The priority of interests in registered land is usually determined by the date of their creation. However, registration confers special priority on dispositions made for valuable consideration. In such cases, disponees take free from unprotected interests.
The provision of valuable consideration is crucial to the application of these rules. In Quest Advisors Ltd v McFeely [2009] EWHC 2651 (Ch); [2009] PLSCS 290, a company contracted to sell land in
The buyer claimed that the company had repudiated the contract because it had assigned the benefit of the agreement to a third party. Alternatively, he argued that the company had failed to arrange for the agreement to be noted on the register and had lost priority when the site was transferred into his and his brother’s joint names.
The contract incorporated the standard conditions of sale (4th ed), which prohibit buyers from transferring the benefit of a contract; an additional provision extends the prohibition to contracts to grant leases. The company argued that the contract provided for this by requiring the buyer to grant back leases “to the Seller or as it directs”.
The judge ruled that the standard conditions prevented the company from assigning the right to require the leases to be granted to a third party but did not affect the company’s ability to require the leases to be granted to someone else. The company remained bound by the contract (because the benefit of a contract can be transferred, but it is not possible to transfer its burden without the consent of the party to whom the obligations are owed) and had not rejected or repudiated it. Consequently, the company was entitled to direct the buyer to grant leases of the commercial units to a third party.
The judge also ruled that the contract bound both brothers. At the time of the transfer into their joint names, the assignment of the agreement was protected on the register. It is doubtful whether this would have sufficed to protect the agreement and, to make matters worse, the notice that was registered protected the assignee of the agreement, not the company.
None the less, the court decided that both brothers were bound by the agreement. The buyer had added his brother’s name to the title without receiving any consideration, which deprived the transfer of priority over the company’s unprotected agreement for lease.
With hindsight, the company must have regretted its omission to protect the agreement for lease by the registration of a notice. The brother’s failure to provide valuable consideration for the transfer saved the day for the company. Registration of a notice would have strengthened its hand and guaranteed the priority of the agreement for lease against all comers.
Allyson Colby is a property law consultant
