Overreaching

Overreaching - the process where equitable rights exist under a trust of land are removed from land and transferred to capital money that has been paid to purchase land.

S2 (1) LPA 1925 ‘a conveyance to purchaser of a legal estate in land shall overreach equitable interest or power affecting the estate, whether he has notice thereof’ S27 capital is paid to at least two trustees or a trust corporation - this is a restriction as it requires mass agreement. For example X sells the legal estate to Y whilst have Z as beneficiary, Y would then become bound by Z’s interest. However if it was both X and W selling the land to Y whilst Z  who was the beneficiary Y would not be bound by Z’s interests as the transaction was entered into by two trustees and so Z’s interests in the property is overreached and is transferred to the proceeds of sale. Z can then claim against X and W for any share of proceeds of sale which they feel are theirs.

Kingsnorth Finance Co. Ltd v Tizard (1986) - rights of beneficiaries under a trust of land.

City of London building society v Flegg (1987) - the interests of beneficiaries in a trust of land are overreached id the transaction is, in this case, entered into by two or more trustees.

State Bank of India v Sood (1997) - overreaching applies not only where capital money is paid but also where the mortgage was created for security for both existing and future liabilities. Held in SHAMI V SHAMI 2012