The court was asked here to determine preliminary issues in 9 test cases concerning the controversial sale and lease back schemes. These schemes enabled the occupiers of property to sell their property to a purchaser who was assumed to be North East Property Buyers (“NEPB”). NEPB borrowed funds from various lenders and has defaulted on these loans. In all the cases the occupiers contended that promises were made to them by NEPB as to their rights to occupy the properties. Although the promises varied from property to property, in all cases the occupiers contend that they were offered a tenancy of their property.
The first question the court was asked to determine was whether with reference to section 29 of the Land Registration Act 2002 were any of the interests sufficient to be overriding interests?
The court had much sympathy for the occupiers. However, based on the previous case of Abbey National v Cann [1991], the court held that the purchaser of land who relies upon a building society or bank loan for completion of his purchase in fact never acquires anything but an equity of redemption, for the land is, from the very inception, charged with the amount of the loan without which it could never have been transferred at all and it was never intended that it should be otherwise. On this basis the mortgagees’ rights under the charges had priority over any equitable rights that the occupiers may have acquired.
The second question the court determined was whether any of the tenancy agreements obtained priority. The leases were of a short duration and were non-registrable and in almost all the cases the registration of the mortgagee’s charge was made within the period of a priority period. The court held that these agreements did not obtain priority. Prior to registration the grant of the leasehold interests was not made out of a registered estate and only takes effect in equity.
Various mortgagors v various mortgagees and various occupiers [2010] EWHC 2991
