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Competing priority and the ‘registration gap’: Baker v Craggs sets a new precedent

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27/06/2018


Walker Morris’ Will Cousins explains that the Court of Appeal decision in Baker v Craggs [1] sets a new precedent in relation to the intricacies of property ownership and the existence of the ‘registration gap’.

The ‘registration gap’

Despite completion of the transfer document, a buyer does not become the legal owner of a property until the transfer from the seller to the buyer is registered at the Land Registry. Until registration, the buyer holds a beneficial interest in the property and the legal title is held by the seller on a bare trust for the buyer. The period of time between completion of the transfer and the registration of the transfer is referred to as the ‘registration gap’. The registration gap can present problems for purchasers and practitioners alike, and it has been addressed recently by the Court of Appeal.

Baker v Craggs

An owner of adjoining properties entered into an agreement to sell one of the properties to Mr Craggs. The owner omitted to reserve a right of way in favour of the remaining adjoining properties over the property sold to Mr Craggs.

The sale to Mr Craggs completed and Mr Craggs took occupation of the property. There was a delay in the registration of the transfer and Mr Cragg’s priority period expired, which meant that Mr Craggs was not protected against any subsequent adverse registrations over the property.

Meanwhile, the original owner entered into an agreement to sell one of the other properties to Mr and Mrs Baker. That agreement included a right of way over the property sold to Mr Craggs. On completion of the sale, Mr and Mrs Baker’s title was registered with the benefit of a right of way over Mr Craggs’ property. Mr Craggs’ title was registered afterwards, subject to Mr and Mrs Baker’s right of way.

In proceedings to determine whether their right of way was valid, the High Court determined that the right of way in favour of Mr and Mrs Baker overreached Mr Craggs’ beneficial interest in the property. Mr Craggs appealed.

The Court of Appeal’s ruling

The Court of Appeal ruled that the grant of a right of way over Mr Craggs’ property could not prevail over Mr Craggs’ right to be registered as the legal owner of the property free from the right of way. The doctrine of overreaching only applies to the sale and purchase of freehold or leasehold land. At the time of the creation of the right of way, Mr Craggs was in actual occupation of the property. Statute [2] confirms that an interest of a person in actual occupation of a property will override a later registered disposition of the property, including the grant of a right of way. Therefore, the right of way did not bind Mr Craggs’ property.

WM comment

The High Court’s initial ruling had caused considerable concern to property lawyers, as it rendered the status of a buyer during the registration gap particularly vulnerable. The Court of Appeal’s decision offers protection for purchasers during the registration gap. However it also stresses the importance of the rules of priority and strict adherence to the Land Registry’s registration requirements.  The safest course is for purchasers and their conveyancers to ensure that transfers are registered as soon as possible following completion, to minimise any risks associated with the registration gap limbo.

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[1] Baker v Craggs [2018] EWCA Civ 1126
[2] Paragraph 2, Schedule 3, Land Registration Act 2002

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