16 January 2017

The importance of inspection

The recent case of Trevallion v Watmore & Another (2016) reminds us why buyers must carry out a careful inspection of the boundaries of a property prior to purchase.

Numbers 46 and 52 Melville Street in Sandown are adjoining properties. The Trevallions' title to 46 was held an unregistered 1,000 year underlease, granted in 1954. The demise included a triangular piece of land at the end of the garden of 52. The owners of 46 used it for storage and a six foot fence had been erected between 52 and the triangular land.

Title to 52 was registered, but, while the title plan included the triangular land, the register made no reference to the underlease of 46.

In 2013 Miss Watmore and Mr Bell ("W&B") bought 52. Prior to buying they carried out an inspection of the garden but, as a large fuscia bush concealed the fence, W&B did not see the discrepancy between the registered plan for 52 and the area occupied by the Trevallions at 46.  Unsurprisingly, following completion W&B argued that the triangular area belonged to them, in accordance with their registered title.

In order to decide on the ownership of the triangular land, the Property Chamber of the Land Registration First-Tier Tribunal considered the provisions of the Land Registration Act 2002 ("LRA 2002") and in particular, whether the underlease of 46 was an overriding interest.

By way of a quick recap: overriding interests are interests not mentioned on the Land Registry title to registered land, but which nevertheless bind any party with an interest in that land. Paragraph 2, Schedule 3 of the LRA 2002, states that an interest belonging to a person in actual occupation is an overriding interest, unless it belongs to a person "whose occupation would not have been obvious on a reasonably careful inspection of the land at the time of the disposition and […] of which the person to whom the disposition is made does not have actual knowledge at that time"

W&B obviously didn't have actual knowledge, so the judge had to decide if a "reasonably careful inspection of the land" would have revealed the boundary discrepancy. W&B said they had looked around the garden. However, the judge (who actually visited the site to carry out their own boundary inspection) held that they had not been vigilant enough, as 42's occupation of the triangular land would have been obvious on a "reasonably careful inspection" of the garden. Had W&B looked behind the fuscia bush to check that the boundaries followed the title plan, they would have noticed the fence and could have raised enquiries (or would at least have known about the issue before proceeding with the purchase).

Bad news for W&B as this meant the underlease of 46 took effect as an overriding interest and the Trevallians' occupation took precedence.

Admittedly certain facts of this case are quite unique (i.e. a 1000 year underlease is a very unusual interest and any such interest granted/transferred since 2003 would have to be registered and would been noticed during due diligence) nevertheless there are points to take away for practitioners:

  • Always advise clients to carry out a careful inspection of the property in order to check for any discrepancies or reasonably obvious interests.
  • If you are on a site visit, bring the registered title plan and check the boundary lines match what is on the ground.

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