Beneficial Interest Claims and Restrictions

News article published on: 29th August 2019

Under the Land Registration Act 2002, a restriction can be entered in the register of any property or land by anybody who has a sufficient interest in it. As well as safeguarding the interest of the beneficiaries of the land, a restriction may also control or limit the way the property or land is dealt with.

In the cases of Hallman v Harkins [2019] UKUT 245 an application was made by the Tracy Harkins to the Land Registry to enter a restriction against the registered title to a property in Bootle (“the Property”) to protect her beneficial interest which she claimed to have. She had shared the Property with her partner of 13 years, Laurence Hallman. They had separated in 2016 and Mr Hallman was the sole registered proprietor of the Property. Mr Hallman objected to the application.

First Tier Tribunal conclusions on beneficial interest

The dispute was referred to the First Tier Tribunal (“FTT”) under section 73(7) of the Land Registration Act 2002. They concluded that parties had has a common intention from January 2013 that Mr Harkin should have a beneficial interest in the Property. As a result it directed the Chief Land Registrar to give effect to her application for a restriction to be entered on the register.

The FTT also went a step further and quantified Mr Harkin’s share on the basis that they had been invited to do so by the parties. By an arithmetical calculation based on the duration of the couple’s engagement relative to the length of their relationship it then concluded that her beneficial interest in the Property was 35% of the whole.

Appeal Findings

Permission to appeal was granted by the Upper Tribunal on two grounds:

• The FTT’s conclusion that the couple had pooled their resources (which Mr Hallman argued was reached without regard to the relevant parts of the evidence); and
• The FTT’s approach to the quantification of Ms Harkin’s beneficial interest (which Mr Hallman argued was arithmetically incorrect, but which is also open to the more fundamental objections that it is contrary to principle and beyond the FTT’s jurisdiction)

On appeal Martin Rodger QC made the following findings:

• The FTT was entitled to find that Mr Harkin has a beneficial interest which should be protected by a restriction;
• The FTT had no jurisdiction to determine the extent of that beneficial interest and its conclusion is not binding on the parties; and
• In any event the FTT’s view that Ms Harkin’s interest was 35% was based on an incomplete assessment of the evidence and was wrong in principle.

Often where such disputes arise at the FTT stage, it is common for parties to issue proceedings in Court and for the FTT proceedings to be stayed pending the resolution of the Court proceedings. The Court can determine the extent of a parties’ beneficial interest and therefore in the interest of costs, parties tend to pursue such claims through the Court route. Naturally, if a determination is made at Court and a party is found to have a beneficial interest, it follows that a restriction should be registered.

This case is, however, is an interesting reminder of the FTT’s jurisdiction when it comes to beneficial interest claims as often these cases can arise from disputes relating to the registration of restrictions.

Shilpa Mathuradas, Partner & Head of Property Litigation