Mortgage Express v Lambert [2017] Ch 93

 Key point

  • A mere equity (such as a right to rescind) can be overreached

Facts

  • D sold her leasehold flat to two buyers at a substantial undervalue, upon the agreement that she would be allowed to rent back from the buyers
  • The buyers obtained a mortgage upon the leasehold, but later defaulted
  • C, the mortgagee, sought an order for possession
  • D argued that C was bound by her right to rescind the agreement with the buyers as an overriding interest

Held (Court of Appeal)

  • Order for possession granted
  • C’s right to rescind while proprietary in nature, was not an overriding interest

Lewison LJ

Right to rescind

  • An “equity” or a “mere equity” which, under s116 Land Registration Act 2002, is an interest capable of being an overriding interest and therefore is proprietary in character
  • The right to rescind falls into s116

Overreaching

  • Under s2 LPA 1925, C’s equitable right to rescind was overreached
  • C’s right was not protected by actual occupation under schedule 3 para 2 LRA 2002 as she had failed to give reasonable notice of her continuing occupation in the flat after the sale of her leasehold