The Remortgage, the Wife in Occupation and the Bank
In 2018, Mr and Mrs Adeyemi bought 14 Larch Close for £300,000. The transfer was registered in Mr Adeyemi's sole name. Mrs Adeyemi paid £60,000 of the purchase price from an inheritance, and the couple agreed orally that she would have a half share. They have lived there ever since. In March 2021, Mr Adeyemi remortgaged the house to Northshire Bank for £240,000 without telling his wife. The mortgage was registered in April 2021. Mr Adeyemi used £90,000 of the loan to pay business debts and the rest to renovate the kitchen. He defaulted in 2024; the bank has begun possession proceedings. Mrs Adeyemi says she knew nothing of the mortgage until the bank's letter. The bank's valuer inspected the property in 2021 and noted 'occupied by a family'; the bank's solicitor asked Mr Adeyemi whether anyone else had rights, and he replied 'no'. Mrs Adeyemi has no registered notice.
1. Does Mrs Adeyemi have an interest capable of overriding the bank's registered mortgage? Apply Schedule 3, paragraph 2 of the Land Registration Act 2002 and the overreaching provisions.
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Mrs Adeyemi has a beneficial interest arising from a common intention constructive trust: the oral agreement plus her £60,000 contribution, and the parties' conduct. Her interest is not overreached. Overreaching under s.2(1)(ii) of the Law of Property Act 1925 requires a conveyance by two or more trustees or a trust corporation. Mr Adeyemi was the sole registered proprietor and sole trustee; a mortgage by him alone cannot overreach.
The bank's mortgage is a registered disposition for value, so under s.29 of the Land Registration Act 2002 it takes priority over prior interests except those that are overriding or protected. Mrs Adeyemi's interest is not protected by notice, so she must rely on Schedule 3, paragraph 2: an interest belonging to a person in actual occupation, so far as it relates to the land, except on enquiry of that person, the interest is not disclosed. She is in actual occupation: the house is her home, and occupation is a question of fact (Link Lending v Bustard [2010] EWCA Civ 424; Chhokar v Chhokar [1984] FLR 313).
The bank's valuer noted a family, which may have put the bank on inquiry. The bank asked Mr Adeyemi, not Mrs Adeyemi. An enquiry of the husband is not an enquiry of the occupier. So the exception does not apply. Her interest overrides the mortgage, and the bank's possession claim is subject to it.
2. Would the result differ if Mrs Adeyemi had known about and consented to the mortgage? Explain the doctrine of consent and its limits.
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Consent can postpone an overriding interest. In Bristol & West Building Society v Henning [1985] 1 WLR 778, a wife who knew of and consented to the mortgage was bound by it. But the consent must be informed and free. In Bank of Scotland v Hussain [2010] EWHC 281 (Ch), the court emphasised that mere knowledge is not enough; the question is whether it would be unconscionable for the occupier to assert her interest against the lender.
If Mrs Adeyemi had known the mortgage was being taken out to fund her husband's business and had agreed that the bank should have priority, she would likely be bound. If she knew only that there was a remortgage but not its terms, or was told it was for kitchen renovation, her consent may not extend to the whole loan. The bank would need to show a clear understanding that her interest was subordinated. A signature on a consent form would be strong evidence, but there is none.
So the result would probably differ only if the bank could prove informed consent. The bank bears the evidential burden. A general awareness that the house was being remortgaged is not the same as consent to the bank taking priority over her beneficial share.
3. What remedy, if any, does the bank have against the register or against Mr Adeyemi? Consider indemnity under Schedule 8.
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If the bank loses priority, it may claim indemnity from HM Land Registry under Schedule 8 to the Land Registration Act 2002 for loss suffered by reason of the rectification or a mistake in the register. But paragraph 5 of Schedule 8 excludes indemnity where the claimant caused or substantially contributed to the loss by lack of proper care. The bank's failure to enquire of the occupier, and its reliance on the husband's statement, may be lack of proper care. The bank may instead have a claim against its solicitor or valuer for negligence.
Against Mr Adeyemi, the bank has a contractual claim under the mortgage and a right to possession, but that right is subject to Mrs Adeyemi's prior interest. The bank could also argue that Mr Adeyemi committed fraud, but fraud by the borrower does not automatically give the bank priority over an innocent occupier.
The bank's best practical route is to negotiate a settlement with Mrs Adeyemi, perhaps allowing her to remain in occupation while paying a proportion of the debt. If it does not, it should consider a claim against its professional advisers and notify its insurers.