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Baroness Buscombe: In responding to the Minister, I apologise to the Committee and, in particular, to the noble Lord, Lord Goodhart. To put it mildly, I am feeling under the weather and I suddenly panicked because I could not think what had happened to Amendments Nos. 17 and 15. I then suddenly realised that they belong to the noble Lord, Lord Goodhart. Therefore, I apologise for the fact that my remarks did not necessarily bear any reflection on the intention behind those proposed amendments.

I listened to the Minister's reply on this complex point. I shall read Hansard with care and then decide whether or not to return to this matter on Report. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 agreed to.

Clause 12 [Leasehold estates]:

[Amendment No. 10 not moved.]

Clause 12 agreed to.

Schedule 1 [Unregistered interests which override first registration]:

[Amendment No. 11 not moved.]

17 Jul 2001 : Column 1403

Baroness Buscombe moved Amendment No. 12:


    Page 45, line 10, leave out from "occupation" to end of line 11.

The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 13, 49 and 50. By tabling these amendments, we are seeking to offer the Government a choice of explanation.

I shall deal first with Amendments Nos. 12 and 49 and then Amendments Nos. 13 and 50. The underlying intention behind these amendments is to seek clarity and consistency in relation to beneficiaries as they are defined in the Bill.

Paragraph 2(1) of Schedule 1 and paragraph 2(1)(a) of Schedule 3 deprive a person in actual occupation of land of protection in relation to any beneficial interest of his under a settlement under the Settled Land Act 1925. By contrast, a person in actual occupation of land who possesses an interest under a trust of land will be entitled to protection in respect of that interest.

The only justification for the discriminatory treatment of the beneficiary under a strict settlement which is given is that interests under a strict settlement are "relatively uncommon" and since the Trusts of Land and Appointment of Trustees Act 1996, no new strict settlements can be created. That may be true, but the fact that persons who are beneficially interested under strict settlements are in a minority is hardly a justification for withholding the protection of the law from them.

Amendments Nos. 13 and 50 pose an alternative option which we should like to put to the Government. These amendments are designed to enact the present position under the law as it stands at present which is established by judicial decision in the Flegg case that where a beneficiary, under a trust of land, is in actual occupation, his interest does not override that of a purchaser or, importantly, a chargee from the trustees if they make that disposition in exercise of their powers under the trust, or by the general law, to overreach the interests of beneficiaries. We believe that including a statement to that effect in the legislation is a useful confirmation and clarification of the law. I beg to move.

Baroness Scotland of Asthal: The general theme of the amendments is to what extent interests under a trust should be protected by reason of actual occupation so as to override a first registration or registered disposition.

As the noble Baroness outlined, Amendments Nos. 12 and 49 seek to provide protection for interests under the Settled Land Act 1925. Amendments Nos. 13 and 50 seek to ensure that the interests of those under a trust of land are overreached in certain circumstances. First, I shall address the settled land amendments.

We have considerable sympathy with the arguments advanced by the noble Baroness, Lady Buscombe, for removing the exceptions for settled land in the Bill as it currently stands. So, too, did the Law Commission. In its 1998 consultation paper the commission originally suggested that the right of a beneficiary

17 Jul 2001 : Column 1404

under the Settled Land Act 1925 shall cease to be, as now, simply a minor interest and become an overriding interest on first registration and in relation to registrable dispositions.

As the noble Baroness pointed out, comparatively few people are affected by this issue and, indeed, comparatively few responded on this point. However, most thought that these rights should not be overriding. Since 1996 it has been impossible to create new settlements under the 1925 Act as a result of the Trusts of Land and Appointment of Trustees Act 1996. This will therefore be an issue of rapidly diminishing importance.

Any settlements of registered land expressly created before 1997 should have been protected by the entry of the prescribed restrictions on the register. The Law Commission therefore thought it likely that little or no hardship would be caused by the abandonment of the recommendation. It therefore recommended the continuation of the present position under which a beneficiary under a settlement cannot protect his or her rights by virtue of his or her actual occupation of the settled land. I hope that the noble Baroness will feel comforted by some of the things I have said.

As regards trusts of land, the second point raised by the noble Baroness, I am certainly not unsympathetic to the intention of the amendments. However, we hope to be able to convince Members of the Committee that they are not necessary. Although we believe that both amendments are unnecessary, the reasons differ.

