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April 2010

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Apr 10 Update
Case name Link Lending Limited v Bustard
Neutral citation [2010] EWCA Civ 424
Legal points Overriding interest – right to set aside transfer – actual occupation - nature of occupation required
Facts H ‘procured’ a transfer from B who, at the time, was suffering from a severe mental illness. There had been some sort of agreement that part of the transfer money would be paid to a third party, with the remainder being paid to B in instalments whilst she continued to live in the property. B was subsequently admitted to a psychiatric hospital and then resided in a care home. H used the property as security for a loan from L. H defaulted in repayments and L commenced possession proceedings. B was joined as a Second Defendant and brought a Part 20 Claim against H seeking to set aside the transfer (and claiming an overriding interest). She claimed that the transfer was voidable by reason of her lack of capacity and that an equity arose in her favour which had priority over L’s charge under Para 2, Sched 3, Land Registration Act 2002. B claimed that she was in actual occupation notwithstanding the fact that she was being cared for at a home at the time of the charge; B’s furniture remained in the property; she frequently visited it; and she intended to return; and no-one else lived there. At first instance (HHJ Walton, Newcastle County Court) held that the transfer was voidable. There were various aspects of the transfer which were highly suspicious. B’s incapacity would have been apparent to H, and it was unlikely that H ever paid any money to B. An equity therefore arose in B’s favour. The term ‘actual occupation’ had to be interpreted in terms of ordinary plain English. It required some degree of physical presence (Williams & Glyn’s Bank Ltd v Boland [1981] AC 487 applied). Whether a person was in actual occupation was a question of fact, depending on all the circumstances of the case. B was in actual occupation at the relevant time. She genuinely wanted to return. Her furniture was there and arrangements had been made to pay bills to maintain the property. Moreover, B continued to visit the property because she considered it to be her home. Although she was not physically present at the property at the time of the charge, her occupation was manifested and accompanied by a continuing intention to occupy (Thompson v Foy [2009] EWHC 1076 (Ch) applied). L appealed on the basis that B was not physically present in the property at the time of L’s charge and had not resided there for the previous year so that the judge was wrong to conclude that she was a person in actual occupation.
Held The trend of the cases shows that the courts are reluctant to lay down, or even suggest, a single test for determining whether a person is in actual occupation. The decisions on statutory construction identify the factors that have to be weighed by the judge on this issue. The degree of permanence and continuity of presence of the person concerned, the intentions and wishes of that person, the length of absence from the property and the reason for it and the nature of the property and personal circumstances of the person are among the relevant factors. The court can only interfere with the judge’s decision on that issue if it is satisfied that, in the light of the law, it was wrong as a matter of statutory construction, or if it was wrong as a judgment of fact and degree. As for construction, the judge considered the relevant provisions and cited the relevant authorities as to what, in law, is capable of constituting actual occupation of property. As for his application of that law to the facts, the question for the court is whether the judge could properly and reasonably conclude that B was in actual occupation at the relevant time. Although the primary facts were not all one way, it was clear that what mattered to the judge was the combined manifestation of her occupation, her continuing intention to occupy, and the reason that prevented her from living at home. The judge was justified in ruling that B was a person in actual occupation of the property. Appeal dismissed.
Comment The first instance decision was reported (Link Lending Limited v Hussein) in the October 09 Update. As noted, it must be remembered that for the purposes of Para 2(c), Sched 3, LRA 2002, the occupation must be obvious on a reasonably careful inspection of the land. In the present case, there must have been sufficient signs of occupation to put the lender on notice, and it follows that for the purposes of Para 2(b), Sched 3, LRA 2002, the lender did not make inquiry of B. Had it not been for this, the outcome would probably have been fairly harsh to a lender in L’s position given the relatively limited extent of B’s ‘occupation’. This is a useful reminder that each case turns on its own facts, and identifies the court’s approach on appeal.
Item MORTGAGE REPOSSESSIONS (PROTECTION OF TENANTS Etc.) ACT 2010
Details The Act received the Royal Assent on 8th April 2010. The Act applies where a mortgagee of land which consists of or includes a dwelling-house brings an action in which it claims possession of the property, and there is an unauthorised tenancy of all or part of the property. An unauthorised tenancy means either an assured, protected or statutory tenancy to which the mortgagee’s interest is not subject When making an order for possession, the court may postpone the date for delivery of possession for up to two months. Furthermore, if the court has already made an order for possession, it may subsequently stay or suspend execution of the order for up to two months if (a) the court has not already exercised its powers under this section, or if it did, the applicant was not the tenant when it exercised those powers, (b) the applicant has asked the mortgagee for an undertaking in writing not to enforce the order for two months, and (c) the mortgagee has not given such an undertaking. When considering whether to exercise its powers the court is required to have regard to (a) the circumstances of the tenant, and (b) if there is an outstanding breach by the tenant of a term of the unauthorised tenancy (i) the nature of the breach, and (ii) whether the tenant might reasonably be expected to have avoided breaching the term or to have remedies the breach. The court may make any postponement, stay or suspension conditional on the making of payments to the mortgagee in respect of the occupation of the property during the period of the postponement, stay or suspension. Finally, where a mortgagee has obtained an order for possession, the order may only be executed if the mortgagee gives notice at the property of any prescribed step taken for the for the purpose of executing the order, and only after the end of a prescribed period beginning with the day on which such notice is given. ‘Prescribed’ means prescribed by regulations to be made by the Secretary of State.
Comment The purpose of the Act is simply to give limited protection to tenants whose landlords are repossessed by their lender. It only extends to unauthorised tenancies. It does not therefore apply to buy-to-let mortgages or where the landlord has obtained consent to let. Tenants should be alerted to the risk of repossession either by the service of a notice to occupiers prior to the hearing, or by the service of a new form of prescribed notice prior to execution. The Act will come into force on a date prescribed by the Secretary of State.