Habermann v Koehler and another [2000]

Habermann v Koehler and another [2000] All ER (D) 1739

REGISTERED LAND – OVERRIDING INTERESTS – TIMING AND SUFFICIENT INQUIRIES

Facts

The appellants had been permitted to occupy a home owner’s property, and had been given an informal option to later buy it. The option was not registered in the Land Register. The home owner later obtained a mortgage on the property and sold it to the mortgagee when they were unable to pay back the debt. Before the conveyance (but after the grant of the mortgage) the mortgagee asked the respondent as to whether the occupiers intended to buy the property, and the home-owner neglected to tell them of the informal option. The appellants attempted to enforce their option against the mortgagee.

Issues

Normally, unless an interest is contained in the Land Register, it will not bind successors-in-title to the land. There are some exceptions to this rule, such as proprietary estoppel, overriding interests and constructive trusts.

The appellants in this case argued that their informal, unregistered option was an overriding interest. If it were, the mortgagee would be bound by it unless he made sufficient inquiries which could have discovered it, but did not. The issue was whether the option was capable of being an overriding interest, and whether the mortgagee was bound by it – in particular, whether his inquiries were sufficient and at what stage they should have been made.

Held

The Court of Appeal held against the appellants.

The court held that while an informal option is capable of being an overriding interest, the mortgagee had made sufficient inquiries into the occupiers. The relevant time for making those inquiries was held to be prior to the purchase, and not prior to the grant of the mortgage. The mortgagee therefore took the land free of the option.