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Overreaching

Overreaching:


This is a mechanism aimed at achieving efficient conveyancing with minimal regard to protecting interests that are held in land. It applies where there is a trust of land in both registered and unregistered land. Essentially, overreaching is the process when rights of beneficiaries under a trust of land become detached from the land and attach to the proceeds of the sale. Meaning, a person who holds a beneficial right or ownership has a right in the value of the land instead of the land itself. Overreaching is important as it ensures that the purchaser of land takes the property without there being any beneficial interests in the way of the sale. Provided the purchase price is paid to at least two trustees, the purchaser, irrespective of whether he had notice of the beneficiaries’ rights, will take the land free from those rights. ( City of London Building Society v Flegg [1988] )


Overreaching is covered under section 2(1) of the Law of Property Act 1925 which states that “a conveyance to a purchaser of a legal estate in land shall overreach any equitable interest or power affecting that estate, whether or not he has notice thereof.” However, section 2(3) of the Law of Property Act 1925 excludes certain equitable interests in land consequently restricting overreaching to only operating when there is equitable ownership in a trust. This principle is essentially a statutory protection in order for one to be able to dispose of their property without any obstacles or hindrances that could prevent the sale.


Elements of Overreaching:


Section .2 (1) (ii) of the LPA 1925 effectively means that overreaching will take place provided that:


1. There is a trust in land

2. The interest under the trust are ‘capable of being overreached’

3. There must be compliance with regard to statutory requirements concerning payment of capital money. These are found in s.27 (2) of the LPA 1925 and require payment to at least two trustees of land. It must be two trustees because it allows for more protection for the beneficiary. It is intended that with two trustees there will be less fraudulence.


Effect of overreaching:


As long as the three criteria’s are fulfilled, there is a presumption that overreaching has taken place. The equitable interests are removed off the land and translated into equivalent trusts in the proceeds of sale. If overreaching has taken place by s.27 (1) and (2) LPA 1925, the purchaser takes the land free of the interests of the beneficiaries and need not concern himself with the trust affecting the proceeds of sale ‘whether or not he has notice thereof’ (s.2(1) LPA 1925). The overall objective of overreaching is that it provides protection for both the purchaser and beneficiary and otherwise just simplifies conveyance transactions.

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