In the case of first registration, the issues are essentially those of the law relating to unregistered land. That is because overreaching will take place when the conveyance or other disposition is completed. The former beneficiaries will therefore have no interest in the land when registration takes place. Under Clauses 11(4) and 12(4) the unregistered interests under Schedule 1 must affect the estate being registered at the time of registration.

In the case of registered land, the noble Baroness is correct in that the position is covered by the common law as discussed in the case of City of London Building Society v. Flegg, to which the noble Baroness correctly alluded. As many noble Lords will know, that was a case in which it was held that the society was not subject to the beneficial interests of Mr and Mrs Flegg in respect of its registered charge, even though the Fleggs had beneficial interests in what was in those days a trust for sale and were in actual occupation of the registered land. That was because the mortgage advance had been paid to the two trustees of the trust, the registered proprietors, Mr and Mrs Maxwell-Brown--as many noble Lords will remember, Mrs Maxwell-Brown was the daughter of the Fleggs--so the overreaching took place. That is well settled law and will remain.

We note the comments of the noble Baroness about the worsening of the position of a small minority. However, the interests under a strict settlement have never been overriding. As was stated earlier, they are only a minor interest under the 1925 Act, so need registration. I hope that the explanation is one which

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finds favour with the noble Baroness and that she is satisfied that the Bill deals with the issue adequately and addresses the issues which concern her. I hope therefore that she will feel able to withdraw the amendment.

4.45 p.m.

Baroness Buscombe: I thank the Minister for her response, which I shall read with care. I am not sure whether I understood her entirely. My underlying intention with the amendments is to ensure that neither class of beneficiary--either under the Trusts of Land and Appointment of Trustees Act 1996 or those under the Settled Land Act 1925--is mentioned or that both are mentioned. It seems that there should be a level playing field.

I agree with the Minister that few people are affected by this provision. However, it is probably right to say that the economics are enormous and will continue for some time. This is an important point. I shall carefully read her comments. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

Lord Goodhart moved Amendment No. 14:


    Page 45, line 11, at end insert--


"( ) Where an interest of a person in actual occupation of any land is an overriding interest under sub-paragraph (1), the interest in that land of any other person under whom the person in actual occupation holds the land by virtue of any grant or licence."

The noble Lord said: In moving Amendment No. 14 I shall speak also to Amendment No. 53. I apologise for the fact that there is a misprint on the Marshalled List in both amendments, which is my fault. It should refer to a "grant or licence" and not, as it does, to a "grant on licence".

Under Section 70 of the Land Registration Act, interests are overriding interests if they are the interests of a person in actual occupation of land or in receipt of the rents and profits of land. Under the Bill, the only interests which are overriding are those of persons in actual occupation, and receipt of rent and profits is not enough. However, actual occupation is defined so as to include occupation by employee or an agent.

Let us assume, however, that a freeholder has granted a contractual licence, which is a form of interest, to A to occupy land and that in turn A has granted a sub-licence to B at some rent or contractual payment. The purchaser inspects the land and meets B. B tells the purchaser that he, B, is there as a licensee of A. In that situation, under the present law the interests of both A and B would be overriding. Under the law as is proposed by the Bill, the interests of B will be overriding but not the interests of A who is in receipt of the rent and profits but not in occupation.

This seems to me to give rise to a peculiar position. I am conscious of the fact that I could be wrong because it is undoubtedly a complicated position. There is plainly no transfer to the purchaser of A's contractual rights under the original licence granted to

17 Jul 2001 : Column 1406

A by the previous freeholder. Therefore, if B, who has the protected right to remain there, pays for the benefit of the licence, that payment is presumably still payable to A. If the licence under the contract is terminable by A, it remains terminable by A and not by the purchaser because there is no transfer of the right to terminate the licence.

However, if A's licence from the earlier freehold requires contractual payments to be made, it is not clear how the purchaser can claim any right in that payment because he is not a party to the licence and there can be no transfer of the rights under the licence. So, A could say, "Thanks. I'd like to go on simply getting my income from B. I recognise that when B leaves I will have no further right to the property but I prefer that to having to agree a new licence and paying you something for it."

The Bill recognises the fact that occupation by an employee or agent is occupation by an employer or principal, but occupation under any other form of contractual relationship should be treated as giving an overriding interest not only to the actual occupier but to the other party to the contract under which the occupier holds it. I beg to move.


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