of Manchester) appeared for the appellant; Geoffrey Zelin (instructed by Wholley Goodings, of Bedlington) appeared for the respondent.
Sally Dobson, barrister