Can the grant of an easement overreach other interests?

The Court of Appeal decision in Baker v Craggs [2018] EWCA Civ 1126; [2018] PLSCS 90 rights a wrong resulting from a series of conveyancing slips and, in so doing, overturns a decision that has been described as “surprising”, “startling” and “extraordinary”. The owners of farmland transferred land in their ownership to a buyer and then granted a right of way over part of that land in a transfer of another parcel to a third party. The easement would not have been binding on the first buyer, had he registered his transfer immediately. But the Land Registry had to cancel his application for registration because the plan attached to the transfer was defective. By the time that the buyer resubmitted his application, the grantees of the easement had registered their own title at the Land Registry. So the buyer’s land was registered as being subject to the easement. The buyer asked the High Court to remove the easement from his title. He argued that his interest took priority because he had an equitable interest in the land transferred to him, which was overriding because he had been in actual occupation of the land at the time. But the trial judge ruled that his overriding interest had been overreached by the grant of the easement. The trial judge reasoned that, when capital sums are paid to trustees for sale, section 2 of the Law of Property Act 1925 provides that a conveyance to a purchaser of a legal estate in land overreaches equitable interests capable of being overreached “affecting that estate” (transferring them to the sums received by the trustees instead). The sellers remained the registered proprietors of the land transferred to the first buyer until registration of the change of ownership and held the property on trust for him in the interim. And, because the sellers had received the capital sum paid by the grantees of the easement as trustees, the buyer’s overriding interest had been overreached. In other words, the trial judge concluded that a grant of an easement is the conveyance of a “legal estate in land” for the purposes of the law on overreaching. The Court of Appeal disagreed. It ruled that, while an easement is capable of subsisting in law, the only two “legal estates in land” that survived the Law of Property Act 1925 are estates in fee simple in possession and terms of years absolute. Therefore, the grant of an easement is not a “legal estate in land” for the purposes of section 2(1) of the 1925 Act. So the problem arising in this case was one of priorities, to be answered in accordance with the rules on overriding interests laid down in the Land Registration Act 2002. It followed that the first buyer’s interest overrode the easement. Conveyancers will be much happier with the outcome after the decision of the Court of Appeal. Few would disagree with Lord Justice Henderson’s observation that overreaching is generally regarded as a process that enables purchasers of land to take free of equitable interests affecting that land. And, in this case, the effect of the decision at first instance, which we now know to be wrong, was that the second transfer overreached an equitable interest affecting an entirely different parcel of land.  Allyson Colby is a property law consultant