Unfair Conveyancing

There are some occasions where the law can seem very unfair; the case of Scott v Southern Pacific Mortgages Limited and another [2014] WLP (D) 447 demonstrates. Rosemary Scott was the last remaining appellant in the test cases that have become known as the North East Property Buyers litigation. Scott resisted mortgage possession proceedings brought by Southern Pacific all the way to the Supreme Court, but lost her appeal on 22 October 2014.

Scott was a tenant of a sale and leaseback scheme who was promised to be allowed to stay in her house for life. Scott’s argument was based on Section 29(2)(a)(ii) of, and Schedule 3, paragraph 2 to, the Land Registration Act 2002 in that she had an equitable interest in the property from the moment of exchange of contracts which amounted to an unregistered interest given priority over lender’s charges.

The Supreme Court recognised the harsh implications of its decision but held that, despite promises made on sale that she (and other home owners in her situation) could remain in their homes, the occupiers had no equitable proprietary (as opposed to a merely personal) right capable of being an unregistered interest which would override registered dispositions under the Land Registration Act 2002. Ultimately, the mortgagees’ rights took priority over the interests of the occupiers. Essentially, the question whether the contract should be seen as an indivisible transaction with the conveyance and the mortgage, is unlikely ever to arise.

The dangers of sale and leaseback schemes have now been recognised and are now regulated under section 19 of the Financial Services and Markets Act 2000 effectively eradicating the use of them.

Therefore we would advise clients to always take independent legal advise before committing a transaction which could have serious personal implications.

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