Birmingham Midshires BS v Sabherwal [2000] 80 P. C.R. 256

Court: Court of Appeal

Basic Facts: S’s sons bought a house, allowing S to live there. They funded the purchase with a mortgage, later taking out a second mortgage, which they defaulted on. Birmingham Midshires Building Society (BMBS) sought possession, and S claimed an overriding interest.

Issue for the Court: Did the Trusts of Land and Appointment of Trustees Act (TLATA) 1996 change the principles of overreaching?

Held: The court held that beneficial interests under a trust could be overreached when the property is sold by trustees, even where beneficiaries occupy the property, transferring their interests to the sale proceeds.

Walker LJ

• Overreaching Remains Unchanged:

• Section 14 of TLATA does not protect third parties with equitable interests in actual occupation against mortgagees.

• Following City of London BS v Flegg, trustees of the sale can give a valid receipt, transferring equitable interests to the proceeds of sale.

• The principle of overreaching under LPA 1925 remains unaffected by TLATA 1996.